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The Structure of Wages in What Should be a Competitive Labour Market

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Author Info
Stephen Machin
Alan Manning

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Abstract

This paper examines the structure of wages in a very specific labour market, for care assistants in residential homes for the elderly on England's "sunshine coast". This sector corresponds closely to economists' notion of what should be a competitive labour market as: (i) there are a large number of small firms undertaking a very homogeneous activity in concentrated geographical areas; and (ii) the workers they employ are not unionized, nor are they covered by any minimum wage legislation so that there are effectively no external constraints on the wage-setting process. We find that the structure of wages does not, in important respects, resemble what we would expect in a competitive labour market. We find there is a small amount of wage dispersion within firms and a correspondingly large amount between firms. And, the wage dispersion that is present does not seem to be closely related to the productivity related characteristics of workers. We propose a test of the hypothesis that unobserved labour quality can explain our findings and reject it. The paper concludes with a discussion of other possible explanations of the patterns in our data.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number 0532.

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Date of creation: Jun 2002
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Handle: RePEc:cep:cepdps:0532

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Related research
Keywords: Wage Dispersion Competitive Model

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Find related papers by JEL classification:
J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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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.:
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Cited by:
(explanations, 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. M Manacorda & Enrico Moretti, 2002. "Intergenerational Transfers and Household Structure. Why Do Most Italian Youths Live With Their Parents?," CEP Discussion Papers 0536, Centre for Economic Performance, LSE. [Downloadable!]
  2. Richard Dickens & Alan Manning, 2002. "Has The National Minimum Wage Reduced UK Wage Inequality?," CEP Discussion Papers 0533, Centre for Economic Performance, LSE. [Downloadable!]
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