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What Can Monopsony Explain of the Gender Wage Differential in Italy?

  • G. Sulis

    ()

This paper studies gender wage differentials in Italy using first-order predictions of monopsony-search models. It compares empirical predictions of these models against other competing ones of wage determination in non-competitive settings. The paper looks at the empirical relevance of the model in terms of third degree wage discrimination among men and women by estimating the labour supply elasticity to the individual firm. It also tests the monopsony model using a "natural" experiment. Italian administrative longitudinal data from INPS are used. Women have lower elasticity of labour supply yo the individual firm - employer size regressions indicate larger effects (and consequently lower elasticity) for women as predicted by the monopsony model. Using the theoretical dynamic monopsony-search model of Burdett and Mortensen (1998), wage elasticity of separations and recruits confirm this result. Using relative men/women employment effects resulting from institutional changes in wage indexation mechanism (Scala mobile), it is found that relative male employment responded differently in the two periods to the exogenous relative increase in the wage differential, as predicted by the monopsony model. Search frictions explain about 50% of the gender differential.

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Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200713.

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Date of creation: 2007
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Handle: RePEc:cns:cnscwp:200713
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  1. Hirsch, Barry T. & Schumacher, Edward J., 2005. "Classic or new monopsony? Searching for evidence in nursing labor markets," Journal of Health Economics, Elsevier, vol. 24(5), pages 969-989, September.
  2. Sullivan, Daniel, 1989. "Monopsony Power in the Market for Nurses," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages S135-78, October.
  3. Aaberge, Rolf & Colombino, Ugo & Strom, Steinar, 1999. "Labour Supply in Italy: An Empirical Analysis of Joint Household Decisions, with Taxes and Quantity Constraints," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(4), pages 403-22, July-Aug..
  4. Douglas O. Staiger & Joanne Spetz & Ciaran S. Phibbs, 2010. "Is There Monopsony in the Labor Market? Evidence from a Natural Experiment," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 211-236, 04.
  5. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, May.
  6. Altonji, Joseph G. & Blank, Rebecca M., 1999. "Race and gender in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 48, pages 3143-3259 Elsevier.
  7. Giovanni Sulis, 2012. "Gender wage differentials in Italy: a structural estimation approach," Journal of Population Economics, Springer, vol. 25(1), pages 53-87, January.
  8. Alan Manning & Ted To, 2002. "Oligopsony and Monopsonistic Competition in Labor Markets," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 155-174, Spring.
  9. Jolivet, Gregory & Postel-Vinay, Fabien & Robin, Jean-Marc, 2006. "The empirical content of the job search model: Labor mobility and wage distributions in Europe and the US," European Economic Review, Elsevier, vol. 50(4), pages 877-907, May.
  10. Christopher Erickson & Andrea Ichino, 1995. "Wage Differentials in Italy: Market Forces, Institutions, and Inflation," NBER Chapters, in: Differences and Changes in Wage Structures, pages 265-306 National Bureau of Economic Research, Inc.
  11. Erling Barth & Harald Dale-Olsen, 1999. "Monopsonistic Discrimination and the Gender-Wage Gap," NBER Working Papers 7197, National Bureau of Economic Research, Inc.
  12. Daniele Checchi & Claudio Lucifora, 2002. "Unions and labour market institutions in Europe," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 361-408, October.
  13. Green, Francis & Machin, Stephen & Manning, Alan, 1996. "The Employer Size-Wage Effect: Can Dynamic Monopsony Provide an Explanation?," Oxford Economic Papers, Oxford University Press, vol. 48(3), pages 433-55, July.
  14. Fathi Fakhfakh & Felix Fitzroy, 2006. "Dynamic Monopsony: Evidence from a French Establishment Panel," Economica, London School of Economics and Political Science, vol. 73(291), pages 533-545, 08.
  15. William M. Boal & Michael R. Ransom, 1997. "Monopsony in the Labor Market," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 86-112, March.
  16. Bowlus, Audra J, 1997. "A Search Interpretation of Male-Female Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 15(4), pages 625-57, October.
  17. repec:cup:cbooks:9780521590730 is not listed on IDEAS
  18. Torberg Falch, 2003. "Estimating the Elasticity of Labour Supply to an Enterprise Utilizing a Quasi–Natural Experiment," Working Paper Series 3303, Department of Economics, Norwegian University of Science and Technology.
  19. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  20. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  21. Alan Manning, 1993. "The Equal Pay Act as an Experiment to Test Theories of the Labour Market," CEP Discussion Papers dp0153, Centre for Economic Performance, LSE.
  22. Hirsch, Barry & Schumacher, Edward J., 2004. "Classic Monopsony or New Monopsony? Searching for Evidence in Nursing Labor Markets," IZA Discussion Papers 1154, Institute for the Study of Labor (IZA).
  23. William M. Boal, 1995. "Testing for Employer Monopsony in Turn-of-the-Century Coal Mining," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 519-536, Autumn.
  24. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
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