Search results

This paper analyzes labor market responses to productivity shocks when firms set employment criteria on the basis of the likelihood of hiring high or low productivity workers. In response to a positive productivity shock, firms do not raise the criterion as much as the shock, increasing the proportion of low productivity workers among the employed. The observed average productivity may respond negligibly even if employment changes substantially. Interest rate fluctuations can yield an opposite relation between productivity and employment, explaining the weak empirical relationship.

This paper examines the effects of union change in Britain on changes in earnings dispersion 1983–1995. We investigate not only the decline in union density but also the greater wage compression among unionised workers, as well as changes in union density across skill groups. For the private sector, we find that deunionisation accounts for little of the increase in earnings dispersion. What unions have lost on the swings (lower density), they have gained on the roundabouts (greater wage compression). But for the public sector we find strong effects, because unions are increasingly organising the more skilled. This change in the character of public sector unions means that they no longer reduce earnings variation nearly as much as they once did.

Many developing and transition countries, and even some in the industrialized West, experience periods in which a substantial proportion of the workforce suffer wage arrears. We examine the implications for estimates of wage gaps and inequality using the Russian labor market as a test case. Wage inequality grew rapidly as did the incidence of wage arrears in Russia in the 1990s. Given data on wages and the incidence of wage arrears we construct counterfactual wage distributions, which give the distribution of pay were arrears not present. The results suggest that wage inequality could be some 30 percent lower in the absence of arrears. If individuals in arrears are distributed across the underlying wage distribution, as appears to be the case in Russia, we show that it may be feasible to use the wage distribution for the subset of those not in arrears to estimate the underlying population wage distribution parameters.

Research has shown that the tax treatment of replacement incomes differs considerably among countries. Consequently, the ranking of countries by expenditure level is different for gross and net social expenditures. On a micro level this is translated into a gap between gross and net benefits; this gap varies among countries. In this chapter, we use EUROMOD for an international comparison of the difference between gross and net benefits at the micro level. We investigate the distribution effects of the income tax treatment of replacement benefits, focusing on old-age pensions and unemployment benefits. We present a summary overview of the different ways of levying taxes on benefits in the pre-2004 EU-15 countries. We then try to answer the question how the tax treatment of social security benefits affects the distribution of these benefits and how progressive taxes on benefits are compared to taxes on earnings.