Employer monopsony power in the labor market for undocumented workers
Using matched employer-employee data from the state of Georgia, this paper investigates the potential for employer monopsony power in the labor market for undocumented workers. We find that the labor supply elasticity of undocumented workers is about 13 percent lower than that estimated for documented workers, suggesting that at least some of the observed wage gap between documented and undocumented workers can be explained by firms' exploiting their monopsony power. There is also evidence of some displacement, with the hiring of undocumented workers being associated with a small amount of ...
The wage impact of undocumented workers
Using administrative, individual-level, longitudinal data from the state of Georgia, this paper finds that a documented worker employed by a firm that hires undocumented workers can expect to earn 0.15 percent less than if employed by a firm that does not hire undocumented workers. However, in sectors where there are opportunities for task specialization and benefits from communication skills, documented workers can expect to earn a wage premium of less than 1 percent from being employed at a firm that also hires undocumented workers.
Stabilization programs and policy credibility: Peru in the 1990s
This paper uses a rational expectations macroeconomic model in which economic agents formulate the probability about the sustainability of the economic policy?that is, policy credibility?using current and lagged values of government expenditures and lagged values of the inflation rate. The estimation of the model is based on Hamilton?s switching regime procedure. The contribution of this paper is the empirical estimation of the credibility of the stabilization program implemented in Peru in August 1990. The results of the estimation show that there are two different regimes in the government ...
Trade and the skill premium in developing countries: the role of intermediate goods and some evidence from Peru
The rise in income inequality in developing countries after trade liberalization has been a puzzle for trade theory, which predicts the opposite effect. The authors present a model with imported intermediate goods in which the relative wages of skilled labor can rise due to higher imports of inputs or due to skill-biased technological change. The evidence from Peru in the post-liberalization phase in the early 1990s supports the skilled-biased technological change hypothesis. The authors find that most of the decrease in the blue-collar wage share in the manufacturing industries can be ...
Does employing undocumented workers give firms a competitive advantage?
Using administrative data from the state of Georgia, this paper finds that on average, among all firms, employing undocumented workers reduces a firm's hazard of exit by 19 percent. However, the impact varies greatly across sectors. In addition, a firm is at a distinct disadvantage if it does not employ undocumented workers but its rivals do. The advantage to employing undocumented workers increases as more firms in the industry do so. In addition, the advantage to a firm from employing undocumented workers decreases with the skill level of the firm's workers, increases with the breadth of a ...
Undocumented worker employment and firm survivability
Do firms employing undocumented workers have a competitive advantage? Using administrative data from the state of Georgia, this paper investigates the incidence of undocumented worker employment across firms and how it affects firm survival. Firms are found to engage in herding behavior, being more likely to employ undocumented workers if competitors do. Rivals' undocumented employment harms firms' ability to survive while firms' own undocumented employment strongly enhances their survival prospects. This finding suggests that firms enjoy cost savings from employing lower-paid undocumented at ...
The labor market experience and impact of undocumented workers
Using administrative data from the state of Georgia, the authors find that average wages among documented workers are lower in industries that employ undocumented workers and that a greater share of undocumented workers in those industries further lowers wages. In addition, undocumented workers have significantly lower labor supply elasticity, likely as a result of their limited employment and grievance opportunities. Furthermore, the inflow of undocumented workers does more to displace earlier hired undocumented workers than it does to displace documented workers.
Can capital-skill complementarity explain the rising skill premium in developing countries? evidence from Peru
The factors behind the increase in the relative wages of skilled workers in developing countries are still not well understood. The authors use data from Peru to analyze the determinants of within-industry share of skilled workers. They use a translog cost function for gross output and are therefore able to incorporate the effects of materials, both domestic and imported, in addition to capital. The authors find that capital accumulation can explain a large fraction of the increase in the wage bill share and relative wages of skilled labor. This finding is contrary to the commonly held view ...
Official dollarization and the banking system in Ecuador and El Salvador
In January 2000 Ecuador adopted the U.S. dollar as legal tender, and El Salvador followed suit in 2001. The two countries officially dollarized under quite different circumstances: Ecuador was suffering an economic and banking crisis, while El Salvador enjoyed economic stability and low inflation rates. This article studies the evolution of the banking system in these two countries before and after official, or full, dollarization. ; In Ecuador the reforms that ensued from full dollarization have improved transparency and banking performance and competitiveness, but the implementation and ...
Monetary policy alternatives for Latin America
During the 1990s, many Latin American countries began to address their problems with recession, inflation, and unemployment through dramatic economic reforms and monetary policy strategies that included exchange rate pegs, monetary aggregate targeting, or inflation targeting. Inflation targeting, in particular, had begun to lower inflation rates and to stabilize or increase real economic growth in countries such as New Zealand, Canada, and the United Kingdom. But has inflation targeting proved as successful for Latin American economies? ; This article describes the recent history of monetary ...