Job Dispersion and Compensating Wage Differentials
AbstractThe empirical literature on compensating wage differentials has a mixed history. While there have been some successes, much of this literature finds weak support for the theory of equalizing differences. We argue that it is dispersion in total job values or "job dispersion" that leads to biased compensating wage differential estimates. We begin by demonstrating how job dispersion can lead to biased hedonic estimates. Then we take a partial equilibrium on-the-job search model with utility from non-wage job characteristics, structurally estimate it and then simulate a dataset. Using our simulated dataset, we conduct a detailed analysis of the sources of bias in hedonic wage estimates. While worker heterogeneity and job dynamics are important sources of job dispersion, a significant proportion of the variation in jobs can only be explained by the inherent randomness of job offers.
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Bibliographic InfoPaper provided by U.S. Bureau of Labor Statistics in its series Working Papers with number 469.
Length: 40 pages
Date of creation: Oct 2013
Date of revision:
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More information through EDIRC
compensating wage differential; theory of equalizing differences; revealed preference; on-the-job search;
Find related papers by JEL classification:
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-14 (All new papers)
- NEP-LAB-2013-11-14 (Labour Economics)
- NEP-LMA-2013-11-14 (Labor Markets - Supply, Demand, & Wages)
- NEP-UPT-2013-11-14 (Utility Models & Prospect Theory)
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