published_or_final_version / Public Administration / Master / Master of Public Administration

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In the Master’s work the problems of the evaluation of the “right” wage level and the factors of this evaluation are discussed. In accordance to the scientific methodological literature the analysis of the wage definitions, the factors that influence wage are given. Also there are given main wage models, systems and forms, evaluated the origin reasons of the wage differentiation and the sugestions for the wage level normalization.

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Prolonged experience of high and long-term unemployment has led many governments to a renewed interest in active labour market policies. In particular, targeted wage subsidies have been seen as a means of both directly getting longterm unemployed people into work, and improving their future prospects of finding and keeping jobs. We examine three issues. Firstly, we look at the macroeconomic theory of targeted wage subsidies, and, to a lesser extent, job search assistance, within efficiency wage, union bargaining and search theoretic frameworks. Subsidies directly increase labour demand, but we also find that their effectiveness is enhanced by general equilibrium effects from targeting: wage pressure is reduced; and the average quality of the unemployed pool rises as long-term unemployed workers are removed from it, increasing the incentives for other firms to open vacancies. Secondly we address the optimal degree of policy targeting, using an extension of the Mortensen-Pissarides job creation and destruction model. We argue that there are real gains to targeting the long-term unemployed, but also diminishing returns. Hence, as the level of policy expenditure rises, the extent of targeting should fall. Simulating the model for the UK, we find that policy could have a significant impact on equilibrium unemployment, with more modest welfare gains. Finally, we look at longer-term employability effects by evaluating the Australian Special Youth Employment Training Program (SYETP). Controlling for selection bias using a bivariate probit, we find that participation increased the chances of having a job by 26% between 8 and 13 months after subsidy expiry, and 20% a year later. Much of this gain arose from retention of initially subsidised jobs, but even excluding this, participants were significantly more likely to be employed in subsequent years than if they had not gone on the programme.

In a unionized duopoly with price setting firms market shares in different wage determination settings are analyzed. I compare decentralized, centralized and sequential wage determination. In the decentralized setting the union in the more productive firm can exploit the differences in productivity for rising local wages. The rising wages in the more productive firm result in smaller differences of unit costs, therefore the market shares are split more equally in the decentralized setting than with centralized wage determination. Sequential wage determination results in an asymmetric outcome. Compared with the simultaneous case the market share of the wage-leader firm is smaller, because the competitor is able to undercut the wage. Additionally with sequential wage determination the union representing the workers of the more productive firm cannot exploit the productivity advantage by raising the wage rate by the same extent as in the simultaneous case. (author's abstract) / Series: Department of Economics Working Paper Series

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This dissertation comprises two essays. While the topics of both essays are different both are interrelated on the base of economic development. The first essay examines ethnic wage gaps on segmented labor markets with evidence from Latin American countries. The second essay revisits the determinants of fiscal decentralization with an emphasis on the role that geography plays in determining fiscal decentralization. The first essay contributes to limited literature on ethnic wage gaps in Latin America. It examines ethnic wage gaps for workers in formal and informal labor markets. Using data from Latin American countries we estimate and examine across-ethnic wage gaps for informal and formal markets, their changes over time, factors that explain their differences, and the wage gap distribution. More specifically, we verify that different ethnic wage gaps do exist across formal and informal markets; they behave differently not only at their means but also along the wage distribution. The results indicate that higher ethnic wage gaps in informal sectors exist not only on average but also throughout the distribution. In addition, we find that wage gaps have declined significantly over the last 10 years. we explain this by examining changes in the prices of institutional factors and changes in human capital endowments. The distributional analysis shows a decrease in the unexplained component, especially in the top part of the distribution. The second essay contributes to the existing literature on the determinants of fiscal decentralization by motivating theoretically and exploiting in depth the empirical relevance that geography has as a determinant of fiscal decentralization. The relationship between decentralization and geography is based on the logic that more geographically diverse countries show greater heterogeneity among their citizens, including their preferences and needs for public goods and services provisions. Communications and physical distance are also a very important issue and play a key role on the effect of geography over time. (Lora et. al., 2003) argue geography plays a key role in economic and social development, as well as in the institutional design of the countries; yet, this effect could be enhanced (or diminished) in the presence of better physical infrastructure or communications. The theoretical model in this paper builds on the work by Arzaghi and Henderson (2002) and Panizza (1999). For the empirical estimation, we use a panel data set for approximately 91 countries for the period 1960-2005. Physical geography is measured along several dimensions, including elevation, land area and climate. We construct a geographical fragmentation index and test its effect on fiscal decentralization. In addition, we interact the geographical fragmentation index with time-variant infrastructure variables in order to test the effect that infrastructure and communications have on the relationship between geography and fiscal decentralization. For robustness, we construct Gini coefficients for in-country elevation and climate. We find a positive and strong correlation between geographical factors and fiscal decentralization. We also find that while the development of infrastructure (in transportation, communications, etc.) tends to reduce the effect of geography on decentralization, this effect is rather small and mostly statistically insignificant, meaning that the impact of geography survives over time. The strategy has additional value because geography may be used as an instrument for decentralization in future econometric estimations where decentralization is used as an explanatory variable, but may be suspected to be endogenous to the economic process being studied (economic growth, political instability, macroeconomic stability, income distribution, etc.).

The thesis examines the effect of tenure on earnings in the British public and private sectors. The characteristic differences between the labour markets associated with the two sectors are examined. Several theories underlying the earnings-tenure effect are then assessed for their suitability in explaining earnings patterns in each of the sectors under analysis. Cross sectional estimation is carried out using one year of the New Earnings Survey Panel. The results show a higher return to tenure in central and local government than in the private sector or public corporations. There also appears to be a higher return to tenure for females in all sectors than for males. Explanations are offered for these observations, based on the labour market characteristics of the sectors noted earlier. An attempt is then made to correct for estimation biases associated with job match heterogeneity, which are purported to overstate return to tenure. The correction is based on techniques adopted in the recent American literature using instrumental variables. Despite the use of this process, the expected decrease in return to tenure is not observed unless certain key variables are omitted from the estimating equation.