Estimation of a Roy/Search/Compensating Differential Model of the Labor Market

SSRN Electronic Journal ◽

10.2139/ssrn.2790012 ◽

2016 ◽

Author(s):

Christopher R. Taber ◽

Rune Vejlin

Keyword(s):

Labor Market ◽

Differential Model ◽

Compensating Differential

Download Full-text

The Cost of Work Discrimination: A Market Capture Differential Game Model

Mathematics ◽

10.3390/math9192419 ◽

2021 ◽

Vol 9 (19) ◽

pp. 2419

Author(s):

Mario Alberto García-Meza

Keyword(s):

Labor Market ◽

Technological Change ◽

Differential Game ◽

Opportunity Costs ◽

Game Model ◽

Differential Model ◽

Potential Market ◽

Market Capture ◽

The Cost

Discrimination in the workplace can be a source of opportunity costs for firms that desire to enter a new market. In this article, we model how an exogenous technological change introduces both new potential workers in the labor market and, as the economy grows, a new set of consumers for firms to conquer. We then use a differential model to show how the payoff of a firm that discriminates in the labor market loses potential market from this same demographic. Our results imply that anti-discriminatory policies within the firm constitute an important element for the solution of this problem, and that there might be incentives for the firms to apply such policies.

Download Full-text

Estimation of a Roy/Search/Compensating Differential Model of the Labor Market

Econometrica ◽

10.3982/ecta14441 ◽

2020 ◽

Vol 88 (3) ◽

pp. 1031-1069 ◽

Cited By ~ 3

Author(s):

Christopher Taber ◽

Rune Vejlin

Keyword(s):

Wage Inequality ◽

Capital Accumulation ◽

Compensating Differentials ◽

Search Frictions ◽

Differential Model ◽

Job Match ◽

Relative Contribution ◽

Compensating Differential ◽

Roy Model ◽

Wage Variation

In this paper, we develop a model that captures key components of the Roy model, a search model, compensating differentials, and human capital accumulation on‐the‐job. We establish which components of the model can be non‐parametrically identified and which ones cannot. We estimate the model and use it to assess the relative contribution of the different factors for overall wage inequality. We find that variation in premarket skills (the key feature of the Roy model) is the most important component to account for the majority of wage variation. We also demonstrate that there is substantial interaction between the other components, most notably, that the importance of the job match obtained by search frictions varies from around 4% to around 29%, depending on how we account for other components. Inequality due to preferences for non‐pecuniary aspects of the job (which leads to compensating differentials) and search are both very important for explaining other features of the data. Search is important for turnover, but so are preferences for non‐pecuniary aspects of jobs as one‐third of all choices between two jobs would have resulted in a different outcome if the worker only cared about wages.

Download Full-text