evidence from iranian households’ expenditures and income survay(iheis) in urban area shows that, average of real hourly wage against the schooling years is declining in the right tail of wage distribution between 1384 and 1390 (2005 and 2011). a tentative justification for this observation is that the private rate of return to education at upper quantiles and higher years of schooling have red...

Note that the variance for ηi is normalized to one since we only observe the sign of Z ′ iγ + ηi. Therefore γ can only be identified up to a scale. A classical example of this two-equation model is the wage regression model, where Yi is the observed wage rate and Di is the labor supply decision, which is decided by the latent calculation that one’s expected wage rate is larger than her reservat...

The present paper examines a two-country model, one with flexible wage and prices (which seems to characterize most high performance East Asian economies), and the other with sticky wage and prices. Wage and prices often “over-shoot” in the flexible wage economy. The impacts of fixed and floating exchange rage regime on the flexible wage economy is typically different. A fixed (floating) exchan...

IN AN EARLIER ISSUE OF Brookings Papers on Economic Activity, George Perry argued that the Phillips curve, measured in the conventional way, had shifted to the right in recent years, and estimated that a 4 percent overall unemployment rate would produce about 1 /2 percentage points more inflation per year than was the case in the mid-1950s.1 Perry's conclusion was based on a wage equation that ...

We exploit the introduction of minimum wages in the agricultural and domestic work sectors of South Africa to study how the structure of low-wage labor markets of a low-income country changes with the changes in policy. Even after the introduction of the minimum wage, we find widespread and persistent non-compliance. Our (lowerbound) estimate of the national level compliance rate in the agricul...

Do Emotions Improve Labor Market Outcomes? Traditionally, models of economic decision-making assume that individuals are rational and emotionless. This chapter argues that the neglect of emotion in economic models explains their inability to predict important aspects of the labor market. We focus on one example: the scarcity of nominal wage cuts. Firms frequently cut real wages of workers, by i...

This paper argues how an increase in minimum wage affects employment, consumption, and social welfare with dynamic general equilibrium model without market frictions. The study demonstrates that a minimum wage hike reduces an actual unemployment rate and has positive effects on an employment rate under the demand-shortage economy whereas they do not under a non-demand shortage economy. The stud...

Over the past decade, economists have developed efficiency wage models to explain the presence of wage rigidity and thus of involuntary unemployment. In these models, workers' productivity depends positively on the wage or firms' costs depend negatively on the wage, giving firms an incentive to pay wages above the market-clearing level. One type of efficiency wage model is the turnover cost mod...

This paper examines the impact of US income and payroll taxes on the decision of wage-and-salary employees to become self-employed. I exploit variations in the tax treatment of wage and self-employment income using the Panel Study of Income Dynamics. Results show that differential taxation has significant effects on the probability of making a transition into self-employment. Reducing an indivi...