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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Article
Determinants of Wages and Labour Supply in the UK
Author(s)
Keshab Bhattarai
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DOI:10.17265/1537-1506/2017.03.002
Affiliation(s)
University of Hull, Hull, UK
ABSTRACT
We
explore characteristics of the UK labour market with special emphasis on
explanation of the existing wage inequalities, determinants of participation, and variation in the magnitude of hours of labour
supplied among individuals. We explain up to 92 percent of variance in the wage
rates from the supply side. Accuracy of the model is accounted by a variety of
factors relevant to the labour market such as gender gaps, marital status, on
and off the job training, fluency in English, and regional characteristics. The study is quite distinct, since it not
only incorporates variables pertinent from the economic point of view, but also some quantified qualitative regressors
relating to individuals’ opinions and political preferences. Interestingly, we
find that the psychological profile of an individual has a very big influence
over his decision on whether to participate, but once he joined the labour
force his personal beliefs and opinions have no further impact on the
probability of finding a job. The chance of being employed once participating
depends mainly on the local labour market conditions. We also report unbiased
and reliable estimate of labour supply elasticity based on British Household
Panel Survey (BHPS) sample.
KEYWORDS
labour supply, determinants of wage, participation, self-selection, probabilistic models
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