Estimated compensating wage differentials

( B ) Critically appraise the findings of empirical surveies that have estimated compensating pay derived functions.

Compensating derived function is a term used in labour economic sciences to analyse the relation between the pay rate and the unpleasantness, hazard, or other unwanted properties of a peculiar occupation. A counterbalancing derived function, which is besides called a compensating pay derived function or an equalizing difference, is defined as the extra sum of income that a given worker must be offered in order to actuate them to accept a given unwanted occupation, comparative to other occupations that worker could execute. One can besides talk of the counterbalancing derived function for an particularly desirable occupation, or one that provides particular benefits, but in this instance the derived function would be negative: that is, a given worker would be willing to accept a lower pay for an particularly desirable occupation, comparative to other occupations.

The thought of counterbalancing derived functions has been used to analyse issues such as the hazard of future unemployment, the hazard of hurt, the hazard of insecure sex, and the pecuniary value workers place on their ain lives. ( Wikipaedia )

A batch of theoretical accounts have been presented by different writers of the universe sing counterbalancing pay derived functions and a batch of surveies have been made as good. Based on these surveies, studies and analyses findings have been published in the diaries, newspapers and web sites. These publications stressed on the compensating pay derived functions non merely for the workers exposed to decease due to accidents but on the other grounds as good. The term ‘Risk Premium ‘ is besides used as an option to the compensating pay derived functions for the workers making unsafe occupations.

Marin and Psacharopoulos ( 1982 ) , in the first paper utilizing British informations from the Office of Population Censuses and Surveys ( OPCS ) Occupational Mortality Decennial Supplement 1970-72, find grounds of a pay premium for exposure to fatal hazard. Sandy and Elliott ( 1996 ) and Arabsheibani and Marin ( 2000 ) utilizing similar informations over the period 1979 to 1983, and Siebert and Wei ( 1994 ) utilizing Health and Safety Executive ( HSE ) information for 1986 to 1988, all find grounds of a fatal hazard premium.

Another survey has been made in the Hong Kong sing counterbalancing pay derived functions giving particular accent on the hazard associated with the workplace human death. The information has been collected from the 1991 nose count and so it has been merged with the accident informations provided by the Labour Department.

A theory has been presented by Thaler and Rosen in 1976. The appraisal of counterbalancing pay derived functions has been carried out with the undermentioned expression

W = a0+ a1X + a2P + vitamin E

Where tungsten is the pay rate, X a vector of single and occupation features, including the usual human capital variables ; P is a step of occupation hazard and vitamin E is an error term. Over the past two decennaries surveies have estimated compensating pay derived functions by utilizing this equation. The consequence usually suggests that a positive and important compensating pay derived function for the occupations with mortality hazard is found majorly in the United States, United Kingdom, Canada, Australia and Japan.

Another of import factor the compensating pay derived functions has been identified as ; child punishment ‘ . The fact that female parents tend to gain less than adult females without kids seems to be good established in the economic literature and is calledkid punishmentorhousehold spread. Several research workers found natural pay spreads of about 20 % for the US, 13 % for the UK and up to 20 % for Germany.

In order to look into the impact of maternity on the pick between monetary and non-pecuniary occupation features the German Socio-Economic Panel ( GSOEP ; 1984-2003 ) was used by Christina in 2006. The sample of involvement consists of adult females during their fertile period, defined as the age from 16 to 46. The dataset provides elaborate information about personal and occupation features, about monetary and in peculiar non-pecuniary 1s. Besides it reports satisfaction with the occupation what is used as a placeholder for public-service corporation and allows proving if both monetary and non-pecuniary occupation features determine jointly the satisfaction of a female parent. The longitudinal nature of the information allows detecting female parents around first birth.

The dataset used is the German Socioeconomic Panel ( GSOEP ) , which is a annually repeated study of Germans and Foreigners in West and East Germany ( 1984-2003 ) . Since 1984 the GSOEP follows the members of the panel. In 2003 the GSOEP provided information about more than 12000 families dwelling of more than 24000 people

In order to prove the hypothesis of the kid punishment as a compensating pay derived function, the following

methodological analysis, divided in three parts, has been conducted.

A first measure was to look into if motherhood truly affects the occupation features, i.e. if non merely the pecuniary but besides the non-pecuniary occupation features change after maternity and therefore the loss of pay might be compensated with an addition in comfortss. In order to gauge alterations in occupation features around and after maternity, an event survey analysis has been used which surveies the effects of first birth on a assortment of occupation features. A 2nd necessary measure was to demo if and how certain occupation characteristics enter the public-service corporation of female parents. Harmonizing to theory of counterbalancing pay derived functions both monetary and non-pecuniary features determine jointly the public-service corporation of a worker. In instance a female parent is willing to give up portion of her income in order to hold a more household friendly occupation, certain occupation features have to counterbalance for this loss in pay and therefore raise the public-service corporation of a female parent. In order to prove this through empirical observation satisfaction arrested developments has been used. In a last measure the existent compensating pay derived function has been measured, i.e. how much of their pay female parents is willing to give up for holding a occupation with more comfortss ( less disamenities ) . Therefore as a last measure a hedonistic pay arrested development has been run including certain ( dis- ) comfortss as control variables.

The decision of the above treatment reveals that the compensating pay derived functions have been surveies by many of the analysts around the Earth utilizing different methodological analysiss and statistics. These surveies helped the users understanding the tendency sing counterbalancing pay derived functions and the impact on workers.


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Arnaud Dupuy, Wendy Smits

How Large is the Compensating Wage Differential for R & A ; D Workers

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Andrea Christina Felfe 2006

The kid punishment – A compensating pay derived function

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Joseph Lanfranchi, Henry Ohlsson, Ali Skalli

Compensating Wage Derived functions And Shift Work Preferences* Evidence from France

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Asiatic Economic Journal 1998, Vol 12 No. 2

Wage Compensation for Job Risks: The Case of Hong Kong

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Jean Abraham, Stephanie Lluis 2008

Compensating Derived functions and Fringe Benefits: Evidence from the Medical Expenditure Panel Survey 1997-2004

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