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Production Function and Wage Equation Estimation with Heterogenous Labor: Evidence from a New Matched Employer-Employee Dataset

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Author Info
Judith Hellerstein
David Neumark

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Abstract

In this paper, we first describe the 1990 DEED, the most recently constructed matched employeremployee data set for the United States that contains detailed demographic information on workers (most notably, information on education). We then use the data from manufacturing establishments in the 1990 DEED to update and expand on previous findings, using a more limited data set, regarding the measurement of the labor input and theories of wage determination (Hellerstein, et al., 1999). We find that the productivity of women is less than that of men, but not by enough to fully explain the gap in wages, a result that is consistent with wage discrimination against women. In contrast, we find no evidence of wage discrimination against blacks. We estimate that both the wage and productivity profiles are rising but concave to the origin (consistent with profiles quadratic in age), but the estimated relative wage profile is steeper than the relative productivity profile, consistent with models of deferred wages. We find a productivity premium for marriage equal to that of the wage premium, and a productivity premium for education that somewhat exceeds the wage premium. Exploring the sensitivity of these results, we also find that different specifications of production functions do not have any qualitative effects on the these results. Finally, the results indicate that the returns to productive inputs (capital, materials, labor quality) as well as the residual variance are virtually unaffected by the choice of the construction of the labor quality input.

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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 04-05.

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Length: 42 pages
Date of creation: Apr 2004
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Handle: RePEc:cen:wpaper:04-05

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Robert H Mcguckin & George A Pascoe, 1988. "The Longitudinal Research Database (LRD): Status And Research Possibilities," Working Papers 88-2, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  2. Loewenstein, George F & Sicherman, Nachum, 1991. "Do Workers Prefer Increasing Wage Profiles?," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 67-84, January. [Downloadable!] (restricted)
  3. Hellerstein, J-K & Neumark, D, 1995. "Sex, Wages, and Productivity : an Empirical Analysis of Israeli, Firm-Level Data," Papers 9501, Michigan State - Econometrics and Economic Theory.
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  4. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Judith K. Hellerstein & David Neumark, 2002. "Ethnicity, Language, and Workplace Segregation: Evidence from a New Matched Employer-Employee Data Set," NBER Working Papers 9037, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Griliches, Z. & Mairesse, J., 1997. "Production Functions: The Search for Identification," Papers 9730, Institut National de la Statistique et des Etudes Economiques-.
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  7. Eric J. Bartelsman & Mark Doms, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September. [Downloadable!] (restricted)
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  8. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November. [Downloadable!] (restricted)
  9. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February. [Downloadable!] (restricted)
  10. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352. [Downloadable!] (restricted)
  11. Ron S Jarmin & Javier Miranda, 2002. "The Longitudinal Business Database," Working Papers 02-17, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  12. Abowd, John M. & Kramarz, Francis, 1999. "The analysis of labor markets using matched employer-employee data," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 40, pages 2629-2710 Elsevier. [Downloadable!] (restricted)
  13. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December. [Downloadable!] (restricted)
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  1. Andrea Ichino & Guido Schwerdt & Rudolf Winter-Ebmer & Josef Zweimüller, 2007. "Too Old to Work, Too Young to Retire?," IZA Discussion Papers 3110, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Jean-Olivier Hairault & Arnaud Chéron & François Langot, 2007. "Job Creation and Job Destruction over the Life Cycle: The Older Workers in the Spotlight," IZA Discussion Papers 2597, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Rebecca M. Blank & Heidi Shierholz, 2006. "Exploring Gender Differences in Employment and Wage Trends Among Less-Skilled Workers," NBER Working Papers 12494, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Bourlès, Renaud & Cette, Gilbert, 2005. "A comparison of structural productivity levels in the major industrialised countries," MPRA Paper 7330, University Library of Munich, Germany. [Downloadable!]
  5. Kyoji Fukao & Ryo Kambayashi & Daiji Kawaguchi & Hyeog Ug Kwon & Young Gak Kim & Izumi Yokoyama, 2006. "Deferred Compensation: Evidence from Employer-Employee Matched Data from Japan," Hi-Stat Discussion Paper Series d06-187, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  6. Johannes Van Biesebroeck, 2007. "Wage and Productivity Premiums in Sub-Saharan Africa," Working Papers tecipa-291, University of Toronto, Department of Economics. [Downloadable!]
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  7. Fox, Jeremy T. & Smeets, Valérie, 2007. "Do Input Quality and Structural Productivity Estimates Drive Measured Differences in Firm Productivity?," Working Papers 07-2, University of Aarhus, Aarhus School of Business, Department of Economics. [Downloadable!]
  8. Johannes Van Biesebroeck, 2007. "Wages Equal Productivity. Fact or Fiction?," Working Papers tecipa-294, University of Toronto, Department of Economics. [Downloadable!]
    Other versions:
  9. Judith Hellerstein & David Neumark, 2005. "Using Matched Employer-Employee Data to Study Labor Market Discrimination," IZA Discussion Papers 1555, Institute for the Study of Labor (IZA). [Downloadable!]
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