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The Assimilation of Young Workers into the Labour Market in France: A Stochastic Earnings Frontier Approach

Listed author(s):
  • Bazen, Stephen

    ()

    (Aix-Marseille University)

  • Waziri, Khalid Maman

    ()

    (Aix Marseille University)

Stochastic earnings frontiers have been used in a relatively small number of papers to analyse workers' ability to capture their full potential earnings in labour markets where there is inefficient job matching (due to lack of information, discrimination, over-education or during process of assimilation of migrants). Using a representative survey of young persons having left full-time education in France in 1998 and interviewed in 2001 and 2005, this paper examines the process of their assimilation into normal employment and the extent to which job matches are inefficient in the sense that the pay in a job is below an individual's potential earnings (determined by education, other forms of training and labour market experience). Our results suggest that young workers manage to obtain on average about 82% of their potential earnings three years after leaving full-time education and earnings inefficiency had disappeared four years later. The results are robust to the treatment of selectivity arising from the exclusion of the unemployed in the estimation of the frontier.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 10841.

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Length: 34 pages
Date of creation: Jun 2017
Handle: RePEc:iza:izadps:dp10841
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  1. Schmidt, Peter & Lin, Tsai-Fen, 1984. "Simple tests of alternative specifications in stochastic frontier models," Journal of Econometrics, Elsevier, vol. 24(3), pages 349-361, March.
  2. Ma Ángeles Díaz, 2011. "Gender and potential wage in Europe: a stochastic frontier approach," International Journal of Manpower, Emerald Group Publishing, vol. 32(4), pages 410-425, July.
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  4. Daneshvary, Nasser, et al, 1992. "Job Search and Immigrant Assimilation: An Earnings Frontier Approach," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 482-492, August.
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  8. Herzog, Henry W, Jr & Hofler, Richard A & Schlottmann, Alan M, 1985. "Life on the Frontier: Migrant Information, Earnings and Past Mobility," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 373-382, August.
  9. Hung-pin Lai, 2015. "Maximum likelihood estimation of the stochastic frontier model with endogenous switching or sample selection," Journal of Productivity Analysis, Springer, vol. 43(1), pages 105-117, February.
  10. Kumbhakar,Subal C. & Wang,Hung-Jen & Horncastle,Alan P., 2015. "A Practitioner's Guide to Stochastic Frontier Analysis Using Stata," Cambridge Books, Cambridge University Press, number 9781107029514, March.
  11. Hofler, Richard A & Murphy, Kevin J, 1992. "Underpaid and Overworked: Measuring the Effect of Imperfect Information on Wages," Economic Inquiry, Western Economic Association International, vol. 30(3), pages 511-529, July.
  12. Günter Lang, 2005. "The difference between wages and wage potentials: Earnings disadvantages of immigrants in Germany," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 3(1), pages 21-42, April.
  13. Hung-Jen Wang, 2002. "Heteroscedasticity and Non-Monotonic Efficiency Effects of a Stochastic Frontier Model," Journal of Productivity Analysis, Springer, vol. 18(3), pages 241-253, November.
  14. Polachek, Solomon W & Yoon, Bong Joon, 1987. "A Two-tiered Earnings Frontier Estimation of Employer and Employee Information in the Labor Market," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 296-302, May.
  15. Bishop, John A. & Grodner, Andrew & Liu, Haiyong & Chiou, Jong-Rong, 2007. "Gender earnings differentials in Taiwan: A stochastic frontier approach," Journal of Asian Economics, Elsevier, vol. 18(6), pages 934-945, December.
  16. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
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