can falling supply explain the rising return to college for younger men a cohort based analysis although the college high school wage gap for younger u s men has doubled over the past 30 years the gap for older men has remained nearly constant in the united kingdom and canada the college high school wage gap also increased for younger relative to older men using a model with imperfect substitution between similarly educated workers in different age groups we argue that these shifts reflect changes in the relative supply of highly educated workers across age groups the driving force behind these changes is the slowdown in the rate of growth of educational attainment that began with cohorts born in the early 1950s in all three countries

unemployment in south africa the nature of the beast abstract unemployment in south africa is so widespread that it demands an explanation this paper examines a central question about south african unemployment why do the unemployed not enter the informal sector as is common in other developing countries the data do not support the idea that unemployment is largely voluntary the policy implications that government should diminish labor market segmentation and the obstacles to entering the productive informal sector may be relevant also to other developing countries with high unemployment

on involuntary unemployment this paper argues that on a proper definition of equilibrium involuntary unemployment equilibrium is a logically coherent concept it then proposes two alternative routes of modeling the labor market efficiency wage and fairness which allows an equ ilibrium with involuntary unemployment copyright 1987 by royal economic society

estimating the firm s labor supply curve in a new monopsony framework school teachers in missouri in the context of certain dynamic models it is possible to infer the elasticity of labor supply to the firm from the elasticity of the quit rate with respect to the wage using this property we estimate the average labor supply elasticity to public school districts in missouri we leverage the plausibly exogenous variation in prenegotiated district salary schedules to instrument for actual salary these estimates imply a labor supply elasticity of about 3 7 suggesting that school districts possess significant market power the presence of monopsony power in this teacher labor market may be partially explained by its institutional features

efficiency wages and the business cycle puzzle abstract the main thrust of this work is to open the real business cycle rbc methodology to non walrasian considerations and reciprocally to submit some non walrasian models to the discipline of the rbc approach in doing so we provide a first rbc model with involuntary unemployment and a suboptimal equilibrium path we also demonstrate the promise and difficulty of resolving the business cycle puzzle by appealing to quantity rationing in the labor market

farm productivity and rural poverty in india armed with new data we return to an old question from the pages of this journal to what extent do india s rural poor share in agricultural growth combining data from 24 household sample surveys spanning 35 years with other sources we estimate a model of the joint determination of consumption poverty measures agricultural wages and food prices we find that higher farm productivity brought both absolute and relative gains to poor rural households a large share of the gains was via wages and prices though these effects took time the benefits to the poor were not confined to those near the poverty line

efficiency wage models of unemployment one view h lorne carmichael persistent wage rigidity and involuntary unemployment appear to be recurrent problems in most economies what could be preventing the wage adjustment necessary to clear the labor market many recent papers claim to have found the answer in efficiency wage models this paper surveys this literature and attempts to evaluate its accomplishments it concludes that the efficiency wage models fail to explain wage rigidity or persistent involuntary unemployment persistent involuntary unemployment of workers is a recurrent problem in labor markets all over the world unemployed workers seem unable to find work even though they are willing to accept lower wages than those being paid employed workers with similar skills what could be preventing wages from adjusting to clear these markets many recent papers known collectively as the efficiency wage literature now claim to have the answer this paper will survey the efficiency wage literature and critically evaluate some of its accomplishments efficiency wage models have already been examined by yellen 1984 katz 1986 and stiglitz 1987 and have received generally favorable reviews this paper is more critical its overall conclusion is that efficiency wage models provide some useful insights into the workings of the labor market but they do not provide a satisfactory account of wage rigidity or involuntary unemployment there are at least five separate versions of the efficiency wage model they share a common structure however and this is outlined in the first section of the paper this section also attempts to relate efficiency wage models to other recent models of unemployment section ii examines and criticizes the different approaches in detail section iii evaluates the achievements of this approach and suggests some directions for future work i a general efficiency wage model efficiency wage models as the name suggests are first of all models of wages they generate unemployment by showing that firms will sometimes want to set wages at non market clearing levels it is useful to begin therefore by reviewing how wages and employment are determined in some related models in a perfectly competitive labor market the wage for each type of labor is adjusted constantly to maintain equality of supply and demand overall employment fluctuates in response to demand changes as workers move up and down their labor supply curves unemployment is voluntary in that anyone who is not working prefers that state to employment at the going wage for people of his skills as well the value of a worker s marginal product is equal to the marginal value of his leisure so there are no unexploited wage bargains between unemployed workers and firms this model is successful in predicting the long term response of wages to shifts in demand and supply but it is clear that in the short run its depiction of voluntary unemployment and flexible wages is unrealistic a natural way to generate more realism is to assume that wages are inflexible in the short run in this case a reduction in demand away from a long run equilibrium will lead to rationing of jobs by employers as they attempt to stay on their labor demand curves the unemployment here is involuntary in that the unemployed would prefer to be working at the going wage and is inefficient in that there are lost gains from trade between these workers and firms the weakness of this model is that it is silent about the mechanism that keeps wages rigid unemployed workers who offer to work for less than the fixed wage ought to find work the early implicit contract models of azariadis 1975 baily 1974 and gordon 1974 provide one explanation for wage rigidity these models introduced the idea that wages can do more than just clear the market for labor wages in an implicit contract model are used to shift the risk generated by uncertain output market conditions from risk averse workers to the risk neutral firm

the acid rain differential game this paper considers an acid rain differential game countries emit sulphur which is partly transferred to other countries depositions above critical loads ultimately destroy the soil countries face a trade off between the costs of emission reductions and the damage to the soil due to the depletion of the acid buffers because of the transboundary externalities the outcome will depend on whether the countries cooperate or not this paper presents the cooperative outcome and the open loop and markov perfect nash equilibria of the acid rain differential game it will be shown that the depositions always converge to the critical loads but the steady state levels of the buffer stocks differ the theory is used to analyse the acid rain differential game for sulphur between great britain and ireland finally some results are given for the whole of europe

transfer benefits from public works employment evidence for rural india current knowledge provides little guidance on one of the key questions in evaluating public employment schemes aimed at directly reducing poverty what are the net income gains to participating workers this paper offers an answer for rural public employment in two villages in the state of maharashtra in india a model of intrahousehold time allocation is proposed and estimates are made using household data over six years the empirical implementation indicates that the projects induce significant behavioral responses transfer benefits are large and are greatly underestimated using prevailing market wage rates for similar work to estimate forgone incomes copyright 1994 by royal economic society

on the self interested use of equity in international climate negotiations abstract we discuss self interested uses of equity arguments in international climate negotiations using unique data from a world wide survey of agents involved in international climate policy we show that the perceived support of different equity rules by regions may be explained by the ranking of their economic costs despite being self interested equity arguments may be perceived as being used for different reasons for example out of fairness considerations or in order to facilitate negotiations consistent with experimental and behavioral studies on fairness perceptions we find that individuals are more likely to state reasons with positive attributes if they evaluate their own region or regions that support the individual s personally preferred equity rule negotiators perceive the use of equity by regions as less influenced by pressure from interest groups

self enforcing contracts shirking and life cycle incentives he labor market is a rich and complicated place when a worker takes a job he expects to earn a wage but will also care about rates of wage growth fringe benefits levels of risk retirement practices pensions promotion and layoff rules seniority rights and grievance procedures in return the worker must give up some time but he is also asked to upgrade his skills train other workers provide effort and ideas and defer to authority in questions of how his time is spent great changes are occurring in the way labor market institutions such as these are modelled central to the new approach is the concept of a self enforcing implicit contract this is the latest in a series of variations on the ideas of azariadis 1975 baily 1974 and gordon 1974 and is one of the more exciting new developments in the theory of labor markets this essay will outline this approach and evaluate some of its accomplishments the ideas will be presented in the context of an incentive model that is of some independent interest the model was introduced by becker and stigler 1974 and was extended by lazear 1979 to account for wage growth and mandatory retirement in these papers the workers retire at a fixed age lending the name life cycle incentives to the approach more recently shapiro and stiglitz 1984 have used a version without a fixed retirement date to account for unemployment this version is often called the shirking model these models have generated some controversy but much of it can be resolved when the models are presented in the framework of self enforcing contracts in fact this simple incentive model can do even more it can provide a rationale for competitive hierarchies where firms place their workers in competition with

uniform externalities two axioms for fair allocation abstract positive resp negative preference externalities say that an agent always prefers his actual welfare to his virtual welfare should other agents share his preferences resp prefers his virtual to his actual welfare negative group externalities say that an agent never prefers his actual welfare to his virtual welfare should he be the sole user of the resources these two axioms unify several familiar fairness properties and yield some new ideas as well in the division of unproduced commodities and the cooperative production of a private or a public good we also discuss their compatibility with no envy and resource monotonicity

a simple auction mechanism for the optimal allocation of the commons efficient regulation of the commons requires information about the regulated firms that is rarely available to regulators e g cost of pollution abatement this paper proposes a simple mechanism that implements the first best for any number of firms a uniform price sealed bid auction of an endogenous number of transferable licenses with a fraction of the auction revenues given back to firms paybacks which rapidly decrease with the number of firms are such that truth telling is a dominant strategy regardless of whether firms behave non cooperatively or collusively the mechanism also provides firms with incentives to invest in socially optimal r d jel d44 d62 d82 q28 regulatory authorities generally find that part of the information they need for implementing an efficient regulation is in the hands of those who are to be regulated regulating externalities such as access to common resources e g clean air water streams fisheries etc is a good example environmental regulators for example know little about firms pollution abatement costs so without communicating with firms they would be unable to establish the efficient level of pollution a number of mechanisms have been proposed for inducing firms to reveal their private information but for different reasons

real wages in the business cycle and the theory of income distribution an unresolved conflict between theory and facts in mainstream macroeconomics the focus of this article is the recurring tension between mainstream macroeconomics and observed facts in connection with the difficult task of providing explanations of the business cycle consistent both with the traditional theory of income distribution and with the empirical evidence concerning the co movements of real wages and employment over the cycle the attempts to reconcile facts and theory have led to the continuous introduction of specific and arguably ad hoc hypotheses in contrast with the search for greater theoretical rigour claimed by the various streams of macroeconomic modelling subsequent to the neo classical synthesis in addition the specific assumptions introduced in the models or their implications are in turn often contradicted or at best not confirmed by subsequent empirical research it is suggested in the conclusions that the difficulty of keeping together in a simple and consistent framework theory and facts reflects the flawed theoretical foundations of mainstream theory

sharing a river abstract a group of agents located along a river have quasi linear preferences over water and money we ask how the water should be allocated and what money transfers should be performed the core lower bounds require that no coalition should get less than the welfare it could achieve by using the water it controls the aspiration upper bounds demand that no coalition enjoy a welfare higher than what it could achieve in the absence of the remaining agents exactly one welfare distribution satisfies the core lower bounds and the aspiration upper bounds it is the marginal contribution vector corresponding to the ordering of the agents along the river journal of economic literature classification numbers d62 c71

segmented labour markets and the estimation of wage functions this paper uses a stratified random sample of private sector employees to estimate wage equations for both the male labour market as a whole and six segments of the labour market segement which are defined with respect to the industry and size characteristics of the employing establishmen highly conventional results are obtained when wage equations are estimated for the male labour market as a whole or within two segements comprising almost half the survey population however one can reject conclusively the hypothesis that the same estimating equation is appropriate for modelling wage determination in all segments and if a human capital hk model is within segements tested against more appropriate alternative hypotheses for wage determination using the davidson and mackinnon 1981 methodology for the testing of non nested hypotheses the conclusion is that one should reject the hk specification and not reject the alternative it is therefore argued that the disaggregation of labour market dat

asymmetric non separation and rural labor markets abstract this paper develops and implements a test that provides insight into the state of rural labor markets the test is based on a theoretical link between a shortage or surplus in the labor market and asymmetric responses to changes in household composition we develop auxiliary tests to distinguish other market imperfections from labor market imperfections and provide evidence that most changes in household composition are exogenous to local labor market conditions we implement the test using data from ethiopia malawi tanzania and uganda the overall pattern is one of excess labor supply in rural areas with heterogeneity across cultivation phases genders and agro ecological zones surplus labor is most evident during low intensity cultivation phases in ethiopia there is suggestive evidence that credit constraints create a de facto labor shortage for poorer households there is also evidence of partial gender segmentation in rural labor markets

valuation methods and policy making in environmental economics 1 valuation methods and policy making in environmental economics relevance and scope h folmer e van ierland part i the valuation of public goods 2 non market asset prices a comparison of three valuation approaches r c d arge j f shogren 3 valuing public goods in a risky world an experiment p o johansson 4 recreational values pareto optimality and timber supply p o johansson k g lofgren k g maler 5 estimating social benefits of environmental improvements from reduced acid rain deposition a contingent valuation survey s navrud part ii the valuation of health and life 6 benefits of reduced morbidity from air pollution control a survey m dickie s gerking 7 valuing a public good direct and indirect valuation approaches to the measurement of the benefits from air pollution abatement m shechter m kim l golan 8 environmental regulation and the valuation of life interindustry mobility and the market price of safety h w herzog jr a m schlottmann part iii cost benefit analysis 9 disequilibrium cost benefit rules an exposition and extension p o johansson k g lofgren 10 macroeconomic cost benefit analysis of environmental programmes a nentjes part iv aspects of policy making 11 benefit estimation for complex policies a randall j hoehn 12 the acid rain game k g maler index

unemployment and interindustry labour mobility in canada in the 1980s the determinants of interindustry mobility of labour and its relationship to the unemployment rate is examined using micro data on canadian workers from 1980 81 1982 83 and 1985 86 it contrasts the implications of the dynamic reallocation model lilien 1982 in which rising aggregate unemployment is due to in creased dispersion in the net hiring rates of firms implying positive covariance of interindustry mobility and unemployment rates with the older keynesian perspective that high unemployment chills labour market mobility implying a neative relationship qualified support is obtained for the chilling model as well as standard results on the role of job tenure hours worked etc the general moral is the cyclical sensitivity of labour market behaviour i e individuals appear to react to the aggregate unemployment rate

characterizations of the pivotal mechanism the pivotal mechanism is strategyproof demand revealing in public decision problems where preferences are quasi linear moreover no agent has an incentive to free ride by withdrawing from the committee and consuming whatever decision is taken by the remaining agents strategyproofness plus no free ride characterize the pivotal mechanism this mechanism is anonymous and neutral yet together strategyproofness anonymity and neutrality do not characterize it they will however if reasonable lower or upper bounds on final utilities are imposed our last characterization of the pivotal mechanism uses the no free ride axiom and two mild monotonicity properties but not strategyproofness

fishing in different pools job search strategies and job finding success in canada in the early 1980s this article examines the job search methods of jobless workers and emphasizes sample selectivity in choice of job search strategies especially use of public employment agencies longitudinal data from the labour force survey of canada for 1981 1983 and 1986 indicate that job search methods change with the business cycle and that many people find jobs without any reported search the determinants of job search success also vary substantially over the business cycle implying a substantial social return to public employment agencies at the 1983 trough of the recession but no noticeable benefits when aggregate unemployment is relatively low

did henry ford pay efficiency wages we examine henry ford s introduction of the five dollar day in 1914 in an effort to evaluate the relevance of efficiency wage theories of wage and employment determination we conclude that the ford experience strongly supports the relevance of these theories ford s decision to increase wages dramatically is most plausibly the consequence of labor problems of the kind efficiency wage theorists stress the structure of the five dollar day program is consistent with the predictions of efficiency wage theories there is vivid evidence that the introduction of the five dollar day resulted in substantial queues for ford jobs significant increases in ford productivity and profits accompanied the new regime

sharing a river among satiable agents abstract we consider the problem of efficiently sharing water from a river among a group of satiable agents since each agent s benefit function exhibits a satiation point the environment can be described as a cooperative game with externalities we show that the downstream incremental distribution is the unique distribution which both is fair according to the aspiration welfare principle and satisfies the non cooperative core lower bounds on the other hand the cooperative core may be empty furthermore the downstream incremental distribution satisfies all core lower bounds for all connected coalitions if and only if each agent s individual rationality constraint is independent of the behavior of the other agents

wage determination in agricultural labour markets under monopsonist labour tying arrangements there is need for a study of wage formation in agricultural labour markets which can simultaneously explain the existence of involuntary unemployment on the one hand and responsiveness to market forces on the other this paper offers an analysis and empirical study of wage determination in a typical rural agricultural setting and finds that based on the notion of efficiency wages a two tier situation explains why rural wage rates are known to vary widely among workers and across regions

the elasticity of labor supply at the establishment level monopsonistic wage setting power requires that the supply of labor directed toward individual establishments is upward sloping this study utilizes institutional features to identify the supply curve the elasticity of labor supply is estimated using data for the norwegian teacher labor market in a period where the only variation in the wage level was determined centrally and with information on whether there is excess demand or not at the school level in fixed effects models the supply elasticity faced by individual schools is estimated to about 1 4 and is in the range 1 0 1 9 in different model specification

effect of flood on agricultural wages in bangladesh an empirical analysis summary this paper analyzes the effects of riverine floods on agricultural wages in bangladesh drawing upon the district wise monthly data over 1979 2000 we model wages as a dynamic process we find that floods have positive implications for wages in the long run in flood months however agricultural wages decline in the inundated districts we obtain difference in difference estimates to show that the magnitude of impact of flood depends on the relative flood proneness of a district and the relative severity of flood conditions our results indicate that favorable demand and supply conditions in the agricultural labor market can mitigate the impact of disasters on wages in bangladesh

cooperative equilibria in finite horizon noncooperative supergames abstract it is well known that cooperative outcomes can be supported by noncooperative equilibrium strategy combinations in games that are infinitely repeated however the example of the repeated prisoner s dilemma has led people to conclude that such cooperative outcomes cannot be sustained if the game is repeated finitely often in this paper it is proved that the belief about finitely repeated games is false conditions are given that allow the existence of cooperative outcomes in finitely repeated games that are supported by subgame perfect noncooperative equilibrium strategies

unemployment and the efficiency wage hypothesis there has been much recent discussion of the reasons why prices in certain markets and in particular in labour markets may not adjust to eliminate excess supply the absence of speedy adjustment of prices is an essential feature of the recent models of disequilibrium macroeconomics but for the most part no explanation for this absence is provided from within those models one explanation that has been around in the literature for some time and has been receiving increasing attention recently is the efficiency wage hypothesis initially applied to developing economies see leibenstein i957 it has more recently been adapted to developed economies by weiss i 980 and used in the context of a keynesian macroeconomic model by hart i 980 similar concepts have been applied to the credit market by stiglitz and weiss i98i the purpose of the present paper is to explore further the conditions under which the notion of an efficiency wage is applicable and can provide an explanation of involuntary unemployment the essential feature of the efficiency wage hypothesis is that the productivity of a firm s employees increases as their wage is increased at least over an economically relevant part of its range if the wage paid by the firm is denoted by w the number of employees by l and the productivity of each employee by p w where p w o then the effective labour force of the firm e can be represented by

differences in labor supply to monopsonistic firms and the gender pay gap an empirical analysis using linked employer employee data from germany this article investigates women s and men s labor supply to the firm within a semistructural approach based on a dynamic model of new monopsony using methods of survival analysis and a large linked employer employee data set for germany we find that labor supply elasticities are small 1 9 3 7 and that women s labor supply to the firm is less elastic than men s which is the reverse of gender differences in labor supply usually found at the level of the market our results imply that at least one third of the gender pay gap might be wage discrimination by profit maximizing monopsonistic employers

need entitlement and desert a distributive justice framework for consumption degrowth abstract post growth societies seek socio ecological transformations towards a just and sustainable redistribution and reduced consumption of natural capital there is no one universally just and ecologically sustainable way of fulfilling these redistribution and consumption objectives it depends on the criteria used and their underlying ethical teleology we suggest three distribution criteria borrowed from the foundations of the environmental justice ej movement need entitlement and desert by juxtaposing and problematising the needs entitlements and deserts of nature and society these criteria comprise an ethical framework for consumption degrowth praxis in communities we present arguments for how each distribution criterion fulfils the aims articulated in the degrowth corpus based on these arguments we propose seven justice based community action principles for redistribution under degrowth in our discussion of these derived principles we demonstrate that like ej degrowth seeks consequential as well as deontological justice underscoring their deep complementarity therefore our need entitlement desert framework may serve as a useful guiding frame to include ethical distribution considerations in societies pursuit of post growth futures

the oslo protocol on sulfur reduction the great leap forward the increasing number of international environmental agreements ieas and the fact that under some agreements emissions have been reduced beyond agreed targets are frequently viewed as success stories of international cooperation we argue that success can only be measured if abatement targets under an iea are compared with estimated abatement levels in the absence of a treaty and are evaluated in terms of costs and benefits we analyze the oslo protocol on sulfur reduction showing that this iea is not the great leap forward when compared with the calculated nash equilibrium and the social optimum however we also demonstrate that under the oslo protocol more ambitious targets could not have been realized due to strong free rider incentives

on input market frictions and estimation of factors demand in this article we explore the impact of imperfectly competitive input markets on production function estimation first order profit maximizing conditions are altered when frictions in input markets cause the elasticity of input supply to the firm to be finite a consequence of this is that the standard econometric model used for production function estimation will be misspecified we prove that in all nontrivial cases finite elasticities of supply to the firm will lead to inconsistent estimates of production function parameters monte carlo simulations show that the resulting bias can be economically significant

deagrarianization and rural employment in sub saharan africa a sectoral perspective abstract sub saharan africa is steadily becoming less rural in character for decades development thinking has prescribed industrialization as the virtuous path leading away from economic dependence on agriculture but africa s industrial record has been plagued with underperformance an alternative perspective centered on the process of deagrarianization and attendant rural employment generation may offer more explanatory power and policy direction this paper outlines key theoretical components and practical concerns of a deagrarianization approach the nature and incidence of deagrarianization in sub saharan africa is contrasted with that experienced in developed industrial countries conceptual approaches dealing with rural non agricultural employment are identified within different social science disciplines through a thematic review of the literature the conclusion highlights the need for more focused study of the deagrarianization process and rural service sector development

implementing the efficient allocation of pollution we provide simple mechanisms to implement the efficient allocation of pollution first assuming complete information across firms and then allowing for incomplete information both mechanisms operate by inducing firms to monitor one another using firms reports to determine pollution allotments and transfers the complete information mechanism determines a firm s transfer according to a linear pollution price set by other firms both mechanisms can be modified to be budget balanced in and out of equilibrium the complete information mechanism implements the efficient allocation even when firms are allowed to use mixed strategies under a single crossing condition the same holds for the incomplete information mechanism this abstract was borrowed from another version of this item

efficiency wage models of unemployment keynesian economists hold it to be self evident that business cycles are characterized by involuntary unemployment but construction of a model of the cycle with involuntary unemployment faces the obvious difficulty of explaining why the labor market does not clear involuntarily unemployed people by definition want to work at less than the going wage rate why don t firms cut wages thereby increasing profits

regulation via the polluter pays principle we consider the problem of regulating an economy with environmental pollution we examine the distributional impact of the polluter pays pp principle which requires that any agent compensates all other agents for the damages caused by his or her pollution emissions with constant marginal damages we show that regulation via the pp principle leads to the unique welfare distribution that induces non negative individual welfare change and renders each agent responsible for his or her pollution impact we extend both the pp principle and this result to increasing marginal damages due to pollution we also compare the pp principle with the vickrey clark groves scheme

family labour supply and labour market segmentation this paper examines the differences in individuals labour supply decisions in different segments of the labour market it tests one of the main hypotheses of the dual labour market theory that the labour market can be divided into at least two segments and also whether the family labour supply decisions of individuals differ in the two segments the possibility of individuals wage rates depending on the number of hours worked is recognized and a model is developed in which both the wage rates and hours of work of individuals are jointly determined with the personal income tax system as an intervening variable since hours of labour supply depend on the post tax wage rate whereas if the marginal product of labour is a positive function of hours worked this affects the pre tax wage rates other alternative wage functions are specified and a simultaneous equations labour supply model using three stage least squares 3sls procedure is estimated the results indicate that there was sample selectivity bias

wage determination in rural labour markets the theory of implicit co operation abstract this paper argues that the process of determination of daily wage rate in rural labour markets is best seen as an act of implicit co operation among workers using the framework of repeated non cooperative game it is argued that this hypothesis can explain better than existing theories several known features of a typical south asian rural labour market e g the co existence of involuntary unemployment with responsiveness to supply and demand plasticity of wage rate in some cases co existing with rigidity in others etc

wage differentials employer size and unemployment the unique equilibrium solution to a game in which a continuum of individual employers choose permanent wage offers and a continuum of workers search by sequentially sampling from the set of offers is characterized wage dispersion is a robust outcome provided that workers search while employed as well as when unemployed the unique nondegenerate equilibrium distribution of wage offers is constructed for three cases 1 identical workers and employers 2 identical employers and an atomless distribution of worker supply prices and 3 identical workers and an atomless distribution of job productivities copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

immigration and inequality immigration is often viewed as a proximate cause of the rising wage gap between highand low skilled workers nevertheless there is controversy over the appropriate theoretical and empirical framework for measuring the presumed effect and over the precise magnitudes involved this paper offers an overview and synthesis of existing knowledge on the relationship between immigration and inequality focusing on evidence from cross city comparisons in the u s while some researchers have claimed that a cross city research design is inherently flawed i argue that the evidence from cross city comparisons is remarkably consistent with recent findings based on aggregate time series data in particular cross city and aggregate time series comparisons provide support for three key conclusions 1 workers with below high school education are perfect substitutes for those with a high school education 2 high school equivalent and college equivalent workers are imperfect substitutes with an elasticity of substitution on the order of 2 3 within education groups immigrants and natives are imperfect substitutes together these results imply that the average impacts of recent immigrant inflows on the relative wages of u s natives are small the effects on overall wage inequality including natives and immigrants are larger reflecting the concentration of immigrants in the tails of the skill distribution and higher residual inequality among immigrants than natives even so immigration accounts for a small share 5 of the increase in u s wage inequality between 1980 and 2000

new market power models and sex differences in pay in the context of certain models it is possible to infer the elasticity of labor supply to the firm from the elasticity of the quit rate with respect to the wage we use this strategy to estimate the elasticity of labor supply for men and women workers at a chain of grocery stores identifying separation elasticities from differences in wages and separation rates across different job titles within the firm we estimate that women have lower elasticities so a robinson style monopsony model can explain reasonably well the lower relative pay of women in the retail grocery industry