The Effects of Incomplete Employee Wage Information: A Cross-Country Analysis

Solomon W. Polachek; Jun (Jeff) Xiang

doi:10.1016/S0147-9121(05)24002-5

Login

Welcome:
Guest

Search for:

Browse:

Product Information:

Resources:

Research in Labor Economics

ISSN: 0147-9121
Series editor(s): Professor Solomon Polachek, Dr Konstantinos Tatsiramos

Subject Area: Economics

Content: Series Volumes | Current Volume RSS

Options: To add Favourites and Table of Contents Alerts please take a Emerald profile

Document request:
The Effects of Incomplete Employee Wage Information: A Cross-Country Analysis

Document Information:
Title:	The Effects of Incomplete Employee Wage Information: A Cross-Country Analysis
Author(s):	Solomon W. Polachek, Jun (Jeff) Xiang
Volume:	24 Editor(s): Solomon W. Polachek, Carmel Chiswick, Hillel Rapoport ISBN: 978-0-76231-275-7 eISBN: 978-1-84950-390-7
Citation:	Solomon W. Polachek, Jun (Jeff) Xiang (2006), The Effects of Incomplete Employee Wage Information: A Cross-Country Analysis, in Solomon W. Polachek, Carmel Chiswick, Hillel Rapoport (ed.) The Economics of Immigration and Social Diversity (Research in Labor Economics, Volume 24), Emerald Group Publishing Limited, pp.35-75
DOI:	10.1016/S0147-9121(05)24002-5 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
Article type:	Chapter Item
Abstract:	In this paper, we define a tractable procedure to measure worker incomplete information in the labor market. The procedure, which makes use of earnings distribution skewness, is based on econometric frontier estimation techniques, and is consistent with search theory. We apply the technique to 11 countries over various years, and find that incomplete information leads workers to receive on average about 30–35% less pay than they otherwise would have earned, had they information on what each firm paid. Generally, married men and women suffer less from incomplete information than the widowed or divorced; and singles suffer the most. Women suffer more from incomplete information than men. Schooling and labor market experience reduce these losses, but institutions within a country can reduce them, as well. For example, we find that workers in countries that strongly support unemployment insurance (UI) receive wages closer to their potential, so doubling UI decreases incomplete information and results in 5% higher wages. A more dense population reduces search costs leading to less incomplete information. A more industrial economy disseminates wage information better, so workers exhibit less incomplete information and higher wages. Finally, we find that foreign worker inflows increase incomplete information, and at the same time reduce average wage levels, at least in the short run.