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Empirical Essays on Inequality

Externe Monographien

Matteo Targa

Berlin: Freie Universität Berlin, 2023, 281 S.


This dissertation consists of four empirical chapters which contribute to the fields of labor economics and inequality research. The first chapter examine whether gender differences exist in fairness evaluation of own earnings. Previous studies found that women tend to evaluate their own pay more favorably than men. Contented women are speculated to not seek higher wages, thus the ‘paradox of the contented female worker’ may contribute to persistent gender pay differences. We extend the literature, by investigating fairness evaluations of own earnings and underlying conceptions of fair earnings, providing a closer link to potential subsequent wage demands than previous literature. Using European Social Survey (2018/19) data, we find no evidence that women evaluate their own earnings more favorably than men. In 15 out of the 28 analyzed countries, women actually report more intense levels of perceived unfairness. Studying fair markups on unfair earnings, i.e., the relative distance between the earnings received and earnings considered fair, we find that women report the same, if not lower, fair markups compared to men in most countries; thus indicating limited potential for perceived unfairness as a driving force to reduce the gender pay gap in Europe. The second chapter studies the link between technological change, employment and earnings inequality. In particular, the Routine-Biased Technological Change hypothesis (RBTC) by Acemoglu and Autor (2011) suggests that automation processes have substituted workers operating middle-skilled routine tasks. Consequently, the relative demand for complementary non-routine occupations, i.e., low-skilled service and high-skilled abstract jobs, has increased. These changes in the labor force composition imply a polarization of jobs along the skills distribution. Here we quantify the polarization of jobs and its importance for earnings distributions using a novel dataset of 35 countries. We find strong evidence for job polarization in most countries but no clear-cut distributional consequences. This weak link stems from variation within rather than between occupational classes and heterogeneous intensities of de-routinization along the earnings distribution. The third chapter investigates how heterogeneity in firm wage policies shape inequalities within and between occupational groups. A long-standing line of literature in labor economics recognizes that workers with similar characteristics and skills earn different wages in different firms. In a decentralized economy, where the wage setting power is at the firm-level, these differentials are ascribed to firm-specific pay policies, hence the ‘firm wage premium’. Differently form previous literature, I allow firms to set differential wage policies to different occupational classes, i.e. managers, blue collar, and white collar workers. Using matched employer-employee administrative data from the Veneto region in Italy, I show that within the same firm, different occupations receive different firm premia so that the high-type firms are not "equally good" for all their employees. Ranking employers by the occupation-specific firm fixed effects reveals substantial heterogeneity in the wage policies applied to the different occupational groups within the same firm. Specifically, I show that the highest-paying firms for a given occupational group are likely to be among the least advantageous for the other employees. Eventually, examining the evolution of occupation-specific firm policies over two decades, this chapter provides empirical evidence that within-firm wage differentials between white and blue collar workers increased among Veneto employers in the 1990s with respect to the 1980s. The fourth chapter analyzes wealth inequality in China. In particular, in the context of China, there is growing interests among economists and other social scientists in measuring the economic returns of the Chinese Communist Party (CCP) membership. Previous literature has mostly focused on the estimation of returns of party membership on labour wages and earnings. In this chapter, we aim to fill the gap in the literature by presenting the first comprehensive study about the wealth gap evolution in urban China between CCP and non-CCP households over the last three decades. Our results show that the average wealth gap between CCP and non-CCP household remained substantial and stable over the time period 1995- 2017, however, the returns structure of political membership has deeply changed over time. While in the 1990s the highest wealth advantages, in relative terms, for party members where concreted at the middle of the distribution, today is the lower class that benefits the most. We then show that the the privatization of the housing market, especially after the housing reform, granted even access to housing wealth to both CCP and non-CCP families, reducing the differences in the middle and at the top of the wealth distribution. However, strong differences between the housing investment of CCP and non-CCP households persist still today at the bottom of the net wealth distribution, where CCP are found to be more likely to own housing real estate assets than non-CCP households and the houses that they own are more valuable.

Keywords: Economics, Inequality, Labour Economics
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