Permanent versus transitory wage differentials and the inequality-hours hypothesis
This paper disentangles the effect of inequality in permanent and transitory wages on hours worked by, first, estimating the two components for Swedish industries and, second, using the resulting estimates as explanatory variables in an hours-worked equation. Consistent with Bell and Freeman’s (2001) inequality-hours hypothesis, permanent wage differentials are found to have a positive effect on individuals’ hours of work while transitory wage differentials have no effect. However, the analysis also shows that, in estimated hours-worked equations, inequality in observed wages is potentially a good approximation for inequality in permanent wages.
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- Dahlberg, Matz & Gustavsson, Magnus, 2005.
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- repec:cup:cbooks:9780521848053 is not listed on IDEAS
- Peter Fredriksson & Robert H. Topel, 2010. "Wage Determination and Employment in Sweden Since the Early 1990s: Wage Formation in a New Setting," NBER Chapters, in: Reforming the Welfare State: Recovery and Beyond in Sweden, pages 83-126 National Bureau of Economic Research, Inc.
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- Bell, Linda A. & Freeman, Richard B., 2001.
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- Linda A. Bell & Richard B. Freeman, 2000. "The Incentive for Working Hard: Explaining Hours Worked Differences in the U.S. and Germany," NBER Working Papers 8051, National Bureau of Economic Research, Inc.
- David Campbell & Francis Green, 2002. "The Long Term Pay-Off From Working Longer Hours," Studies in Economics 0205, School of Economics, University of Kent.
- Booth, Alison L. & Francesconi, Marco & Frank, Jeff, 2003. "A sticky floors model of promotion, pay, and gender," European Economic Review, Elsevier, vol. 47(2), pages 295-322, April.
- George J. Borjas, 1980. "The Relationship between Wages and Weekly Hours of Work: The Role of Division Bias," Journal of Human Resources, University of Wisconsin Press, vol. 15(3), pages 409-423.
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