Decomposition of differences in distribution using quantile regression

Glass ceiling effect in urban China: Wage inequality of rural-urban migrants during 2002–2007

Changes in Wage Structure in Mexico Going Beyond the Mean: An Analysis of Differences in Distribution, 1987-2008

Counterfactual distributions are important ingredients for policy analysis and decomposition analysis in empirical economics. In this article we develop modeling and inference tools for counterfactual distributions based on regression methods. The counterfactual scenarios that we consider consist of ceteris paribus changes in either the distribution of covariates related to the outcome of interest or the conditional distribution of the outcome given covariates. For either of these scenarios we derive joint functional central limit theorems and bootstrap validity results for regression-based estimators of the status quo and counterfactual outcome distributions. These results allow us to construct simultaneous confidence sets for function-valued effects of the counterfactual changes, including the effects on the entire distribution and quantile functions of the outcome as well as on related functionals. These confidence sets can be used to test functional hypotheses such as no-effect, positive effect, or stochastic dominance. Our theory applies to general counterfactual changes and covers the main regression methods including classical, quantile, duration, and distribution regressions. We illustrate the results with an empirical application to wage decompositions using data for the United States. As a part of developing the main results, we introduce distribution regression as a comprehensive and flexible tool for modeling and estimating the \textit{entire} conditional distribution. We show that distribution regression encompasses the Cox duration regression and represents a useful alternative to quantile regression. We establish functional central limit theorems and bootstrap validity results for the empirical distribution regression process and various related functionals.

This paper reports on an investigation into changes in wage inequality in Bangladesh between 2000 and 2010, based on gender, marital status, education, job industry, job sector, location, etc. The 2000 and 2010 Labour Force Surveys conducted by the Bangladesh Bureau of Statistics (BBS) provided the data used. Oaxaca–Blinder’s (1973) decomposition and regression of the (recentered) influence function (RIF) model of Firpo–Fortin–Lemieux (FFL)’s (2007) decomposition were used to identify the important factors that caused wage inequality in Bangladesh. Both methods showed that the coefficient effect is the main contributor to the overall increase in wage inequality.

Dynamics of wage inequality over the prolonged economic transformation: The case of Vietnam

This paper presents ex post decomposition analysis of wage inequality change using multisector general equilibrium models. The analytical structure used is a specific-factors model of trade, which we calibrate to UK data for the two years 1979 and 1975. We first calibrate our general equilibrium trade model to observations on wage inequality, trade, production and consumption spanning these years, capturing the separate influences of trade, technology and demographics on inequality. Between these years wage inequality changed, but multiple changes in exogenous variables occurred (world prices, technology, endowments). We use calibration techniques to determine parameter values consistent with both the equilibria and the changes in exogenous variables contributing to the wage inequality change being decomposed. We then compute counterfactual equilibria in which only some of the changes in exogenous variables are present to allow us to assess what portion of the observed change is attributable to the various contributing factors. Our findings are that the roles of trade and factor-biased technological change are relatively larger than in earlier literature. We also find that changes in factor endowments to offset increased inequality generated by trade and skilled-biased technological changes, a feature that seems to have gone relatively unnoticed in earlier literature.

What caused the decline in wage inequality of the 2000s in Latin America? Looking to the future, will the current economic slowdown be regressive? Wage Inequality in Latin America: Understanding the Past to Prepare for the Future addresses these two questions by reviewing relevant literature and providing new evidence on what author know from the conceptual, empirical, and policy perspectives. The answer to the first question can be broken down into several parts, although the bottom line is that the changes in wage inequality resulted from a combination of three forces: (a) education expansion and its effect on falling returns to skill (the supply-side story); (b) shifts in aggregate domestic demand; and (c) exchange rate appreciation from the commodity boom and the associated shift to the non tradable sector that changed inter firm wage differences. Other forces had a non-negligible but secondary role in some countries, while they were not present in others. These include the rapid increase of the minimum wage and a rapid trend toward formalization of employment, which played a supporting role but only during the boom. Understanding the forces behind recent trends also helps to shed light on the second question. The analysis in this volume suggests that the economic slowdown is putting the brakes on the reduction of inequality in Latin America and will likely continue to do so—but it might not actually reverse the region’s movement toward less wage inequality.

The equalizing spiral in early 21st century Brazil: a Kaleckian model with sectoral heterogeneity

Who benefits from economic growth? This paper analyses the distributional impact of different types of growth within a two-sector model. The paper first presents necessary and sufficient conditions for unambiguous changes in wage inequality in a dual economy, based on analysis of the entire Lorenz curve. These conditions are then applied to the Harris–Todaro model with an urban non-agricultural sector and rural agriculture. It is shown that capital accumulation or technical progress in agriculture can shift the Lorenz curve inwards and reduce wage inequality, while the effects of development in non-agriculture are typically ambiguous.

This paper analyzes the effects of changes in relative commodity prices on the distribution of income among factors of production in the context of two models of a simple, two-good economy. In the first model capital is treated as a specific factor in each industry, with labor mobile between industries. The assumption of specificity determines the direction of factor income changes, with magnitudes depending on substitutability between factors and on intensities of factor use within the two industries. In the second model, capital is viewed as a quasi-fixed factor. For the short run, this model is identical to the model first considered. For the long run, this model is identical to the Stolper-Samuelson model in which the direction and magnitude of factor income changes depend solely on relative factor intensities. The difference between the short-run and long-run determinants of changes in factor incomes gives rise to a conflict between factor owners' short-run and long-run interests.

The sharp rise in U.S. wage inequality and educational wage differentials in the 1980s motivated this research examining the extent to which the patterns of changes in the wage structure differed in the U.S. private and public sectors. The project represented a marriage and natural outgrowth of three distinctive but related research agendas of the authors: (1) work on understanding U.S. wage structure and wage inequality changes (Katz); (2) studies of the level of the public–private wage differential and the use of data on quits and job queues (applications) to measure labor market rents for public sector employees (Krueger); (3) burgeoning research in the 1980s on testing theories of industry, firm, and establishment wage differentials (Katz and Krueger). The use of large-scale micro household Current Population Survey samples as well micro administrative personnel data on federal government employees foreshadowed more recent developments in computing power and data accessibility allowing the use of rich individual-level administrative data sets to explore key labor market issues. The analysis went beyond examining public sector compensation responses to changes in skill differentials to also explore how compensation in different levels of government (federal, state, and local) responded to variation in local

Trends in technology, policies and education were the key drivers of changes in wage inequality and employment in the OECD area

Changes in Wage Inequality in France: The Impact of Composition Effects (in French)

The authors identify winners and losers in Slovenia's economic transition by tracing changes in returns to education, experience, and gender and changes in wage inequality from 1987 to 1991. They find the following. Relative wages and employment rose for the most educated and fell for the least educated, in all industries. Relative wages and employment rose with years of work experience until pensionable age. At pensionable age, relative wages increased very rapidly and relative employment was greatly reduced. Using pension policies to encourage early retirement drastically reduced the supply of very experienced workers. Either the policy caused firms to bid up wages for workers of pensionable age to keep them from retiring, or it caused a selection process in which only the highest-paid workers remained in the workforce. Regardless, the pension policy has proved to be costly, and early retirements did not make room for the youngest workers but for those just under pensionable age. Women gained relative to men in both wages and employment primarily because they occupy education and industry groups less adversely affected by the transition, not because of economywide reductions in discrimination against women. Increasing returns to education and experience contributed to wage inequality, but the variance in wages also increased for individuals with identical skills. Big changes in relative wages should signal future reallocation of labor toward more productive, higher-paying sectors. Setting minimum wages, fixing ranges of pay, and indexing wages to inflation did not prevent increases in wage variation from occuring. Wage minimums did not appear to have an effect, presumably because inflation reduced real minimum wages so quickly that most workers were paid above the minimums. In Slovenia, policy changes are reflected in labor market outcomes. Disabling the tax-transfer policy from relatively profitable to relatively unprofitable firms and eliminating worker referendums on wage scales removed mechanisms that tended to compress wage variation. Greater demand for skilled workers also reflected both the economywide need to cope with uncertainty and such industry-specific factors as reduced labor demand, especially in less skill-intensive industries. The results in Slovenia contrast sharply with those in eastern Germany. Eastern German workers have had decreasing returns to education and experience. But it is not clear how relevant the eastern German experience is to other transitional economies because of western Germany's efforts to alleviate problems. More similar to the authors' findings are the results of Flanagan (1993) on the Czech Republic, which show increasing returns to education but decreasing returns to experience. In some respects, Slovenia is atypical because it is richer and more western in orientation than other transitional economies. However, economies could learn from the experience in Slovenia because Slovenia also had social ownership, full employment coupled with substantial hidden unemployment, and an egalitarian wage structure. And Slovenia has introduced labor market reform and experienced social dislocations similar to those in other transitional European economies.

Labor Market Institutions and the Distribution of Wages: The Role of Spillover Effects