IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Plant Turnover and the Evolution of Regional Inequalities

  • Jose Varejao

    ()

  • Anabela Carneiro

    ()

Understanding the evolution of earnings inequality is a major research topic with obvious policy implications. While there is widespread belief that institutions are largely responsible for the limited rise in inequality in some European countries, it is also recognised that little or no growth in inequality could be the outcome of market forces alone. However, the role of these market forces in different institutional environments is still not entirely understood. Is the small growth in inequality at the country level reflecting small increases in inequality within and between groups or is it the result of large offsetting changes in different components? Using a large longitudinal matched employer-employee dataset we produce several measures of within and between groups inequality in Portugal for the 1986-1998 period. We focus our attention on changes in the returns to observable characteristics (gender, age and education) of workers and test the hypothesis that these changes reflect developments in the labour market. However, we depart from previous research by shifting focus from the supply side to the demand side of the labour market. Drawing on the results of the by-now large literature on plant turnover we investigate the link between plant entry and exit and changing returns to observable worker characteristics. We argue that Portugal is an interesting case study because, despite very tight regulation and a centralised wage setting system, the level and changes of earnings inequality in recent years make the Portuguese case akin to the US and UK cases rather than to other European cases that share with Portugal similar labour market institutions. Furthermore, high firing costs have previously been identified as the cause for a larger share of employment adjustment occurring in Portugal through plant openings and closings as an alternative to the expansion and contraction of continuing plants. Our analysis is done at the regional level - 28 regions in mainland Portugal (NUTS III) are considered. The advantages of working at the regional level are twofold. First, data for all regions come from the same source - the Personnel Records - which eliminates all issues of comparability that plague many studies dealing with international comparisons. Second, regional comparisons within the same country guarantees a common institutional background which is appropriate given our focus on the role market forces play in shaping patterns of changing earnings inequality. Personnel Records are an administrative survey administered by the Ministry of Employment which is mandatory to all plants with at least one wage earner. Data reported by respondents include characteristics of the plant (location, industry and size), the firm they belong to (location, industry, total employment, annual sales and legal status) and each worker in the plant. Reported worker characteristics include gender, age, education, skill, tenure, earnings and weekly hours of work). Because each plant is assigned a unique invariant identifier, plants can be followed across waves and entries and exits can be identified. On average, the data contains information on 200 thousand plants and 2 million workers per year.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www-sre.wu-wien.ac.at/ersa/ersaconfs/ersa05/papers/709.pdf
Download Restriction: no

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa05p709.

as
in new window

Length:
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:wiw:wiwrsa:ersa05p709
Contact details of provider: Postal: Welthandelsplatz 1, 1020 Vienna, Austria
Web page: http://www.ersa.org

References listed on IDEAS
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.:

as in new window
  1. Haltiwanger, John C. & Lane, Julia I. & Spletzer, James R., 2007. "Wages, productivity, and the dynamic interaction of businesses and workers," Labour Economics, Elsevier, vol. 14(3), pages 575-602, June.
  2. Francine D. Blau & Lawrence M. Kahn, 1994. "International Differences in Male Wage Inequality: Institutions versus Market Forces," NBER Working Papers 4678, National Bureau of Economic Research, Inc.
  3. Peter Gottschalk & Mary Joyce, 1997. "Cross-National Differences in the Rise in Earnings Inequality: Market and Institutional Factors," Boston College Working Papers in Economics 366, Boston College Department of Economics.
  4. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, June.
  5. Chinhui Juhn, 1999. "Wage inequality and demand for skill: Evidence from five decades," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 52(3), pages 424-443, April.
  6. Ana Rute Cardoso, 1999. "Firms' wage policies and the rise in labor market inequality: The case of Portugal," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 53(1), pages 87-102, October.
  7. Ana Rute Cardoso, 1999. "Firms' Wage Policies and the Rise in Labor Market Inequality: The Case of Portugal," ILR Review, Cornell University, ILR School, vol. 53(1), pages 87-102, October.
  8. Chinhui Juhn, 1999. "Wage Inequality and Demand for Skill: Evidence from Five Decades," ILR Review, Cornell University, ILR School, vol. 52(3), pages 424-443, April.
  9. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
  10. Lambson, V.E., 1989. "Industry Evolution With Sunk Costs And Uncertian Market Conditions," Working papers 8904, Wisconsin Madison - Social Systems.
  11. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May.
  12. Julia I. Lane & John C. Haltiwanger & James Spletzer, 1999. "Productivity Differences across Employers: The Roles of Employer Size, Age, and Human Capital," American Economic Review, American Economic Association, vol. 89(2), pages 94-98, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa05p709. 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: (Gunther Maier)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.