Department of Economics

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Dr Jennifer C Smith

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Office: 44 (0)24 7652 3469
Fax: 44 (0)24 7652 3032
Email: jennifer.smith@warwick.ac.uk
Room: S2.125
Office hours Term 1 (2009-10): Tuesday 12-1 and Thursday 3-4
Terms 2 and 3 (2009-10): Research Leave.

Research Interests

Labour Economics, Macroeconomics, Applied Econometrics

Pay growth, fairness and job satisfaction: implications for nominal and real wage rigidity (August 2009).
Abstract: Several important theories of wage rigidity rely on a positive relationship between pay growth and utility, so workers become unhappy if they su¤er pay cuts. This paper investigates this relationship using job satisfaction as proxy for utility. Non-linearities are investigated, includingg the presence of loss aversion, and ‘excess’ satisfaction among those who experience pay freezes. Results show a significant concave relationship between job satisfaction and real raises: workers prefer large raises but there are diminishing marginal benefits. Nominal freezes are better (for the workers receiving them) than nominal raises leaving pay the same in real terms. This is explained in part by external referents: workers consider their firm’s performance when assessing the merits of a particular pay change, and appear particularly happy with freezes when real output of the firm’s industry falls, which is consistent with relief at avoiding warranted nominal cuts. Evidence is also found that workers also compare themselves to others like themselves. No evidence of loss aversion is found. Overall, the relationship between pay growth and job satisfaction is less steep for cuts than for raises.
The ins and outs of UK unemployment. Paper presented to BHPS-2009 (July 2009, University of Essex). [Powerpoint presentation in pdf]
"Punishment without crime? Prison as a worker-discipline device", CEPR Discussion Paper 6621 (December 2007) (with Marcus Miller). Presented to RES Conference 2008.
Abstract: An ‘efficiency wage’ model developed for Western economies is reinterpreted for Soviet Russia assuming that it was the Gulag not unemployment that acted as a ‘worker-discipline device’. Archival data now available allows for a basic account of the dynamics of the Gulag to be estimated. When this is combined with a dictatorship wishing to maximise the ‘investible surplus’ subject to an efficiency wage incentive constraint, what does it imply? That to secure resources for investment or war, consumption must be compressed; and making the Gulag harsher helps reduce incentive problems in the workplace. This is the cruel logic of coercion. But this economic rationale for the Gulag does not, we find, encompass randomised mass terror. Why did Stalin’s system of coercion ultimately fail? The paper concludes with comparisons of Western and Soviet systems from an efficiency wage perspective
"Differences in decline: quantile regression analysis of union wage differentials in the United Kingdom, 1991-2003" (April 2009) (with Wiji Arulampalam and Alejandra Manquilef). IZA Discussion Paper 4138
Abstract: Wage premia related to union membership and coverage are examined over 1991-2003, a period involving first decline, then stabilization, of unionization. Differences in union premia across workers and over time are studied using individual-level British Household Panel Survey data and quantile regression techniques allowing for endogeneity of the membership decision. Raw differentials suggest the presence of large positive membership and coverage premia that are stronger at the bottom of the wage distribution in both private and public sectors. After controlling for other factors influencing wages, union asymmetries are no longer apparent in the private sector. When endogeneity of union membership is taken into account, the private sector union wage premium disappears, indicating that individuals positively select into unions. In contrast, the public sector total union wage premium remains significant – entirely due to a coverage effect; it is stronger at the bottom among males, while for females the premium is constant across workers and substantial over the whole period, reflecting the continuing strength of public sector unions. Once we control for endogeneity, the membership premium is nowhere significant; there is no free rider puzzle in the private sector, as there is no coverage premium, but the puzzle persists for the public sector.
"The impact of downward nominal wage rigidity on quits and layoffs" - Version presented to RES Conference 2006.
Abstract: This paper assesses the cost of downward nominal wage rigidity (DNWR) by investigating whether individual workers are more likely to be laid off after their pay has been frozen and whether nominal cuts prevent layoffs. The relationship between DNWR and quits is also investigated - in particular whether nominal cuts lead to quits. Micro data are used, in the hope of resolving the so-called "micro-macro" puzzle: the contrast between the plentiful evidence of DNWR from micro data but the general failure of empirical macroeconomic studies to find any unemployment-related cost of this rigidity. Results suggest that DNWR does have significant economic costs: DNWR impacts on individual separation decisions in the theoretically-predicted manner.
Currently investigating the cyclicality of new hires' and continuing employees' wages using UK and German micro data. Investigating the relative importance of job finding and separation rates in driving unemployment fluctuations over the cycle, also using UK and German micro data.