RevisedCh10Notes

RevisedCh10Notes - Chapter10:WageStructuresacrossMarkets...

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Chapter 10: Wage Structures across Markets Introduction the previous two chapters investigated how wages can vary systematically across jobs with  different workplace amenities (compensating wage differentials) and across people with different  levels of education or skill  in this chapter we focus on wage variation across occupations, industries, regions, and in the public  versus private sectors  the human capital earnings function is especially helpful in summarizing how earnings vary in these  dimensions because it allows us to isolate the  pure  impact of working in a specific occupation,  industry, region or sector, controlling for all other factors such as education and work experience  Table 10.1 reports earning differentials by province, occupation and industry for men who worked  full-year, full-time using data from the 2001 census 
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o provincial variation : in 2000, compared to men working in Ontario, men in Prince Edward  Island were paid 24.0% less and men in Alberta were paid 1.0% less, holding all other  factors constant  o occupational variation : compared to trades, men working in child-care were paid 34.5%  less and men working as managerial/business professionals were paid 29.7% more, again  holding all other factors (such as education) constant  o industry variation : compared to manufacturing, men working in the accommodation, food  and beverage industry were paid 54.9% less and men working in primary industries were  paid 26.2% more, again holding all other factors constant  Theoretical Issues simple supply and demand diagrams can be used to explain why wages differ across sectors  in the short-run we expect wage differentials to exist between sectors because of differing demand  conditions, combined with differences in the supply of workers  o Textbook Figure 10.1 illustrates the occupational wage differential that exists between two  hypothetical occupations, such as skilled welders and unskilled labourers in the long run the labour supply curves will become more elastic as workers adjust to sectoral  wage differentials (for example, some workers will acquire the training necessary to enter high- paying skilled occupations)  given the basic determinants of sectoral supply and demand, economic theory predicts that in the  long run the forces of competition will ensure an equal present value of net advantage at the 
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RevisedCh10Notes - Chapter10:WageStructuresacrossMarkets...

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