Martyn J. Andrews

The estimation of union wage differentials and the impact of methodological choices

Abstract This paper demonstrates that methodological differences can matter a lot in the estimation of union/non-union wage differentials. Using individual-level data from the 1991 Wave of the British Household Panel Survey and a model evolved from replicating six existing British studies, we find that the model specification adopted has an important impact on the estimated differential and that the choice of which group means to use when evaluating the mean differential in multi-equation models is of considerable importance. There are also important differences between membership and coverage differentials and the earnings measure used and sample selected also make a difference. However, apart from firm size, the contents of the control vector used is not found to be of great importance.

Modelling the Transition from School and the Demand for Training in the United Kingdom

This paper analyses the choices made by school leavers and the demand for training in the youth labour market. Using a large cross-section database on all school leavers in Lancashire in 1991, we model, using a multinomial logit, their first destination six months after the end of compulsory schooling. We model six choices/outcomes: non-vocational continuing education, vocational continuing education, youth training, employment with on-the-job training, employment with general-skills training, and unemployment. Our results show that the first destination from school is affected by a range of individual, school and local labour market variables. In addition to academic ability, we report three effects that are not well known: a young person is more likely to leave school the bigger the school, the lower its academic performance, and the lower his or her expected lifetime earnings. Our results might be interpreted as evidence of a segmented youth labour market. It is also inappropriate to model the decision to stay on in continuing education as a simple binary choice.

The Takeover and Selection Effects of Foreign Ownership in Germany: An Analysis Using Linked Worker-Firm Data

We use a linked employer-employee data set from Germany to estimate the wage effect of foreign-affiliates in East and West Germany. In addition, the wage effects of the large number of West German affiliates which are located in East Germany are also considered. The implemented techniques allow us to control both for worker- and plant-level unobserved components of earnings. We find large selection effects both in terms of worker and firm unobserved components of wages. The selection effect is larger for East German plants. Once it is taken into account, the genuine takeover effect is small and in some cases insignificantly different from zero. In contrast to the selection effect, the takeover effect is slightly larger in West Germany, where it amounts to 2.7 %.

Successful Employer Search? An Empirical Analysis of Vacancy Duration Using Micro Data

This paper provides the first estimates of the determinants of the duration of employer search in the UK. We model duration until a vacancy is either successfully filled or withdrawn from the market. The econometric techniques deal with multiple vacancies and unobserved heterogeneity (dependent risks), using flexible and parametric baseline hazards. The hazards to filling and withdrawing exhibit negative and positive duration dependence respectively, implying that the conditional probability of successful employer search decreases with duration. We also find that nonmanual vacancies are less likely to fill, consistent with there being skill shortages in the sample period.

Estimating the probability of a match using microeconomic data for the youth labour market

Abstract In this paper, we estimate the probability of a match for contacts between job seekers and vacancies. We relate the determinants of a match to the characteristics of the job seeker, the vacancy, and labour market conditions. Our main results are: ethnic minorities are discriminated against, but women are not; employers ‘cream’ the market and job seekers are ranked by their labour market state; high wage offers have a lower probability of a match; the probability of filling a job vacancy falls with vacancy duration, the higher stock of unemployed youths in a labour market, and the larger Careers Service; the probability of a match increases with job seeker duration.

Friday May Never be the Same Again: Some Results on Work Sharing from Union–Firm Bargaining Models

This paper analyses work-sharing in the union-firm bargaining context. In keeping with mechanisms observed in actual negotiations, we assume that the firm sets employment and we consider bargaining regimes with and without overtime. In models without overtime, work-sharing is consistent with union-firm bargaining provided that income-sharing occurs when the wage rises. In models with overtime, a Pareto-improving cut in the workweek requires wage concession, which is necessary, but not sufficient, for work-sharing. Our models are consistent with a number of well-established stylised facts. In particular, we explain why estimates of the actual hours-standard hours elasticity are always close to unity. Copyright 2001 by Scottish Economic Society.

The Aggregate Labour Market: An Empirical Investigation into Market-Clearing for the UK

A two-equation model of the aggregate labor market is presented as part of a larger market- clearing macroeconomic framework, which is then estimated by a suitable subsystem estimator using annual data for the U.K., 1948- 1979. Taken on their own theory-consistent estimates of both labor supply and labor demand are obtained. The maintained hypothesis that the market clears cannot be tested againsta more general structural model within the framework presented; however, a test of the model against the data generation process suggests that the maintained hypothesis is untenable after 1966, which is confirmed by evidence of dynamic instability. Copyright 1987 by Royal Economic Society.

Measuring Pre- and Post-Labour Market Occupational Segregation Using Careers Service Data.

In this article we calculate the magnitude of occupational segregation pre‐ and post‐labour market entry for young people using the Karmel and Maclachlan IP index. Our data refer to 22,280 males and 17,678 females who entered the labour market during the period 1988–91. Our results show that the magnitude of segregation is substantial, and is higher prior to young peoples entry to the labour market than it is once they have entered the market. Furthermore, occupational segregation in the planned Youth Training market exceeded that for the competitive job market, thereby having a greater effect in perpetuating gender stereotypes. Several recommendations are made to change policy and practice to reduce gender segregation in the youth labour market

Inference in the Presence of Redundant Moment Conditions and the Impact of Government Health Expenditure on Health Outcomes in England

ABSTRACT In his 1999 article with Breusch, Qian, and Wyhowski in the Journal of Econometrics, Peter Schmidt introduced the concept of “redundant” moment conditions. Such conditions arise when estimation is based on moment conditions that are valid and can be divided into two subsets: one that identifies the parameters and another that provides no further information. Their framework highlights an important concept in the moment-based estimation literature, namely, that not all valid moment conditions need be informative about the parameters of interest. In this article, we demonstrate the empirical relevance of the concept in the context of the impact of government health expenditure on health outcomes in England. Using a simulation study calibrated to this data, we perform a comparative study of the finite performance of inference procedures based on the Generalized Method of Moment (GMM) and info-metric (IM) estimators. The results indicate that the properties of GMM procedures deteriorate as the number of redundant moment conditions increases; in contrast, the IM methods provide reliable point estimators, but the performance of associated inference techniques based on first order asymptotic theory, such as confidence intervals and overidentifying restriction tests, deteriorates as the number of redundant moment conditions increases. However, for IM methods, it is shown that bootstrap procedures can provide reliable inferences; we illustrate such methods when analysing the impact of government health expenditure on health outcomes in England.

Testing for efficient contracts in unionized labour markets

This paper addresses the design of empirical tests to distinguish between two competing explanations of wage and employment determination in unionized labour markets, the labour-demand and efficient-contract models. We argue that most of the tests employed are restrictive, propose an alternative non-nested approach, a central feature of which is the variation in the set of instrumental variables across the models, and provide an illustration of how it might be implemented, using data from the Work-place Industrial Relations Survey (WIRS) 1984 Panel File. The results demonstrate how the traditional approach can lead to inappropriate conclusions, and thereby emphasize the empirical importance of the specification of the instrumental variables. Copyright 1998 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research