The industry premium: What we know and what the New Zealand data say

Debasis Bandyopadhyay

New Zealand Economic Papers, 2001, vol. 35, issue 1, 53-75

Abstract: Earning regressions often reveal time-invariant industry premiums. Competitive theories explain them by referring to unobservable characteristics or compensating differentials. Non-competitive theories do the same by using efficiency wage, insider-outsider and rent sharing hypotheses. Those theories appear inadequate for explaining what one observes from the New Zealand data: employees receive industry premiums; but so do their self-employed counterparts; among those with no formal education industry premiums from employment are smaller than those from self-employment; but as the cohort's education level increases the premium differential increases and becomes positive. To explain those observations I propose a new hypothesis that measures an industry's total factor productivity and the corresponding industry premium.

Date: 2001
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Working Paper: Industry Premium: What we Know and What The New Zealand Data Say (1999)
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DOI: 10.1080/00779950109544332

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