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What Can Monopsony Explain of the Gender Wage Differential in Italy?

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  • G. Sulis

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Abstract

This paper studies gender wage differentials in Italy using first-order predictions of monopsony-search models. It compares empirical predictions of these models against other competing ones of wage determination in non-competitive settings. The paper looks at the empirical relevance of the model in terms of third degree wage discrimination among men and women by estimating the labour supply elasticity to the individual firm. It also tests the monopsony model using a "natural" experiment. Italian administrative longitudinal data from INPS are used. Women have lower elasticity of labour supply yo the individual firm - employer size regressions indicate larger effects (and consequently lower elasticity) for women as predicted by the monopsony model. Using the theoretical dynamic monopsony-search model of Burdett and Mortensen (1998), wage elasticity of separations and recruits confirm this result. Using relative men/women employment effects resulting from institutional changes in wage indexation mechanism (Scala mobile), it is found that relative male employment responded differently in the two periods to the exogenous relative increase in the wage differential, as predicted by the monopsony model. Search frictions explain about 50% of the gender differential.

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Bibliographic Info

Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200713.

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Date of creation: 2007
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Handle: RePEc:cns:cnscwp:200713

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Keywords: monopsony; gender wage differentials; elasticity of labour supply; employer size-effect; italy;

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References

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  1. Alan Manning, 1993. "The Equal Pay Act as an Experiment to Test Theories of the Labour Market," CEP Discussion Papers dp0153, Centre for Economic Performance, LSE.
  2. Bowlus, Audra J, 1997. "A Search Interpretation of Male-Female Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 15(4), pages 625-57, October.
  3. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-59, October.
  4. Douglas Staiger & Joanne Spetz & Ciaran Phibbs, 2008. "Is There Monopsony In The Labor Market? Evidence From A Natural Experiment," Working Papers 1115, Princeton University, Department of Economics, Industrial Relations Section..
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  7. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
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  12. G. Sulis, 2007. "Gender Wage Differentials in Italy: a Structural Estimation Approach," Working Paper CRENoS 200715, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  13. F. Fakhfakh & F. Fitzroy F., 2003. "Dynamic Monopsony : Evidence from a French Establishement Panel," Working Papers ERMES 0312, ERMES, University Paris 2.
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  16. Hirsch, Barry T. & Schumacher, Edward J., 2005. "Classic or new monopsony? Searching for evidence in nursing labor markets," Journal of Health Economics, Elsevier, vol. 24(5), pages 969-989, September.
  17. William M. Boal & Michael R. Ransom, 1997. "Monopsony in the Labor Market," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 86-112, March.
  18. Daniele Checchi & Claudio Lucifora, 2002. "Unions and labour market institutions in Europe," Economic Policy, CEPR & CES & MSH, vol. 17(35), pages 361-408, October.
  19. Joseph G. Altonji & Rebecca M. Blank, . "Race and Gender in the Labor Market," IPR working papers 98-18, Institute for Policy Resarch at Northwestern University.
  20. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, May.
  21. Sullivan, Daniel, 1989. "Monopsony Power in the Market for Nurses," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages S135-78, October.
  22. Aaberge, Rolf & Colombino, Ugo & Strom, Steinar, 1999. "Labour Supply in Italy: An Empirical Analysis of Joint Household Decisions, with Taxes and Quantity Constraints," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(4), pages 403-22, July-Aug..
  23. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
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Citations

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Cited by:
  1. M. Pitzalis & I. Sulis & M. Porcu, 2008. "Differences of Cultural Capital among Students in Transition to University. Some First Survey Evidences," Working Paper CRENoS 200805, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  2. I. Sulis & M. Porcu, 2008. "Assessing the Effectiveness of a Stochastic Regression Imputation Method for Ordered Categorical Data," Working Paper CRENoS 200804, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  3. Vincenzo Scoppa, 2012. "Firm Size And Wages In Italy: Evidence From Exogenous Job Displacements," Working Papers 201201, Università della Calabria, Dipartimento di Economia, Statistica e Finanza (Ex Dipartimento di Economia e Statistica).

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