A Quantile Regression Analysis of Wages in Panama
Abstract
I investigate differences in the effects of worker characteristics on wages in Panama at
different points of the conditional wage distribution using quantile regression. Public
sector employment increases wages of men and of women relatively more at lower
quantiles. Public sector employment increases wages of the median worker in that sector
and reduces wage inequality within the sector. The existence of a labor union at a
worker’s workplace increases relatively more wages of men at lower quantiles. This
result is consistent with unions contributing to the enforcement of minimum wage laws.
Labor union membership and the existence of collective bargaining at a worker’s place of
work have the biggest impact on men’s wages at middle quantiles of the wage
distribution. On the whole, labor unions are institutions that reduce male wage inequality
within the union sector in Panama and increase average wages of union members.
Unions do not increase women’s wages but reduce wage inequality within the union
sector. Employment in the Canal Zone, where U.S. labor laws are in effect, increases
wages uniformly across the wage distribution except at the highest quantiles. Working
for a large firm increases wages relatively more at lower quantiles of the wage
distribution. Rates of return to higher education are larger for men at higher quantiles, a
result consistent with the complementarity of higher education and unobserved ability.
A similar result occurs for the effect of experience for men across quantiles. Experience
and higher education increase men’s wage inequality. A u-shaped pattern of rates of
return across quantiles for secondary education for men is found. There are no
differences in the rates of return to primary education across quantiles for men. There are
also no differences across quantiles in the rates of return to each level of schooling and experience for women.