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Are Occupations Paid What They are Worth? An Econometric Study of Occupational Wage Inequality and Productivity

39 Pages Posted: 18 Sep 2011  

Stephan Kampelmann

Université Libre de Bruxelles (ULB)

Francois Rycx

Université Libre de Bruxelles (ULB) - Department of Applied Economics (DULBEA); IZA Institute of Labor Economics

Abstract

Labour economists typically assume that pay differences between occupations can be explained with variations in productivity. The empirical evidence on the validity of this assumption is surprisingly thin and subject to various potential biases. The authors use matched employer-employee panel data from Belgium for the years 1999-2006 to examine occupational productivity-wage gaps. They find that occupations play distinct roles for remuneration and productivity: while the estimations indicate a significant upward-sloping occupational wage-profile, the hypothesis of a flat productivity-profile cannot be rejected. The corresponding pattern of over- and underpayment stands up to a series of robustness tests.

Keywords: labour productivity, wages, occupations, production function, matched employer-employee data

JEL Classification: J24, J31, J44

Suggested Citation

Kampelmann, Stephan and Rycx, Francois, Are Occupations Paid What They are Worth? An Econometric Study of Occupational Wage Inequality and Productivity. IZA Discussion Paper No. 5951. Available at SSRN: https://ssrn.com/abstract=1929651

Stephan Kampelmann (Contact Author)

Université Libre de Bruxelles (ULB)

CP 132 Av FD Roosevelt 50
Brussels, Brussels 1050
Belgium

François Rycx

Université Libre de Bruxelles (ULB) - Department of Applied Economics (DULBEA) ( email )

Ave. Franklin D Roosevelt, 50
Brussels, B-1050
Belgium
+32 0 2 6504110 (Phone)
+32 0 2 6503825 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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