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This paper investigates the effect of coworker characteristics on wages, measured by the average person effect of coworkers in a wage regression. The effect of interest is identified from within-firm changes in workforce composition, controlling for person effects, firm effects, and sector-specific time trends. My estimates are based on a linked employer employee dataset for the population of workers and firms of the Italian region of Veneto for years 1982-2001. I find that a 0.1 increase in the average labour market value of coworkers’ skills (which is around one within-person standard deviation) is associated with a 3.6 percent wage premium. I also find that a sizeable share of the wage variation previously explained by unobserved individual and firm heterogeneity may be due to variation in coworker skills. An event-type study, a Placebo exercise and a series of heterogeneity analyses lend credibility to the baseline results. I also evaluate the role of the spillover effects for wage differentials between specific groups of workers. I find that around 12 percent of the gender wage gap and 10 to 16 percent of the immigrant wage gap can be explained by differences in coworker characteristics.

Distinguishing carefully between mobility across firms and across oc- cupations, this study provides causal estimates of the wage effects of mobility among graduates from apprenticeship in Germany. Our instrumental variables approach exploits variation in regional labor market characteristics. Pure firm changes and occupation-and-job changes after graduation from apprenticeship result in average wage losses, whereas an occupation change within the train- ing firm results in persistent wage gains. For the majority of cases a change of occupation involves a career progression. In contrast, for job switches the wage loss dominates.

This paper presents a short overview of dynamic models of labor markets with transaction costs. It shows that these models have deeply renewed the understanding of job search, job flows, job creations and destructions, unemployment and wage formation. It argues that this renewal provides a very useful toolkit for analyzing important economic policy issues such as the optimal level of unemployment benefits, the funding of unemployment insurance and the impact of employment protection legislation.

This paper has resulted in a publication in Labour Economics (2013), 23, 50-56. The paper provides a theoretical foundation for the empirical regularities observed in estimations of wage consequences of overeducation and undereducation. Workers with more education than required for their jobs are observed to suffer wage penalties relative to workers with the same education in jobs that only require their educational level. Similarly, workers with less education than required for their jobs earn wage rewards. These departures from the Mincer human capital earnings function can be explained by Nash bargaining between workers and employers. Under fairly mild assumptions, Nash bargaining predicts a wage penalty for overeducation and a wage reward for undereducation, and further predicts that the wage penalty will exceed the wage reward. This paper reviews the established empirical regularities and then provides Nash bargaining results that explain these regularities.

This study analyzes real wage cyclicality for male full-time workers within employer–employee matches in Germany over the period 1984–2004. Five different wage measures are compared: the standard hourly wage rate; hourly wage earnings including overtime and bonus pay; the effective wage, which takes into account unpaid overtime; and monthly earnings, with and without additional pay. None of the hourly wage measures exhibits cyclicality except for the group of salaried workers with unpaid overtime. Their effective wages show a strongly procyclical reaction to changes in unemployment. Despite acyclical wage rates, salaried workers without unpaid overtime experienced procyclical earnings movements if they had income from extra pay. Monthly earnings were also procyclical for hourly paid workers with overtime pay. These findings suggest that cyclical earnings movements are generated by variable pay components, such as bonuses and overtime pay, and by flexible working hours. The degree of earnings procyclicality revealed for the German labor market is comparable to the United States. NOTICE: This is the author’s version of a work that was accepted for publication in Labour Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Labour Economics 18 (2011), 6, pp. 786-797 and is online available at http://dx.doi.org/10.1016/j.labeco.2011.06.002

Learning about the impact of immigration on the labor market outcomes of natives is a topic of major concern for immigrant-receiving countries. There exists an extensive literature evaluating the impact of immigration on the employment and wages of natives in the U.S. Yet, despite the significant degree of occupational segregation by gender regardless of workers' origin, the literature has traditionally treated male and female immigrants as a homogenous group when examining the impact of immigration on native workers. Instead, using data from Spain, where the immigrant population has risen from 4 percent to 10 percent of the population within a decade, we allow for male and female foreign-born workers to have distinct impacts on the employment patterns of native men and women. This proves to be important as foreign-born workers only seem to have a significant impact on the employment pattern of native workers of the same sex. Furthermore, foreign-born male (female) workers do not appear to be perfect substitutes of similarly skilled native male (female) workers, which may help explain the null or small impacts of immigration on native employment and wages. Instead, immigration appears to have affected the task specialization and occupational distribution of natives of the same gender.

While much of the literature that investigates the part-time (PT) / full-time (FT) hourly wage differential and its causes focuses on average effects, very few studies analyze the heterogeneous effects of PT work across different subgroups, despite the policy relevance of understanding channels behind the (raw) PT penalty in different labor markets. This paper is the first to examine the implications of switching to PT work for women's subsequent earnings trajectories, distinguishing by their type of contract: permanent or fixed-term. Using a 21-year unbalanced Social Security records panel of over 76,000 prime-aged women strongly attached to the Spanish labor market, we find that PT work aggravates the segmentation of the labor market insofar there is a PT pay penalty and this penalty is larger and more persistent in the case of women with fixed-term contracts. The paper discusses problems arising in empirical estimation, and how to address them. It concludes with policy implications relevant for Continental Europe and its dual structure of employment protection.

We examine the effects of establishment- and industry-level labor market turnover on employees’ well-being. The linked employer-employee panel data contain both survey information on employees’ subjective well-being and comprehensive register-based information on job and worker flows. Labor market turbulence decreases well-being as experienced job satisfaction and satisfaction with job security are negatively related to the previous year’s flows. We test for the existence of compensating wage differentials by explaining wages and job satisfaction with average uncertainties, measured by an indicator for a high moving average of past excessive turnover (churning) rate. The results are consistent with compensating wage differentials, since high uncertainty increases real wages, but has no effect on job satisfaction.

This paper presents instrumental variables estimates of the effects of firm tenure, occupation specific work experience, industry specific work experience, and general work experience on wages using data from the 1979 Cohort of the National Longitudinal Survey of Youth. A key feature of the empirical work presented in this paper is that the returns to human capital are allowed to vary across occupations, in contrast to existing research which has constrained the parameters of the wage equation to be the same across occupations. The estimates indicate that both occupation and industry specific human capital are key determinants of wages, and the importance of various types of human capital varies widely across one-digit occupations. Human capital is primarily occupation specific in occupations such as craftsmen, where workers realize a 14% increase in wages after five years of occupation specific experience but do not realize wage gains from industry specific experience. In contrast, human capital is primarily industry specific in other occupations such as managerial employment where workers realize a 23% wage increase after five years of industry specific work experience. In other occupations, such as professional employment, both occupation and industry specific human capital are key determinants of wages.

This paper considers how asymmetric tax treatment, where labour market earnings are taxed but household production is untaxed, aspects educational choice and labour supply. We show that taxes on labour market earnings can generate a large (non-marginal) switch to home production and the ensuing deadweight losses are large. Using a cross-country panel, we find that gender differences in labour supply responses to tax policy can explain differences in aggregate labour supply and years of education across countries.

Motivated by models of worker flows, we argue in this paper that monopsonistic discrimination may be a substantial factor behind the overall gender wage gap. On matched employer-employee data from Norway, we estimate establishment-specific wage premiums separately for men and women, conditioning on fixed individual effects. Regressions of worker turnover on the wage premium identify less wage elastic labour supply facing each establishment of women than that of men. Workforce gender composition is strongly related to employers' wage policies. The results suggest that 70-90 percent of the gender wage gap for low-educated workers may be attributed to differences in labour market frictions between men and women, while the similar figures for high-educated workers ranges from 20 to 70 percent.

In many countries wages are set in two stages, where industry-level collective bargaining is followed by firm-specific arrangements determining actual paid wages as a mark-up on the industry wage floor. What explains the wage set in each of these stages? In this paper we show that both the industry wage floor and the average wage cushion are systematically associated with the degree of firm heterogeneity in the industry: The former (latter) is negatively (positively) associated with the productivity spread. Furthermore, since the response of the wage floor dominates that of the wage cushion, workers in more heterogeneous industries tend to get lower actual paid wages. These conclusions are reached in a model of Cournot oligopoly with firm productivity heterogeneity and a two-tiered wage setting system. They are then confirmed by administrative data covering virtually all workers, firms and collective bargaining agreements of the Portuguese private sector for the period 1991-2000., NIPE – Núcleo de Investigação em Políticas Económicas – is supported by the Portuguese Foundation for Science and Technology through the Programa Operacional Ciência e Inovação 2010 (POCI 2010) of the III Quadro Comunitário de Apoio (QCA III), which is financed by FEDER and Portuguese funds.

In Finnish manufacturing, the gender wage gap more than doubles during the first ten years in the labour market. This paper studies the factors contributing to the gender gap in early-career wage growth. The analysis shows that the size of the gender gap in average wage growth varies with mobility status, the gap being higher with employer changes compared to wage growth within firms. Several explanations for the gender gap in wage growth based on human capital theory and theory of compensating wage differentials are considered. However, much of the gap in wage growth remains unexplained. The distributional analysis of the wage growth shows that the female wage penalty increases significantly as we move along the conditional wage growth distribution, the increase being stronger with employer changes compared to within-firm wage growth.

Firms are central to many theories of the labor market. However, the actual degree to which firms shape the structure of wages is still not well understood. This paper investigates (i) the importance of firms in explaining wage differences across individuals and industries, and (ii) how the nature of interfirm mobility – job-to-job vs. job-unemployment-job – affects the relative importance of firms and workers in wage determination. Results indicate that (i) firms are much more important in explaining the variance of average wages across industries rather than across individuals, and (ii) using job-to-job transitions to identify the firm's contribution to the wage rate reduces the importance of firm wage policies in explaining wage differences by as much as 50%.

We analyze empirically the impact of urban agglomeration on Italian wages. Using micro-data from the Bank of Italy's Survey of Household Income and Wealth for the years 1995, 1998, 2000 and 2002 on more than 22,000 employees distributed in 242 randomly drawn local labor markets, we test whether the structure of wages varies with urban scale. We find that every additional 100,000 inhabitants in the local labor market raises earnings by 0.1 percent. The use of a geographical approach enables us to state that this effect decays very rapidly with distance, losing significance beyond approximately 12 kilometers. We also find that urbanization does not affect returns to experience and that it reduces returns to education and to tenure with current firm, while providing a premium to worker supervisors and office workers.

This paper considers the effects of union-bargained minimum wages on transitions into and out of employment in the hotels and catering industry over the period 1979–99. This industry is characterised by a high fraction of unskilled labour input, high worker turnover and binding minimum wages. The empirical approach identifies workers affected by real minimum wage increases and decreases, respectively. Job separations and accessions for the treatment groups are then contrasted to the outcomes for control groups, with wages marginally above those of the treatment groups. Unlike previous studies, this paper also considers same-period transitions for same-wage workers who are unaffected by minimum wage changes. This procedure should help to control for unobserved differences between high- and low-wage workers and is made possible by the diversified minimum wage structure of the industry. According to the results, increasing minimum wages tend to be associated with non-negligible employment effects (except for teenagers during 1993–98). The evidence regarding decreasing minimum wages is less conclusive.

This study examines how university students' employment decisions affect their labor market success after graduation. The study is based on individual level panel data of Finnish university students from the years 1987–1998. The OLS estimates show that in-school work experience is associated with higher earnings and employment after graduation. However, work months during the enrollment are not exogenously chosen. Average local unemployment rate during enrollment is used as an instrument for work experience acquisition to correct for the endogeneity bias. Comparing graduates with equal times-to-degree, the IV estimates show that work experience increases earnings considerably one year after graduation. The effect is smaller and statistically insignificant in later years. Taking into account that working usually leads to longer times-to-degree, IV estimates show no significant returns to student employment.

This Paper presents firm level evidence on the dynamics of non-manual wage premia and employment shares in Italian manufacturing during the nineties. We find that the relative stability of aggregate wage premia and employment shares hides offsetting disaggregate forces. First, while technical progress raises the relative demand for skilled labor within firms, demand changes associated with exports reduce the relative demand for skills. Second, within the class of non-manual workers, wage premia and employment shares of executives rise substantially, whereas those of clerks fall in a similar proportion. We also find that the export status of firms plays a key role in explaining labour market dynamics, as exporters account for most of both demand-related and technology-related shifts. Overall, our results for Italy question the general validity of the conventional view that emphasizes the role of labour market institutions, as opposed to trade and technology, in determining wage and employment dynamics in continental Europe.

Increasing participation in Higher Education, and the rising number of graduates in the labour markets of most developed countries, are likely to alter graduate wage distributions. Increasing wage inequality amongst graduates has been observed in a number of countries. This paper takes as an example the UK, where the increase in inequality has been amongst the highest, to investigate any potential link between these two phenomena of participation and inequality. Dividing graduates by subject of degree to provide more variation, we show that most of the increase in graduate wage inequality has occurred within subjects. We investigate two potential explanations, specifically the increase in the variance of childhood cognitive test scores amongst graduates in the same subject, and the widening variety of jobs performed by graduates with degrees in the same subject. The paper shows that both of these factors have played a role in explaining growing graduate wage inequality within subjects, though the largest is by far from the increased variance of test scores. The results also show that mean test scores are falling over time within every subject to a greater or lesser extent, suggesting that the widening variance of test scores is due to universities accepting individuals from lower in the ability distribution, as Higher Education participation has expanded.