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The pervasive absence of compensating differentials

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  • StÈphane Bonhomme

    (CEMFI, Madrid, Spain)

  • GrÈgory Jolivet

    (Department of Economics, University of Bristol, UK)

Abstract

We study the relation between individual preferences for job amenities (e.g., type of work, job security) and compensating wage differentials in cross-section. To this end, we estimate a partial equilibrium job search model on panel data from eight European countries. There are five non-wage job characteristics and two sources of job-to-job mobility: on-the-job search and reallocation shocks. We also allow for two types of unobserved heterogeneity. We find strong preferences for amenities, especially job security, yet, these preferences do not translate into significant wage differentials in cross-section. Counterfactual experiments show that one would need extremely low levels of search frictions for compensating differentials to arise. Lastly, a similar exercise on the distribution of job change outcomes reveals the role of constrained job-to-job mobility in the absence of compensating wage differentials. Copyright © 2009 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 24 (2009)
Issue (Month): 5 ()
Pages: 763-795

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Handle: RePEc:jae:japmet:v:24:y:2009:i:5:p:763-795

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Cited by:
  1. Paul Sullivan & Ted To, 2014. "Search and Nonwage Job Characteristics," Journal of Human Resources, University of Wisconsin Press, vol. 49(2), pages 472-507.
  2. Hospido, Laura, 2010. "Job Changes and Individual-Job Specific Wage Dynamics," IZA Discussion Papers 5088, Institute for the Study of Labor (IZA).
  3. Giovanni L. Violante & Per Krusell & Andreas Hornstein, 2006. "Frictional wage dispersion in search models: a quantitative assessment," Working Paper 06-07, Federal Reserve Bank of Richmond.
  4. Pauline Givord & Cédric Afsa, 2009. "Le rôle des conditions de travail dans les absences pour maladie : le cas des horaires irréguliers," Économie et Prévision, Programme National Persée, vol. 187(1), pages 83-103.
  5. Christina Felfe, 2009. "The Willingness to Pay for Job Amenities: Evidence from Mothers' Return to Work," SOEPpapers on Multidisciplinary Panel Data Research 247, DIW Berlin, The German Socio-Economic Panel (SOEP).
  6. John F. Helliwell & Haifang Huang, 2008. "Well-being and Trust in the Workplace," NBER Working Papers 14589, National Bureau of Economic Research, Inc.
  7. Diego Dueñas Fernández & Carlos Iglesias Fernández & Raquel Llorente Heras, 2010. "Job quality, job satisfaction and services in Spain," Working Papers 06/10, Instituto Universitario de Análisis Económico y Social.
  8. Usui, Emiko, 2009. "Wages, non-wage characteristics, and predominantly male jobs," Labour Economics, Elsevier, vol. 16(1), pages 52-63, January.
  9. Christina Felfe, 2008. "Return to Work - Mothers' Willingness to Pay for Job Amenities," University of St. Gallen Department of Economics working paper series 2008 2008-25, Department of Economics, University of St. Gallen.
  10. Luke Haywood, 2014. "Too Rich to Do the Dirty Work?: Wealth Effects on the Demand for Good Jobs," Discussion Papers of DIW Berlin 1355, DIW Berlin, German Institute for Economic Research.

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