We use data on male employees from the U.K. Family Expenditure Survey for the years 1968-86 to investigate the behavior of wages over time and across cohorts. We find that differentials between manual workers and professional managerial ones are lower at labor market entry for younger cohorts but increasing faster with age in the 1980s than in the past. The returns to experience appear to be very low in the United Kingdom, particularly for manual and clerical workers, although the improved education of younger workers may partly explain this. Finally we show that individual wages in the United Kingdom are highly procyclical.

Recent theoretical work has shown the importance of measuring microeconomic uncertainty for models of both general and partial equilibrium under imperfect insurance. In this paper the assumption of i.i.d. income innovations used in previous empirical studies is removed and the focus of the analysis placed on models for the conditional variance of income shocks, which is related to the measure of risk emphasized by the theory. We first discriminate amongst various models of earnings determination that separate income shocks into idiosyncratic transitory and permanent components. We allow for education- and time-specific differences in the stochastic process for earnings and for measurement error. The conditional variance of the income shocks is modelled as a parsimonious ARCH process with both observable and unobserved heterogeneity. The empirical analysis is conducted on data drawn from the 1967-1992 Panel Study of Income Dynamics. We find strong evidence of sizeable ARCH effects as well as evidence of unobserved heterogeneity in the variances.

We examine the effects of international trade in the presence of a set of domestic distortions giving rise to informality, a prevalent phenomenon in developing countries. In our quantitative model, the informal sector arises from burdensome taxes and regulations that are imperfectly enforced by the government. In equilibrium, smaller, less productive firms face fewer distortions than larger, more productive ones, potentially leading to substantial misallocation. We show that in settings with a large informal sector, the gains from trade are significantly amplified, as reductions in trade barriers imply a reallocation of resources from initially less distorted to more distorted firms. We confirm findings from earlier reduced‐form studies that the informal sector mitigates the impact of negative labor demand shocks on unemployment. Nonetheless, the informal sector can exacerbate the adverse real income effects of economic downturns, amplifying misallocation. Last, our research sheds light on the relationship between trade openness and cross‐firm wage inequality.

In this paper we study the sources of wage growth. We identify the contribution to such growth of general, sector specific and firm specific human capital. Our results are interpretable within the context of a model where the returns to human capital may be heterogeneous and where firms may offer different combinations of entry level wages and firm specific human capital development. We allow for the possibility that wages are match specific and that workers move jobs as a result of identifying a better match. To estimate the average returns to experience, sector tenure and firm specific tenure within this context, we develop an identification strategy which relies on the use of firm closures. Our data source is a new and unique administrative data-set for Germany that includes complete work histories as well as individual characteristics. We find positive returns to experience and firm tenure for skilled workers. The returns to experience for unskilled workers are small and insignificant after 2 years of experience. Their returns to sector tenure are also zero. However, their returns to firm tenure are substantial.

We develop an empirical model of labour supply that is consistent with on-the-job search and which is identified and estimated by combining two data sets: the U.K. Family Expenditure Survey which contains information on income and expenditure and the U.K. Labour Force Survey, which has data on hours and job search behaviour. We provide statistical evidence on the compatibility of the two samples for the purposes of estimating our model. We find that search has a direct negative effect on hours of work and we establish a strong positive effect of wages on hours.

Costas Meghir, Guglielmo Weber, Intertemporal Nonseparability or Borrowing Restrictions? A Disaggregate Analysis using a U.S. Consumption Panel, Econometrica, Vol. 64, No. 5 (Sep., 1996), pp. 1151-1181

We examine the effects of male and female labor supply on household demands and present a simple and robust test for the separability of commodity demands from labor supply. Using data on individual households from six years of the UK FES we estimate a demand system for seven goods which includes hours and participation dummies as conditioning variables. Allowance is made for the possible endogeneity of these conditioning labor supply variables. We find that separability is rejected. Furthermore, we present evidence that ignoring the effects of labor supply leads to bias in the parameter estimates.

In this paper we evaluate the impact of a major school reform, that took place in the 1950s in Sweden, on educational attainment and earnings. The reform, which has many common elements with reforms in other European countries including the UK, consisted of increasing compulsor schooling, imposing a national curriculum and abolishing selectionby ability into Academic and non-academic streams at the age of 12 (comprehensive school reform). Our data combines survey data with administrative sources. We find that the reform increased both the educational attainment and the earnings of children whose fathers had just complusory education. However the earnings of those with educated parents declined - possibly because of a dilution of quality at the top end of the education levels. The overall effect of the reform was however positive. In this paper we evaluate the impact of a major school reform, that took place in the 1950s in Sweden, on educational attainment and earnings. The reform, which has many common elements with reforms in other European countries including the UK, consisted of increasing compulsor schooling, imposing a national curriculum and abolishing selectionby ability into Academic and non-academic streams at the age of 12 (comprehensive school reform). Our data combines survey data with administrative sources. We find that the reform increased both the educational attainment and the earnings of children whose fathers had just complusory education. However the earnings of those with educated parents declined - possibly because of a dilution of quality at the top end of the education levels. The overall effect of the reform was however positive.

We investigate the role of training in reducing the gender wage gap using the British Household Panel Survey. On the basis of a life-cycle model and using tax and welfare benefit reforms as a source of exogenous variation, we evaluate the role of formal training and experience in defining the evolution of wages and employment careers, conditional on education. Training is potentially important in compensating for the effects of children, especially for women who left education after completing high school, but does not fundamentally change the wage gap resulting from labor market interruptions following child birth.