Individual Heterogeneity and Interindustry Wage Differentials
Estimates of interindustry wage differentials are obtained using a fixed-effects estimator on a long panel, the National Longitudinal Survey of Young Men (NLS). After controlling for observable worker characteristics, 84 percent of the residual variance of log wages across industries is explained by individual fixed-effects. Only 16 percent of the residual variance is "explained" by industry dummies. Since no controls for specific job characteristics are used, job characteristics that vary across industries could potentially explain this rather small residual across-industry log wage variance that is not attributable to individual effects. Clearly, then, these data do not force us to resort to non-competitive explanations of interindustry wage differentials, such as efficiency wage theory. Furthermore, efficiency wage theories predict that wages in efficiency wage paying (or primary) industries should be relatively rigid. Therefore, industry wage differentials should widen in recessions. However, no such tendency is found in the data.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lang, Kevin & Kahn, Shulamit, 1990. "Efficiency Wage Models of Unemployment: A Second View," Economic Inquiry, Western Economic Association International, vol. 28(2), pages 296-306, April.
- Stiglitz, Joseph E, 1985.
"Equilibrium Wage Distribution,"
Royal Economic Society, vol. 95(379), pages 595-618, September.
- Joseph E. Stiglitz, 1974. "Equilibrium Wage Distributions," Cowles Foundation Discussion Papers 375, Cowles Foundation for Research in Economics, Yale University.
- Joseph E. Stiglitz, 1984. "Equilibrium Wage Distributions," NBER Working Papers 1337, National Bureau of Economic Research, Inc.
- Duncan, Greg J & Holmlund, Bertil, 1983. "Was Adam Smith Right after All? Another Test of the Theory of Compensating Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 366-379, October.
- Duncan, Greg J. & Holmlund, Bertil, 1983. "Was Adam Smith Right, After All? Another Test of the Theory of Compensating Wage Differentials," Working Paper Series 93, Research Institute of Industrial Economics.
- Freeman, Richard B, 1984. "Longitudinal Analyses of the Effects of Trade Unions," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 1-26, January.
- Richard B. Freeman, 1983. "Longitudinal Analyses of the Effects of Trade Unions," NBER Working Papers 1207, National Bureau of Economic Research, Inc.
- Freeman, Richard Barry, 1984. "Longitudinal Analyses of the Effects of Trade Unions," Scholarly Articles 4631951, Harvard University Department of Economics.
- Keane, Michael & Moffitt, Robert & Runkle, David, 1988. "Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1232-1266, December.
- Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
- George A. Akerlof & Janet L. Yellen, 1985. "A Near-Rational Model of the Business Cycle, with Wage and Price Inertia," The Quarterly Journal of Economics, Oxford University Press, vol. 100(Supplemen), pages 823-838.
- Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-793, August.
- William T. Dickens & Lawrence F. Katz, 1987. "Inter-Industry Wage Differences and Theories of Wage Determination," NBER Working Papers 2271, National Bureau of Economic Research, Inc.
- Breusch, Trevor S & Mizon, Grayham E & Schmidt, Peter, 1989. "Efficient Estimation Using Panel Data," Econometrica, Econometric Society, vol. 57(3), pages 695-700, May.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
- Robert E. Hall, 1975. "The Rigidity of Wages and the Persistence of Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(2), pages 301-350.
- Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
- Wachter, Michael L, 1970. "Cyclical Variation in the Interindustry Wage Structure," American Economic Review, American Economic Association, vol. 60(1), pages 75-84, March. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:uwp:jhriss:v:28:y:1993:i:1:p:134-161. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.