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An Empirical Investigation of the Impact of Imperfect Information on Wages in Canada

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  • Sharif, Najma R.
  • Dar, Atul A.
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    Abstract

    Most studies of wage differentials explain such differentials in terms of factors like gender, race, and human capital. But systematic gaps in earnings can arise even among homogenous individuals as a result of asymmetric employer and worker information gaps, thereby reflecting labour market inefficiency. This paper estimates these gaps in terms of wage differentials across various population groups in Canada. We examine 21 populations groups, which include a number of immigrant groups as well. Information gaps are likely to be important in the context of immigrants, especially those new to Canadian labour markets. Our special interest is not only to compare information gaps of immigrant and other population groups, but also to assess whether (and how) immigrant information gaps depend upon the length of residence in Canada. The econometric model we employ is the two-tier stochastic earnings frontier, which is estimated using data from the 2001, 1996 and 1991 censuses.

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    Bibliographic Info

    Article provided by Review of Applied Economics in its journal Review of Applied Economics.

    Volume (Year): 3 (2007)
    Issue (Month): 1-2 ()
    Pages:

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    Handle: RePEc:ags:reapec:50162

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    Web page: http://www.lincoln.ac.nz/story11874.html

    Related research

    Keywords: labour markets; information gaps; wages; Labor and Human Capital; J31; J61; J64;

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    1. Guenter Lang, 2004. "How Different are Wages from Wage Potentials? - Analyzing the earnings disadvantage of immigrants in Germany," Discussion Paper Series 256, Universitaet Augsburg, Institute for Economics.
    2. Anthony Murphy & Eric Strobl, 2008. "Employer and Employee Ignorance in Developing Countries: The Case of Trinidad and Tobago," Review of Development Economics, Wiley Blackwell, vol. 12(2), pages 339-353, 05.
    3. Borjas, George J, 1985. "Assimilation, Changes in Cohort Quality, and the Earnings of Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 463-89, October.
    4. Groot, W. & Oosterbeek, H., 1995. "Stochastic reservation and offer wages," Labour Economics, Elsevier, vol. 2(1), pages 107-107, March.
    5. Ours, J.C. van & Ridder, G., 1992. "Vacancies and recruitment of new employees," Open Access publications from Tilburg University urn:nbn:nl:ui:12-142178, Tilburg University.
    6. Baker, Michael & Benjamin, Dwayne, 1994. "The Performance of Immigrants in the Canadian Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 12(3), pages 369-405, July.
    7. van Ours, Jan & Ridder, Geert, 1992. "Vacancies and the Recruitment of New Employees," Journal of Labor Economics, University of Chicago Press, vol. 10(2), pages 138-55, April.
    8. Daneshvary, Nasser, et al, 1992. "Job Search and Immigrant Assimilation: An Earnings Frontier Approach," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 482-92, August.
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