We study a labour market in which ...rms can observe workers’ output but not their e¤ort, and in which a worker’s productivity in a given ...rm depends on a worker-...rm speci...c component, unobservable for the ...rm. Firms o¤er wage contracts that optimally trade o¤ effort and wage costs. As a result, employed workers enjoy rents, which in turn create unemployment. We show that the incentive ...

This paper explores the use of a loglinear tax and transfer function, displaying increasing marginal and average tax rates along with a means-tested transfer payment. The two parameters are a break-even income threshold, where the average tax rate is zero, and a tax parameter equivalent to the marginal tax rate at the breakeven income level. When combined with Cobb-Douglas utility, the resultin...

The central motivation of this article is to endogenous market structure (free entry) in the Kaleckian model. Using this model, we find that the model is unstable under a wage-led growth regime when the real interest rate is constant, but stable under a profit-led growth regime. On the other hand, if the interest rate is related to the growth rate, the stability condition depends on not only th...

We demonstrate that wage volatility, measured as the cross-sectional variance of wage changes in PSID data, is counter-cyclical. We quantify this relationship by estimating the regression coefficient of wage volatility on the national unemployment rate in a multilevel Bayesian model, then decompose this coefficient into three main factors. During a recession, wage volatility increases substanti...

India’s Increasing Skill Premium: Role of Demand and Supply The tertiary-secondary (college-high school) wage premium has been increasing in India over the past decade, but the increase differs across age groups. The increase in wage premium has been driven mostly by younger age groups, while older age groups have not experienced any significant increase. This paper uses the demand and supply m...

Standard search and matching models of equilibrium unemployment, once properly calibrated, can generate only a small amount of frictional wage dispersion, i.e., wage differentials among ex-ante similar workers induced purely by search frictions. We derive this result for a specific measure of wage dispersion—the ratio between the average wage and the lowest (reservation) wage paid. We show that...

This article uses data from the Survey of Labour and Income Dynamics (SLID) to investigate the extent to which factors not previously explored in the Canadian context account for wage differences between men and women. Like other studies using standard decomposition techniques and controlling for a variety of productivity-related characteristics, the results demonstrate that men still enjoy a w...

A large amount of recent evidence finds a negative relationship between local unemployment and wages in OECD countries, a relationship christened a ‘wage curve’. This contradicts the conventional model of the labour market in which high unemployment regions have higher wages to compensate for search and other costs. This paper discovers a wage curve in South Africa, a country with several times...

This paper investigates empirically the factors that influence real agricultural wage rates in Ghana, based on 1957 to 1991 data. The Johansen cointegration framework is used to examine long-run relationships among agricultural and urban wage rates, the domestic terms of trade between agriculture and nonagriculture, urban unemployment, capital stock in agriculture and the size of the rural popu...

The contribution of the present paper is threefold. First, we formally test whether the effect of calorie deprivation on wages is more significant/higher for the lower quantiles of workers. In the extant literature this is established through non-linear terms in the wage equation. A more satisfactory method of doing this is through quantile regressions. Second, the quantile regression approach ...