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Testing urban efficiency wages in France and Spain

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Abstract

This paper analyzes the existence of efficiency wages in the French and Spanish labor markets, within an urban efficiency wage theoretical framework. Using data from the French and Spanish time use surveys for the year 2009–2010, results support the main hypothesis of urban efficiency wage models. In particular, that leisure and shirking at work are substitutes, that there is a negative relationship between commuting and leisure, and that there are positive relationships between commuting-shirking at work and commuting-earnings. These results represent the second test of this relationship in the literature, and the first empirical estimate of these relationships for France and Spain. The results show the existence of a direct link between commuting and earnings, which may be helpful in improving the functioning of labor markets.

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Notes

  1. Urban efficiency wages models do not consider the possible existence of monopsony in labor markets (Manning, 2003). Monopsony is characterized by the presence of many individuals looking for work and only a few employers, who can afford to offer a lower salary than they would have to offer if there was more competition for workers. Furthermore, trade unions can provide a counterweight to bargaining power and the unilateral exercise of monopsonic power, promoting higher wages. Thus, with monopsony, the theoretical relationship between commuting and wages may not be as positive as expected.

  2. More information at https://www.insee.fr/en/metadonnees/source/serie/s1224; and at https://www.ine.es/prensa/eet_prensa.htm.

  3. The FTUS and STUS are based on diaries, so they can be used to compute the time devoted to different activities in 10-minute bands. In these time bands, apart from the main activity reported by respondents, there is information on the place where activities are taking place, including the workplace, which allows us to compute the time at the workplace that is not reported as market work.

  4. Results are sensitive to the inclusion of “work breaks” and “meals at work” in the definition of shirking at work.

  5. The FTUS does not include information on worker occupation, but it does include information on worker industry, in terms of the NACE 2 classification. We use this classification and, for the sake of simplicity and consistency, refer to the industry in which employees work as “occupation”.

  6. The datasets do not include the required information to replicate the employment analysis of Gimenez-Nadal, Molina and Velilla (2018), as housing stock variables, or other variables required to instrument commutes are not included.

  7. The vector \(X_{i}\) of socio-demographic controls includes being male, age and its square, secondary education, university education, being native, living in couple, having children, and family size. In the case of France information on regions is not available, and thus the equations include only occupation fixed effects. Robust standard errors are clustered at the regional (NUTS-2) and occupation level for Spain, and at the occupation level in France.

  8. Commuting time may be different for different type of workers, as they may, for instance, be selected into different occupations according to their characteristics (e.g., more educated workers are more likely to be in non-supervised occupations) or have different preferences for leisure (Hamermesh and Lee, 2007). For this reason, we regress (log of) commuting time on the set of socio-demographic characteristics (Xi) defined in Eqs. (1) to (4) plus occupation fixed effects, by supervision level. The results are shown in Table 6 in the “Appendix”, and the coefficients are in general terms not significant at standard levels, and R-squared statistics are quite low, which is in line with a number of studies suggesting that commuting is a magnitude that depends on stochastic and non-controllable factors, such as weather conditions and traffic congestion (see Gimenez-Nadal, Molina and Velilla, 2020) for a review.

  9. Note that monthly earnings are missing for 906 Spanish employees, who are omitted from the analysis shown in Table 5.

  10. We have also estimated a regression of log hours worked, where we include the same explanatory variables as in the previous regressions, the log-of-shirking time, and a dummy for non-supervised workers. Table 7 in the “Appendix” shows the results of estimating this regression. We first find, for both France and Spain, a statistically significant and positive correlation between being a supervised worker and market work time, which suggests that unsupervised workers work shorter hours. Furthermore, after controlling for the supervision level, the elasticity between market work time and shirking at work is positive and statistically significant, indicating that market work hours and shirking are positively related. However, these results may be biased due to reverse causality issues, and must be taken with caution.

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Authors and Affiliations

  1. Universidad de Zaragoza, Zaragoza, Aragón, Spain

    José Ignacio Giménez-Nadal, José Alberto Molina & Jorge Velilla

  2. BIFI, Zaragoza, Spain

    José Ignacio Giménez-Nadal & José Alberto Molina

  3. IZA, Bonn, Germany

    José Alberto Molina

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  1. José Ignacio Giménez-Nadal
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  2. José Alberto Molina
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Correspondence to José Ignacio Giménez-Nadal.

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Appendix A: Additional results

Appendix A: Additional results

See Tables 6, 7, 8, 9, 10, 11, 12 and 13.

Table 6 Estimates on commuting time
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Table 7 Work time, supervision, and shirking
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Table 8 Sensitivity analysis—Supervised occupations, France
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Table 9 Sensitivity analysis—Non-supervised occupations, France
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Table 10 Sensitivity analysis—Supervised occupations, Spain
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Table 11 Sensitivity analysis—Non-supervised occupations, Spain
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Table 12 Estimates for the Netherlands
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Table 13 Distribution of income by degree of urbanization, year 2009.
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Giménez-Nadal, J.I., Molina, J.A. & Velilla, J. Testing urban efficiency wages in France and Spain. Empir Econ 61, 2205–2236 (2021). https://doi.org/10.1007/s00181-020-01928-x

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