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What can monopsony explain of the gender wage differential in Italy?

What can monopsony explain of the gender wage differential in Italy? Purpose – This paper seeks to study gender wage differentials in Italy using first‐order predictions of monopsony‐search models. It compares empirical predictions of these models against other competing ones of wage determination in non‐competitive settings. Design/methodology/approach – The paper looks at the empirical relevance of the model in terms of third degree wage discrimination among men and women by estimating the labour supply elasticity to the individual firm. It also tests the monopsony model using a “natural” experiment. Italian administrative longitudinal data from INPS are used. Findings – Women have lower elasticity of labour supply to the individual firm: employer size regressions indicate larger effects (and consequently lower elasticity) for women as predicted by the monopsony model. Using the theoretical dynamic monopsony‐search model of Burdett and Mortensen, wage elasticity of separations and recruits confirm this result. Using relative men/women employment effects resulting from institutional changes in wage indexation mechanism (Scala Mobile), it is found that relative male employment responded differently in the two periods to the exogenous relative increase in the wage differential, as predicted by the monopsony model. Search frictions explain about 50 per cent of the gender differential. Research limitations/implications – No role for discrimination. Better controls for rents and union status would be needed. More rich firm data would be needed. Originality/value – The paper is one of the few attempts of testing implications of monopsony models in unionised labour markets, such as Italy, after some important reforms in wage bargaining agreements. The change in institutional agreements is an interesting test for different theories of wage determination. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Manpower Emerald Publishing

What can monopsony explain of the gender wage differential in Italy?

International Journal of Manpower , Volume 32 (4): 25 – Jul 12, 2011

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
0143-7720
DOI
10.1108/01437721111148559
Publisher site
See Article on Publisher Site

Abstract

Purpose – This paper seeks to study gender wage differentials in Italy using first‐order predictions of monopsony‐search models. It compares empirical predictions of these models against other competing ones of wage determination in non‐competitive settings. Design/methodology/approach – The paper looks at the empirical relevance of the model in terms of third degree wage discrimination among men and women by estimating the labour supply elasticity to the individual firm. It also tests the monopsony model using a “natural” experiment. Italian administrative longitudinal data from INPS are used. Findings – Women have lower elasticity of labour supply to the individual firm: employer size regressions indicate larger effects (and consequently lower elasticity) for women as predicted by the monopsony model. Using the theoretical dynamic monopsony‐search model of Burdett and Mortensen, wage elasticity of separations and recruits confirm this result. Using relative men/women employment effects resulting from institutional changes in wage indexation mechanism (Scala Mobile), it is found that relative male employment responded differently in the two periods to the exogenous relative increase in the wage differential, as predicted by the monopsony model. Search frictions explain about 50 per cent of the gender differential. Research limitations/implications – No role for discrimination. Better controls for rents and union status would be needed. More rich firm data would be needed. Originality/value – The paper is one of the few attempts of testing implications of monopsony models in unionised labour markets, such as Italy, after some important reforms in wage bargaining agreements. The change in institutional agreements is an interesting test for different theories of wage determination.

Journal

International Journal of ManpowerEmerald Publishing

Published: Jul 12, 2011

Keywords: Monopsony; Gender wage differentials; Elasticity of labour supply; Employer size‐effect; Scala Mobile; Italy; Pay differentials

References