Regional income disparities have increased in many European countries recently, even as national and supra-national policy instruments were created to correct them. To explain these evolutions, we develop a two-region, two-sector model with migration and public investment in infrastructure and education. Accumulation and creation of new ideas and technologies as well as migration are at the core of differential regional growth. In this framework, we assess the effectiveness of structural funds, modeled on the EU policy. In a numerical example calibrated to Portugal, we find that, to diminish the initial gap in income per capita, the backward region needs to receive over 8% of its own GDP in structural funds, while the actual disbursements were around 4%. We also find that maximizing innovation in the backward region conflicts in the short run with the goal of maximizing its income per capita. Moreover, the rich region has an incentive to bias the allocation of structural funds towards human capital formation.
{"title":"Growth Effects of Spatial Redistribution Policies","authors":"Calin Arcalean, G. Glomm, Ioana Schiopu","doi":"10.2139/ssrn.960475","DOIUrl":"https://doi.org/10.2139/ssrn.960475","url":null,"abstract":"Regional income disparities have increased in many European countries recently, even as national and supra-national policy instruments were created to correct them. To explain these evolutions, we develop a two-region, two-sector model with migration and public investment in infrastructure and education. Accumulation and creation of new ideas and technologies as well as migration are at the core of differential regional growth. In this framework, we assess the effectiveness of structural funds, modeled on the EU policy. In a numerical example calibrated to Portugal, we find that, to diminish the initial gap in income per capita, the backward region needs to receive over 8% of its own GDP in structural funds, while the actual disbursements were around 4%. We also find that maximizing innovation in the backward region conflicts in the short run with the goal of maximizing its income per capita. Moreover, the rich region has an incentive to bias the allocation of structural funds towards human capital formation.","PeriodicalId":428258,"journal":{"name":"CAEPR: Center for Applied Economics & Policy Research Working Paper Series","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125581950","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Farmer, Waggoner, and Zha (2009) show that a new Keynesian model with a regime-switching monetary policy rule can support multiple solutions that depend only on the fundamental shocks in the model. Their note appears to find solutions in regions of the parameter space where there should be no bounded solutions, according to conditions in Davig and Leeper (2007). This puzzling finding is straightforward to explain: Farmer, Waggoner, and Zha (FWZ) derive solutions using a model that differs from the one to which the Davig and Leeper (DL) conditions apply. FWZ's multiple solutions rely on special assumptions about the correlation structure between fundamental shocks and policy regimes, blurring the distinction between "deep" parameters that govern behavior and the parameters that govern the exogenous shock processes, and making it difficult to ascribe any economic interpretation to FWZ's solutions.
Farmer, Waggoner, and Zha(2009)表明，具有制度转换货币政策规则的新凯恩斯模型可以支持仅依赖模型中基本冲击的多种解决方案。根据Davig和Leeper(2007)的条件，他们的笔记似乎在参数空间中不应该有界解的区域中找到解。这个令人困惑的发现很容易解释:Farmer、Waggoner和Zha (FWZ)使用的模型不同于Davig和Leeper (DL)条件适用的模型，他们得出了解决方案。FWZ的多重解决方案依赖于关于基本冲击和政策制度之间相关结构的特殊假设，模糊了控制行为的“深层”参数和控制外生冲击过程的参数之间的区别，使得很难将任何经济解释归因于FWZ的解决方案。
{"title":"Reply to Generalizing the Taylor Principle: A Comment","authors":"Troy A. Davig, E. Leeper","doi":"10.2139/ssrn.1416904","DOIUrl":"https://doi.org/10.2139/ssrn.1416904","url":null,"abstract":"Farmer, Waggoner, and Zha (2009) show that a new Keynesian model with a regime-switching monetary policy rule can support multiple solutions that depend only on the fundamental shocks in the model. Their note appears to find solutions in regions of the parameter space where there should be no bounded solutions, according to conditions in Davig and Leeper (2007). This puzzling finding is straightforward to explain: Farmer, Waggoner, and Zha (FWZ) derive solutions using a model that differs from the one to which the Davig and Leeper (DL) conditions apply. FWZ's multiple solutions rely on special assumptions about the correlation structure between fundamental shocks and policy regimes, blurring the distinction between \"deep\" parameters that govern behavior and the parameters that govern the exogenous shock processes, and making it difficult to ascribe any economic interpretation to FWZ's solutions.","PeriodicalId":428258,"journal":{"name":"CAEPR: Center for Applied Economics & Policy Research Working Paper Series","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131252242","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Modeling club structures as bipartite directed networks, we formulate the problem of club formation as a noncooperative game of network formation and identify conditions on network formation rules and players’ network payoffs sufficient to guarantee that the game has a potential function. Our sufficient conditions on network formation rules require that each player be choose freely and unilaterally those clubs he joins and also his activities within these clubs (subject to his set of feasible actions). We refer to our conditions on rules as noncooperative free mobility. We also require that players’ payoffs be additively separable in player-specific payoffs and externalities (additive separability) and that payoff externalities — a function of club membership, club activities, and crowding — be identical across players (externality homogeneity). We then show that under these conditions, the noncooperative game of club network formation is a potential game over directed club networks and we discuss the implications of this result.
{"title":"Club Networks with Multiple Memberships and Noncooperative Stability","authors":"Frank H. Page, M. Wooders","doi":"10.2139/ssrn.1348634","DOIUrl":"https://doi.org/10.2139/ssrn.1348634","url":null,"abstract":"Modeling club structures as bipartite directed networks, we formulate the problem of club formation as a noncooperative game of network formation and identify conditions on network formation rules and players’ network payoffs sufficient to guarantee that the game has a potential function. Our sufficient conditions on network formation rules require that each player be choose freely and unilaterally those clubs he joins and also his activities within these clubs (subject to his set of feasible actions). We refer to our conditions on rules as noncooperative free mobility. We also require that players’ payoffs be additively separable in player-specific payoffs and externalities (additive separability) and that payoff externalities — a function of club membership, club activities, and crowding — be identical across players (externality homogeneity). We then show that under these conditions, the noncooperative game of club network formation is a potential game over directed club networks and we discuss the implications of this result.","PeriodicalId":428258,"journal":{"name":"CAEPR: Center for Applied Economics & Policy Research Working Paper Series","volume":"61 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-02-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122583161","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We model the structure and strategy of social interactions prevailing at any point in time as a directed network and we address the following open question in the theory of social and economic network formation: given the rules of network and coalition formation, preferences of individuals over networks, strategic behavior of coalitions in forming networks, and the trembles of nature, what network and coalitional dynamics are likely to emergence and persist. Our main contributions are to formulate the problem of network and coalition formation as a dynamic, stochastic game and to show that: (i) the game possesses a pure stationary equilibrium (in network and coalition formation strategies), (ii) together with the trembles of nature, this stationary equilibrium determines an equilibrium Markov process of network and coalition formation, and (iii) this endogenous Markov process possesses a finite set of ergodic measures, and generates a finite, disjoint collection of nonempty subsets of networks and coalitions, each constituting a basin of attraction. Moreover, we extend to the setting of endogenous Markov dynamics the notions of path dominance core (Page-Wooders, 2009) and pairwise stability (Jackson-Wolinsky, 1996). We show that in order for any network-coalition pair to emerge and persist, it is necessary that the pair reside in one of finitely many basins of attraction. As an example, we consider a dynamic noncooperative game of club network formation and we demonstrate conditions ensuring that, even if multiple club memberships are allowed, there exists an pure stationary equilibrium where the only club networks which emerge and persist are those where players are members of a single club. The results we obtain here for endogenous network dynamics and stochastic basins of attraction are the dynamic analogs of our earlier results on endogenous network formation and strategic basins of attraction in static, abstract games of network formation (Page and Wooders, 2009), and build on the seminal contributions of Jackson and Watts (2002), Konishi and Ray (2003), and Dutta, Ghosal, and Ray (2005).
{"title":"Endogenous network dynamics","authors":"Frank H. Page, M. Wooders","doi":"10.2139/ssrn.1344439","DOIUrl":"https://doi.org/10.2139/ssrn.1344439","url":null,"abstract":"We model the structure and strategy of social interactions prevailing at any point in time as a directed network and we address the following open question in the theory of social and economic network formation: given the rules of network and coalition formation, preferences of individuals over networks, strategic behavior of coalitions in forming networks, and the trembles of nature, what network and coalitional dynamics are likely to emergence and persist. Our main contributions are to formulate the problem of network and coalition formation as a dynamic, stochastic game and to show that: (i) the game possesses a pure stationary equilibrium (in network and coalition formation strategies), (ii) together with the trembles of nature, this stationary equilibrium determines an equilibrium Markov process of network and coalition formation, and (iii) this endogenous Markov process possesses a finite set of ergodic measures, and generates a finite, disjoint collection of nonempty subsets of networks and coalitions, each constituting a basin of attraction. Moreover, we extend to the setting of endogenous Markov dynamics the notions of path dominance core (Page-Wooders, 2009) and pairwise stability (Jackson-Wolinsky, 1996). We show that in order for any network-coalition pair to emerge and persist, it is necessary that the pair reside in one of finitely many basins of attraction. As an example, we consider a dynamic noncooperative game of club network formation and we demonstrate conditions ensuring that, even if multiple club memberships are allowed, there exists an pure stationary equilibrium where the only club networks which emerge and persist are those where players are members of a single club. The results we obtain here for endogenous network dynamics and stochastic basins of attraction are the dynamic analogs of our earlier results on endogenous network formation and strategic basins of attraction in static, abstract games of network formation (Page and Wooders, 2009), and build on the seminal contributions of Jackson and Watts (2002), Konishi and Ray (2003), and Dutta, Ghosal, and Ray (2005).","PeriodicalId":428258,"journal":{"name":"CAEPR: Center for Applied Economics & Policy Research Working Paper Series","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-02-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116965055","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The purpose of the present paper is to relate two important concepts of time series analysis, namely, nonlinearity and persistence. Traditional measures of persistence are based on correlations or periodograms, which may be inappropriate under nonlinearity and/or non-Gaussianity. This article proves that nonlinear persistence can be characterized by cumulative measures of dependence. The new cumulative measures are nonparametric, simple to estimate and do not require the use of any smoothing user-chosen parameters. In addition, we propose nonparametric estimates of our measures and establish their limiting properties. Finally, we employ our measures to analyze the nonlinear persistence properties of some international stock market indices, where we find an ubiquitous nonlinear persistence in conditional variance that is not accounted for by popular parametric models or by classical linear measures of persistence. This finding has important economic implications in, e.g., asset pricing and hedging. Conditional variance persistence in bull and bear markets is also analyzed and compared.
{"title":"Persistence in Nonlinear Time Series: A Nonparametric Approach","authors":"J. Escanciano, J. Hualde","doi":"10.2139/ssrn.1346052","DOIUrl":"https://doi.org/10.2139/ssrn.1346052","url":null,"abstract":"The purpose of the present paper is to relate two important concepts of time series analysis, namely, nonlinearity and persistence. Traditional measures of persistence are based on correlations or periodograms, which may be inappropriate under nonlinearity and/or non-Gaussianity. This article proves that nonlinear persistence can be characterized by cumulative measures of dependence. The new cumulative measures are nonparametric, simple to estimate and do not require the use of any smoothing user-chosen parameters. In addition, we propose nonparametric estimates of our measures and establish their limiting properties. Finally, we employ our measures to analyze the nonlinear persistence properties of some international stock market indices, where we find an ubiquitous nonlinear persistence in conditional variance that is not accounted for by popular parametric models or by classical linear measures of persistence. This finding has important economic implications in, e.g., asset pricing and hedging. Conditional variance persistence in bull and bear markets is also analyzed and compared.","PeriodicalId":428258,"journal":{"name":"CAEPR: Center for Applied Economics & Policy Research Working Paper Series","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-02-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121859417","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Traditionally, Dynamic Scoring calculations experiments are carried out using representative agent based macroeconomic models. Existing literature does not provide any objection to this approach. In this paper, I develop a heterogeneous agent model similar to the Saver-Spenders model of Mankiw (2000). But spenders in my model are merely credit constrained and not rule-of-thumb consumers. Both groups are intertemporal optimizers because of the existence of Internal Habit Persistence. Transition path of most of the macro and fiscal variables for various tax cuts under alternative financing scheme shows pattern which are significantly different and sometimes contrasting to the representative agent model. Dynamic scoring calculations reveal a downward bias of the representative agent model. Underestimation of the dynamic response could be as large as 45%. Finally, steady state results indicate smaller impact of contractionary policies on major fiscal variables such as net tax revenue and tax base. Over all, the paper argues that the need to use heterogeneous agent based model in dynamic fiscal calculations is not only desirable, but also essential.
{"title":"Should Dynamic Scoring Be Done with Heterogeneous Agent-Based Models? Challenging the Conventional Wisdom","authors":"M. Rahman","doi":"10.2139/ssrn.1270634","DOIUrl":"https://doi.org/10.2139/ssrn.1270634","url":null,"abstract":"Traditionally, Dynamic Scoring calculations experiments are carried out using representative agent based macroeconomic models. Existing literature does not provide any objection to this approach. In this paper, I develop a heterogeneous agent model similar to the Saver-Spenders model of Mankiw (2000). But spenders in my model are merely credit constrained and not rule-of-thumb consumers. Both groups are intertemporal optimizers because of the existence of Internal Habit Persistence. Transition path of most of the macro and fiscal variables for various tax cuts under alternative financing scheme shows pattern which are significantly different and sometimes contrasting to the representative agent model. Dynamic scoring calculations reveal a downward bias of the representative agent model. Underestimation of the dynamic response could be as large as 45%. Finally, steady state results indicate smaller impact of contractionary policies on major fiscal variables such as net tax revenue and tax base. Over all, the paper argues that the need to use heterogeneous agent based model in dynamic fiscal calculations is not only desirable, but also essential.","PeriodicalId":428258,"journal":{"name":"CAEPR: Center for Applied Economics & Policy Research Working Paper Series","volume":"67 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-09-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122122087","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Recent models of trade with firm heterogeneity predict that opening to trade reduces the number of firms, increases the average size of firms, and decreases firms’ markups. This paper uses a large dataset for 28 manufacturing industries and 46 countries to test these predictions. The econometric analysis based on the treatment effects literature shows that on average, trade liberalizations do not decrease the number of firms nor increase the average size of firms. Markups appear to decrease during the three years after the liberalization. We also find that the number of firms and the average size of firms increase in comparative advantage industries.
{"title":"Trade Liberalization and Industry Dynamics: A Difference in Difference Approach","authors":"R. Alvarez, Ricardo A. López","doi":"10.2139/ssrn.1127251","DOIUrl":"https://doi.org/10.2139/ssrn.1127251","url":null,"abstract":"Recent models of trade with firm heterogeneity predict that opening to trade reduces the number of firms, increases the average size of firms, and decreases firms’ markups. This paper uses a large dataset for 28 manufacturing industries and 46 countries to test these predictions. The econometric analysis based on the treatment effects literature shows that on average, trade liberalizations do not decrease the number of firms nor increase the average size of firms. Markups appear to decrease during the three years after the liberalization. We also find that the number of firms and the average size of firms increase in comparative advantage industries.","PeriodicalId":428258,"journal":{"name":"CAEPR: Center for Applied Economics & Policy Research Working Paper Series","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-04-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131450293","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We analyze whether a consumer driven health care plan like the newly established Health Savings Accounts (HSAs) can reduce health care expenditures in the United States and increase the fraction of the population with health insurance. Unlike previous literature, our analysis relies on a dynamic general equilibrium framework with heterogenous agents. We endogenize health care expenditure and insurance choice, so that the model fully accounts for feedback effects from both factor markets and insurance markets. We then highlight the importance of including general equilibrium effects into the policy analysis. Specifically, our results from numerical simulations indicate that the success of HSAs depends critically on the productivity of health and the annual contribution limit to HSAs. In addition, we find that taxpayers can face substantial costs when HSAs are introduced to insure more people and to curb aggregate health expenditures.
{"title":"The Macroeconomics of Health Savings Accounts","authors":"Juergen Jung, C. Tran","doi":"10.2139/ssrn.1024556","DOIUrl":"https://doi.org/10.2139/ssrn.1024556","url":null,"abstract":"We analyze whether a consumer driven health care plan like the newly established Health Savings Accounts (HSAs) can reduce health care expenditures in the United States and increase the fraction of the population with health insurance. Unlike previous literature, our analysis relies on a dynamic general equilibrium framework with heterogenous agents. We endogenize health care expenditure and insurance choice, so that the model fully accounts for feedback effects from both factor markets and insurance markets. We then highlight the importance of including general equilibrium effects into the policy analysis. Specifically, our results from numerical simulations indicate that the success of HSAs depends critically on the productivity of health and the annual contribution limit to HSAs. In addition, we find that taxpayers can face substantial costs when HSAs are introduced to insure more people and to curb aggregate health expenditures.","PeriodicalId":428258,"journal":{"name":"CAEPR: Center for Applied Economics & Policy Research Working Paper Series","volume":"127 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-04-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124473045","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Overpromising remains ingrained in international agreements, clouding their expected aggregate outcomes and how to assess the Parties' performance. This paper provides a theory-based explanation and evaluation of this regime and its consequences, with an empirical application to the Kyoto Protocol. It shows (1) overpromising to be part of a sustainable strategy for electoral success, and (2) there are common determinants of the countries' overpromising values that characterize the group regime. (3) Targets need to be adjusted for regression-predicted overpromising to yield rationally-expected outcomes. (4) Individual countries' performance is best identified by deviations of outcomes from their adjusted, not the agreed, targets.
{"title":"Performance Measurement under Rational International Overpromising Regimes","authors":"George M. von Furstenberg","doi":"10.2139/ssrn.1116255","DOIUrl":"https://doi.org/10.2139/ssrn.1116255","url":null,"abstract":"Overpromising remains ingrained in international agreements, clouding their expected aggregate outcomes and how to assess the Parties' performance. This paper provides a theory-based explanation and evaluation of this regime and its consequences, with an empirical application to the Kyoto Protocol. It shows (1) overpromising to be part of a sustainable strategy for electoral success, and (2) there are common determinants of the countries' overpromising values that characterize the group regime. (3) Targets need to be adjusted for regression-predicted overpromising to yield rationally-expected outcomes. (4) Individual countries' performance is best identified by deviations of outcomes from their adjusted, not the agreed, targets.","PeriodicalId":428258,"journal":{"name":"CAEPR: Center for Applied Economics & Policy Research Working Paper Series","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-04-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123552905","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Moshe Buchinsky, D. Fougère, F. Kramarz, R. Tchernis
Much of the research in labor economics during the 1980s and the early 1990s was devoted to the analysis of changes in the wage structure across many of the world's economies. Only recently, has research turned to the analysis of mobility in its various guises. From the life cycle perspective, decreased wage mobility and increased job instability, makes the phenomenon of increasing wage inequality more severe than it appears to be at first sight. In general, workers' wages may change through two channels: (a) return to their firm-specific human capital (seniority); or (b) inter-firm wage mobility. Our theoretical model gives rise to three equations: (1) a participation equation; (2) a wage equation; and (3) an interfirm mobility equation. In this model the wage equation is estimated simultaneously with the two decision equations. We use the Panel Study of Income Dynamics (PSID) to estimate the model for three education groups. Our main finding is that returns to seniority are quite high for all education groups. On the other hand, the returns to experience appear to be similar to those previously found in the literature.
{"title":"Interfirm Mobility, Wages, and the Returns to Seniority and Experience in the U.S.","authors":"Moshe Buchinsky, D. Fougère, F. Kramarz, R. Tchernis","doi":"10.2139/ssrn.671022","DOIUrl":"https://doi.org/10.2139/ssrn.671022","url":null,"abstract":"Much of the research in labor economics during the 1980s and the early 1990s was devoted to the analysis of changes in the wage structure across many of the world's economies. Only recently, has research turned to the analysis of mobility in its various guises. From the life cycle perspective, decreased wage mobility and increased job instability, makes the phenomenon of increasing wage inequality more severe than it appears to be at first sight. In general, workers' wages may change through two channels: (a) return to their firm-specific human capital (seniority); or (b) inter-firm wage mobility. Our theoretical model gives rise to three equations: (1) a participation equation; (2) a wage equation; and (3) an interfirm mobility equation. In this model the wage equation is estimated simultaneously with the two decision equations. We use the Panel Study of Income Dynamics (PSID) to estimate the model for three education groups. Our main finding is that returns to seniority are quite high for all education groups. On the other hand, the returns to experience appear to be similar to those previously found in the literature.","PeriodicalId":428258,"journal":{"name":"CAEPR: Center for Applied Economics & Policy Research Working Paper Series","volume":"101 4","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120971782","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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