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We study a longitudinal sample of over one million French workers from more than five hundred thousand employing firms. We decompose real total annual compensation per worker into components related to observable employee characteristics, personal heterogeneity, firm heterogeneity, and residual variation. Except for the residual, all components may be correlated in an arbitrary fashion. At the level of the individual, we find that person effects, especially those not related to observables like education, are a very important source of wage variation in France. Firm effects, while important, are not as important as person effects. At the level of firms, we find that enterprises that hire high-wage workers are more productive but not more profitable. They are also more capital and high-skilled employee intensive. Enterprises that pay higher wages, controlling for person effects, are more productive and more profitable. They are also more capital intensive but are not more high-skilled labor intensive. We find that person effects explain about 90% of inter-industry wage differentials and about 75% of the firm-size wage effect while firm effects explain relatively little of either differential.

We reconsider the potential for explaining inter-industry wage differences by decomposing those differences into parts due to individual and employer heterogeneity, respectively. Using longitudinally linked employer-employee data, we estimate the model for the United States and France. The part arising from individual heterogeneity can be theoretically and empirically related to the worker's opportunity wage rate. The part arising from employer heterogeneity can similarly be related to product market quasi-rents and relative bargaining power. We find that these two variables are highly correlated with both parts of the differential in France. Although the U.S. inter-industry wage differentials are strongly correlated with those in France, the decomposition is more nuanced in the American data, where the opportunity wage rate and the product market conditions are related to both the personal and employer heterogeneity.

PurposeThis paper investigates the potential wage impacts of a shift to more environmentally sustainable production patterns.Design/methodology/approachThe empirical analysis is carried out using labour force survey data and interval regressions.FindingsEstimates at the individual level suggest that small wage differentials exist: individuals employed in green industries earn about seven per cent more than those working in non-green industries.Originality/valueTo date, very little is known about the characteristics of jobs in the green industry and by extension, the labour force effects that can emerge or change as a result of transitioning towards a greener economy. While exploratory in nature, this analysis seeks to shed light on an underdeveloped area of research, namely, wage inequalities associated with transitioning towards green growth.

Outsourcing of labor services grew substantially during the 1980s and 1990s and was associated with lower wages, fewer benefits, and lower rates of unionization. The authors focus on two occupations for which they can identify outsourcing in those two decades using industry and occupation codes: janitors and guards. Across a wide array of specifications, they find that the outsourcing wage penalty ranged from 4% to 7% for janitors and from 8% to 24% for guards. Their findings on health benefits mirror those on wages. Evidence suggests that the outsourcing penalty was not due to compensating differentials for higher benefits or lower hours, skill differences, or the types of industries that outsourced. Rather, outsourcing seems to have reduced labor market rents for workers, especially for those in the upper half of the occupational wage distribution. Industries with higher historical wage premia were more likely to outsource service work.

It has been widely documented that there is a high level of inter-industry wage dispersion in the United States and several other developed countries. Unfortunately, due to the lack of data availability, industry wage differentials in developing countries have been examined in only a few studies and have been constrained by data limitations. Identifying the causes of industry wage differentials is crucial because it has policy implications toward mitigating wage inequality and unemployment. In this paper, I investigate industry wage differentials in the Palestinian territories – the West Bank and the Gaza Strip – using a rich dataset that allows cross-sectional and longitudinal analyses. I find that observed labor quality, unobserved labor quality, and labor market segmentation along the public and private sector represent the most suitable explanations for inter-industry wage dispersion in the Palestinian territories. Additionally, there is (limited) evidence of a shirking model especially in Gaza.

This report analyzes the paths by which developing country labor markets adjust to permanent trade-related shocks. Trade shocks can bring about reallocation of labor between industries, but the presence of labor mobility costs implies economy-wide losses because they extend the period of economic adjustment. This report focuses primarily on the adjustment costs faced by workers after a trade shock, because of magnitude and welfare implications and policy relevance. From a policy viewpoint, understanding the relative magnitudes of labor mobility and adjustment costs can help policymakers design trade policies that are consistent with employment objectives, can be complemented by labor policies, or support programs to facilitate labor transitions, or both. To complement and validate the analysis based on structural choice models, the study designed a distinct empirical approach using reduced-form econometric estimation strategies. This approach examines the impact of structural reforms and worker displacement on labor market outcomes. This makes it possible to estimate the time required to adjust to a trade-related shock, but does not assume the rigid underlying relationship inherent in structural models. This report is organized as follows: chapter one gives introduction. Chapter two presents evidence from the literature on the relative magnitude of labor adjustment costs borne by workers and by firms. Chapter three presents a new database of country-level labor mobility cost estimates for both developing and developed economies. Chapter four showcases country case studies in which labor mobility costs vary by industry, firm size, and worker type (for example, informal versus. formal). Chapter five analyzes the impact of structural reforms on aggregate labor market outcomes across countries and the effect of worker displacement due to plant closings on the employment outcomes of individual workers in Mexico. Chapter six concludes with a summary of the main findings about the labor adjustment costs associated with trade-related shocks and a discussion of policy responses internationally.

We add to the gender wage gap literature by considering how characteristics of past employers are correlated with current wages and whether differences between the work histories of men and women are related to the persistent gender wage gap. Our hypothesis is that women have less exposure to higher paying industries and firms and more exposure to lower paying ones over the course of their careers and this history is correlated with male-female earnings differences in middle age. We use unique administrative employer history data to conduct a decomposition exercise to determine the impact of past employer characteristics relative to current employer characteristics, both at the mean and across the wage distribution. Consistent with past literature, we find that women in their forties work for lower paying firms than men, even within the same industry, and this difference accounts for almost a quarter of the wage gap observed at this point in time. In addition, we find that length and magnitude of past exposure to high and low paying industries and firms continues to exert influence on the wages observed in middle age. If women spent similar amounts of career time as men at employers with pay premiums similar to those of the employers of men, the gender wage gap would be 5% - 8% lower. The largest effects are found at the median, where differences in pay levels between men and women’s past employers explain approximately 8% of the gender wage gap. At the 90th percentile, differences in field of college degree are a more important predictor of the wage gap than work history.

Pakistan witnessed significant trade liberalization reforms between 1988 and 2005. This study investigates the impact of Pakistan's significant trade liberalization policies in 1988 on industry wage premia. We use an estimation strategy that takes into account dispersion in sector wage premiums and trade reforms over time and across sectors. We employed the wage premium approach and Restricted Least Squares to obtain sectoral wage premia. We used weighted least squares and two-stage-least-squares (2SLS) to explore the liaison between trade reforms and sector wage premia. Contrary to previous empirical studies on less developed economies, our findings reveal a significant and resilient correlation between changes in trade reforms and fluctuations in sector wage premiums during the liberalisation period of 1990-2005. Our findings are consistent with short- and medium-run trade models in which workers are immobile across industries or, on the other hand, with the presence of sector rents that are reduced when trade policy is liberalized.

We examine the academe–industry wage gap. Once self-selection and different personal characteristics of academic and industrial scientists have been taken into account the wage gap narrows from 28 to 13 %. The counterfactual wage faced by an academic scientist increases with time spent on development and decreases with time spent on research. This finding challenges the idea of a solely negative relationship between science and wages. We further find that preferences for science augment the relationship between research orientation and wages. Overall, the results have implications for policy makers that aim to increase development oriented research activities at universities, individual scientists thinking about whether to pursue a career in industry or academe, and managers trying to hire academic scientists.

This paper develops a tractable version of the Lucas and Prescott (1974) search model. Each of a continuum of industries produces a heterogeneous good using a production technology that is continually hit by idiosyncratic shocks. In response to adverse shocks, some workers search for new industries while others are rest unemployed, waiting for their industry's condition to improve. We obtain closed-form expressions for key aggregate variables and use them to evaluate the model's quantitative predictions for unemployment and wages. Both search and rest unemployment are important for understanding the behavior of wages at the industry level.