On stabilization of an automaton model of migration processes

A dynamic system of cities with migrants is considered. The wage function is each city depends on the number of migrants in the city. The system is modeled by an automaton whose state is the vector consisting of the numbers of migrants in the cities. The transition function of the automaton reflects the conditions for transfers of migrants between cities. The system stabilizes if the moves are stopped at some point. We find conditions for stabilization of such system depending on the restrictions on the wage function and the automaton transition function. It is shown that if the functions of wages are strictly decreasing, if their ranges are disjoint, and if the transition function is defined so that a migrant moves to another city if and only if its salary increases, then the system necessarily stabilizes and its final state depends only on the total number of migrants and does not depend on their initial distribution over the cities. However, if the transition function is changed so that a migrant moves also if its salary is preserved, but the total wages in all cities are increased, then a monotonous decrease in the wage functions is sufficient for stabilization of the system.

The Effects of Minimum Wage Throughout the Wage Distribution in Indonesia

The global financial crisis in 2007 followed by Indonesia’s largest labor demonstration in 2013 encouraged turmoils on Indonesia labor market. This paper examines the effect of the minimum wage on wage distribution in 2007 and 2014 and how the minimum wage increases in 2014 affected the distribution of wage differences between 2007 and 2014. This study employs recentered influence function (RIF) regression method to estimate the wage function by using unconditional quantile regression. Furthermore, to measure the effect of the minimum wage increase in 2014 on the distribution of wage differences, it uses the Oaxaca–Blinder decomposition method. Using balanced panel data from the Indonesian Family Life Survey (IFLS), it found that the minimum wage mitigates wage disparity in 2007 and 2014. The minimum wage policy in 2014 leads to an increase in the wage difference between 2007 and 2014, with the largest wage difference being in the middle distribution.DOI: 10.15408/sjie.v7i2.6125

Heterogeneity and Learning in Labor Markets

I develop an equilibrium matching model where heterogeneous workers and firms learn about match quality and bargain over wages. The model generalizes Jovanovic (1979) to the case of heterogeneous workers and firms. Equilibrium wage dispersion arises due to productivity differences between workers, technological differences between firms, and heterogeneity in beliefs about match quality. Under a simple CRS technology, the equilibrium wage is additively separable in worker- and firm-specific components as well as in the posterior mean of beliefs about match quality. This parallels the “person and firm effects” empirical specification of Abowd et al (1999) and others. The model predicts a negative correlation between estimated person and firm effects, which is consistent with most previous empirical evidence. I estimate the equilibrium wage function and test the model's empirical predictions using linked employer-employee data from the U.S. Census Bureau. I find empirical support for many of the model's predictions and estimate that dispersion in beliefs about match quality explains over 20 percent of observed earnings variation.