The Anatomy of the Wage Distribution: How do Gender and Immigration Matter?

Suphanit Piyapromdee (), Jean-Marc Robin and Rasmus Lentz
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Rasmus Lentz: University of Wisconsin Madison

No 1686, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: ​Workers with similar observed characteristics may have different wage paths because their unobserved characteristics are rewarded differently or because they have different mobility patterns. For example, controlling for observed characteristics, a native worker may have a steeper wage profile than his counterpart immigrant because he has different unobserved characteristics or because he is more likely to be employed at a more productive firm (likewise for male versus female workers). Understanding the contributions of worker and firm heterogeneity to wage and mobility differentials can shed light on many key economic issues such as wage inequality, statistical discrimination and wage assimilation of immigrants. In this paper, we propose an estimation method that allows for unrestricted interactions between worker and firm unobserved characteristics in both wages and the moving probability. Related to Bonhomme, Lamadon and Manresa (2014) (BLM), our method identifies double sided unobserved heterogeneity through an application of the EM-algorithm. The analysis estimates both wage and mobility patterns using Danish matched employer-employee data and decomposes wage dispersion into mobility and wage variation across firms and workers.

Date: 2016
New Economics Papers: this item is included in nep-gen, nep-ltv and nep-mig
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:1686

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