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Wage-setting Decisions on Newly Hired Employees:

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Author Info

  • Ana María iregui

    ()

  • Ligia Alba Melo B.

    ()

  • María Teresa Ramírez G.

    ()

Abstract

This paper uses a survey on wage formation that was applied to 1,305 Colombian firmsto study wage-setting decisions with respect to newly hired employees. The Colombiancase is interesting, since the country´s labour market performance, especially itsunemployment rate and level of informality, differs not only from the developedcountries, where studies of this type are concentrated, but also from most LatinAmerican countries. The replies to the survey indicate wages for the newly hired arebased mainly on a predefined wage structure. This may help to explain, in part, thepresence of downward nominal wage rigidities in Colombia, since firms are unwillingto differentiate the pay of new hires from the wages of existing workers. Using logitmodels, we find that the probability of wages being bargained between the employeeand the employer is less in the case of larger firms. On the contrary, the larger firms aremore likely to determine wages according to a predefined wage structure. In general,the presence of flexible benefits and variable pay reduces the probability of wagesbeing determined pursuant to a predefined wage structure. The results also indicate theworker´s educational level, experience and job duties are the main determinants of thewages of newly hired employees.

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Bibliographic Info

Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 007808.

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Length: 31
Date of creation: 19 Dec 2010
Date of revision:
Handle: RePEc:col:000094:007808

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Keywords: Wage setting; newly hired employees; wage rigidities survey evidence; logit; Colombia;

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References

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  1. Kamil Galuščắk & Mary Keeney & Daphne Nicolitsas & Frank Smets & Pawel Strzelecki & Matija Vodopivec, 2011. "The determination of wages of newly hired employees: survey evidence on internal versus external factors," Working Papers 129, Bank of Greece.
  2. Ana María Iregui & Ligia Alba Melo & María Teresa Ramírez, . "Formación e incrementos de salarios en Colombia: Un estudio microeconómico a partir de una encuesta a nivel de firma," Borradores de Economia 582, Banco de la Republica de Colombia.
  3. Ana María Iregui B. & Ligia Alba Melo B. & María Teresa Ramírez, 2010. "Wage differentials across economic sectors in the Colombian formal labour market: evidence from a survey of firms," BORRADORES DE ECONOMIA 007736, BANCO DE LA REPÚBLICA.
  4. Ana María Iregui B. & Ligia Alba Melo B. & María Teresa Ramírez G., 2010. "Downward Wage Rigidities and Other Firms´ Responses to an Economic Slowdown: Evidence from a Survey of Colombian Firms," BORRADORES DE ECONOMIA 007195, BANCO DE LA REPÚBLICA.
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Cited by:
  1. Luis Eduardo Arango & Nataly Obando & Carlos Esteban Posada, . "Los salarios reales a lo largo del ciclo económico en Colombia," Borradores de Economia 666, Banco de la Republica de Colombia.

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