Alejandro Badel

Decomposing the Gender Wage Gap with Sample Selection Adjustment: Evidence from Colombia

Despite the remarkable improvement of female labor market characteristics, a sizeable gender wage gap exists in Colombia. We employ quantile regression techniques to examine the degree to which current small differences in the distribution of observable characteristics can explain the gender gap. We find that the gap is largely explained by gender differences in the rewards to labor market characteristics and not by differences in the distribution of characteristics. We claim that Colombian women experience both a “glass ceiling effect’’ and also (what we call) a “quicksand floor effect” because gender differences in returns to characteristics primarily affect women at the top and the bottom of the distribution. Also, self selection into the labor force is crucial for gender gaps: if all women participated in the labor force, the observed gap would be roughly 50% larger at all quantiles.

Taxing Top Earners: A Human Capital Perspective

We analyze the Diamond-Saez policy recommendation within a human capital model. We calculate the steady-state welfare implications of raising the marginal income tax rate on top incomes from current levels to those in the range of 54 percent to 80 percent. We also calculate the transitional dynamics implied by such a modification of the US tax system.

Interpreting Life-Cycle Inequality Patterns as an Efficient Allocation: Mission Impossible?

Data on consumption, earnings, wages and hours dispersion over the life cycle has been viewed as being at odds with an efficient allocation. We challenge this view. We show that a model with preference and wage shocks and full insurance produces the type of inequality patterns across age groups found in U.S. data. The efficient allocation model requires an increasing preference shifter dispersion profile to account for an increasing consumption dispersion profile. We examine U.S. data and find support for the view that the dispersion in preference shifters increases with age.

Descomponiendo la brecha salarial de genero con ajuste de sesgo de selección: el caso colombiano

Despite the remarkable improvement of female labor market characteristics, a sizeable gender wage gap exists in Colombia. We employ quantile regression techniques to examine the degree to which current small differences in the distribution of observable characteristics can explain the gender gap. We find that the gap is largely explained by gender differences in the rewards to labor market characteristics and not by differences in the distribution of characteristics. We claim that Colombian women experience both a “glass ceiling effect’’ and also (what we call) a “quicksand floor effect” because gender differences in returns to characteristics primarily affect women at the top and the bottom of the distribution. Also, self selection into the labor force is crucial for gender gaps: if all women participated in the labor force, the observed gap would be roughly 50% larger at all quantiles.

Understanding permanent black-white earnings inequality

For more than 30 years, the ratio of average black earnings to average white earnings has remained close to 0.6. Additionally, US cities have remained dramatically segregated by race. This paper provides a joint theory of pre-market skills and residential segregation for quantitatively studying these phenomena. It is established that the magnitude of racial and earnings sorting observed in US cities implies 70 percent of observed black-white inequality. While the mechanism posed is intricate, all of its three non-standard components are essential for permanent black-white inequality to arise in a steady state: neighborhood human capital externalities, house price differences across neighborhoods, and preferences over neighborhood racial composition.

Top Earners: Cross-Country Facts

We provide a common set of life-cycle earnings statistics using administrative data from the United States, Canada, Denmark and Sweden. Three qualitative patterns are common across countries: (1) the earnings distribution above the median fans out with age, (2) the extreme right tail of the earnings distribution becomes thicker with age, and (3) the growth rate of earnings over the working lifetime is larger for groups with higher lifetime earnings. Models of top earners should account for these qualitative patterns and, importantly, for how they quantitatively differ across countries.

The Sufficient Statistic Approach: Predicting the Top of the Laffer Curve

We provide a formula that relates the tax rate at the top of the Laffer curve to three elasticities. The formula applies to static models and to steady states of dynamic models. We also explore whether existing methods for estimating elasticities, common in the elasticity of taxable income literature, accurately estimate the theoretically-relevant elasticity. Existing methods work poorly in models with endogenous human capital accumulation but better in models with exogenous human capital.