Preferences, Comparative Advantage, and Compensating Wage Differentials for Job Routinization

Authors


  • This article is a revised version of Chapter 1 of my Ph.D. dissertation at Princeton University. I would like to thank my advisor, Alan Krueger, who has always been exceptionally generous with his advice. I am also extremely grateful to Jesse Rothstein for his insights and suggestions. I am particularly indebted to Carlos Bozzoli and Marco Gonzalez-Navarro for their many thoughtful remarks. Thanks also go to the Editor Beata Javorcik and the seminar participants at Princeton University, Universitat d'Alacant, Universitat de les Illes Balears, SAE 2007 Meetings in Granada and Universidad Pablo de Olavide. Special thanks go to an anonymous referee of the Oxford Bulletin of Economics and Statistics whose comments, insights and suggestions made the conceptual framework shorter, clearer and neater. I also want to thank Erik Plug for providing me with the codes used in his previous work. Financial support from the Rafael del Pino Foundation, the Bank of Spain and the Spanish Ministry of Science and Innovation (ECO2008-05721/ECON) is gratefully acknowledged. The usual disclaimers apply. Previous versions of this paper are circulated as Industrial Relations Section Working Paper 525, Princeton University, and IVIE Working Paper WP-AD 2010-06. This research uses data from the Wisconsin Longitudinal Study (WLS) of the University of Wisconsin-Madison. Since 1991, the WLS has been supported principally by the National Institute on Aging (AG-9775 and AG-21079), with additional support from the Vilas Estate Trust, the National Science Foundation, the Spencer Foundation and the Graduate School of the University of Wisconsin-Madison. A public use file of data from the WLS is available from the University of Wisconsin-Madison, 1180 Observatory Drive, Madison, Wisconsin 53706 and at http://www.ssc.wisc.edu/~wls/data/. The opinions expressed herein are those of the authors.

Abstract

I attempt to explain why there is not much evidence on compensating wage differentials for job disamenities. I focus on the match between workers’ preferences for routine jobs and the variability in tasks associated with the job. Using data from the Wisconsin Longitudinal Study, I find that mismatched workers earn lower wages and that both male and female workers in routinized jobs earn, on average, 5.5% and 7% less than their counterparts in non-routinized jobs. However, once preferences and mismatch are accounted for, this difference decreases to 2% for men, and 4% for women, not statistically significant in both cases.

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