What is it about?
High wages should be paid to compensate for bad working conditions. But it is possible that high wage (productivity) persons use part of their earnings capacity to buy better working conditions, in contradiction to this expectation. We compare wages and working conditions of identical twins to remove the effect of productivity.
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Why is it important?
Our results show that there are positive compensating differences for some working conditions as predicted by economic theory, and that unobserved productivity prevents observing these in standard cross section data.
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This page is a summary of: Using Twins to Resolve the Twin Problem of Having a Bad Job and a Low Wage, Manchester School, December 2016, Wiley,
DOI: 10.1111/manc.12178.
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