Please enable JavaScript.
Coggle requires JavaScript to display documents.
Why do wages differ? (Incentive Pay (Back-loaded Compensation (Due to back…
Why do wages differ?
Incentive Pay
-
Efficiency Wage
Holzer, Katz & Krueger (1991); Krueger
(1991)
- 2 sectors: primary and secondary
- Efficiency wage premium given to discourage shirking
Back-loaded Compensation
- Due to back-loaded incentives, contributes to concave age-earnings profile
Krueger (1991), Kotlikoff & Gokhale (1992)
- Worker is initially paid w<VMP
- If worker stays, worker is paid w>VMP
- Discourages worker from shirking by withholding compensation
- Supports a mandatory retirement age
Bonding Critique
- Workers get paid lower efficiency wage, but pay the company a bond
- Company gets to keep the bond if worker shirks
- Very rare; workers may not have resources to pay bond
Discrimination
-
-
Blinder-Oaxaca Decomposition:
- Partial: Decomposition without controversial characteristics
- Full: Decomposition with controversial characteristics
Audit studies, Bertrand & Mullainatan (2004), Goldin & Rouse (2000), Doleac & Stein (2013)
Human Capital Model
Signalling Model
Signalling Model
- Education does not increase productivity
- Education serves as a signal of worker's ability
- More education leads to higher wages
Mixed Signalling Model
- Education increases productivity and also serves as a signal
- Leads to overinvestment in education which is wasteful
Tyler, Murnane & Willett (2000) shows GED (and education) to be a significant signal.
-
-
-