Jari Vainiomäki

Wages and Product Market Power

This paper analyzes time-series on some 800 British manufacturing companies to address various questions concerning the role of insiders and market power in wage determination. The following are the most important results. First, product market power has a positive impact on wages; this impact is enhanced in large firms but is not influenced by union status. Second, while firm-specific factors influence wages, the size of these effects is not influenced by union status, firm size or product market power; however, product market power reduces the generally strong negative effect of unemployment on wages. Finally, there is no robust evidence of insider power at work in wage-setting irrespective of product market position. Copyright 1994 by The London School of Economics and Political Science.

Inter-industry wage differentials in Finland: Evidence from longitudinal census data for 1975–85

Abstract This paper provides estimates of inter-industry wage differentials in the Finnish private sector using a new longitudinal data source. We find about 8 percentage point industry wage differentials, even after controlling for observable human capital and job characteristics, which explain over half of the raw wage differentials between industries. Controlling further for the unobservable ability using fixed effects methods we still find statistically significant industry wage differentials in the order of 2–3 percentage points. The industry wage differentials are persistent over the period studied. Finally, interindustry wage differentials are larger in Finland than in Sweden despite apparently similar centralized wage bargaining institutions.

Worker turnover and productivity growth

Total factor productivity growth is positively related to the worker inflow rate and negatively related to the worker outflow rate in Finnish manufacturing. The churning rate, which measures separations that lead to replacement hiring, speeds up productivity growth.

Stature and life-time labor market outcomes: Accounting for unobserved differences

We use twin data matched to register-based individual information on earnings and employment to examine the effect of height on life-time labor market outcomes. The use of twin data allows us to remove otherwise unobserved ability and other differences. The twin pair difference estimates from instrumental variables estimation for genetically identical twins reveal a significant height-wage premium for women but not for men. This result implies that cognitive ability explains the effect of height on life-time earnings for men. Additional findings using capital income as the outcome variable suggest that discrimination against short persons may play a role for women.

Who bears the burden of wage cuts? Evidence from Finland during the 1990s

This paper focuses on the share and incidence of nominal and real wages cuts in the Finnish private sector. It complements other analyses of downward wage rigidities especially by looking for individual and employer characteristics that might explain the likelihood of observing an individual’s wage cut. The examinations are based on Probit models that include individual characteristics, employer characteristics, and the form of remuneration as explanatory variables. We find relatively few individual or employer characteristics that have a strong and common influence on the likelihood of wage decline across the different segments of labour markets. However, the full-time workers have had a lower likelihood of nominal and real wage declines during the 1990s compared with part-time workers. Declines in wages have also been more common in small plants/firms. In addition, nominal wage declines have been more transitory by their nature within the segments of the Finnish labour markets in which they are more common. Overall, the frequency of nominal wage declines has been fairly low for manufacturing non-manuals and service sector workers but somewhat higher for manual workers in manufacturing. However, nominal wage moderation together with a positive inflation rate produced real wage cuts for a large proportion of employees during the worst recession years of the early 1990s.

Factors Associated with Physicians' Choice of Working Sector: A National Longitudinal Survey in Finland

ObjectiveTo analyse factors affecting physicians’ choice to work in either the public or the private sector.MethodWe undertook a longitudinal data analysis in the years 1988, 1993, 1998 and 2003 (n = 12 909) using a multilevel modelling technique. Factors related to economic factors, physician identity, appreciation as well as demographic factors were hypothesised to influence sector choice.ResultsPhysicians seem to make their career choices prior to graduation, at least to some extent. Wage levels, the physician’s personal characteristics and whether or not the physician knew his or her place of work before graduation were the key factors affecting the decision-making process in the years 1988, 1993, 1998 and 2003. Physicians for whom wages were important were less likely to choose the public sector. Also, physicians who regarded themselves as entrepreneurial preferred to work in the private sector. If a physician had worked in the public sector during his or her medical training before graduation, the probability of applying for a vacancy in the public sector was higher.ConclusionIt is not only economic factors, such as salary, that are involved in the physician’s decision to choose the working sector.

Technology, job creation and job destruction in Finnish manufacturing

Job creation, destruction and reallocation rates is examined using data on Finnish manufacturing establishments for the period 1987-93, focusing on differences in these rates across the technology levels, and on the effects of the 1990s recession on the rates. The results indicate that the high technology sector has higher job creation and destruction rates, and it has responded to the recession somewhat differently than other sectors. It is also found that the high and low technology sectors are contributing differently to job reallocation: high technology is more important (compared to its employment share) in job creation, entry, and gross reallocation, while low technology is more important in job destruction, exit, and net job decrease.

Stature and long-term labor market outcomes : Evidence using Mendelian randomization

HIGHLIGHTSTaller people have higher earnings.We use genetic instruments for height.The OLS models show that 10 cm of extra height increases earnings by 13%.The IV point estimate is lower at 9% and not statistically significant. ABSTRACT We use the Young Finns Study (N = ˜2000) on the measured height linked to register‐based long‐term labor market outcomes. The data contain six age cohorts (ages 3, 6, 9, 12, 15 and 18, in 1980) with the average age of 31.7, in 2001, and with the female share of 54.7. We find that taller people earn higher earnings according to the ordinary least squares (OLS) estimation. The OLS models show that 10 cm of extra height is associated with 13% higher earnings. We use Mendelian randomization, with the genetic score as an instrumental variable (IV) for height to account for potential confounders that are related to socioeconomic background, early life conditions and parental investments, which are otherwise very difficult to fully account for when using covariates in observational studies. The IV point estimate is much lower and not statistically significant, suggesting that the OLS estimation provides an upward biased estimate for the height premium. Our results show the potential value of using genetic information to gain new insights into the determinants of long‐term labor market success.

Technology Effects on Wages in Finnish Manufacturing

In this paper we study the effect of technology on establishmentdlevel wages using a classification of manufacturing industries based on four technology levels. The technology wage premiums are estimated separately for nondmanual and manual workers using wage equations with available control variables for plant and workforce characteristics (human capital) over the time period 1974-93. The results do not show a straightforward increasing relationship between a plants average wages and its technology at higher technology levels. However, establishments with the lowest technology level paid the lowest wages during the whole period. We also find that the relative nondmanual to manual wage ratio increased over the time period in the highest technology levels. These findings are consistent with technology wage premiums and skilldbiased technological change found in studies for other countries Copyright Fondazione Giacomo Brodolini and Blackwell Publishers Ltd 2001.

Using Twins to Resolve the Twin Problem of Having a Bad Job and a Low Wage

We use data on twins matched to register-based information on earnings to examine the long-standing puzzle of non-existent compensating wage differentials. The use of twin data allows us to remove otherwise unobserved productivity differences that were the prominent reason for estimation bias in the earlier studies. Using twin differences we find evidence for positive compensation of adverse working conditions in the labor market.