labour market structure and inequality a comparison of italy and the u s markets with rigid labour regulations and centralized wage setting are often thought to be inefficient but egalitarian using a model of off and on the job search and event history individual level data for italy and the u s we show that while the cross sectional wage distributions of young italian males are much more compressed than are the comparable distributions for young white u s males the estimated search model implies that the distribution of lifetime welfare is no more disperse in the u s than it is in italy our model implies that the high frequency of movements between labour market states leads to both a relatively equitable distribution of long run welfare in the u s and a high level of cross sectional inequality

the distribution of earnings in an equilibrium search model with state dependent offers and counteroffers we construct an equilibrium job search model with on the job search in which firms implement optimal wage strategies under full information in the sense that they leave no rent to their employees and counter the offers received by their employees from competing firms productivity dispersion across firms results in wage mobility both within and across firms workers may accept wage cuts to move to firms offering higher future wage prospects equilibrium productivity dispersion across ex ante homogeneous firms can be endogenously generated productivity dispersion then generates a nontrivial wage distribution which is generically thin tailed as typically observed in the data

what aspects of formality do workers value evidence from a choice experiment in bangladesh this study uses a choice experiment among 2 000 workers in bangladesh to elicit willingness to pay wtp for job attributes a contract termination notice working hours paid leave and a pension fund using a stated preference method allows calculation of wtp for benefits in this setting despite the lack of data on worker transitions and the fact that many workers are self employed which makes it difficult to use revealed preference methods workers highly value job stability the average worker would be willing to forego a 27 percent increase in income to obtain a 1 year contract relative to no contract or to forego a 12 percent increase to obtain thirty days of termination notice there is substantial heterogeneity in wtp by type of employment and gender women value shorter working hours more than men while government workers place a higher value on contracts than do private sector employees

estimating a simultaneous search model the primary goal of this article is to specify and estimate a structural simultaneous search model and then determine the empirical importance of simultaneous search the results indicate that new labor force entrants search simultaneously a secondary goal is to identify and estimate job offer arrival rates and wage offer rejection probabilities separately the results indicate that a significant portion of unemployment spells are caused by slow arrival rates but policies intended to speed arrival rates would increase the average length of unemployment spells

compensating differentials and self selection an application to lawyers this paper models individual choice between two types of jobs as dependent on the difference in potential earnings and on preferences for nonpecuniary the model leads to simultaneous estimation of earnings and job choice functions in a manner that takes account of self selection of individuals into the sector of highest utility an application to lawyers choosing between private and public interest law casts doubt on the notion that public interest lawyers are accepting substantially lower earnings by virtue of their choice an impression derived from estimation of earnings functions without accounting for self selection the estimation technique also takes proper account of the choice based nature of the sample which appears to be important

effects of immigrant legalization on crime in the late 1970s rates of undocumented immigration into the united states began to increase dramatically fearing negative labor market and social effects congress passed the 1986 immigration reform and control act irca the primary purpose of the bill was to enhance the controls on the hiring of undocumented immigrants making it illegal to hire or recruit undocumented immigrants however the legislation also represented a near universal legalization of immigrants in the united states a group comprising almost three million people about 1 percent of the nation s population this paper examines the effects that the irca had on the commission of crime in the united states i provide estimates of the total effect of this legalization exploiting the large amount of variation in both the geographical distribution and the quasi random timing of the legalizations i find persistent decreases in crime of 3 percent to 5 percent primarily driven by a drop in property crimes this fall in crime is equivalent to 120 000 180 000 fewer violent and property crimes committed each year across the nation due to legalization moreover the declines in crime cannot be explained by existing trends economic conditions declines in drug crimes changes to police forces and prison populations or other common explanations of changes in crime rates during this period

labor supply hours constraints and job mobility if hours can be freely varied within jobs the effect on hours of changes in preferences for those who do change jobs should be similar to the effect on hours for those who do not change jobs conversely if employers restrict hours choices then changes in preferences should affect hours more strongly when the job changes than when it does not change for a sample of married women we find that changes in many of the labor supply preference variables produce much larger effects on hours when the job changes

it pays to be different endogenous heterogeneity of firms in an oligopoly abstract heterogeneous firms can be supported by familiar conditions of technology and demand in a two stage duopoly game firms choose technologies simultaneously in stage i from a continuous technology set in stage ii once technological commitments have been made firms choose quantities and the equilibrium price is determined if the technology set is insufficiently convex firms choose only the extreme production technologies in some cases they choose the same technology in others they choose different technologies when compared to socially optimal industry structures equilibria tend to have too little heterogeneity uncertainty about demand or costs favors the emergence of heterogeneous firms

hedonic wages and labor market search this article investigates the consequences of labor market search for the theory of hedonic wages we find that the introduction of search has surprising consequences for the theory of hedonic wages in particular we demonstrate that the equilibrium distribution of wage and nonwage amenity bundles generally bears little resemblance to workers underlying preferences a consequence of this analysis is that estimates of workers marginal willingness to pay derived from the conventional hedonic wage methodology are biased in addition we demonstrate that search generates differences between firm level and employee level data that can cause substantial deviations in the estimates of hedonic wage equations

job search hours restrictions and desired hours of work a structural empirical job search model is presented that incorporates the labor supply decision of individuals the arrival of a job offer is modeled as a random draw from a wage hours offer distribution subjective information is used on desired working hours to identify optimal hours from offered hours policy simulations are performed to address several policy questions does a decrease in unemployment benefits lead to the acceptance of jobs with less preferred working hours how does a decrease in the length of the standard working week affect the job acceptance behavior of the unemployed

local labor supply responses to immigration how natives adjust is central to an understanding of the impact of immigration in destination countries using detailed labor force data for malaysia for 1990 2010 we provide estimates of native responses to immigration on multiple extensive margins and rare evidence for a developing country instrumental variable estimates show that increased immigration to a state causes substantial internal inward migration consistent with the fact that immigration increases the demand for native workers relocating malaysian workers are accompanied by their spouses three quarters of whom are housewives and children who attend school we find that these effects are concentrated among middle and lower skilled malaysians

the determinants of black white differences in early employment careers search layoffs quits and endogenous wage growth this paper studies the transition from school to full time employment and subsequent labor mobility during the first five postschooling years for several recent cohorts of black and white male terminal high school graduates using unique data from the 1979 youth cohort of the national longitudinal surveys of labor market experience a constrained optimization model of labor force dynamics is implemented empirically integrating features of models previously described in the literature the estimates of the model provide quantitative evidence on underlying structural differences in labor market constraints faced by blacks and whites for example while blacks have overall a substantially smaller wage return to work experience and face a less disperse wage offer distribution blacks face a higher probability of receiving job offers

the crime reducing effect of education in this article we study the crime reducing potential of education presenting causal statistical estimates based upon a law that changed the compulsory school leaving age in england and wales we frame the analysis in a regression discontinuity setting and uncover significant decreases in property crime from reductions in the proportion of people with no educational qualifications and increases in the age of leaving school that resulted from the change in the law the findings show that improving education can yield significant social benefits and can be a key policy tool in the drive to reduce crime

job search bargaining and wage dynamics this article constructs and estimates a model of wage bargaining with on the job search to explore three different components of wages general human capital match specific capital and outside options as the workers find better job opportunities the current employer has to compete with outside firms to retain them this between firm competition results in wage growth even when productivity remains the same the model is estimated by a simulated minimum distance estimator and data from the 1979 national longitudinal study of youth the results indicate that the improved value of the outside option raises wages by 14 16 in the first 5 years

search and nonwage job characteristics this paper quantifies the importance of nonwage job characteristics to workers by estimating a structural on the job search model the model generalizes the standard search framework by allowing workers to search for jobs based on both wages and job specific nonwage utility flows within the structure of the search model data on accepted wages and wage changes at job transitions identify the importance of nonwage utility through revealed preference the estimates reveal that utility from nonwage job characteristics plays an important role in determining job mobility the value of jobs to workers and the gains from job search

a dynamic analysis of educational attainment occupational choices and job search this article examines career choices using a dynamic structural model that nests a job search model within a human capital model of occupational and educational choices wage growth occurs in the model because workers move between firms and occupations as they search for suitable job matches and because workers endogenously accumulate firm and occupation specific human capital simulations performed using the estimated model reveal that both self selection in occupational choices and mobility between firms account for a much larger share of total earnings and utility than the combined effects of firm and occupation specific human capital

job and wage mobility with minimum wages and imperfect compliance we propose a job search model with minimum wage regulations and imperfect compliance to explain the doubling of the mean and variance of hourly earnings of white males during the first 18 years of labor market experience the model encompasses job mobility and on the job wage growth as sources of wage dynamics and is estimated by simulated generalized method of moments using data from the national longitudinal survey of youths 1979 our estimates provide a good fit for the observed levels and trends of the main job and wage mobility data and for the increase in the mean and variance of wages over the life cycle as well as for the fall in the fraction of workers paid below the minimum wage job mobility explains 40 50 of the observed wage growth increases in the minimum wage and or compliance deliver small effects on the wage distribution and the nonemployment rate

how and why does immigration affect crime evidence from malaysia the perception that immigration fuels crime is an important source of anti immigrant sentiment using malaysian data for 2003 10 this paper provides estimates of the overall impact of economic imm

timing of investments in oligopoly under uncertainty a framework for numerical analysis abstract we present a modeling framework for the analysis of investments in an oligopoly market for a homogenous commodity the demand evolves stochastically and the firms carry out investment projects in order to adjust their production cost functions or production capacities the model is formulated as a discrete time state space game where the firms use feedback strategies the firms are assumed to move sequentially to ensure a unique markov perfect nash equilibrium once the equilibrium has been solved monte carlo simulation is used to form probability distributions for the firms cash flow patterns and accomplished investments such information can be used to value firms operating in an oligopoly market an example of the model is given in a duopoly market the example illustrates the trade off between the value of flexibility and economies of scale under competitive interaction

capacity expansion and the size of plants scale economies in industrial plants confer a tradeoff on firms between the capacity of production facilities and the average cost of production this tradeoff is central to firms capacity expansion decisions in growing industries this article imbeds the cost versus capacity tradeoff in an investment timing game and explores the properties of equilibrium capacity expansion in growing industries with free entry some of the results are analytical and others are based on numerical examples using a particular class of demand functions equilibrium capacity expansion is suboptimal from a social point of view but it involves zero profits small plants with high unit costs can coexist in a rent dissipating equilibrium with large plants with low unit costs small plants sometimes precede and at other times follow the installation of large plants as the industry evolves along the equilibrium path

an empirical analysis of lumpy investment the case of us petroleum refining industry this paper employs five econometric models to examine lumpy investment and investigates the investment behavior of the us petroleum refining industry firms in the industry are classified into three groups by their size all three groups show zero investment disinvestment and investment in accordance with economic conditions the analysis finds the minimum amount of investment and disinvestment for each group which suggests that the size of fixed costs of investment is substantial regardless of firm size however small firms adjust capital stock more slowly than medium or large firms the analysis also suggests the existence of a convex adjustment cost

the spike at benefit exhaustion leaving the unemployment system or starting a new job in this paper we review the literature on the spike in unemployment exit rates around benefit exhaustion and present new evidence based on administrative data for a large sample of job losers in austria we find that the way unemployment spells are measured has a large effect on the magnitude of the spike at exhaustion both in existing studies and in our austrian data spikes are typically much smaller when spell length is defined by the time to next job than when it is defined by the time spent on the unemployment system in austria the exit rate from registered unemployment rises by over 200 at the expiration of benefits while the hazard rate of re employment rises by only 20 the difference between the two measures arises because many individuals leave the unemployment register immediately after their benefits expire without returning to work the modest spike in re employment rates implies that most job seekers do not wait until their ui benefits are exhausted to return to work fewer than 1 of jobless spells have an ending date that is manipulated to coincide with the expiration of ui benefits this abstract was borrowed from another version of this item

labor supply estimation biases from disregarding nonwage benefits labor supply models and research underpinned by labor supply decisions typically assume the agents choices are functions of wage and wage offers however there is evidence that these selections are not only wage driven but at least in part depend on non wage benefits encompassed in jobs and occupations in this paper i develop and estimate a stochastic dynamic model of occupational and job choice where non wage benefits are directly incorporated into the decision alongside wages a nested model within this is a wage model representing common practice in the literature where non wage benefits are disregarded i separately estimate the full model and the nested wage model in order to compare the implications of omitting non wage benefits three analyses are compared elasticities economy wide structural changes in occupations and inequality reduction intervention policies i find that while disregarding non wage benefits generally causes biases there are cases when the two models predict very similar outcomes and have close estimates such as in occupational specific elasticities and job transition elasticities however i demonstrate that these special cases are products of canceling biases and that the same estimates on subpopulations are biased these results suggest that in most cases ignoring non wage benefits will bias estimates by overestimating the importance of wage in the selection process and so any intervention or change in wages will be over emphasized and by disregarding changes in relative prices between wage and non wage benefits such as happens through changes in wage taxes or in non wage benefits these biases can be severe the results suggest that ignoring non wage benefits in labor supply decisions is appropriate only in the special case in which subpopulation biases negate each other which is atypical i would like to thank moshe buchinsky and maria casanova for their invaluable and continual help in this project as well as rosa matzkin arturo harker seth kerstein dan ben moshe peter bergman anonymous referees at review of economics and statistics and seminar participants at ucla rand syracuse university the bureau of labor statistics and the census bureau for numerous helpful comments and suggestions

minimum wages for ronald mcdonald monopsonies a theory of monopsonistic competition recent empirical work on the effects of minimum wages has called into question the conventional wisdom that minimum wages invariably reduce employment we develop a model of monopsonistic competition with free entry to analyse the effects of minimum wages and our predictions fit the empirical results closely under monopsonistic competition we find that a rise in the minimum wage raises employment per firm causes firm exit and may increase or reduce industry employment minimum wages increase welfare if they raise industry employment but welfare effects are ambiguous if employment falls

oligopsony and monopsonistic competition in labor markets we argue that models of oligopsony or monopsonistic competition provide insights and explanation for many empirical phenomena in labor markets using a simple model with job differentiation and preference heterogeneity we illustrate how such models can be employed to explain the existence of wage dispersion the persistence of labor market discrimination market failures in the provision of training and the anomalous employment effects of minimum wages

crime and economic incentives we explore the role that economic incentives particularly changes in wages at the bottom end of the wage distribution play in determining crime rates we use data on the police force areas of england and wales between 1975 and 1996 and find relative falls in the wages of low wage workers lead to increases in crime we carry out a number of experiments with different wage measures including a wage measure that accounts for the effects of changes in the composition of employment these reinforce the picture of a strong association between the low wage labor market and crime the result that incentives play a central role is reinforced further by the strong impact on crime of deterrence measures and of a measure of the returns to crime

estimating workers marginal willingness to pay for job attributes using duration data this paper develops and applies a method for estimating workers marginal willingess to pay for job attributes when workers job choices are characterized by imperfect information and labor market search as an application this paper analyzes the job durations of white males using data from the national longitudinal survey youth cohort and the dictionary of occupational titles estimates of workers willingness to pay derived from the job duration model are compared with those derived from an hedonic wage model

panic on the streets of london police crime and the july 2005 terror attacks in this paper we study the causal impact of police on crime by looking at what happened to crime before and after the terror attacks that hit central london in july 2005 the attacks resulted in a large redeployment of police officers to central london boroughs as compared to outer london in fact police deployment in central london increased by over 30 percent in the six weeks following the july 7 bombings during this time crime fell significantly in central relative to outer london study of the timing of the crime reductions and their magnitude the types of crime which were more likely to be affected and a series of robustness tests looking at possible biases all make us confident that our research approach identifies a causal impact of police on crime implementing an instrumental variable approach shows an elasticity of crime with respect to police of approximately 0 3 so that a 10 percent increase in police activity reduces crime by around 3 percent

ranking firms using revealed preference this article estimates workers preferences for firms by studying the structure of employer to employer transitions in u s administrative data the article uses a tool from numerical linear algebra to measure the central tendency of worker flows which is closely related to the ranking of firms revealed by workers choices there is evidence for compensating differentials when workers systematically move to lower paying firms in a way that cannot be accounted for by layoffs or differences in recruiting intensity the estimates suggest that compensating differentials account for over half of the firm component of the variance of earnings

the empirical content of the job search model labor mobility and wage distributions in europe and the us abstract job search models of the labor market hypothesize a very tight correspondence between the determinants of labor turnover and individual wage dynamics on one hand and the determinants of wage dispersion on the other this paper offers a systematic examination of whether this correspondence is present in the data by estimating a rudimentary partial equilibrium job search model on a three year panel of individual worker data covering 10 european countries and the u s we find that our basic job search model fits the data surprisingly well this also allows us to point at a number of interesting empirical regularities about wage distributions our results suggest that cross sectional data on individual wages contain the basic information needed to obtain a reliable measure of the magnitude of labor market frictions as measured by a parameter of the canonical job search model finally we use our results in a cross country comparison of the intensity and nature of job to job turnover we arrange countries into two different groups according to their turnover intensity we further show that the nature of job to job turnover is very different between those two groups turnover is predominantly voluntary in low turnover countries whereas it is to a large extent involuntary in high turnover countries

an equilibrium model of health insurance provision and wage determination we investigate the effect of employer provided health insurance on job mobility rates and economic welfare using a search matching and bargaining framework in our model health insurance coverage decisions are made in a cooperative manner that recognizes the productivity effects of health insurance as well as its nonpecuniary value to the employee the resulting equilibrium is one in which not all employment matches are covered by health insurance wages at jobs providing health insurance are larger in a stochastic sense than those at jobs without health insurance and workers at jobs with health insurance are less likely to leave those jobs even after conditioning on the wage rate we estimate the model using the 1996 panel of the survey of income and program participation and find that the employer provided health insurance system does not lead to any serious inefficiencies in mobility decisions

identification of search models using record statistics this paper shows how record value theory a branch of statistics that deals with the timing and magnitude of extreme values in sequences of random variables can be used to recover features of the wage offer distribution in conventional search models using national longitudinal survey of youth nlsy wage data i show that the data are not compatible with specifications for the offer distribution characterized by extreme negative skewness in addition i show that my approach can be used to construct a bound on the returns to job seniority my results suggest that job seniority plays only a minor role in the wage growth of the workers surveyed in the nlsy copyright 2008 wiley blackwell

on the job search with match specific amenities we construct an equilibrium on the job search model in which workers value wages and amenities we show by example that in a standard burdett mortensen model with a distribution of worker tastes over amenities worker mobility need not imply equilibrium wage dispersion

heterogeneous firms and the organization of production firms in the same industry exhibit systematic differences in the organization of production and the structure of employment entrepreneurial ability is the specific scarce input that limits the size of a firm this input must be allocated to two activities coordinating production and monitoring workers able entrepreneurs can convert calendar time into larger supplies of coordinating effort that enable them to assemble large firms greater ability implies a higher shadow price of time which increases the implicit costs of monitoring a dispersion of entrepreneurial abilities generates an equilibrium size distribution of firms differences in monitoring costs affect the choice of worker productivities the design of products and the organization of production the monitoring cost hypothesis advanced in this paper goes a long way in explaining the equilibrium of an industry containing heterogeneous firms that differ in size and behavior

the pervasive absence of compensating differentials we study the relation between individual preferences for job amenities e g type of work job security and compensating wage differentials in cross section to this end we estimate a partial equilibrium job search model on panel data from eight european countries there are five non wage job characteristics and two sources of job to job mobility on the job search and reallocation shocks we also allow for two types of unobserved heterogeneity we find strong preferences for amenities especially job security yet these preferences do not translate into significant wage differentials in cross section counterfactual experiments show that one would need extremely low levels of search frictions for compensating differentials to arise lastly a similar exercise on the distribution of job change outcomes reveals the role of constrained job to job mobility in the absence of compensating wage differentials copyright 2009 john wiley sons ltd

unemployment risk and wage differentials workers in less secure jobs are often paid less than identical looking workers in more secure jobs we show that this lack of compensating differentials for unemployment risk can arise in equilibrium when all workers are identical and firms differ only in job security i e the probability that the worker is not sent into unemployment in a setting where workers search for new positions both on and off the job the worker s marginal willingness to pay for job security is endogenous increasing with the rent received by a worker in his job and depending on the behavior of all firms in the labor market we solve for the labor market equilibrium and find that wages increase with job security for at least all firms in the risky tail of the distribution of firm level unemployment risk unemployment becomes persistent for low wage and unemployed workers a seeming pattern of unemployment scarring created entirely by firm heterogeneity higher in the wage distribution workers can take wage cuts to move to more stable employment

search for nonwage job characteristics a test of the reservation wage hypothesis previous structural models of job search behavior have been based upon the reservation wage property this article provides estimates of a more general search model that nests models with the reservation wage property the estimates lead to rejection of the reservation wage property the model includes hours of work in the utility function but other nonwage job characteristics can be included as well an experiment based on the estimated parameters indicates that a significant proportion of job offers would be mistakenly predicted to be accepted or rejected under the restrictions implied by the reservation wage property

the great mexican emigration abstract in this paper we examine net emigration from mexico over the period 1960 to 2000 the data are consistent with labor supply shocks having made a substantial contribution to mexican emigration accounting for two fifths of mexican labor flows to the united states over the last two decades of the twentieth century net emigration rates by mexican state birth year cohort display a strong positive correlation with the initial size of the mexican cohort relative to the corresponding u s cohort in states with long histories of emigration the effects of cohort size on emigration are relatively strong consistent with the existence of preexisting networks

birth rates and border crossings latin american migration to the us canada spain and the uk we use census data for the us canada spain and uk to estimate bilateral migration rates to these countries from 25 latin american and caribbean nations over the period 1980 to 2005 latin american migration to the us is responsive to labor supply shocks as predicted by earlier changes in birth cohort sizes and labor demand shocks associated with balance of payments crises and natural disasters latin american migration to canada spain and the uk in contrast is largely insensitive to these shocks responding only to civil and military conflict the results are consistent with us immigration policy toward latin america which is relatively permissive toward illegal entry being mediated by market forces and immigration policy in the other countries which favor skilled workers and asylum seekers among other groups insulating them from labor market shocks in the region