An Application of Quantile Analysis

No AccessPolicy Research Working Papers25 Jun 2013An Application of Quantile AnalysisAuthors/Editors: William F. Maloney, Pontual Eduardo RibeiroWilliam F. Maloney, Pontual Eduardo Ribeirohttps://doi.org/10.1596/1813-9450-2131SectionsAboutPDF (0.1 MB) ToolsAdd to favoritesDownload CitationsTrack Citations ShareFacebookTwitterLinked In Abstract:May 1999 In this study of Mexican firms, unions appear to bargain principally about employment rather than wages and firms appear to pay efficiency wages above market clearing to reduce turnover. Since minimum wages are not binding, whatever labor market segmentation is observed arises endogenously, and is not due to union- or government-induced distortions. Applying quantile analysis to detailed firm-level data from Mexico, Maloney and Ribeiro study determinants of demand and wages for two classes of labor. Unions appear to have a strong impact on how much unskilled labor is employed but not on wages. This suggests an extreme example of efficient bargaining rather than the more common monopoly union behavior. The impact on productivity is, by definition, negative, but unions could also be said to be forcing firms to use appropriate technology (less capital and more workers), increasing the total amount of labor employed in the economy. The only impact on wages appears for the tenth (lowest) quantile of unskilled workers, suggesting that unions prevent workers from being paid too far below the median for their skill level. Maloney and Ribeiro identify significant efficiency wage effects where firms pay above market clearing to prevent labor turnover both in labor demand and in the wage equations. Since minimum wages are not binding and the union impact on wages is small, this suggests that whatever segmentation exists emerges endogenously and is not due to union- or government-induced distortions. Maloney and Ribeiro offer the first use of quantile analysis to analyze labor demand at the firm level, and one of the first uses of correct standard errors in two-stage least-squares quantile regression. This paper-a product of the Poverty Reduction and Economic Management Sector Unit, Latin America and the Caribbean Region-is part of a larger effort in the region to understand the functioning of developing country labor markets. The authors may be contacted at [email protected] or [email protected] Previous bookNext book FiguresreferencesRecommendeddetailsCited byLabor Market Distortions in Côte d'Ivoire: Analyses of Employer-Employee Data from the Manufacturing Sector*African Development Review, Vol.20, No.3Relative prices and wage inequality: evidence from MexicoJournal of International Economics, Vol.64, No.2 View Published: May 1999 Copyright & Permissions Related RegionsLatin America & CaribbeanRelated CountriesCzech RepublicGhanaMexicoRelated TopicsFinance and Financial Sector DevelopmentMacroeconomics and Economic GrowthSocial Protections and Labor KeywordsBARGAININGEFFECTSEFFICIENCYEFFICIENCY WAGESEMPLOYMENTHUMAN CAPITALINFORMATIONLABORLABOR DEMANDLABOR FORCELABOR MARKETSLABOR ORGANIZATIONSMINIMUM WAGESPRODUCTIVITYTHEORYUNSKILLED LABORUNSKILLED WORKERSWAGE DISTRIBUTIONWAGE STRUCTUREWAGES PDF DownloadLoading ...