Wage Differentials in Experimental Efficiency Wage Markets

In recent years, many econometric studies have confirmed the existence of inter-industry wage differentials. Even after controlling for a large number of joband worker related characteristics, and demographic variables, large and statistically significant industry wage differences remain. Moreover, these differences exist for union as well as for non-union workers and seem to be remarkably similar (i) across countries with different labor market institutions, (ii) across occupations, and (iii) across time. Two particularly interesting facts are that (a) high profit industries tend to pay high wages and (b) if one occupation in an industry is highly paid, all other occupations in that industry also tend to pay high wages (Dickens and Katz (1987), Katz and Summers (1989)).