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Production Function and Wage Equation Estimation with Heterogeneous Labor: Evidence from a New Matched Employer-Employee Data Set

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Judith K. Hellerstein
David Neumark

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Abstract

In this paper, we first describe the 1990 DEED, the most recently constructed matched employer-employee data set for the United States that contains detailed demographic information on workers (most notably, information on education). We then use the data from manufacturing establishments in the 1990 DEED to update and expand on previous findings, using a more limited data set, regarding the measurement of the labor input and theories of wage determination. We find that the productivity of women is less than that of men, but not by enough to fully explain the gap in wages, a result that is consistent with wage discrimination against women. In contrast, we find no evidence of wage discrimination against blacks. We estimate that both the wage and productivity profiles are rising but concave to the origin (consistent with profiles quadratic in age), but the estimated relative wage profile is steeper than the relative productivity profile, consistent with models of deferred wages. We find a productivity premium for marriage equal to that of the wage premium, and a productivity premium for education that somewhat exceeds the wage premium. Exploring the sensitivity of these results, we also find that different specifications of production functions do not have any qualitative effects on the these results. Finally, the results indicate that the returns to productive inputs (capital, materials, labor quality) as well as the residual variance are virtually unaffected by the choice of the construction of the labor quality input.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10325.

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Date of creation: Feb 2004
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Handle: RePEc:nbr:nberwo:10325

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Find related papers by JEL classification:
J7 - Labor and Demographic Economics - - Labor Discrimination
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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  3. Judith K. Hellerstein & David Neumark, 2002. "Ethnicity, Language, and Workplace Segregation: Evidence from a New Matched Employer-Employee Data Set," NBER Working Papers 9037, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Z, Griliches ; Jacques Mairesse, . "Production Functions : The Search for Identification," Working Papers 97-30, Centre de Recherche en Economie et Statistique. [Downloadable!]
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  5. Eric J. Bartelsman & Mark Doms, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September. [Downloadable!] (restricted)
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  6. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February. [Downloadable!] (restricted)
  7. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December. [Downloadable!] (restricted)
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  1. Andrea Ichino & Guido Schwerdt & Rudolf Winter-Ebmer & Josef Zweimüller, 2007. "Too Old to Work, Too Young to Retire?," IZA Discussion Papers 3110, Institute for the Study of Labor (IZA). [Downloadable!]
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  2. Kathryn Shaw & Edward P. Lazear, 2007. "Tenure and Output," NBER Working Papers 13652, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Rosario Crinò & Paolo Epifani, 2009. "Export Intensity and Productivity," Development Working Papers 271, Centro Studi Luca d\'Agliano, University of Milano. [Downloadable!]
  4. Thierry Lallemand & François Rycx, 2009. "Are Young and Old WorkersS Harmful for Firm Productivity ?," Working Papers CEB 09-002.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
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  5. Judith Hellerstein & David Neumark, 2005. "Using Matched Employer-Employee Data to Study Labor Market Discrimination," IZA Discussion Papers 1555, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Kyoji Fukao & Ryo Kambayashi & Daiji Kawaguchi & Hyeog Ug Kwon & Young Gak Kim & Izumi Yokoyama, 2006. "Deferred Compensation: Evidence from Employer-Employee Matched Data from Japan," Hi-Stat Discussion Paper Series d06-187, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  7. Uschi Backes-Gellner & Stephan Veen, 2007. "Aging Workforces and Challenges to Human Resource Management in German Firms," Working Papers 0079, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  8. Jean-Olivier Hairault & Arnaud Chéron & François Langot, 2007. "Job Creation and Job Destruction over the Life Cycle: The Older Workers in the Spotlight," IZA Discussion Papers 2597, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Karakaya, Güngör, 2008. "Early cessation of activity in the labour market: impact of supply and demand factors," MPRA Paper 13390, University Library of Munich, Germany. [Downloadable!]
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  10. Mika Maliranta & Rita Asplund, 2007. "Training and Hiring Strategies to Improve Firm Performance," Discussion Papers 1105, The Research Institute of the Finnish Economy. [Downloadable!]
  11. Johannes Van Biesebroeck, 2007. "Wages Equal Productivity. Fact or Fiction?," Working Papers tecipa-294, University of Toronto, Department of Economics. [Downloadable!]
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  12. Øivind A. Nilsen, Arvid Raknerud, Marina Rybalka and Terje Skjerpen, 2008. "Skill Composition: Exploring a Wage-based Skill Measure," Discussion Papers 531, Research Department of Statistics Norway. [Downloadable!]
  13. Bourlès, Renaud & Cette, Gilbert, 2005. "A comparison of structural productivity levels in the major industrialised countries," MPRA Paper 7330, University Library of Munich, Germany. [Downloadable!]
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  14. Fox, Jeremy T. & Smeets, Valérie, 2007. "Do Input Quality and Structural Productivity Estimates Drive Measured Differences in Firm Productivity?," Working Papers 07-2, University of Aarhus, Aarhus School of Business, Department of Economics. [Downloadable!]
  15. Johannes Van Biesebroeck, 2007. "Wage and Productivity Premiums in Sub-Saharan Africa," NBER Working Papers 13306, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Rebecca M. Blank & Heidi Shierholz, 2006. "Exploring Gender Differences in Employment and Wage Trends Among Less-Skilled Workers," NBER Working Papers 12494, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Tim Simcoe & David Waguespack & Lee Fleming, 2008. "What's in a (Missing) Name? Status and Signaling in Open Standards Development," Working Papers 08-31, NET Institute, revised Oct 2008. [Downloadable!]
  18. ASANO Hirokatsu & KAWAGUCHI Daiji, 2007. "Male-Female Wage and Productivity Differentials: A Structural Approach Using Japanese Firm-level Panel Data," Discussion papers 07020, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
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