Papers Containing Keywords(s): 'wage variation'
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Viewing papers 1 through 10 of 11
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Working PaperDownward Nominal Wage Rigidity in the United States: New Evidence from Worker-Firm Linked Data
February 2019
Working Paper Number:
CES-19-07
This paper examines the extent and consequences of Downward Nominal Wage Rigidity (DNWR) using administrative worker-firm linked data from the Longitudinal Employer Household Dynamics (LEHD) program for a large representative U.S. state. Prior to the Great Recession, only 7-8% of job stayers are paid the same nominal hourly wage rate as one year earlier - substantially less than previously found in survey-based data - and about 20% of job stayers experience a wage cut. During the Great Recession, the incidence of wage cuts increases to 30%, followed by a large rise in the proportion of wage freezes to 16% as the economy recovers. Total earnings of job stayers exhibit even fewer zero changes and a larger incidence of reductions than hourly wage rates, due to systematic variations in hours worked. The results are consistent with concurrent findings in the literature that reductions in base pay are exceedingly rare but that firms use different forms of non-base pay and variations in hours worked to flexibilize labor cost. We then exploit the worker-firm link of the LEHD and find that during the Great Recession, firms with indicators of DNWR reduced employment by about 1.2% more per year. This negative effect is driven by significantly lower hiring rates and persists into the recovery. Our results suggest that despite the relatively large incidence of wage cuts in the aggregate, DNWR has sizable allocative consequences.View Full Paper PDF
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Working PaperSorting Between and Within Industries: A Testable Model of Assortative Matching
January 2017
Working Paper Number:
CES-17-43
We test Shimer's (2005) theory of the sorting of workers between and within industrial sectors based on directed search with coordination frictions, deliberately maintaining its static general equilibrium framework. We fit the model to sector-specific wage, vacancy and output data, including publicly-available statistics that characterize the distribution of worker and employer wage heterogeneity across sectors. Our empirical method is general and can be applied to a broad class of assignment models. The results indicate that industries are the loci of sorting-more productive workers are employed in more productive industries. The evidence confirm that strong assortative matching can be present even when worker and employer components of wage heterogeneity are weakly correlated.View Full Paper PDF
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Working PaperThe Role of Establishments and the Concentration of Occupations in Wage Inequality
September 2015
Working Paper Number:
CES-15-26
This paper uses the microdata of the Occupational Employment Statistics (OES) Survey to assess the contribution of occupational concentration to wage inequality between establishments and its growth over time. We show that occupational concentration plays an important role in wage determination for workers, in a wide variety of occupations, and can explain some establishmentlevel wage variation. Occupational concentration is increasing during the 2000-2011 time period, although much of this change is explained by other observable establishment characteristics. Overall, occupational concentration can help explain a small amount of wage inequality growth between establishments during this time period.View Full Paper PDF
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Working PaperTesting for Wage Discrimination in U.S. Manufacturing
September 2012
Working Paper Number:
CES-12-23
In spite of the large literature on labor market discrimination, the quantity of solid evidence on discrimination is relatively limited. This is because evidence of discrimination is difficult to obtain. Two individuals may be treated equally, but this does not prove discrimination unless we can show that the differences in treatment were not justified by differences in productivity. The method most commonly used to identify wage discrimination, the Oaxaca decomposition, is flawed because any omitted variables that are correlated with gender will contribute to the unexplained portion of the wage gap, leading to an over- or under-estimation of wage discrimination. Audit studies provide more direct evidence of differential treatment, but are costly to carry out. Only a small number of studies attempt to measure worker productivity to see if wage differences are justified. This may be because the data needed to measure productivity are difficult to obtain. This paper tests for wage discrimination by gender and race by estimating relative productivity from 2002 Census of Manufacturing data linked to demographic information on workers from Longitudinal Employer-Household Dynamics (LEHD) files. Comparing the estimated productivity ratios to the observed wage ratios, I conclude that females and blacks face wage discrimination in US manufacturing.View Full Paper PDF
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Working PaperJob Referral Networks and the Determination of Earnings in Local Labor Markets
December 2010
Working Paper Number:
CES-10-40
Referral networks may affect the efficiency and equity of labor market outcomes, but few studies have been able to identify earnings effects empirically. To make progress, I set up a model of on-the-job search in which referral networks channel information about high-paying jobs. I evaluate the model using employer-employee matched data for the U.S. linked to the Census block of residence for each worker. The referral effect is identified by variations in the quality of local referral networks within narrowly defined neighborhoods. I find, consistent with the model, a positive and significant role for local referral networks on the full distribution of earnings outcomes from job search.View Full Paper PDF
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Working PaperDecomposing the Sources of Earnings Inequality: Assessing the Role of Reallocation
September 2010
Working Paper Number:
CES-10-32
This paper uses matched employer-employee data from the U.S. Census Bureau to investigate the contribution of worker and firm reallocation to changes in wage inequality within and across industries between 1992 and 2003. We find that the entry and exit of firms and the sorting of workers and firms based on underlying worker skills are important sources of changes in earnings distributions over time. Our results suggest that the underlying dynamics driving changes in earnings inequality are complex and are due to factors that cannot be measured in standard cross-sectional data.View Full Paper PDF
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Working PaperTesting for Factor Price Equality in the Presence of Unobserved Factor Quality Diferences
August 2009
Working Paper Number:
CES-09-22
We develop a method for identifying departures from relative factor price equality across regions that is valid under general assumptions about production, markets and factors. Application of this method to the United States reveals substantial and increasing deviations in relative skilled wages across labor markets in both 1972 and 1992. These deviations vary systematically with labor markets .industry structure both in the cross section and over time.View Full Paper PDF
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Working PaperWage Dispersion, Compensation Policy and the Role of Firms
November 2005
Working Paper Number:
tp-2005-04
Empirical work in economics stresses the importance of unobserved firm- and person-level characteristics in the determination of wages, finding that these unobserved components account for the overwhelming majority of variation in wages. However, little is known about the mechanisms sustaining these wage di'er- entials. This paper attempts to demystify the firm-side of the puzzle by developing a statistical model that enriches the role that firms play in wage determination, allowing firms to influence both average wages as well as the returns to observable worker characteristics. I exploit the hierarchical nature of a unique employer-employee linked dataset for the United States, estimating a multilevel statistical model of earnings that accounts for firm-specific deviations in average wages as well as the returns to components of human capital - race, gender, education, and experience - while also controlling for person-level heterogeneity in earnings. These idiosyncratic prices reflect one aspect of firm compensation policy; another, and more novel aspect, is the unstructured characterization of the covariance of these prices across firms. I estimate the model's variance parameters using Restricted (or Residual) Maximum Likelihood tech- niques. Results suggest that there is significant variation in the returns to worker characteristics across firms. First, estimates of the parameters of the covariance matrix of firm-specific returns are statistically significant. Firms that tend to pay higher average wages also tend to pay higher than average returns to worker characteristics; firms that tend to reward highly the human capital of men also highly reward the human capital of women. For instance, the correlation between the firm-specific returns to education for men and women is 0.57. Second, the firm-specific returns account for roughly 9% of the variation in wages - approximately 50% of the variation in wages explained by firm-specific intercepts alone. The inclusion of firm-specific returns ties variation in wages, otherwise attributable to firm-specific intercepts, to observable components of human capital.View Full Paper PDF
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Working PaperFactor Price Equality and the Economies of the United States
October 2005
Working Paper Number:
CES-05-21
We develop a methodology for identifying departures from relative factor price equality across regions that is valid under general assumptions about production, markets and factors. Application of this methodology to the United States reveals substantial and increasing deviations in relative skilled wages across labor markets in both 1972 and 1992 . These deviations vary systematically with labor markets' industry structure both in cross section and over time.View Full Paper PDF
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Working PaperThe Demand for Human Capital: A Microeconomic Approach
December 2001
Working Paper Number:
CES-01-16
We propose a model for explaining the demand for human capital based on a CES production function with human capital as an explicit argument in the function. The resulting factor demand model is tested with data on roughly 6,000 plants from the Census Bureau's Longitudinal Research Database. The results show strong complementarity between physical and human capital. Moreover, the complementarity is greater in high than in low technology industries. The results also show that physical capital of more recent vintage is associated with a higher demand for human capital. While the age of a plant as a reflection of learning-by-doing is positively related to the accumulation of human capital, this relation is more pronounced in low technology industries.View Full Paper PDF
