Viewing 14 posts categorized under Inequality

Minimum wage's significant role in reducing wage inequality in Portugal

April 6, 2024

In recent decades, discussions about mounting wage inequality have become central among economists and policymakers, with the potential role of minimum wage policies to address it gaining increased attention. In Portugal, a fascinating case emerges, offering insights into how minimum wage adjustments can significantly impact the wage distribution. Caption: Wage growth between 2006 and 2019 at different points of the wage distribution. The x-axis shows wage deciles from lowest (on the left) to highest (on the right).

Firms and wage inequality dynamics

July 28, 2022

Policies aimed at mitigating wage inequality, such as redistribution or access to services, frequently focus on workers. Fewer efforts are directed toward firms, despite their relevance for wage inequality dynamics. This paper exploits a sharp reduction in Portuguese inequality over the last decades – driven exclusively by the compression of firm pay premiums – to pin down the role of firms in the evolution of wage inequality. Over the past two decades, Portugal witnessed a 20 percent decline in wage inequality (see panel A of the figure), almost single-handedly driven by firms (see panel b of the figure).

Economic austerity and the political environment

July 27, 2022

Anti-establishment and EU-skeptic parties have gained significant support since the Great Recession and the subsequent European Sovereign Debt Crisis. Higher vote shares for these parties have increased partisan conflict and led to more fragmented parliaments. Interestingly, the rise in support for extreme parties occurred during a period of significant fiscal policy interventions. In particular, several European countries, such as Portugal, have implemented large-scale fiscal consolidation measures to reduce high levels of public debt, thereby averting the risk of sovereign default.

Heterogeneity in gender wage growth gap across fields of study in Europe

June 29, 2022

This paper analyzes the early career dynamics of wages of European college graduates using data from the Flexible Professional in the Knowledge Society, a retrospective survey interviewing individuals a few years after their graduation in 1999/2000. The sample includes individuals from Austria, Belgium, Finland, France, Germany, Italy, Netherlands, Spain, UK, Portugal and Norway. The paper finds a gender gap of 0.7 percentage points on an average annual raw wage growth over the five-year period after graduation of 6 1/2%.

Narcissistic corporate managers do not share!

June 26, 2022

Stakeholder theory implies that firms’ economic and social purpose is to create value for all their stakeholders, without favoring any group. However, the distribution of the value created is a matter of choice for each firm and may reflect top managers’ values and characteristics. This paper examines whether the narcissistic characteristic of top managers impacts the distribution of value added. Using a sample of 489 top managers (368 males and 121 females) of Portuguese firms, this study shows that narcissism does not impact overall value added.

Wage inequality and entrepreneurship in regional labour markets

May 19, 2022

Entrepreneurship has been recognized as an important driver of innovation and economic growth. For that reason, policymakers seek to attract knowledge-based and high-tech entrepreneurial activities into their cities and regions. To achieve this objective, increasing attention has been paid to people engaged in ‘creative’ professions, i.e., those occupations where knowledge is created, transformed, or used in innovative ways. By attracting creative professions, policymakers expect to contribute to better economic performance.

Wages and firm-level unexpected good times

April 28, 2022

Suppose that a firm unexpectedly experiences good times in the form of higher revenues. Does it choose to invest or hire more workers? Does it alter workers’ compensation, and if so mainly through base wages or other components of pay? How are these decisions shaped by the attributes of top executives? Research on these questions has faced two important challenges. First, it is difficult to quantify in a systematic but precise way the unexpected component of revenue shocks at the firm-level, while distinguishing it from anticipated changes in market conditions.

Who waits for surgeries in Portugal?

April 4, 2022

Wait lists and wait times for scheduled surgery are common in National Health Services-type systems. The analysis of factors that impact wait times for access to surgery has been consistently focused on patients who underwent surgery, ignoring patients that had been on the wait list but did not benefit from surgery due to cancellation by the hospital. This paper studies the effect that cancellation episodes have on understanding wait times.

Financial constraints and the executive gender gap

February 1, 2022

This paper investigates how financing constraints following the 2008-9 financial crisis affected executive pay and the gender pay-gap of executives, as well as the share of females in executive positions. The paper uses employer-employee data for Portugal, and exploits pre-crisis variation in external finance dependence across industries to estimate the differential effect of the crisis for more exposed firms - which relied more on external finance - relative to other firms.

Long-term changes in wage inequality in Portugal and the modernization of the labor force

January 25, 2022

Wage inequality increased in Portugal for over 40 years starting in the beginning of the 1980s. The aim of this paper is to study the causes of the long-term trend in wage inequality in Portugal. Specifically, did wage inequality increase because the labor force became increasingly heterogeneous, or rather because wage differences between or within groups of workers expanded over time even if labor force heterogeneity did not change? The empirical analysis of this research is carried out with data from Quadros de Pessoal.

Wage inequality and firm reorganization when firm competition changes

November 19, 2021

This paper studies how increased domestic product market competition induces firms to change their internal organization and how this change affects wage inequality. The paper exploits the Empresa na Hora (Firm On the Spot) program in Portugal as a quasi-natural experiment of a shock to competition. The paper uses detailed employer-employee data for the analysis. The main findings are that increased domestic competition following the “Firm On the Spot” program leads firms to flatten their hierarchies by delayering and that reorganization is accompanied by a reduction in within-firm wage inequality.

Redistributive effects of monetary policy on labor income

October 26, 2021

In recent years, inequality has attracted a great deal of attention in monetary policy circles. A growing strand of the macroeconomic literature suggests that monetary policy is not immune to redistributive consequences, despite inequality not being an explicit target of its actions. The bulk of this debate centers around the relationship between monetary policy and asset prices, yet labor income represents a major source of inequality, and its relationship with monetary policy remains unexplored.

Discrimination against same-sex couples in the Portuguese rental market

September 14, 2020

A correspondence-based field experiment was carried out in the Portuguese housing market to determine whether same-sex couples are treated differently than opposite-sex couples. This is the first study of its type to explore the relation between discrimination and religiosity. In this experiment, fictitious couples replied to real housing ads in the metropolitan areas of Porto and Lisbon via e-mail. The applicants are portrayed as married, having stable income and professions. Some of them are opposite-sex couples, others same-sex couples (female or male).

Hiring older workers in Portugal

April 24, 2018

This paper asks why companies retain older workers while not hiring older workers in Portugal. The Portuguese case is particularly relevant to study this question, because the level of participation of older workers in the labor market is at least twice as high in Portugal when compared to European countries. Using unique matched employer-employee data of 2007, from Quadros de Pessoal, this paper examines the determinants of hiring individuals aged 50 and older.