Decomposition of The Wage Gap between Credit Department of Farmers’ and Fisherman’s Associations and Banks
Date Issued
2015
Date
2015
Author(s)
Chen, Hsin-I
Abstract
The credit departments of Farmers’ and Fishermen’s Associations (hereafter referred to as the credit departments) are important financial institutions in non-urban areas around Taiwan. Since the legislation of Agricultural Finance Act and the establishment of Bureau of Agricultural Finance, these credit departments have had significantly improved management. As management relies on human resources, the payment system remains the key to attracting and retaining high-performing employees. Therefore, this study investigated the wage gap between the credit departments and banks. Through a comparison across different periods of time, this study also explored the effects of the agricultural finance reform on the wage gap. Data were extracted from the employee wage survey and the employee attitude toward job change survey conducted annually by Directorate-General of Budget, Accounting, and Statistics, Executive Yuan, during 1994~2010. Average human capital of the firm, firm attributes, and other wage-related factors were considered. The 17-year data period was divided into three sub-periods, including before, during, and after the agricultural finance reform. Based on Oaxaca decomposition procedure, the wage gap was decomposed into endowment effect, over-payment of banks, and under-payment of the credit departments. Empirical findings showed that the wage gap between the credit departments and banks was continuously widening, with their gap from foreign banks being the largest, and that from credit unions being the lowest. This indicated that the improvement in the credit departments’ management following the agricultural finance reform did not help narrow the wage difference from banks. The decomposition analysis across three periods indicated that the endowment effects caused by differences in human capital and firm attributes had led to a smaller wage gap between the credit departments and banks, and such wage gap mainly resulted from the under-payment of the credit departments. In other words, the wage level of employees at the credit departments was below the fair wage level. Further decomposition showed that the under-payment was primarily related to education degree and region, indicating that compared to employees with the same education degree, seniority or those in the same region, employees at the credit departments were under-paid.
Subjects
age Gap
Wage Differential
Oaxaca Decomposition
Credit Department of Farmers’ and Fisherman’s Associations
Type
thesis
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