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Comparative Advantage, Learning, and Sectoral Wage Determination

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Author Info
Robert Gibbons
Lawrence F. Katz
Thomas Lemieux ()
Daniel Parent ()

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Abstract

We develop a model in which a worker's skills determine the worker's current wage and sector. Both the market and the worker are initially uncertain about some of the worker's skills. Endogenous wage changes and sector mobility occur as labor-market participants learn about these unobserved skills. We show how the model can be estimated using non-linear instrumental-variables techniques. We then apply our methodology to study the wages and allocation of workers across occupations and across industries. For both occupations and industries, we find that high-wage sectors employ high-skill workers and offer high returns to workers' skills. Estimates of these sectoral wage differences that do not account for sector-specific returns are therefore misleading. We also suggest further applications of our theory and methodology.

Dans cet article, nous cherchons à développer un modèle par lequel le salaire d'un travailleur est fonction de ses qualifications. Le marché ainsi que le travailleur sont au préalable dans l'incertitude quant à certaines de ces qualifications. L'endogénéité à la fois des changements de salaire et des décisions de changements du secteur d'affiliation résulte du processus d'apprentissage relié aux qualifications du travailleur. Nous montrons ensuite comment le modèle peut être estimé par les méthodes des variables instrumentales non-linéaires. Nous appliquons notre méthodologie à l'étude des salaires et de l'allocation des travailleurs aux différentes occupations et industries. Nous trouvons que les secteurs à salaires élevés emploient des travailleurs ayant davantage de qualifications et que ces secteurs rémunèrent ces qualifications à un taux supérieur relativement aux secteurs à faibles salaires. Les estimés des rendements associés aux qualifications qui ne tiennent pas compte du fait que les rendements diffèrent d'un secteur à un autre sont par conséquent erronés. Nous proposons enfin d'autres applications possibles de notre méthodologie.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2002s-35.

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Date of creation: 01 Apr 2002
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Handle: RePEc:cir:cirwor:2002s-35

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Related research
Keywords: comparative advantage; learning; non-linear instrumental variables; avantages comparés; apprentissage; variables instrumentales;

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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. Harris, Milton & Holstrom, Bengt, 1982. "A Theory of Wage Dynamics," Review of Economic Studies, Blackwell Publishing, vol. 49(3), pages 315-33, July. [Downloadable!] (restricted)
    Other versions:
  2. Stephanie Lluis, . "The Role of Comparative Advantage and Learning in Wage Dynamics and Intra-Firm Mobility: Evidence from Germany," Working Papers 0103, Industrial Relations Center, University of Minnesota (Twin Cities Campus). [Downloadable!]
    Other versions:
  3. Lawrence F. Katz & Alan B. Krueger, 1991. "Changes in the Structure of Wages in the Public and Private Sectors," NBER Working Papers 3667, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Farber, Henry S & Gibbons, Robert, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1007-47, November. [Downloadable!] (restricted)
  5. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  6. Murphy, Kevin M & Welch, Finis, 1992. "The Structure of Wages," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 285-326, February. [Downloadable!] (restricted)
  7. Stephen Ross & Paul Taubman & Michael L. Wachter, 1981. "Learning by Observing and the Distribution of Wages," NBER Chapters, in: Studies in Labor Markets, pages 359-386 National Bureau of Economic Research, Inc. [Downloadable!]
  8. William T. Dickens & Lawrence F. Katz, 1987. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Newey, Whitney K, 1990. "Efficient Instrumental Variables Estimation of Nonlinear Models," Econometrica, Econometric Society, vol. 58(4), pages 809-37, July. [Downloadable!] (restricted)
  10. Alan B. Krueger & Lawrence H. Summers, 1987. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October. [Downloadable!] (restricted)
  12. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March. [Downloadable!] (restricted)
  13. Donald, Stephen G. & Whitney Newey, 1999. "Choosing the Number of Instruments," Working papers 99-05, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Neal, Derek & Rosen, Sherwin, 2000. "Theories of the distribution of earnings," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 7, pages 379-427 Elsevier. [Downloadable!] (restricted)
  15. Heckman, James J & Honore, Bo E, 1990. "The Empirical Content of the Roy Model," Econometrica, Econometric Society, vol. 58(5), pages 1121-49, September. [Downloadable!] (restricted)
  16. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February. [Downloadable!] (restricted)
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  17. MacDonald, Glenn M, 1982. "A Market Equilibrium Theory of Job Assignment and Sequential Accumulation of Information," American Economic Review, American Economic Association, vol. 72(5), pages 1038-55, December. [Downloadable!] (restricted)
  18. Lemieux, Thomas, 1998. "Estimating the Effects of Unions on Wage Inequality in a Panel Data Model with Comparative Advantage and Nonrandom Selection," Journal of Labor Economics, University of Chicago Press, vol. 16(2), pages 261-91, April. [Downloadable!] (restricted)
  19. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October. [Downloadable!] (restricted)
    Other versions:
  20. Robert Gibbons & Michael Waldman, 1998. "A Theory of Wage and Promotion Dynamics in Internal Labor Markets," NBER Working Papers 6454, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  21. Gibbons, R. & Katz, L., 1989. "Does Unmeasured Ability Explain Inter-Industry Wage Differences," Working papers 543, Massachusetts Institute of Technology (MIT), Department of Economics.
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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. Paul Oyer, 2007. "Ability and Employer Learning: Evidence from the Economist Labor Market," NBER Working Papers 12989, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Stephanie Lluis, . "The Role of Comparative Advantage and Learning in Wage Dynamics and Intra-Firm Mobility: Evidence from Germany," Working Papers 0103, Industrial Relations Center, University of Minnesota (Twin Cities Campus). [Downloadable!]
    Other versions:
  3. Ana Ferrer & Stephanie Lluis, . "Should Workers Care About Firm Size?," Working Papers 0204, Industrial Relations Center, University of Minnesota (Twin Cities Campus). [Downloadable!]
    Other versions:
  4. Philip Oreopoulos & Till von Wachter & Andrew Heisz, 2006. "The Short- and Long-Term Career Effects of Graduating in a Recession: Hysteresis and Heterogeneity in the Market for College Graduates," NBER Working Papers 12159, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Simon D. Woodcock, 2005. "Heterogeneity and Learning in Labor Markets," Labor and Demography 0511012, EconWPA. [Downloadable!]
  6. Sullivan, Paul, 2008. "Empirical Evidence on Occupation and Industry Specific Human Capital," MPRA Paper 863, University Library of Munich, Germany, revised Jun 2008. [Downloadable!]
  7. António Dias da Silva & Bas van der Klaauw, 2006. "Wage Dynamics and Promotions Inside and Between Firms," IZA Discussion Papers 2351, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  8. Alós-Ferrer, Carlos & Prat, Julien, 2008. "Job Market Signaling and Employer Learning," IZA Discussion Papers 3285, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Daniel Parent, 2002. "Incentives? The Effect of Profit Sharing Plans Offered by Previous Employers on Current Wages," CIRANO Working Papers 2002s-54, CIRANO. [Downloadable!]
    Other versions:
  10. Thomas Lemieux & W. Bentley Macleod & Daniel Parent, 2006. "Performance Pay And Wage Inequality," Departmental Working Papers 2006-08, McGill University, Department of Economics. [Downloadable!]
    Other versions:
  11. von Wachter, Till & Bender, Stefan, 2004. "In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers’ Careers," IZA Discussion Papers 1348, Institute for the Study of Labor (IZA). [Downloadable!]
  12. Dohmen, Thomas J., 2003. "Performance, Seniority and Wages: Formal Salary Systems and Individual Earnings Profiles," IZA Discussion Papers 935, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  13. Lopez-Pablos, Rodrigo A., 2007. "Health Econometric: Uncovering the Anthropometric Behavior on the Women's Labor Market," MPRA Paper 5961, University Library of Munich, Germany, revised 02 Feb 2008. [Downloadable!]
  14. Christina Gathmann & Uta Schönberg, 2006. "How General Is Specific Human Capital?," IZA Discussion Papers 2485, Institute for the Study of Labor (IZA). [Downloadable!]
  15. Jennifer Hunt & Sonia Laszlo, 2006. "Bribery: Who Pays, Who Refuses, What Are The Payoffs?," Departmental Working Papers 2006-06, McGill University, Department of Economics. [Downloadable!]
    Other versions:
  16. João Carlos Cerejeira da Silva, 2004. "Estimating the employer size-wage premium in a panel data model with comparative advantage and non-random selection," NIPE Working Papers 6/2004, NIPE - Universidade do Minho. [Downloadable!]
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