How Could Wage Inequality Within and Across Enterprises be Reduced?

Moser, Christian (2016): How Could Wage Inequality Within and Across Enterprises be Reduced?

Abstract

This note surveys the recent literature on wage inequality between and across enterprises. Implications for policies such as the minimum wage, collective bargaining, and other wage setting institutions are discussed.

• Item Type: MPRA Paper
• Language: English
• Keywords: Wage inequality; firm heterogeneity; worker heterogeneity; policy; minimum wage; collective bargaining; wage setting institutions
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E64 - Incomes Policy ; Price Policy; J - Labor and Demographic Economics > J0 - General; J - Labor and Demographic Economics > J0 - General > J01 - Labor Economics: General; J - Labor and Demographic Economics > J0 - General > J08 - Labor Economics Policies; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J30 - General; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J38 - Public Policy

References

Abowd, John M. and Francis Kramarz, “The Analysis of Labor Markets Using Matched Employer-Employee Data,” Handbook of Labor Economics, 1999, 3, 2629–2710.

Abowd, John M., Francis Kramarz, and David N. Margolis, “High Wage Workers and High Wage Firms,” Econometrica, 1999, 67 (2), 251–333.

Abowd, John M., Hampton Finer, and Francis Kramarz, “Individual and Firm Heterogeneity in Compensation: An Analysis of Matched Longitudinal Employer-Employee Data for the State of Washington,” in eds. J. Haltiwanger et al., ed., The Creation and Analysis of Employer-Employee Matched Data, Amsterdam: North Holland, 1999.

Akerman, Anders, Elhanan Helpman, Oleg Itskhoki, Marc-Andreas Muendler, and Stephen Redding, “Sources of Wage Inequality,” American Economic Review, May 2013, 103 (3), 214–19.

Alder, Simeon, David Lagakos, and Lee Ohanian, “Competitive Pressure and the Decline of the Rust Belt: A Macroeconomic Analysis,” NBER Working Paper, 2014, October (No. 20538), 1–44.

Alvarez, Jorge, Felipe Benguria, Niklas Engbom, and Christian Moser, “Firms and the Decline in Earnings Inequality in Brazil,” Unpublished Manuscript, 2016.

Andrews, Martyn J., Len Gill, Thorsten Schank, and Richard Upward, “High Wage Workers and Low Wage Firms: Negative Assortative Matching or Limited Mobility Bias?,” Journal of the Royal Statistical Society. Series A: Statistics in Society, 2008, 171 (3), 673–697.

Autor, David H., Alan Manning, and Christopher L. Smith, “The Contribution of the Minimum Wage to US Wage Inequality Over Three Decades: A Reassessment,” American Economic Journal: Applied Economics, 2016, 8 (1), 58–99.

Barth, Erling, Alex Bryson, James C. Davis, and Richard Freeman, “It’s Where You Work: In- creases in the Dispersion of Earnings across Establishments and Individuals in the United States,” Journal of Labor Economics, 2016, 34 (No. S2), S67–S97.

Barth, Erling, Karl O. Moene, and Fredrik Willumsen, “The Scandinavian Model-An interpretation,” Journal of Public Economics, 2014, 117, 60–72.

Blinder, Alan S., “Wage Discrimination: Reduced Form and Structural Estimates,” Journal of Human Resources, 1973, 8 (4), 436–455.

Bonhomme, Stephane, Thibaut Lamadon, and Elena Manresa, “A Distributional Framework for Matched Employer Employee Data,” Unpublished Manuscript, 2016.

Bontemps, Christian, Jean-Marc Robin, and Gerard J. Van Den Berg, “An Empirical Equilibrium Job Search Model with Search on the Job and Heterogeneous Workers and Firms,” International Economic Review, 1999, 40 (4), 1039–1074.

Bound, John and George Johnson, “Changes in the Structure of Wages in the 1980s: An Evaluation of Alternative Explanations,” American Economic Review, 1992, (82(3)), 371–92.

Bourguignon, Francois, “Decomposable Income Inequality Measures,” Econometrica, 1979, 47 (4), 901–920.

Burdett, Kenneth and Dale T. Mortensen, “Wage Differentials, Employer Size, and Unemployment,” International Economic Review, 1998, 39 (2), 257–273.

Cahuc, Pierre, Fabien Postel-Vinay, and Jean-Marc Robin, “Wage Bargaining with On-the-Job Search: Theory and Evidence,” Econometrica, 2006, 74 (2), 323–364.

Card, David, “The Effect of Unions on the Structure of Wages: A Longitudinal Analysis,” Econometrica, 1996, 64 (4), 957–979.

Card, David, Alexandre Mas, Enrico Moretti, and Emmanuel Saez, “Inequality at Work: The Effect of Peer Salaries on Job Satisfaction,” American Economic Review, May 2012, 102 (6), 2981–3003.

Card, David, Ana-Rute Cardoso, and Patrick Kline, “Bargaining, Sorting, and the Gender Wage Gap: Quantifying the Impact of Firms on the Relative Pay of Women,” Quarterly Journal of Economics, 2016, 131 (2), 633–686.

Card, David and Alan B. Krueger, “Wages and Employment: Minimum A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,” American Economic Review, 1994, 84 (4), 772–793.

Card, David, Jorg Heining, and Patrick Kline, “Workplace Heterogeneity and the Rise of West German Wage Inequality,” Quarterly Journal of Economics, 2013, 128 (3), 967–1015.

Diamond, Peter, “Wage Determination and Efficiency in Search Equilibrium,” Review of Economic Studies, 1982, 49 (2), 217–227.

Elsby, Michael, Bart Hobijn, and Aisegul Sahin, “The Decline of the US Labor Share,” Brookings Papers on Economic Activity, 2013, 2013 (2), 1–63.

Engbom, Niklas and Christian Moser, “Earnings Inequality and the Minimum Wage: Evidence from Brazil,” Unpublished Manuscript, 2016.

Fortin, Nicole, Thomas Lemieux, and Sergio Firpo, Decomposition Methods in Economics, Vol. 4 of Handbook of Labor Economics, Elsevier,

Furman, Jason and Peter Orszag, “A Firm-Level Perspective on the Role of Rents in the Rise in Inequality,” Presentation at: A Just Society. Centennial Event in Honor of Joseph Stiglitz. Columbia University, 2015.

Harasztosi, Peter and Attila Lindner, “Who Pays for the Minimum Wage?,” Unpublished Manuscript, 2015.

Heckman, James J., Lance J. Lochner, and Petra E. Todd, “Fifty Years of Mincer Earnings Regressions,” National Bureau of Economic Research, 2003, p. 73.

Helpman, Elhanan, Oleg Itskhoki, Marc Muendler, and Stephen Redding, “Trade and Inequality: From Theory to Estimation,” Review of Economic Studies, forthcoming, 2016.

Iranzo, Susana, Fabiano Schivardi, and Elisa Tosetti, “Skill Dispersion and Firm Productivity: An Analysis with Employer-Employee Matched Data,” Journal of Labor Economics, 2008, 26 (2), 247–285.

Karabarbounis, Loukas and Brent Neiman, “The Global Decline of the Gabor Share,” Quarterly Journal of Economics, 2014, 129 (1), 61–103.

Katz, Lawrence F. and Ana L. Revenga, “Changes in the Structure of Wages: The United States vs Japan,” Journal of The Japanese and International Economies, 1989, 3 (4), 522–553.

Krueger, Alan B. and Lawrence H. Summers, “Efficiency Wages and the Inter-Industry Wage Structure,” Econometrica, 1988, 56 (2), 259–293.

Lazear, Edward P. and Kathryn L. Shaw, “Personnel Economics: The Economist’s View of Human Resources,” Journal of Economic Perspectives, 2007, 21 (4), 91–114.

Lee, David S., “Wage Inequality in The United States During The 1980s: Rising Dispersion Or Falling Minimum Wage?,” Quarterly Journal of Economics, 1999, 114 (3), 977–1023.

Lopes de Melo, Rafael, “Firm Wage Differentials and Labor Market Sorting: Reconciling Theory and Evidence,” Journal of Political Economy, forthcoming, 2016.

Lucas, Robert E. and Edward C. Prescott, “Equilibrium Search and Unemployment,” Journal of Economic Theory, 1974, (7), 188–209.

McCall, John J., “Economics of Information and Job Search,” Quarterly Journal of Economics, 1970, 84 (1), 113–126.

Mincer, Jacob A., Schooling, Experience, and Earnings, NBER, 1974.

Mortensen, Dale T., “A Theory of Wage and Employment Dynamics,” in Edmund S. Phelps, ed., Microeconomic Foundations of Employment and Inflation Theory, Macmillan, 1970.

Moser, Christian, “Firms as Drivers of (In-)Equality,” in Ewing Marion Kauffman Foundations, ed., Proceedings of the New Entrepreneurial Growth Conference, 2016.

Murphy, Kevin M. and Finis Welch, “The Structure of Wages,” Quarterly Journal of Economics, 1992, 107 (1), 285–326.

Oaxaca, Ronald, “Male-Female Wage Differentials in Urban Labor Markets,” International Economic Review, 1973, 14 (3), 693–709.

Pissarides, Christopher A., “Short-Run Equilibrium Dynamics of Unemployment, Vacancies, and Real Wages,” American Economic Review, 1985, 75 (4), 676–690.

Postel-Vinay, Fabien and Jean-Marc Robin, “Equilibrium Wage Dispersion with Worker and Employer Heterogeneity,” Econometrica, 2002, 70 (6), 2295–2350.

Rosen, Sherwin, “Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition,” Journal of Political Economy, 1974, 82 (1), 34.

Rosen, Sherwin, “The Theory of Equalizing Differences,” in O. Ashenfelter and R. Layard, eds., Handbook of Labor Economics, Vol. 1 of Handbook of Labor Economics, Elsevier, 1987, chapter 12, pp. 641–692.

Song, Jae, David J. Price, Fatih Guvenen, Nicholas Bloom, and Till von Wachter, “Firming Up Inequality,” Unpublished Manuscript, 2016.

Sorkin, Isaac, “Ranking Firms Using Revealed Preference,” Unpublished Manuscript, 2016.

Wallerstein, Michael, “Wage-Setting Institutions and Pay Inequality in Advanced Industrial Societies,” American Journal of Political Science, 1999, 43 (3), 649–680.

Woodcock, Simon D., “Match Effects,” Research in Economics, 2015, 69 (1), 100–121.