# Lecture1 - Wages Across Markets Lecture 1, January 10 2012...

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Wages Across Markets Lecture 1, January 10 2012

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Announcements (Many of these are on the supplementary syllabus) Test 2 will be returned in Class on Friday, January 13 th (10:00). Reminder: Make-up Test is Friday, January 13 th , 9:00-11:00, WI1017. Only for those with previously approved medical accommodation Term Paper Assignment will be distributed on Friday, January 20 th (in class)
Outline Summarizing Wage Variation What summary statistics? Explorations based on LFS, November 2011 Introduce “Earnings Function” Theoretical Model of Compensating Differentials Demand side: Firm offers of wages and amenities Supply side: Worker preferences for wages and amenities Market Equilibrium: Deriving the Wage-Amenity locus Application: Workplace Safety Regulation Estimation of compensating differentials for job risk Valuing human life Problems of estimation

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Last Semester The focus was wage and employment determination in a single market, and the theoretical framework was the supply and demand model. Recall the combined assumptions: Optimization (utility and profit maximization) Equilibrium Labour Supply Labour Demand Employment Wages W* E*
Summarizing Wage Variation Clearly, however, wages are not the same for everyone. How can we summarize the degree of variation in wages? Most informative would be showing the entire wage distribution, but summary statistics are useful: Percentiles (or quantiles), especially 10 th , 25 th , 50 th , 75 th , and 90 th , e.g., Or ratios of percentiles, e.g., Variance, standard deviation, coefficient of variation Gini coefficient, etc. W 10 , W 25 , W 50 , W 75 , W 90 W 90 W 10

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Exploring Wages in Canada Consider the distribution of wages in Canada. Data come from the Labour Force Survey , November 2011 Pooled men and women, ages 20-59, with positive wage earnings. Note : Average Hourly Earnings – not quite the same as “the wage.” The following distributions show: Wages Log Wages Key percentiles (10 th , 50 th (median), and 90 th )
0 .01 .02 .03 .04 Density 10 20 30 40 50 60 70 80 90 100 Average Hourly Earnings Source: Labour Force Survey Distribution of Wages, November 2011

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0 .2 .4 .6 .8 1 Density 2 2.5 3 3.5 4 4.5 Log Average Hourly Earnings Source: Labour Force Survey Distribution of Log Wages, November 2011
Summary Statistics Key results : Average wage = \$23.87 per hour Median = \$21.00 per hour W10 = \$11.00; W90 = \$40.00 W 90 W 10 = 3.64 ln W 90 W 10 ( ) = ln W 90 ln W 10 = 3.69 2.40 = 1.29

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## This note was uploaded on 03/30/2012 for the course ECO 339 taught by Professor Mbaker during the Spring '11 term at University of Toronto.

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Lecture1 - Wages Across Markets Lecture 1, January 10 2012...

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