Essays on wage dispersion -PhD Thesis-
UK Wage dispersion changed dramatically over the 1970s and 1980s (OECD employment outlook, 1993). Attempts to reconcile this have typically concentrated on explanations of demand and supply. These studies have shown that while competitive factors are important, there is ground for alternatives.
This thesis considers two issues regarding wages dispersion. The first observes the macro-time effect on wages between 1991-95 for both personal and workplace attributes of individuals. In addition to yearly descriptions of wage dispersion, the DiNardo, Fontin and Lemieux (1995) technique, comparing the actual wage density with what would have occurred if an attribute's characteristics (conditional of individual characteristics) remained as they were in 1991 is applied. Extending this analysis to panel data and attributes of more than two categories, panels are constructed from individual responses of the British Household Panel Study. Of interest is whether switching behaviour is important. When individuals switch employer or job-spell, skills may be non-transferable, altering the lifetime income profile (Mincer and Ofek, 1982). Systematic differences in wage dispersion may occur as a result.
The second issue considers information systems on wage dispersion described through search frictions. Using the Burdett and Mortensen (1989, 1998) model, heterogeneity in worker ability and employer productivity are introduced to observe the ensuing steady-state equilibrium outcome. Workers receive wage offers while unemployed and employed, with differences in information in either state showing contrasting outcomes.
The Burdett and Mortensen (1989, 1998) framework is also extended to observe the steady-state equilibrium outcome when workers choose their ability through education, and employers choose which market to hire from. One of three outcomes can occur, each displaying differences in wage dispersion. Two describe single market outcomes of either uneducated or educated workers, with the third characterising two markets of ability with both agents indifferent in their decision choices.
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