Parametric vs. semi-parametric estimation of the male-female wage gap: An application to France

We use a semi-parametric method to decompose the difference in male and female wage densities into two parts–one explained by characteristics and one which is attributable to differences in returns to characteristics. We learn substantially more about the gender wage gap in France through this analysis that we do through parametric techniques which we also employ for comparative purposes. In particular, we find that there are no unexplained differences in male and female earnings distributions in the bottom fifth of the data. Occupation and part-time status are the most important determinants of the wage gap for all workers. In the semi-parametric estimates we find that education plays no role in the wage gap once we account for occupation and part-time status

Parametric vs. Semi-parametric Estimation of the Male-Female Wage Gap: An Application to France

We use a semi-parametric method to decompose the difference in male and female wage densities into two parts-one explained by characteristics and one which is attributable to differences in returns to characteristics. We demonstrate that one learns substantially more about the gender wage gap in France through this analysis than through standard parametric techniques. In particular, we find that there are no unexplained differences in male and female earning distributions in the bottom fifth of the data. Occupation and part-time status are the most important determinants of the wage gap for all workers. In the semi-parametric estimates we find that education plays no role in the wage gap once we account for occupation and part-time status.Gender pay gap, sticky floors, glass ceilings, semi-parametric estimation

Maverick Firms: An Exploratory Analysis of Mortgage Providers in Australia

This paper develops an empirical strategy to measure maverick-like behaviour. It applies the strategy to a dataset that contains interest rates charged by mortgage providers in Australia from January 2003 to October 2006. The Reserve Bank of Australia raised its cash rate five times in this period, which provides a natural setting to observe suppliers� responses. We examine suppliers� behaviour both in terms of the rates they charge and the time it takes them to change their rates as a response to a systemic increase in costs. These empirical observations suggest that the development of a theory for maverick behaviour be focused on dynamic, asymmetric models and informed by institutions and market dynamics that are relevant to the case at hand.

Welfare Transfers and Intra-Household Trickle Down: A Model with Evidence from the US Food Stamp Program

We examine the case for maintaining welfare and income redistribution programs even when their adverse general equilibrium effects reduce total earnings of poor households. Using a Cournot model of intra-household decision-making, we show that even if welfare cutbacks generate large increases in household income, these may still reduce the well-being of children and elderly dependants. Our model also explains the higher marginal propensity to consume food out of food stamps in the US, compared to that out of market income, noted in earlier empirical studies. We find evidence consistent with our argument in data from a US Food Stamp experiment.Food Stamp Program, Welfare Transfers, Cash-out Puzzle, Cournot Model, Intra-household Distribution, Engel Curves

An Empirical Investigation of the Mergers Decision Process in Australia

In this paper we examine a database assembled from an Australian public register of 553 merger decisions taken between March 2004 and July 2008. Mergers may be accepted without public assessment, accepted in conjunction with publication of a Public Competition Assessment, or rejected. We estimate an ordered probit model, using these three possible outcomes, with the objective of gaining better insight into the regulator’s decision-making process. Our two major findings are: (i) the existence of entry barriers and the existence of undertakings are highly correlated with the regulator’s decision to closely scrutinise a merger proposal; and (ii) if we compare two decisions, one which does not mention entry barriers (or import competition) with a decision that does mention entry barriers (or import competition), then the latter is significantly more likely to be opposed than the former.

Testing Regulatory Consistency

We undertake an analysis of regulatory consistency using a database of publicly available regulatory decisions in Australia. We propose a simple exploratory model which allows us to test for regulatory consistency across jurisdictions and industries without detailed knowledge of the regulatory process. We compare two measures using our approach--the weighted average cost of capital and the proportion of firms’ revenue requirement claims disallowed by the regulator. We advocate use of the second measure, but our empirical results may be interpreted as indicating that a range of measures ought to be considered when assessing regulatory consistency.

A Richer Understanding of Australia’s Productivity Performance in the 1990s: Improved estimates based upon firm-level panel data

Australia’s productivity performance is characterized by important differences across continuing firms, frequent entry of new firms, and substantial exit of firms which, for one reason or another, decide to cease production. These basic facts call into question the appropriateness of measuring productivity using an aggregate production function that is based upon a representative firm. This study relaxes the standard assumptions that industries are comprised of a set of homogeneous firms, the set of which are constant over time. Instead, we apply a semi-parametric production to continue production. The model controls for the relationship between productivity shocks and input choices and the inter-relationship between these and the decision to continue production. Using the Business Longitudinal Survey we estimate an improved set of production functions for twenty-five two-digit industries in Australia. We use these results to examine aggregate industry-level productivity performance. We use a new aggregation method in calculating these changes which allows us to separate productivity changes and output composition changes which sheds new light on industry-level productivity performance in Australia.Firm-level production function estimation, multi-factor productivity, semiparametric estimation, Australian economic performance

How Responsive is Female Labour Supply to Child Care Costs: New Australian Estimates

The degree of responsiveness of Australian women's labour supply to child care cost has been a matter of some debate. There is a view that the level of responsiveness is very low or negligible, running counter to international and anecdotal evidence. In this paper we review the Australian and international literature on labour supply and child care, and provide improved Australian estimates of labour supply elasticities and child care demand elasticities with respect to gross child care price. We find that the limited literature in Australia has suffered from measurement error problems stemming in large part from shortcomings with data on child care price and child care usage. We use detailed child care data from three recent waves of the Household, Income and Labour Dynamics in Australia (HILDA) Survey (covering the period 2005 to 2007) to address these problems. We extend the standard labour supply and child care model to allow for separate effects of different child care prices for children in different age ranges and we calculate regional child care prices based upon child-level information. The salient finding is that child care prices do have statistically significant effects on mothers’ labour supply and child care demand. The new estimates are in line with international findings, and their robustness is supported by a validation exercise involving an alternative technique and an earlier time period.labour supply, child care price, child care demand, elasticity

A Couples-based Approach to the Problem of Workless Families

The goal of this paper is to evaluate a “couples-based” policy intervention designed to reduce the number of Australian families without work. In 2000 and 2001, the Australian Government piloted a new counseling initiative targeted towards couple-headed families with dependent children in which neither partner was in paid employment. Selected women on family benefits (who were partnered with men receiving unemployment benefits) were randomly invited to participate in an interview process designed to identify strategies for increasing economic and social participation. While some women were interviewed on their own, others participated in a joint interview with their partners. Our results indicate that the overall effect of the interview process led to lower hours of work among family benefit recipients in the intervention group than the control group, but to greater participation and hours in job search and in study or training for work-related reasons. Whether women were interviewed with their partner or not had no effect on the level of economic and social activity of participants.

Improving the Modeling of Couples' Labour Supply

We study the work hours of Australian couples, using a neoclassical labour-supply model in which couples choose from a small, realistic set of possible wife-husband working hour combinations. We introduce three improvements to this standard model. First, we allow partners' preferences about non-market time to be correlated. We also correct the estimates to accunt for the fact that we estimate the non-observable wage rates of individuals who do not work. Lastly, we allow each individual's preferences for nonmarket time to be correlated with her or his wage rate. These changes, which substantially enhance the realism of the standard, discretized labour-supply model, also have an important impact on the results. We estimate the model using HILDA data and find wage elasticities of labour supply - 0.26 for men and 0.50 for women - that are twice as large as those found without these three innovations. Using simulation methods, we then analyze the expected impact of the 2005/06 Australian tax reform. As a result of the tax cuts, we expect working hours to increase by 1.7 per cent for both men and women and household after-tax incomes to increase by approximately $60 per week on average. For families with two wage earners, each earning between$25,000 and $55,000 per year, our model predicts an after-tax increase in income of$38 after accounting for these labour supply effects - much larger than the Australian Government's own prediction of $12, which does not allow for labour supply effects.Family Labour Supply, Australia, Simulated Maximum Likelihood, Discretized Structural Model