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Alternative Models of Earnings Determination and Labor Market Structures


  • Eric A. Hanushek


There are three distinct research traditions in the analysis of individual earnings determination: human capital, or earnings function, analyses; aggregate wage analyses; and labor demand analyses. An important and incongruous aspect of each is the treatment of geographical differences in labor markets. This paper first investigates the magnitude and character of geographical wage differentials. The sizable differences discovered there are then related to the existing, and highly simplified, models of labor market differences. While the two major classes of models (compensating differentials and labor demand) differ significantly in assumptions and implications, it is impossible to distinguish adequately between them. There appears to be a clear need for more structural analyses of labor market operations.

Suggested Citation

  • Eric A. Hanushek, 1981. "Alternative Models of Earnings Determination and Labor Market Structures," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 238-259.
  • Handle: RePEc:uwp:jhriss:v:16:y:1981:i:2:p:238-259

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    References listed on IDEAS

    1. Ben-Porath, Yoram, 1973. "Labor-Force Participation Rates and the Supply of Labor," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 697-704, May-June.
    2. Richard B. Freeman & James L. Medoff, 1982. "The Youth Labor Market Problem in the United States: An Overview," NBER Chapters,in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 35-74 National Bureau of Economic Research, Inc.
    3. Arthur M. Okun, 1973. "Upward Mobility in a High-Pressure Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1), pages 207-262.
    4. Kim B. Clark & Lawrence H. Summers, 1982. "Labour Force Participation: Timing and Persistence," Review of Economic Studies, Oxford University Press, vol. 49(5), pages 825-844.
    5. George L. Perry, 1977. "Potential Output and Productivity," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(1), pages 11-60.
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    Cited by:

    1. David C Ribar, 2000. "County-Level Estimates of the Employment Prospects of Low-Skill Workers," Working Papers 00-11, Center for Economic Studies, U.S. Census Bureau.
    2. Jack E. Triplett, 1983. "Introduction: An Essay on Labor Cost," NBER Chapters,in: The Measurement of Labor Cost, pages 1-60 National Bureau of Economic Research, Inc.
    3. John Odland & Mark Ellis, 1998. "Variations in the Labour Force Experience of Women Across Large Metropolitan Areas in the United States," Regional Studies, Taylor & Francis Journals, vol. 32(4), pages 333-347.
    4. Miriam Maeder, 2014. "State-level heterogeneity in returns to secondary schooling in West Germany," Working Papers 147, Bavarian Graduate Program in Economics (BGPE).
    5. Paul E. Gabriel & Susanne Schmitz, 1995. "Favorable Self-Selection and the Internal Migration of Young White Males in the United States," Journal of Human Resources, University of Wisconsin Press, vol. 30(3), pages 460-471.
    6. Naser Daneshvary & William L. Weber, 1991. "Sources Of Wage Differentials Between Native And Immigrant Workers: A Regional Analysis," The Review of Regional Studies, Southern Regional Science Association, vol. 21(2), pages 119-135, Summer.
    7. Grubb, W. Norton, 2002. "Learning and earning in the middle, part II: state and local studies of pre-baccalaureate education," Economics of Education Review, Elsevier, vol. 21(5), pages 401-414, October.

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