Economists generally assume, implicitly, that “the return to schooling” is invariant across local labor markets. We demonstrate that this outcome pertains if and only if preferences are homothetic—a special case that seems unlikely. Our theory predicts that returns to education will instead be relatively low in expensive high-amenity locations. Our analysis of U.S. data provides support for thi...

Gender Pay Gaps among Highly Educated Professionals: Compensation Components Do Matter Making use of panel data from a survey of highly educated professionals, gender pay gaps are explored with regard to total compensation as well as to individual compensation components. The results indicate meaningful male-female wage differentials for this quite homogeneous group of people working in one spe...

We propose a framework to estimate earnings distributions and worker and firm unobserved heterogeneity on matched panel data. We introduce two models: a static model that allows for interaction effects between workers and firms, and a dynamic model that allows in addition for Markovian dynamics in earnings and mobility decisions. We establish identification in short panels. We develop a tractab...

Many compensation schemes consist of cash ̄ow streams with different risk characteristics. For example, bonuses, which help align a ®rm's wage bill with business cycle ̄uctuations, are more variable than regular (®xed) pay. We investigate empirical regularities in compensation schemes involving risky pay which is contingent on certain random outcomes. Using data for Germany, Japan and the US, w...

Labor Market Pooling, Outsourcing and Labor Contracts Economic regions, such as urban agglomerations, face external demand and price shocks that produce income risk. Workers in large and diversified agglomerations may benefit from reduced wage volatility, while firms may outsource the production of intermediate goods and realize benefits from Chamberlinian externalities. Firms may also protect ...

Opening the capital account allows financially constrained firms to raise capital from abroad. Since capital and skilled labor are relative complements, this increases the relative demand for skilled labor versus unskilled labor, leading to higher wage inequality. Using aggregate data and exploiting variation in the timing of capital account openings across 20 mainly European countries, I find ...

Labor Market Effects of Immigration: Evidence from Neighborhood Data This paper combines individual-level data from the German Socio-Economic Panel (SOEP) with economic and demographic postcode-level data from administrative records to analyze the effects of immigration on wages and unemployment probabilities of highand low-skilled natives. Employing an instrumental variable strategy and utiliz...

We offer a unified analysis of the growth of low-skill service occupations between 1980 and 2005 and the concurrent polarization of US employment and wages. We hypothesize that polarization stems from the interaction between consumer preferences, which favor variety over specialization, and the falling cost of automating routine, codifiable job tasks. Applying a spatial equilibrium model, we co...

Paying More to Hire the Best? Foreign Firms, Wages and Worker Mobility In the context of the debate on the labour-market consequences of globalisation, we examine worker mobility in order to identify the wage differences between foreign and domestic firms. Using matched employer-employee panel data for Portugal, we consider virtually all spells of interfirm mobility over a period of ten years. ...

Risk Aversion and Sorting into Public Sector Employment This research note uses two German data sets – the large-scale German Socio-Economic Panel and unique data from own student questionnaires – to analyse the relationship between risk aversion and the choice for public sector employment. Main results are: (1) more risk averse individuals sort into public sector employment, (2) the impact of ...