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The sources of interindustry wage differentials

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Author Info
Ferreira P () (Institute for Social and Economic Research)

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Abstract

We analyse the nature of interindustry wage differentials using Portuguese data. Estimates from models controlling for observed worker and firm characteristics reveal significant and persistent raw interindustry differentials, which questions the competitive model of the labour market. However, estimates controlling for unobserved worker heterogeneity suggest that the raw differentials are due to the concentration of high wage workers in certain industries and not to genuine differences in compensation across industries. However, a complete decomposition shows that (i) firm effects on average explain 70% of the industry wage premia, and (ii) genuine and sizeable interindustry wage differentials exist. These differentials are shown to increase the time to separation from firms, and are therefore compatible with the competitive model.

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File URL: http://www.iser.essex.ac.uk/publications/working-papers/iser/2009-13.pdf
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Paper provided by Institute for Social and Economic Research in its series ISER working papers with number 2009-13.

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Date of creation: 01 Apr 2009
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Publication status: published
Handle: RePEc:ese:iserwp:2009-13

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Postal: Publications Office, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ UK
Phone: 44-1206-872957
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Web page: http://www.iser.essex.ac.uk/

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Postal: Publications Office, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ UK
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Web: http://www.iser.essex.ac.uk/publications/

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This page was last updated on 2009-11-26.

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