JMPIERCE: Stata module to perform Juhn-Murphy-Pierce decomposition

jmpierce computes the decomposition of differences between two outcome distributions introduced by Juhn, Murphy and Pierce (1993). Examples are the decomposition of changes in the income distribution over time, the decomposition of male-female wage differentials, or the decomposition of wage inequality differences between countries. This routine was previously circulated as jmp.

The Hierarchical Structure of the Firm: A Geometric Perspective

This paper incorporates hierarchical structure into the neoclassical theory of the firm. Firms are hierarchical in two respects: the organization of workers in production and the wage structure. The firm’s hierarchy is represented as the sector of a circle, where the radius represents the hierarchy’s height, the width of the sector represents the breadth of the hierarchy at a given height, and the angle of the sector represents span of control for any given supervisor. A perfectly competitive firm then chooses height and width, as well as capital inputs, in order to maximize profit. We analyze the short run and long run impact of changes in scale economies, input substitutability and input and output prices on the firm’s hierarchical structure. We find that the firm unambiguously becomes more hierarchical as the specialization of its workers increases or as its output price increases relative to input prices. The effect of changes in scale economies is contingent on the output price. The model also brings forth an analysis of wage inequality within the firm, which is found to be independent of technological considerations, and only depends on the firm’s wage schedule.

FDI and the labour market: a review of the evidence and policy implications

This paper presents a series of results concerning the labour-market impact of inward foreign direct investment (FDI) in the UK. The paper demonstrates that one of the crucial impacts of FDI is to increase wage inequality and the use of relatively more skilled labour in the domestic firms. This result is found to be a combination of two effects. First, the entry by a multinational enterprise (MNE) increases the demand for skilled workers in an industry or region, thus increasing wage inequality. Second, technology spillovers occur from foreign to domestic firms. As a result of these spillovers, relative demand for skilled workers increases in the domestic firms, further contributing to aggregate wage inequality and skill upgrading. The paper also considers how FDI impacts upon skill shares by productivity differentials between foreign and domestic firms. Finally, the policy implications of this are discussed, from the perspective of regional development, and the likely effectiveness of attracting FDI to reduce structural unemployment.

A dual definition for the factor content of trade and its effect on factor rewards in US manufacturing sector

We introduce a dual definition of the Factor Content of Trade (FCT) using the concept of the Equivalent Autarky Equilibrium. Estimating a symmetric normalized quadratic revenue function for the U.S. manufacturing sector between 1965 and 1991, we find that the FCT for capital is positive, while the FCT for skilled and unskilled labor is negative, suggesting that the Leontief Paradox is not present. Then the growth rate of the factor rewards is decomposed to the FCT, endowments, and technological change effects. We find that technological change is the most important determinant in explaining wage inequality between skilled and unskilled labor.

Waged domestic work in Argentina: the regulation of care provision

This paper addresses the condition of domestic work in Argentina, in a perspective that draws from the literature on care work. In this approach, domestic work can be interpreted as one of the mercantile forms in which care work is socially organized, due to the persistence of the traditional sexual division of labor and the weakness of public policies. From these considerations, I develop a quantitative study on the levels of informality, precarity, and wage inequality that characterize domestic work in that country. Thereafter, I discuss the main measures adopted by the Argentine government since 2003, with the goal of reducing legal discrimination of domestic workers and promoting their formalization. On this basis, the paper highlights the advances in the recognition of domestic workers’ labor rights, while emphasizing how social and cultural restraints still permeate labor relations in this sector.

Diferencias regionales en las estructuras de ingresos laborales en Colombia

Dada la persistencia de las diferencias en ingresos laborales por regiones en Colombia, el presente artículo propone cuantificar la magnitud de este diferencial que es atribuida a la diferencia en estructuras de mercado laboral, entendiendo esta última como la diferencia en los retornos a las características de la fuerza laboral. Para ello se propone el uso de un método de descomposición del tipo Oaxaca- Blinder y se compara a Bogotá –la ciudad con mayores ingresos laborales- con otras ciudades principales. Los resultados obtenidos al conducir el ejercicio de descomposición muestran que las diferencias en estructura están a favor de Bogotá y que estas explican más de la mitad de la diferencia total, indicando que si se quieren reducir las disparidades de ingresos laborales entre ciudades no es suficiente con calificar la fuerza laboral y que es necesario indagar por las causas que hacen que los retornos a las características difieran entre ciudades.

Las reformas emprendidas en Túnez de la mano del FMI y el BM ¿Precedente para la revolución de los Jazmines?”(1987-2010)

El estallido de la “Revolución de los Jazmines” cuestionó el éxito de un país que por más de dos décadas fue exaltado por el Banco Mundial (BM) y el Fondo Monetario Internacional (FMI) por los logros alcanzados gracias a un programa de restructuración económica. Las exigencias e inconformidades de los manifestantes, que iban más allá de la falta de garantías democráticas, permitieron ver que el país sufría de problemas estructurales relacionados a los altos niveles de desempleo, la precariedad de la situación laboral y la desigualdad. Esta monografía pretende evaluar el papel que tuvieron las reformas económicas y en general el modelo de desarrollo que siguió Túnez de la mano del FMI y el BM, en el surgimiento y consolidación de las condiciones que dieron lugar a la Revolución de los Jazmines a finales del año 2010.

Inequality for Wage Earners and Self-Employed: Evidence from Panel Data

Published as an article in: Oxford Bulletin of Economics and Statistics, 2009, vol. 71, issue 4, pages 491-518.

Essays on labour market dualisation in Western Europe: active labour market policies, temporary work regulation and inequality

European labour markets are increasingly divided between insiders in full-time permanent employment and outsiders in precarious work or unemployment. Using quantitative as well as qualitative methods, this thesis investigates the determinants and consequences of labour market policies that target these outsiders in three separate papers. The first paper looks at Active Labour Market Policies (ALMPs) that target the unemployed. It shows that left and right-wing parties choose different types of ALMPs depending on the policy and the welfare regime in which the party is located. These findings reconcile the conflicting theoretical expectations from the Power Resource approach and the insider-outsider theory. The second paper considers the regulation and protection of the temporary work sector. It solves the puzzle of temporary re-regulation in France, which contrasts with most other European countries that have deregulated temporary work. Permanent workers are adversely affected by the expansion of temporary work in France because of general skills and low wage coordination. The interests of temporary and permanent workers for re-regulation therefore overlap in France and left governments have an incentive to re-regulate the sector. The third paper then investigates what determines inequality between median and bottom income workers. It shows that non-inclusive economic coordination increases inequality in the absence of compensating institutions such as minimum wage regulation. The deregulation of temporary work as well as spending on employment incentives and rehabilitation also has adverse effects on inequality. Thus, policies that target outsiders have important economic effects on the rest of the workforce. Three broader contributions can be identified. First, welfare state policies may not always be in the interests of labour, so left parties may not always promote them. Second, the interests of insiders and outsiders are not necessarily at odds. Third, economic coordination may not be conducive to egalitarianism where it is not inclusive.

Income inequality in a job-search model with heterogeneous discount factors: (revised version, forthcoming 2006, Revista Economia)

This paper investigates the income inequality generated by a jobsearch process when di§erent cohorts of homogeneous workers are allowed to have di§erent degrees of impatience. Using the fact the average wage under the invariant Markovian distribution is a decreasing function of the discount factor (Cysne (2004, 2006)), I show that the Lorenz curve and the between-cohort Gini coe¢ cient of income inequality can be easily derived in this case. An example with arbitrary measures regarding the wage o§ers and the distribution of time preferences among cohorts provides some insights into how much income inequality can be generated, and into how it varies as a function of the probability of unemployment and of the probability that the worker does not Önd a job o§er each period.

Income inequality in a job-search model with heterogeneous time preferences

This paper explores the use of an intertemporal job-search model in the investigation of within-cohort and between-cohort income inequality, the latter being generated by the heterogeneity of time preferences among cohorts of homogenous workers and the former by the cross-sectional turnover in the job market. It also offers an alternative explanation for the empirically-documented negative correlation between time preference and labor income. Under some speciÖc distributions regarding wage offers and time preferences, we show how the within-cohort and between-cohort Gini coe¢ cients of income distribution can be calculated, and how they vary as a function of the parameters of the model.

On the positive correlation between income inequality and unemployment

Several empirical studies in the literature have documented the existence of a positive correlation between income inequalitiy and unemployment. I provide a theoretical framework under which this correlation can be better understood. The analysis is based on a dynamic job search under uncertainty. I start by proving the uniqueness of a stationary distribution of wages in the economy. Drawing upon this distribution, I provide a general expression for the Gini coefficient of income inequality. The expression has the advantage of not requiring a particular specification of the distribution of wage offers. Next, I show how the Gini coefficient varies as a function of the parameters of the model, and how it can be expected to be positively correlated with the rate of unemployment. Two examples are offered. The first, of a technical nature, to show that the convergence of the measures implied by the underlying Markov process can fail in some cases. The second, to provide a quantitative assessment of the model and of the mechanism linking unemployment and inequality.

Towards a measure of income inequality freed from the volatility caused by variations in the rate of unemployment

By mixing together inequalities based on cyclical variables, such as unemployment, and on structural variables, such as education, usual measurements of income inequality add objects of a di§erent economic nature. Since jobs are not acquired or lost as fast as education or skills, this aggreagation leads to a loss of relavant economic information. Here I propose a di§erent procedure for the calculation of inequality. The procedure uses economic theory to construct an inequality measure of a long-run character, the calculation of which can be performed, though, with just one set of cross-sectional observations. Technically, the procedure is based on the uniqueness of the invariant distribution of wage o§ers in a job-search model. Workers should be pre-grouped by the distribution of wage o§ers they see, and only between-group inequalities should be considered. This construction incorporates the fact that the average wages of all workers in the same group tend to be equalized by the continuous turnover in the job market.

Inflation and income inequality: A link through the job-search process

In this paper I devise a new channel by means of which the (empirically documented) positive correlation between ináation and income inequality can be understood. Available empirical evidence reveals that ináation increases wage dispersion. For this reason, the higher the ináation rate, the higher turns out to be the beneÖt, for a worker, of making additional draws from the distribution of wages, before deciding whether to accept or reject a job o§er. Assuming that some workers have less access to information (wage o§ers) than others, I show that the Gini coe¢ cient of income distribution turns out to be an increasing function of the wage dispersion and, consequently, of the rate of ináation. Two examples are provided to illustrate the mechanism.

Income inequality: the role of impatience in a job-search process

This paper investigates the income inequality generated by a jobsearch process when di§erent cohorts of homogeneous workers are allowed to have di§erent degrees of impatience. Using the fact the average wage under the invariant Markovian distribution is a decreasing function of the time preference (Cysne (2004)), I show that the Lorenz curve and the between-cohort Gini coe¢ cient of income inequality can be easily derived in this case. An example with arbitrary measures regarding the wage o§ers and the distribution of time preferences among cohorts provides some quantitative insights into how much income inequality can be generated, and into how it varies as a function of the probability of unemployment and of the probability that the worker does not Önd a job o§er each period.