Wages and jobs : essays in labour demand

Abstract

This thesis contains four essays, of varying length, on the general theme of labour demand. An initial Overview describes the subjects of the different essays, and the links between them. Each essay also contains its own, more detailed, abstract. Part A considers the question 'Why Has Wage Inequality Risen Most Where Wage Shares Have Fallen Least?' In recent decades, most developed countries have experienced rising wage inequality and falling wage shares. The same causes have often been blamed for both trends. It is observed, however, that wage inequality has risen the most in those countries where wage shares have fallen the least, and vice-versa. The majority of existing theories are either theoretically or empirically unable to explain this puzzling relationship, which deserves much more attention than it has received. Part B combines the two shortest essays, 'A Note on the Elasticity of Demand for Homogenous Labour' and 'A Note on Immigration and Average Wages'. These argue, respectively, that commonly used labour demand elasticity formulae derived from the microeconomic conditions of a single industry are inappropriate for most macroeconomic applications, and that immigration should be considered as a shock to the growth rate of the labour force, rather than its level. Part C asks 'Why Don't Relative Wages Affect Employment (Very Much)?' It argues that several common explanations for these findings lack sufficient evidence to be persuasive, and proposes an alternative: that the demand for labour is much less elastic at the occupational level than at the aggregate level. This hypothesis is shown to be consistent with a range of stylized facts about the labour market, while the rival explanations are not. The Last Words offer some reflections on the findings, both empirical and theoretical, of the preceding essays, and their more general implications. Show more