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Efficiency wage and union effects in labor demand and wage structure in Mexico - An application of quantile analysis

Author

Listed:
  • Maloney, William F.
  • Pontual Ribeiro, Eduardo

Abstract

Applying quantile analysis to detailed firm-level data from Mexico, the authors study determinants of demand and wages for two classes of labor. Unions appear to have a strong impact on how much unskilled labor is employed but not on wages. This suggests an extreme example of"monopoly union"behavior. The impact on productivity is, by definition, negative, but unions could also be said to be forcing firms to use"appropriate technology"(less capital and more workers), increasing the total amount of labor employed in the economy. The only impact on wages appears for the tenth (lowest) quantile of unskilled workers, suggesting that unions prevent workers from being paid too far below the median for their skill level. The authors identify significant efficiency wage effects where firms pay above market clearing to prevent labor turnover both in labor demand and in the wage equations. Since minimum wages are not binding and the union impact on wages is small, this suggests that whatever segmentation exists emerges endogenously and is not due to union - or government - induced distortions. The authors offer the first use of quantile analysis to analyze labor demand at the firm level, and one of the first uses of correct standard errors in two-stage least-squares quantile regression.

Suggested Citation

  • Maloney, William F. & Pontual Ribeiro, Eduardo, 1999. "Efficiency wage and union effects in labor demand and wage structure in Mexico - An application of quantile analysis," Policy Research Working Paper Series 2131, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2131
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Susan Hayter & Bradley Weinberg, 2011. "Mind the Gap: Collective Bargaining and Wage Inequality," Chapters,in: The Role of Collective Bargaining in the Global Economy, chapter 6 Edward Elgar Publishing.
    2. Verner, Dorte, 2005. "Wage determination in Northeast Brazil," Policy Research Working Paper Series 3548, The World Bank.
    3. Blunch, Niels-Hugo & Verner, Dorte, 2001. "Asymmetries in union relative wage effects in Ghanaian manufacturing - an analysis applying quantile regressions," Policy Research Working Paper Series 2570, The World Bank.
    4. Blunch, Niels-Hugo & Verner, Dorthe, 2001. "Assymetries in Union Relative Wage Effects in Ghanian Manufacturing - An analysis Applying Quantile Regressions," CLS Working Papers 01-7, University of Aarhus, Aarhus School of Business, Centre for Labour Market and Social Research.
    5. Krebs, Tom & Maloney, William F., 1999. "Quitting and labor turnover : microeconomic evidence and macroeconomic consequences," Policy Research Working Paper Series 2068, The World Bank.
    6. Verner, Dorte, 2005. "Activities, employment, and wages in rural and semi-urban Mexico," Policy Research Working Paper Series 3561, The World Bank.
    7. Susan Hayter, 2015. "Unions and collective bargaining," Chapters,in: Labour Markets, Institutions and Inequality, chapter 4, pages 95-122 Edward Elgar Publishing.
    8. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
    9. Lopez-Acevedo, Gladys & Tinajero, Monica & Rubio, Marcela, 2005. "Mexico : human capital effects on wages and productivity," Policy Research Working Paper Series 3791, The World Bank.
    10. Fajnzylber, Pablo & Maloney, William F., 2001. "How comparable are labor demand elasticities across countries?," Policy Research Working Paper Series 2658, The World Bank.
    11. Maloney, William F., 1999. "Self-employment and labor turnover - cross-country evidence," Policy Research Working Paper Series 2102, The World Bank.
    12. Nicolai Kristensen & Dorte Verner, 2008. "Labor Market Distortions in Côte d'Ivoire: Analyses of Employer‐Employee Data from the Manufacturing Sector," African Development Review, African Development Bank, vol. 20(3), pages 343-377.
    13. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
    14. Arias, Omar, 2001. "Are men benefiting from the new economy : male economic marginalization in Argentina, Brazil, and Costa Rica," Policy Research Working Paper Series 2740, The World Bank.

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