Discussion Paper

No. 2010-21 | July 27, 2010
The Acceptance of Earnings Losses After Voluntary Mobility

Abstract

Because rational individuals know that they cannot always get what they want, they are assumed to make appropriate adjustments. However, little is known about trade-off reasoning in labor market mobility decision making. The objective of this paper is to analyze the effect of commuting on the decision to voluntarily accept wage cuts. Application of German household data reveals that workers are more likely to accept lower wages when daily commuting expenses can be reduced. In other words, workers trade off amenities and monetary rewards when changing employers.

JEL Classification

J24 J30 J62

Cite As

Stefan Schneck (2010). The Acceptance of Earnings Losses After Voluntary Mobility. Economics Discussion Papers, No 2010-21, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2010-21

Assessment



Comments and Questions


Anonymous - Acceptance of earnings losses after voluntary mobility
July 31, 2010 - 09:50

It is indeed a very interesting,fascinating,well thought,&insightful paper.as present i am(personally speaking) in a very similar position in Nigeria, except for the fact,that, in the Nigerian context job mobilty is very rare phenomenon.i strongly comend the Author,& recomend the article!!!.


Anonymous - Referee Report 1
September 01, 2010 - 10:17

The paper addresses the question whether workers are willing to pay for an improvement in their commuting situation by accepting wage cuts. Section 2 presents an equation, where the probability of accepting lower wages is a function of socio-demographic characteristics and a binary indicator on whether the individual improves his/her ...[more]

... situation w.r.t. commuting between the previous and the new job. The model is intended to capture what the author calls trade-off reasoning throughout the paper: differences in wages between two jobs are balanced out by non-wage characteristics. The model is estimated in a probit model using GSOEP data.


Voluntary downwards wage mobility is an interesting topic. Why actually do individuals accept lower wages? After nicely motivating the topic, the author draws the focus to “changes in different non-pecuniary job characteristics after the transition” (p. 3).


I would not publish the paper in the current form. Two major concerns are: first, I am afraid that the simultaneity of the decision of accepting lower wages and improving non-wage characteristics is not accounted for appropriately neither analytically nor empirically. The author proposes a bundle of job characteristics (wage and non-wage characteristics, such as commuting distance) to matter for accepting a job offer. Therefore, it was not clear to me how one could be the result of the other as suggested by equation 1, 2 and 4. (In short, is “improving commuting” not rather a second outcome than a determinant?) I suspect the results presented in Section 4 to suffer from endogeneity biases that are imposed by the research question.

Second, the sample used in the empirical analysis is restricted to those who were observed to be mobile between two jobs. Yet, the author seems to claim to make inference about all workers. Already in the abstract, e.g. it is stated "workers are more likely to accept lower wages when daily commuting expenses can be reduced". I do not see how this can be inferred from the analysis presented in the paper.

In sum, my assessment is that the author raises a question which he does not appropriately answer in paper.


Anonymous - Referee Report 2
September 01, 2010 - 10:23

see attached file


Anonymous - Referee Report 3
September 01, 2010 - 10:52

see attached file


Stefan Schneck - Reply to Referee Reports 1-3
October 08, 2010 - 09:56

See attached file