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

Author

Listed:
  • Suphanit Piyapromdee

    (University College London)

  • Jean Marc Robin

    (Sciences Po)

  • Rasmus Lentz

    (University of Wisconsin Madison)

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.

Suggested Citation

  • Suphanit Piyapromdee & Jean Marc Robin & Rasmus Lentz, 2016. "The Anatomy of the Wage Distribution: How do Gender and Immigration Matter?," 2016 Meeting Papers 1686, Society for Economic Dynamics.
    • Handle: RePEc:red:sed016:1686
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    References listed on IDEAS

    as
    1. Stéphane Bonhomme & Jean-Marc Robin, 2009. "Assessing the Equalizing Force of Mobility Using Short Panels: France, 1990-2000," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(1), pages 63-92.
    2. Stéphane Bonhomme & Thibaut Lamadon & Elena Manresa, 2019. "A Distributional Framework for Matched Employer Employee Data," Econometrica, Econometric Society, vol. 87(3), pages 699-739, May.
    3. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09j008g6g0g is not listed on IDEAS
    4. Peter Arcidiacono & John Bailey Jones, 2003. "Finite Mixture Distributions, Sequential Likelihood and the EM Algorithm," Econometrica, Econometric Society, vol. 71(3), pages 933-946, May.
    5. Peter Arcidiacono & Robert A. Miller, 2011. "Conditional Choice Probability Estimation of Dynamic Discrete Choice Models With Unobserved Heterogeneity," Econometrica, Econometric Society, vol. 79(6), pages 1823-1867, November.
    Full references (including those not matched with items on IDEAS)

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    1. Bødker, Jonas Ehn & Maibom, Jonas & Vejlin, Rune Majlund, 2018. "Decomposing the Exporter Wage Gap: Selection or Differential Returns?," IZA Discussion Papers 11998, Institute of Labor Economics (IZA).

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