compensating wage differentials

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Compensating wage differentials . Heterogeneity. One limitation of the static LS model lies in the heterogeneity assumption. In reality, individuals differ in preference and in information acquired. We thus need to have such heterogeneity in the model . Household production. - PowerPoint PPT Presentation

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ECON 3039

Labor Economics2015-16

By Elliott FanEconomics, NTUElliott Fan: Labor 2015 Fall Lecture 111

1DD Example: Kan and Lin (2011)Elliott Fan: Labor 2015 Fall Lecture 112The Effects of Employment Protection on Labor Turnover: Empirical Evidence from Taiwan, Economic Inquiry, 49, 398433. The paper explored the effect on labor turnovers of the introduction of Labor Standards Law, which has substantially increased the costs of firing.

2DD Example: Kan and Lin (2011)Elliott Fan: Labor 2015 Fall Lecture 113

3DD Example: Kan and Lin (2011)Elliott Fan: Labor 2015 Fall Lecture 114Taiwans LSL attempts to regulate all aspects of employment relationship, for example, labor contract, wage, overtime payments and hours, retirement and severance payments, compensations for occupational accidents, and maternity benefits.

4DD Example: Kan and Lin (2011)Elliott Fan: Labor 2015 Fall Lecture 115Some of the LSL labor protection measures were new, for example, the prohibition of firing at will. Firstly, employers have to give an advance notice before dismissing an employee. Secondly, LSL imposes a higher severance pay than previous labor laws. An employer can dismiss an employee only if the business is closing down, suspended for more than 1 month, suffering from a loss, or when the employee is not able to perform the duties satisfactorily or violates the work rule.

5DD Example: Kan and Lin (2011)Elliott Fan: Labor 2015 Fall Lecture 116EnforcementThe poor enforcement of LSL has also contributed to the low compliance rate of LSL in the early years of its implementations. During the first 3 years of LSLs enactment the Department of Labor of the Ministry of Interior was in charge of the enforcement of LSL. However, inspection and prosecution were carried out by a multitude of local labor agencies belonging to the Taiwan Provincial Government, the Taipei and Kaohsiung municipalities, and the Ministry of Economic Affairs.

6DD Example: Kan and Lin (2011)Elliott Fan: Labor 2015 Fall Lecture 117The industries covered by LSL include: (a) agriculture, forestry, fishing, and animal husbandry; (b) mining and quarrying; (c) manufacturing; (d) electricity, gas, and water; (e) construction; (f) transportation, storage, and communication; and (g) mass media. The industries not covered by LSL belong to the service sector: (a) retail and wholesale; (b) hotels and restaurants; (c) commerce; (d) finance, insurance and real estate; (e) business services; (f) social, personal, and related community services; and (g) public administration.

7DD Example: Kan and Lin (2011)Elliott Fan: Labor 2015 Fall Lecture 118Definitions:Rate of hiring: HRATEit = (HIREit /EMPit1) 100Rate of separating:SRATEit = (SEPARATEit /EMPit1) 100Worker flow:WFLOWit = (HIREit + SEPARATEit /EMPit1) 100Job reallocation rate:JREALLOCit = (| EMPit EMPit1|/EMPit1) 100,= (| JCit JDit |/EMPit1) 100,= (| HIREit SEPARATEit |/EMPit1)100

8Elliott Fan: Labor 2015 Fall Lecture 119

Elliott Fan: Labor 2015 Fall Lecture 1110

Elliott Fan: Labor 2015 Fall Lecture 1111

DD Example: Kan and Lin (2011)Elliott Fan: Labor 2015 Fall Lecture 1112Difference-in-differenceFirst layer: time (three timings)Second layer: being covered by LSL

12DD Example: Kan and Lin (2011)Elliott Fan: Labor 2015 Fall Lecture 1113

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