IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp17878.html
   My bibliography  Save this paper

Estimating the Green Wage Premium

Author

Listed:
  • Kuai, Wenjing

    (Hunan University)

  • Elliott, Robert J. R.

    (University of Birmingham)

  • Okubo, Toshihiro

    (Keio University)

  • Ozgen, Ceren

    (University of Birmingham)

Abstract

To address climate change concerns, Japan is accelerating the greening of its economy. In this paper we analyze the characteristics of the workers that are contributing to the green transition and estimate the so-called green wage premium. Using propriety data from a recent worker-level survey for Japan, we provide a continuous measure of the degree to which a job can be considered green and document how green jobs are different from non-green jobs by sector, occupation and different demographics. Our structural model estimates of a green wage premium show that the hourly wage of green workers is 7.3% higher on average than non-green work- ers. A 10% increase in the green intensity of a job is shown to increase average hourly wages by 0.8%. Decomposition results suggest that the explainable part of the wage premium is largely due to task differences, gender disparities (in lower percentiles), and occupation. The unexplained part of the green wage premium are found mainly in high-paying green jobs where certain characteristics appear to be better rewarded, possibly driven by supply and demand imbalances.

Suggested Citation

  • Kuai, Wenjing & Elliott, Robert J. R. & Okubo, Toshihiro & Ozgen, Ceren, 2025. "Estimating the Green Wage Premium," IZA Discussion Papers 17878, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17878
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp17878.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Consoli, Davide & Marin, Giovanni & Marzucchi, Alberto & Vona, Francesco, 2016. "Do green jobs differ from non-green jobs in terms of skills and human capital?," Research Policy, Elsevier, vol. 45(5), pages 1046-1060.
    2. Francesco Vona & Giovanni Marin & Davide Consoli & David Popp, 2018. "Environmental Regulation and Green Skills: An Empirical Exploration," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(4), pages 713-753.
    3. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    4. Magnac, Thierry & Roux, Sébastien, 2021. "Heterogeneity and wage inequalities over the life cycle," European Economic Review, Elsevier, vol. 134(C).
    5. Fierro, Luca Eduardo & Caiani, Alessandro & Russo, Alberto, 2022. "Automation, Job Polarisation, and Structural Change," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 499-535.
    6. Francesco Vona & Giovanni Marin & Davide Consoli, 2019. "Measures, drivers and effects of green employment: evidence from US local labor markets, 2006–2014," Journal of Economic Geography, Oxford University Press, vol. 19(5), pages 1021-1048.
    7. Salvatore Lo Bello & Iacopo Morchio, 2022. "Like father, like son: Occupational choice, intergenerational persistence and misallocation," Quantitative Economics, Econometric Society, vol. 13(2), pages 629-679, May.
    8. Ju, Yiyi & Sugiyama, Masahiro & Kato, Etsushi & Oshiro, Ken & Wang, Jiayang, 2022. "Job creation in response to Japan’s energy transition towards deep mitigation: An extension of partial equilibrium integrated assessment models," Applied Energy, Elsevier, vol. 318(C).
    9. Herbert Gintis & Samuel Bowles & Melissa Osborne, 2001. "Incentive-Enhancing Preferences: Personality, Behavior, and Earnings," American Economic Review, American Economic Association, vol. 91(2), pages 155-158, May.
    10. David Card & Ana Rute Cardoso & Patrick Kline, 2016. "Bargaining, Sorting, and the Gender Wage Gap: Quantifying the Impact of Firms on the Relative Pay of Women," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(2), pages 633-686.
    11. Belzil, Christian, 2007. "The return to schooling in structural dynamic models: a survey," European Economic Review, Elsevier, vol. 51(5), pages 1059-1105, July.
    12. Okubo, Toshihiro, 2022. "Telework in the spread of COVID-19," Information Economics and Policy, Elsevier, vol. 60(C).
    13. Alderotti, Giammarco & Rapallini, Chiara & Traverso, Silvio, 2023. "The Big Five personality traits and earnings: A meta-analysis," Journal of Economic Psychology, Elsevier, vol. 94(C).
    14. Francesco Vona & Giovanni Marin & Davide Consoli & David Popp, 2018. "Environmental Regulation and Green Skills: An Empirical Exploration," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(4), pages 713-753.
    15. Matthias Doepke & Fabrizio Zilibotti, 2017. "Parenting With Style: Altruism and Paternalism in Intergenerational Preference Transmission," Econometrica, Econometric Society, vol. 85, pages 1331-1371, September.
    16. Marinescu, Ioana & Ouss, Ivan & Pape, Louis-Daniel, 2021. "Wages, hires, and labor market concentration," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 506-605.
    17. Jason Long & Joseph Ferrie, 2013. "Intergenerational Occupational Mobility in Great Britain and the United States since 1850: Reply," American Economic Review, American Economic Association, vol. 103(5), pages 2041-2049, August.
    18. David H. Autor & David Dorn, 2013. "The Growth of Low-Skill Service Jobs and the Polarization of the US Labor Market," American Economic Review, American Economic Association, vol. 103(5), pages 1553-1597, August.
    19. Elliott, Robert J.R. & Kuai, Wenjing & Maddison, David & Ozgen, Ceren, 2024. "Eco-innovation and (green) employment: A task-based approach to measuring the composition of work in firms," Journal of Environmental Economics and Management, Elsevier, vol. 127(C).
    20. Lucien Georgeson & Mark Maslin, 2019. "Estimating the scale of the US green economy within the global context," Palgrave Communications, Palgrave Macmillan, vol. 5(1), pages 1-12, December.
    21. repec:hal:spmain:info:hdl:2441/1fkb59dcsg9alqqq6qv18jj5us is not listed on IDEAS
    22. Leblebicioğlu, Asli & Weinberger, Ariel, 2021. "Openness and factor shares: Is globalization always bad for labor?," Journal of International Economics, Elsevier, vol. 128(C).
    23. Nick SOFRONIOU & Pauline ANDERSON, 2021. "The green factor: Unpacking green job growth," International Labour Review, International Labour Organization, vol. 160(1), pages 21-41, March.
    24. Prayag Lal Yadav & Seung Hun Han & Hohyun Kim, 2017. "Sustaining Competitive Advantage Through Corporate Environmental Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 26(3), pages 345-357, March.
    25. Lucia Kureková & Miroslav Beblavý & Anna Thum-Thysen, 2015. "Using online vacancies and web surveys to analyse the labour market: a methodological inquiry," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-20, December.
    26. Melissa Osborne & Herbert Gintis & Samuel Bowles, 2001. "The Determinants of Earnings: A Behavioral Approach," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1137-1176, December.
    27. Jens Horbach & Markus Janser, 2016. "The role of innovation and agglomeration for employment growth in the environmental sector," Industry and Innovation, Taylor & Francis Journals, vol. 23(6), pages 488-511, August.
    28. Rica, Sara De La & Gortazar, Lucas & Lewandowski, Piotr, 2020. "Job Tasks and Wages in Developed Countries: Evidence from PIAAC," Labour Economics, Elsevier, vol. 65(C).
    29. Haoran He & Sherry Xin Li & Yuling Han, 2023. "Labor Market Discrimination against Family Responsibilities: A Correspondence Study with Policy Change in China," Journal of Labor Economics, University of Chicago Press, vol. 41(2), pages 361-387.
    30. Greaney, Theresa M. & Tanaka, Ayumu, 2021. "Foreign Ownership, Exporting and Gender Wage Gaps: Evidence from Japanese Linked Employer-Employee Data," Journal of the Japanese and International Economies, Elsevier, vol. 61(C).
    31. Hara, Hiromi, 2018. "The gender wage gap across the wage distribution in Japan: Within- and between-establishment effects," Labour Economics, Elsevier, vol. 53(C), pages 213-229.
    32. Bluedorn, John & Hansen, Niels-Jakob & Noureldin, Diaa & Shibata, Ippei & Tavares, Marina M., 2023. "Transitioning to a greener labor market: Cross-country evidence from microdata," Energy Economics, Elsevier, vol. 126(C).
    33. Jeffrey M. Wooldridge, 2015. "Control Function Methods in Applied Econometrics," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 420-445.
    34. Bowen, Alex & Kuralbayeva, Karlygash & Tipoe, Eileen L., 2018. "Characterising green employment: The impacts of ‘greening’ on workforce composition," Energy Economics, Elsevier, vol. 72(C), pages 263-275.
    35. Nagatomo, Yu & Ozawa, Akito & Kudoh, Yuki & Hondo, Hiroki, 2021. "Impacts of employment in power generation on renewable-based energy systems in Japan— Analysis using an energy system model," Energy, Elsevier, vol. 226(C).
    36. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    37. Bowen, Alex & Kuralbayeva, Karlygash & Tipoe, Eileen L., 2018. "Characterising green employment: The impacts of ‘greening’ on workforce composition," Energy Economics, Elsevier, vol. 72(C), pages 263-275.
    38. Zhang, Jian & Jin, Songqing & Li, Tao & Wang, Haigang, 2021. "Gender discrimination in China: Experimental evidence from the job market for college graduates," Journal of Comparative Economics, Elsevier, vol. 49(3), pages 819-835.
    39. Jason Long & Joseph Ferrie, 2013. "Intergenerational Occupational Mobility in Great Britain and the United States since 1850," American Economic Review, American Economic Association, vol. 103(4), pages 1109-1137, June.
    40. Maczulskij, Terhi, 2024. "How are green jobs created? A decomposition analysis," Economics Letters, Elsevier, vol. 244(C).
    41. Patricia (Tish) Robinson & Catherine Sibala & Kiyohiko Ito & Vicki L. Beyer, 2022. "The deepening divide In Japanese employment: The increasing marginalization of contract workers as explained by path dependence, vested interests, and social psychology," Contemporary Japan, Taylor & Francis Journals, vol. 34(1), pages 13-41, January.
    42. Hu, Jiayin & Wang, Xuan & Yang, Qingxu & Yi, Junjian, 2024. "Gender disparities in the labor market during COVID-19 lockdowns: Evidence from online job postings and applications in China," Journal of Economic Behavior & Organization, Elsevier, vol. 223(C), pages 199-215.
    43. David J. Peters, 2014. "Understanding Green Occupations from a Task-Based Approach," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 36(2), pages 238-264.
    44. Rice, Nigel & Robone, Silvana, 2022. "The effects of health shocks on risk preferences: Do personality traits matter?," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 356-371.
    45. Esteban-Pretel, Julen & Fujimoto, Junichi, 2020. "Non-regular employment over the life-cycle: Worker flow analysis for Japan," Journal of the Japanese and International Economies, Elsevier, vol. 57(C).
    46. Judith K. Hellerstein & Melinda Sandler Morrill, 2011. "Dads and Daughters: The Changing Impact of Fathers on Women’s Occupational Choices," Journal of Human Resources, University of Wisconsin Press, vol. 46(2), pages 333-372.
    47. Fabo, Brian, & Kurekova, Lucia Mytna,, 2022. "Methodological issues related to the use of online labour market data," ILO Working Papers 995191692102676, International Labour Organization.
    48. Peter Arcidiacono & V. Joseph Hotz & Arnaud Maurel & Teresa Romano, 2020. "Ex Ante Returns and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 128(12), pages 4475-4522.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marin, Giovanni & Vona, Francesco, 2019. "Climate policies and skill-biased employment dynamics: Evidence from EU countries," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    2. Pablo de la Vega & Natalia Porto & Manuela Cerimelo, 2024. "Going green: estimating the potential of green jobs in Argentina," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 58(1), pages 1-18, December.
    3. repec:hal:spmain:info:hdl:2441/5ahh4t5kfl8nprei89ignlk5nl is not listed on IDEAS
    4. repec:spo:wpmain:info:hdl:2441/2vteelu0n785l82j764n6ul273 is not listed on IDEAS
    5. repec:spo:wpmain:info:hdl:2441/5ahh4t5kfl8nprei89ignlk5nl is not listed on IDEAS
    6. Janser, Markus, 2018. "The greening of jobs in Germany : First evidence from a text mining based index and employment register data," IAB-Discussion Paper 201814, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    7. repec:hal:spmain:info:hdl:2441/2vteelu0n785l82j764n6ul273 is not listed on IDEAS
    8. Bluedorn, John & Hansen, Niels-Jakob & Noureldin, Diaa & Shibata, Ippei & Tavares, Marina M., 2023. "Transitioning to a greener labor market: Cross-country evidence from microdata," Energy Economics, Elsevier, vol. 126(C).
    9. Elliott, Robert J.R. & Kuai, Wenjing & Maddison, David & Ozgen, Ceren, 2024. "Eco-innovation and (green) employment: A task-based approach to measuring the composition of work in firms," Journal of Environmental Economics and Management, Elsevier, vol. 127(C).
    10. Elliott, Robert J. R. & Kuai, Wenjing & Maddison, David & Ozgen, Ceren, 2021. "Eco-Innovation and Employment: A Task-Based Analysis," IZA Discussion Papers 14028, Institute of Labor Economics (IZA).
    11. Bachmann, Ronald & Janser, Markus & Lehmer, Florian & Vonnahme, Christina, 2024. "Disentangling the greening of the labour market: The role of changing occupations and worker flows," Ruhr Economic Papers 1099, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    12. Juliette Caucheteux & Sam Fankhauser & Sugandha Srivastav, 2025. "Climate Change Mitigation Policies for Developing Countries," Review of Environmental Economics and Policy, University of Chicago Press, vol. 19(1), pages 69-89.
    13. Jacqueline Mosomi & Wendy Cunningham, 2024. "Profiling green jobs and workers in South Africa: An occupational tasks approach," SALDRU Working Papers 305, Southern Africa Labour and Development Research Unit, University of Cape Town.
    14. Emilio Colombo & Alessia De Santo & Francesco Trentini, 2025. "Let's get green: understanding green skills and jobs through online job advertisements," DISEIS - Quaderni del Dipartimento di Economia internazionale, delle istituzioni e dello sviluppo dis2503, Università Cattolica del Sacro Cuore, Dipartimento di Economia internazionale, delle istituzioni e dello sviluppo (DISEIS).
    15. Rutzer, Christian & Niggli, Matthias, 2020. "Environmental Policy and Heterogeneous Labor Market Effects: Evidence from Europe," Working papers 2020/09, Faculty of Business and Economics - University of Basel.
    16. Lobsiger, Michael & Rutzer, Christian, 2021. "Green potential of Europe's labour force: Relative share and possible skills imbalances," Working papers 2021/04, Faculty of Business and Economics - University of Basel.
    17. Guia Bianchi, 2020. "Sustainability competences: A systematic literature review," JRC Research Reports JRC123624, Joint Research Centre.
    18. Barbieri, Nicolò & Consoli, Davide, 2019. "Regional diversification and green employment in US metropolitan areas," Research Policy, Elsevier, vol. 48(3), pages 693-705.
    19. Maczulskij, Terhi, 2024. "How are green jobs created? A decomposition analysis," Economics Letters, Elsevier, vol. 244(C).
    20. Vona, Francesco, 2023. "Managing the distributional effects of climate policies: A narrow path to a just transition," Ecological Economics, Elsevier, vol. 205(C).
    21. Becerra, Oscar & Piñeros, Juana, 2024. "Quantifying Green Job Potential in Colombia: A Task-Based Approach," Documentos CEDE 21270, Universidad de los Andes, Facultad de Economía, CEDE.
    22. Rutzer, Christian & Niggli, Matthias & Weder, Rolf, 2020. "Estimating the Green Potential of Occupations: A New Approach Applied to the U.S. Labor Market," Working papers 2020/03, Faculty of Business and Economics - University of Basel.
    23. Cirillo, Valeria & Divella, Marialuisa & Ferrulli, Eustachio & Greco, Lidia, 2024. "Active labor market policies in the framework of Just Transition Programs: the case of Italy, Spain, and Germany," Working Papers 79, Austrian Foundation for Development Research (ÖFSE).
    24. Filippo Bontadini & Francesco Vona, 2023. "Anatomy of Green Specialisation: Evidence from EU Production Data, 1995–2015," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(3), pages 707-740, August.

    More about this item

    Keywords

    Japan; wage gap; employment; green jobs; green transition; climate change;
    All these keywords.

    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp17878. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.