Tiltag, Dr. Andreas

More than 200 years have passed since Adam Smith described the theory of compensating wage differentials. Although theory offers a simple yet compelling explanation for wages associated with job characteristics, the empirical evidence is conflicting. So why do workers with disadvantageous working conditions earn less and not more? The theory of compensating wage differentials assumes a perfect labor market, which is not to be found in reality. The approach presented is to remove some of the assumptions. This results in...