Changing Wage Distributions and the Evolution of Wage Inequality in Indonesia:1994 – 2007

This paper investigates the developments in wage inequality in Indonesia from 1994 to 2007. Wage changes are decomposed at the mean as well along the wage distribution. In earlier years, the substantial growth in the earnings of workers was accompanied by moderately declining earnings inequality, a development driven by the effect of coefficients (“prices”). However, in recent years, wage inequality increased substantially. These results are attributed to the effect of coefficients which increased sharply at higher deciles of the earnings distribution. Changes in wage inequality over the period examined are related to developments in the real minimum wage over time, the effects of the 1997-98 financial crisis and increases in the return to skill in recent years.Wage inequality, counterfactual decompositions, Indonesia

Heterogeneity in the Returns to Education and Experience: Evidence from a High and a Low Income S.E. Asian Country

This study investigates the pattern of returns across the earnings distribution by first, contributing new evidence on the pattern of returns to education and experience for one developed and one developing S.E. Asian country (Singapore and the Philippines, respectively); subsequently the existence of a relationship between a country’s development stage and the pattern of returns to education along the earnings distribution is investigated, by putting together the existing international evidence. It was found that quantile returns to an additional year of schooling in the Philippines decrease monotonically, while the opposite is the case for Singapore. This pattern is maintained for both men and women. Looking at the quality rather than quantity of education, we find that in the Philippines the pattern of quantile returns for those with tertiary qualifications are sharply decreasing with quantiles, while it exhibits a more moderate decrease for those with primary and secondary qualifications. In the case of Singapore the pattern of returns for those with primary and tertiary qualifications is increasing with quantiles, while it is relatively flat for those with secondary qualifications. A compilation of the available evidence from 27 case studies suggests that a pattern is emerging, with high income countries associated with increasing returns by quantile and low income countries associated with a decreasing pattern of returns.

Demand for Skills, Supply of Skills and Returns to Schooling in Cambodia

In this paper I take a detailed look into the returns to schooling in Cambodia using the 1997 and 2003-04 Socioeconomic Surveys of Households and alternative estimation techniques (OLS vs. Family Fixed Effects and Instrumental Variables). The main focus of the analysis has to do with differences by sector (public vs. private). In Cambodia, the average educational attainment of workers in the public sector is significantly higher compared to the private sector. Without considering issues of selection into the public vs. the private sector, the wage premium for one additional year of schooling in the private sector is about twice that in the public sector for both men and women. Furthermore, the average return to one additional year of potential labor market experience is higher in the private sector. This raises questions about the reasons for the self-selection of more educated workers in the public sector in Cambodia. The picture changes drastically, especially in the case of female employment, once the assumption that the location of individuals in the public and private sectors is the outcome of a random process. However, after correcting for selection bias using Heckman's correction, one additional year of schooling still increases earnings by more in the private sector for men, but the spread between sectors narrows. However for women, one additional year of schooling increases earnings in the public sector by more than in the private sector. Furthermore, now the return to one additional year of potential labor market experience is significantly higher in the public sector, for both men and women. Other findings indicate that the supply of more educated workers has outstripped demand, resulting in a decline in the return to tertiary education and a stable return to secondary education. The dynamics of the demand and supply of skills and their changes over the time suggest that the supply of post-primary skills is adequate, except perhaps in the private sector.

Human capital and industry wage structure in Guatemala

The presence and persistence of substantial wage differentials between industries has been documented. Differences between industries could result from (1) the normal functioning of competitive labor markets (compensating differential levels of human capital), (2) institutional factors, such as the presence of a union, and (3) efficiency wages paid on some industries (employers finding they can increase profits by paying workers above-market wages). Using the testable model of endogenous growth, the author analyzes microdata from the Guatemala Household Survey to estimate the external effects of education. First, he estimates a wage equation and filters out the internal effects of education. Then, to isolate external effects, he regresses the resulting wage premiums in industry on average human capital as well as on industry-specific characteristics. Stronger conclusions cannot be drawn, but the analysis does not reject the hypothesis that external effects are present.Banks&Banking Reform,Water and Industry,Public Health Promotion,Health Monitoring&Evaluation,Labor Policies,Health Monitoring&Evaluation,Banks&Banking Reform,Economic Theory&Research,Environmental Economics&Policies,Water and Industry

After the reforms: Determinants of wage growth and change in wage inequality in Vietnam: 1998-2008

The Vietnam ―renovation‖ reforms were implemented during the 1990s, but their full effect was only felt many years later. We present evidence on the developments in real wage growth and inequality in Vietnam from 1998 to 2008. For men, wage growth was underpinned by both increases in endowments of productive characteristics (mainly education) as well as changes in the wage structure (mainly associated with experience) and residual changes. For women, the wage structure effect was the main contributor to wage growth and the most important determinant was the change in the pattern of the returns to experience: younger, less experienced workers enjoyed a premium compared to more experience workers, reversing the previous, opposite pattern. Conventional measures of inequality as well as background analysis show that wage inequality decreased sharply through the 1990s until 2006, but increased subsequently. Over the entire 10-year period, wage inequality increased slightly and more so for women.Wage inequality, counterfactual decompositions, Asia, Vietnam

Discrimination in the Equilibrium Search Model with Wage-Tenure Contracts

We extend the Burdett and Coles (2003) search model with wage-tenure contracts to two types of workers and firms and derive the equilibrium earnings distributions for both types of workers, by means of which we succeed in predicting many stylized facts found in empirics. For example, we find that at the same wage level, majority workers almost always experience a faster wage increase than the minority workers; minority workers have a higher unemployment rate; discriminating firms make lower profit than non-discriminating firms and offers to minority workers by non-discriminating firms are consistently superior to those provided by discriminating firms etc. Besides, we find a similar result to the classical discrimination theory that the average wage of the majority workers, though higher in most cases, can be smaller than their counterpart’s wage when the fraction of discriminating firms is small and the degree of recruiting discrimination and disutility are mild. We also show that in a special case of CRRA utility function with the coefficient of relative risk aversion approaching infinity, our model degenerates to Bowlus and Eckstein (2002).discrimination, wage gap, equilibrium search, wage-tenure

Industry and skill wage premiums in east Asia

This paper focuses on the estimation of skill/industry premiums and labor force composition at the national and sector levels in seven East Asian countries with the objective of providing a comprehensive analysis of trends in demand for skills in the region. The paper addresses the following questions: Are there converging or diverging trends in the region regarding the evolution of skill premiums and labor force composition? Are changes in skill premiums generalized or industry-related? How have industry premiums evolved? The analysis uses labor and household surveys going back at least 10 years. The main trends emerging from the analysis are: (a) increasing proportions of skilled/educated workers over the long run across the region; (b) generally increasing demand for skills in the region; (c) the service sector has become the most important driver of demand for skills for all countries (except Thailand); (d) countries can be broadly categorized into three groups in relation to trends and patterns of demand for skills (Indonesia, Philippines, and Thailand; Vietnam and China; and Cambodia and Mongolia); and (e) industry premiums have increased in three countries of the region (Philippines, Thailand, and Cambodia). These trends point to several policyimplications, including that governments should focus on policies promoting access to education to address the increasing demand for skills and/or persistent skill shortages; support general rather than specific curricula given broad-based increases in skill premiums in most countries; better tailor curriculum design and content and pedagogical approaches to the needs of the service sector; and target some social protection programs to unskilled workers to protect them from the"unequalizing"impact of education.Labor Markets,Water and Industry,Tertiary Education,Education For All,Secondary Education

Incidence analysis of public support to the private education sector in Cote d'Ivoire

This report analyzes the equity effects of public subsidization of private schools in Cote d'Ivoire, updates previous analyses, and attempts to assess how efficiently public spending is targeted. The subsidy per student in private (and public) schools increases at higher quintiles. Students from families in the highest quintile receive more than twice the subsidy received by students from families in the lowestquintile, compared with four times more in the case of students attending public schools. However, the subsidy system is progressive as there is a clear tendency for the share of family education expenditure covered by subsidies to decline at higher quintiles. This element of progressivity is stronger in the case of private school attendance.Primary Education,Public Health Promotion,Teaching and Learning,Health Monitoring&Evaluation,Gender and Education,Health Monitoring&Evaluation,Gender and Education,Primary Education,Teaching and Learning,Urban Services to the Poor