lab4Wage determination(劳动经济学-剑桥大学,Dr Hamish Low)

1、Labour EconomicsDr Hamish LowLecture 4(Office Hour: Wed 24th 11.45 1.15pm)Outline: Wage determinationNon-verifiable outputSeniority pay and deferred compensationefficiency wagestournamentsSeniority PayMPLpx.wageExperience: length of time in workplaceSeniority: length of time at a particular firmIs h

2、uman capital firm specific or general? Harris-Holmstrom: paying insurance premium (and some workers stay at low wage). Outside option increases with experience because general human capital Lazear: Outside option is independent of experience because human capital is specific. Workers are “making loa

3、ns” to the companiesNon-verifiable output: Deferred Compensation Output is not verifiable When young: may exert high or low effort. Low effort leads to low output, but may not be observed firm cannot base pay on results Some monitoring is possible: probability of being caught if invest low effort wh

4、at is the cost of being caught? Incentive to shirk as approach retirement Firm can claim low effort outcome and no-verification and then fire workersAgeIncomeWage scheme 1High effort, outputTLow effort, outputOutside value (disutility of effort) Future wage determines behaviour in current period. Cu

5、rrent wage does not matter for incentives. Self-enforcing: must be worth both workers and employers continuing with contract Wages rise more sharply than productivity Have to introduce mandatory retirementijtijtteijtexijtedijtteexedwlnOLS: 27% wage gain from 10 years seniority34% wage gain from 10 y

6、ears experienceBut: experience and seniority are endogenous (previously had equation reversed)1. a better match between a worker and a firm will lead to greater wage and greater seniorityCorrected: 13% wage gain from 10 years seniorityEfficiency Wages In deferred compensation story, workers “lend to

7、 their employers” and employers commit to “paying back” through higher wages later on. Liquidity constraints? What if lack of commitment by firms? efficiency wages and involuntary unemploymentShapiro-Stiglitz Model Same wage in every period Benefit of accepting a job must be strictly greater than be

8、nefit of being unemployedUNEMPVV So, unemployment is involuntary Wage paid will be higher as unemployment falls (less costly to be unemployed)LNL*w*Incentive curveNon-verifiable output: Tournaments Firm measures output incentives to cheat and claim low output realisation Workers cannot observe absol

9、ute performance Give incentive to firm to stick to agreement Promotions through relative performance: promote the best L workers to give wage w = w0 + b Firm has committed to make a number of promotions, L, so no incentive to cheat about ranking output. Experience?IncomeWinnersLosersTournaments (con

10、t.) Relative performance evaluation, winner takes all Wage does not reflect marginal product: manager may not be 3x as productive as workers CoalitionsProblems Commitment by firm Evidence in industries where hard to monitor Wage growth between jobsOn-the-job trainingMPLpx.wageTraining is analogous to the firm making a loan to the workerConclusionsThree models of wage determination when output is non-verifiableDeferred paymentyoung workers make loans to firm, paid back when oldEf