A SURVEY ON LABOR MARKETS IMPERFECTIONS IN MEXICO USING A STOCHASTIC FRONTIER
Abstract
It is assumed that observed labor income is the result of three stages across the job search process from the reservation wage formation, the bargaining between employers and potential employees when the match, and finally a possible additional adjustment once the worker is completely hired. This paper provides a methodological proposal and an intuitive estimation of the wage gain due to the presence of labor market imperfections across those three stages. The part of the wage that is explained by labor markets imperfections is estimated by performing a stochastic frontier model with panel data belonging to the Mexican labor survey – ENOE. The results suggest that 82.7% of the variance of the wages of the subordinated workers is explained by market imperfections. Moreover, public labor offices and small firms are negatively correlated with their presence.
References
[1] Arnott, R., Hosios, A., and Stiglitz, J. 1988. Implicit Contracts, Labor Mobility, and Unemployment. The American Economic Review, Vol. 78, No. 5: 1046-1066.
[2] Arnott, R., and Stiglitz, J. 1985. Labor Turnover, Wage Structures, and Moral Hazards: The Inefficiency of Competitive Markets. Journal of Labor Economics, Vol. 3, No. 4: 434-462.
[3] Aslund, O., and Rooth, D. 2005. Shifts in Attitudes and Labor Market Discrimination: Swedish Experiences After 9-11. Journal of Population Economics, Vol. 18, No. 4: 603-629.
[4] Baldwin, M. 1991. An Asymmetric Information Theory of Labor Market Discrimination. Southern Economic Journal, Vol. 57, No. 4: 1148-1154.
[5] Bartolucci, C. 2009. Gender Wage Gaps Reconsidered: A Structural Approach Using Matched Employer-Employee Data. Collegio Carlo Alberto. Notebook No. 116. September.
[6] Bemmels, B. 1987. How Unions Affect Productivity in Manufacturing Plants. Industrial and labor Relations Review, Vol. 40, No. 2: 241-253.
[7] Blau, D. 1991. Search for Nonwage Job Characteristics: A Test of the Reservation Wage Hypothesis. Journal of Labor Economics, Vol. 9, No. 2: 196-205.
[8] Bloemen, H. 2005. Job Search, Search Intensity, and Labor Market Transitions an Empirical Analysis. The Journal of Human Resources, Vol. 40, No. 1: 231-269.
[9] Boehm, T., and Hofler, R. 1987. A Frontier Approach to Measuring the Effect of Market Discrimination: A Housing Illustration. Southern Economic Journal, Vol. 54, No. 2: 301-315.
[10] Card, D. 2001. The Effect of Unions on Wage Inequality in the U.S. Labor Market. Industrial and Labor Relations Review, Vol. 54, No. 2: 296-315.
[11] Carroll, S., and Rolph, J. 1973. A Stochastic Model of Discrimination in the Labor Market. Econometrica, Vol. 41, No. 1: 97-108.
[12] Cawley, J., Heckman, J., and Vytlacil, E. Three Observations on Wages and Measured Cognitive Ability. Labour Economics, Vol. 8, No. 4: 419-442.
[13] Cobb-Clark, D., and Tan, M. 2009. Noncognitive Skills, Occupational Attainment, and Relative Wages. Centre for Economic Policy Research. Discussion Paper No. 612. July.
[14] David, H. 2008. The Economics of Labor Market Intermediation: An Analytic Framework. Working paper 14348. National Bureau of Economic Research, September.
[15] Fields, G. 2007. Labor Market. ILR Collection Working Papers. Cornell University ILR School.
[16] Gannon, F., and Zenou, Y. 1997. Segregation and Labor Discrimination in Cities. Annales d’Economie et de Statistique, No. 45: 233-249.
[17] Greene, W. 2003. Distinguishing Between Heterogeneity and Inefficiency: Stochastic Frontier Analysis of the World Hearth Organization’s Panel Data on National Health Care Systems. Department of Economics, Stern School of Business, New York University.
[18] Heckman, J. 1998. Detecting Discrimination. The Journal of Economic Perspectives, Vol. 12, No. 2: 101-116.
[19] Heckman, J. 1979. Sample Selection Bias as a Specification Error. Econometrica, 47:153-161.
[20] Heckman, J., Stixrud, J., and Urzua, S. 2006. The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior. Journal of Labor Economics, Vol. 24, No. 3: 411-482.
[21] Heckman, J., and Willis, R. 1979. The Distribution of Lifetime Labor Force Participation of Married Women: Reply to Mincer an Ofek. The Journal of Political Economy, Vol. 87, No. 1: 203-211.
[22] Hofler, R., and Murphy, K. 1994. Estimating Reservation Wages of Employed Workers Using a Stochastic Frontier. Southern Economic Journal, Vol. 60, No. 4: 961-975.
[23] Kahn, L., and Low, S. 1990. The Demand for Labor Market Information. Southern Economic Journal, Vol. 56, No. 4: 1044-1058.
[24] Kiefer, N., and Neumann, G. 1979. An empirical job-search model, with a test of the constant reservation wage hypothesis. Journal of Political Economy, Vol. 87, No. 1: 89-107.
[25] Kolpin, V., and Singell, L. 1997. Information, Strategic Behavior, and Discrimination in the Labor Market. Economic Theory, Vol. 10, No. 1:175-184.
[26] Mavromaras, K. et al. 2009. Job Mismatches and Labour Market Outcomes. ESRI, Working Paper No. 314. September.
[27] Mincer, J. 1974. Learning Schooling and Earnings. National Bureau of Economic Research.
[28] Moffitt, R., and Wolfe, B. 1992. The Effect of the Medicaid Program on Welfare Participation and Labor Supply. The Review of Economics and Statistics, Vol. 74, No. 4: 615-626.
[29] Mortensen, D. 1989. The Persistence and Indeterminacy of Unemployment in Search Equilibrium. The Scandinavian Journal of Economics, 90th Anniversary Symposium: Whither Macroeconomics? Vol. 91, No. 2: 347-370.
[30] Owen, John D. 1971. The demand for Leisure. The Review of Political Enomy, Vol. 79, No. 1: 56-76.
[31] Rogerson, R., Shimer, R., and Wright, R. 2005. Search-Theoretic Models of the Labor Market: A Survey. Journal of Economic Literature, Vol. 43, No. 4: 959-988.
[32] Salop, J., and Salop, S. 1976. Self-Selecion and Turnover in the Labor Market. The Quarterly Journal of Economic, Vol. 90, No. 4: 619-627.
[33] Stigler, G. 1962. Information in the Labor Market. The Journal of Political Economy, Vol. 70, No. 5, Part 2: Investment in Human Beings: 94-105.
[34] Swinton, D. 1977. A Labor Force Competition Theory of Discrimination in the Labor Market. The American Economic Review, Vol. 67, No. 1, Papers and Proceedings of the Eight-ninth Annual Meeting of the American Economic Association: 400-404.
[35] United Nations Department of Economic and Social Affairs. Population Division. 2009. World Population Prospects: the 2008 Revision. March, 2009. Appendix VII.15.
[36] Van den Berg, G. 2003. Multiple Equilibria and Minimum Wages in Labor Markets with Informational Frictions and Heterogeneous Production Technologies. International Economic Review, Vol. 44, No. 44: 1337-1357.
[37] Wessels, W. 1985. The Effects of Employment and Productivity: An Unresolved Contradiction. Journal of Labor Economics, Vol. 3, No. 1: 101-108.
[2] Arnott, R., and Stiglitz, J. 1985. Labor Turnover, Wage Structures, and Moral Hazards: The Inefficiency of Competitive Markets. Journal of Labor Economics, Vol. 3, No. 4: 434-462.
[3] Aslund, O., and Rooth, D. 2005. Shifts in Attitudes and Labor Market Discrimination: Swedish Experiences After 9-11. Journal of Population Economics, Vol. 18, No. 4: 603-629.
[4] Baldwin, M. 1991. An Asymmetric Information Theory of Labor Market Discrimination. Southern Economic Journal, Vol. 57, No. 4: 1148-1154.
[5] Bartolucci, C. 2009. Gender Wage Gaps Reconsidered: A Structural Approach Using Matched Employer-Employee Data. Collegio Carlo Alberto. Notebook No. 116. September.
[6] Bemmels, B. 1987. How Unions Affect Productivity in Manufacturing Plants. Industrial and labor Relations Review, Vol. 40, No. 2: 241-253.
[7] Blau, D. 1991. Search for Nonwage Job Characteristics: A Test of the Reservation Wage Hypothesis. Journal of Labor Economics, Vol. 9, No. 2: 196-205.
[8] Bloemen, H. 2005. Job Search, Search Intensity, and Labor Market Transitions an Empirical Analysis. The Journal of Human Resources, Vol. 40, No. 1: 231-269.
[9] Boehm, T., and Hofler, R. 1987. A Frontier Approach to Measuring the Effect of Market Discrimination: A Housing Illustration. Southern Economic Journal, Vol. 54, No. 2: 301-315.
[10] Card, D. 2001. The Effect of Unions on Wage Inequality in the U.S. Labor Market. Industrial and Labor Relations Review, Vol. 54, No. 2: 296-315.
[11] Carroll, S., and Rolph, J. 1973. A Stochastic Model of Discrimination in the Labor Market. Econometrica, Vol. 41, No. 1: 97-108.
[12] Cawley, J., Heckman, J., and Vytlacil, E. Three Observations on Wages and Measured Cognitive Ability. Labour Economics, Vol. 8, No. 4: 419-442.
[13] Cobb-Clark, D., and Tan, M. 2009. Noncognitive Skills, Occupational Attainment, and Relative Wages. Centre for Economic Policy Research. Discussion Paper No. 612. July.
[14] David, H. 2008. The Economics of Labor Market Intermediation: An Analytic Framework. Working paper 14348. National Bureau of Economic Research, September.
[15] Fields, G. 2007. Labor Market. ILR Collection Working Papers. Cornell University ILR School.
[16] Gannon, F., and Zenou, Y. 1997. Segregation and Labor Discrimination in Cities. Annales d’Economie et de Statistique, No. 45: 233-249.
[17] Greene, W. 2003. Distinguishing Between Heterogeneity and Inefficiency: Stochastic Frontier Analysis of the World Hearth Organization’s Panel Data on National Health Care Systems. Department of Economics, Stern School of Business, New York University.
[18] Heckman, J. 1998. Detecting Discrimination. The Journal of Economic Perspectives, Vol. 12, No. 2: 101-116.
[19] Heckman, J. 1979. Sample Selection Bias as a Specification Error. Econometrica, 47:153-161.
[20] Heckman, J., Stixrud, J., and Urzua, S. 2006. The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior. Journal of Labor Economics, Vol. 24, No. 3: 411-482.
[21] Heckman, J., and Willis, R. 1979. The Distribution of Lifetime Labor Force Participation of Married Women: Reply to Mincer an Ofek. The Journal of Political Economy, Vol. 87, No. 1: 203-211.
[22] Hofler, R., and Murphy, K. 1994. Estimating Reservation Wages of Employed Workers Using a Stochastic Frontier. Southern Economic Journal, Vol. 60, No. 4: 961-975.
[23] Kahn, L., and Low, S. 1990. The Demand for Labor Market Information. Southern Economic Journal, Vol. 56, No. 4: 1044-1058.
[24] Kiefer, N., and Neumann, G. 1979. An empirical job-search model, with a test of the constant reservation wage hypothesis. Journal of Political Economy, Vol. 87, No. 1: 89-107.
[25] Kolpin, V., and Singell, L. 1997. Information, Strategic Behavior, and Discrimination in the Labor Market. Economic Theory, Vol. 10, No. 1:175-184.
[26] Mavromaras, K. et al. 2009. Job Mismatches and Labour Market Outcomes. ESRI, Working Paper No. 314. September.
[27] Mincer, J. 1974. Learning Schooling and Earnings. National Bureau of Economic Research.
[28] Moffitt, R., and Wolfe, B. 1992. The Effect of the Medicaid Program on Welfare Participation and Labor Supply. The Review of Economics and Statistics, Vol. 74, No. 4: 615-626.
[29] Mortensen, D. 1989. The Persistence and Indeterminacy of Unemployment in Search Equilibrium. The Scandinavian Journal of Economics, 90th Anniversary Symposium: Whither Macroeconomics? Vol. 91, No. 2: 347-370.
[30] Owen, John D. 1971. The demand for Leisure. The Review of Political Enomy, Vol. 79, No. 1: 56-76.
[31] Rogerson, R., Shimer, R., and Wright, R. 2005. Search-Theoretic Models of the Labor Market: A Survey. Journal of Economic Literature, Vol. 43, No. 4: 959-988.
[32] Salop, J., and Salop, S. 1976. Self-Selecion and Turnover in the Labor Market. The Quarterly Journal of Economic, Vol. 90, No. 4: 619-627.
[33] Stigler, G. 1962. Information in the Labor Market. The Journal of Political Economy, Vol. 70, No. 5, Part 2: Investment in Human Beings: 94-105.
[34] Swinton, D. 1977. A Labor Force Competition Theory of Discrimination in the Labor Market. The American Economic Review, Vol. 67, No. 1, Papers and Proceedings of the Eight-ninth Annual Meeting of the American Economic Association: 400-404.
[35] United Nations Department of Economic and Social Affairs. Population Division. 2009. World Population Prospects: the 2008 Revision. March, 2009. Appendix VII.15.
[36] Van den Berg, G. 2003. Multiple Equilibria and Minimum Wages in Labor Markets with Informational Frictions and Heterogeneous Production Technologies. International Economic Review, Vol. 44, No. 44: 1337-1357.
[37] Wessels, W. 1985. The Effects of Employment and Productivity: An Unresolved Contradiction. Journal of Labor Economics, Vol. 3, No. 1: 101-108.
Published
2010-06-30
How to Cite
VILLA, Juan M..
A SURVEY ON LABOR MARKETS IMPERFECTIONS IN MEXICO USING A STOCHASTIC FRONTIER.
Theoretical and Practical Research in Economic Fields, [S.l.], v. 1, n. 1, p. 97-114, june 2010.
ISSN 2068-7710.
Available at: <https://journals.aserspublishing.eu/tpref/article/view/1097>. Date accessed: 25 apr. 2024.
Section
Articles
Non-Exclusive License under Attribution 4.0 International Public License (CC BY 4.0):
This ‘Article’ is distributed under the terms of the license CC-BY 4.0., which lets others distribute, remix, adapt, and build upon this article, even commercially, as long as they credit this article for the original creation. ASERS Publishing will be acknowledged as the first publisher of the Article and a link to the appropriate bibliographic citation (authors, article title, volume issue, page numbers, DOI, and the link to the Published Article on ASERS Publishing’ Platform) must be maintained.