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Title: Efficiency Wages, Inter-Industry Wage Differentials, and the Returns to Ability
Resulting in 1 citation.
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Blackburn, McKinley L. Neumark, David B. |
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Efficiency Wages, Inter-Industry Wage Differentials, and the Returns to Ability Working Paper, Finance and Economics Discussion Series, Federal Reserve Board, Washington DC, 1988 Cohort(s): Young Men Publisher: Federal Reserve Board Keyword(s): Armed Services Vocational Aptitude Battery (ASVAB); Current Population Survey (CPS) / CPS-Fertility Supplement; Earnings; Education; Endogeneity; I.Q.; Industrial Classification; Modeling, Fixed Effects; Occupations; Schooling; Test Scores/Test theory/IRT; Wages The empirical regularity that has most frequently been offered as evidence consistent with efficiency wage models is the existence of persistent inter-industry wage differentials in wage regressions estimated for individuals. A principal competing explanation of these differentials is that they are generated by differences across workers in unobserved ability. While fixed-effects wage equations have been estimated to account for this, the estimates may suffer from measurement error and endogeneity of the decision to change industries. This paper takes an alternative, direct approach, by incorporating ability directly in a MIMIC model of earnings, with test scores serving as indicators of unobserved ability, and family background measures serving as causes. The models are estimated using data from the NLS Young Men's cohort. The results indicate that neither inter-industry nor inter- occupation wage differentials are attributable to differences in unobserved ability. |
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Bibliography Citation
Blackburn, McKinley L. and David B. Neumark. "Efficiency Wages, Inter-Industry Wage Differentials, and the Returns to Ability." Working Paper, Finance and Economics Discussion Series, Federal Reserve Board, Washington DC, 1988. |