The industry premium: What we know and what the New Zealand data say
Earning regressions often reveal time-invariant industry premiums. Competitive theories explain them by referring to unobservable characteristics or compensating differentials. Non-competitive theories do the same by using efficiency wage, insider-outsider and rent sharing hypotheses. Those theories appear inadequate for explaining what one observes from the New Zealand data: employees receive industry premiums; but so do their self-employed counterparts; among those with no formal education industry premiums from employment are smaller than those from self-employment; but as the cohort's education level increases the premium differential increases and becomes positive. To explain those observations I propose a new hypothesis that measures an industry's total factor productivity and the corresponding industry premium.
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Volume (Year): 35 (2001)
Issue (Month): 1 ()
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