decentralized college admissions we study decentralized college admissions with uncertain student preferences colleges strategically admit students likely to be overlooked by competitors highly ranked students may receive fewer admissions or have a higher chance of receiving no admissions than those ranked below when students attributes are multidimensional colleges avoid head on competition by placing excessive weight on school specific attributes such as essays restricting the number of applications or wait listing alleviates enrollment uncertainty but the outcomes are inefficient and unfair a centralized matching via gale and shapley s deferred acceptance algorithm attains efficiency and fairness but may make some colleges worse off than under decentralized matching

sources of intra industry wage dispersion how much do employers matter observed human capital explains less than half of wage variation in bls industry wage surveys establishment based wage differentials controlling for occupation account for 20 70 percent of intra industry wage variation this corresponds to a standard deviation in wages of 14 percent of the mean almost as large as interindustry wage variation investigation suggests that establishment wage differentials are not random variations or returns to usual measures of human capital

jumping the curse early contracting with private information in university admissions this article introduces a new model of early contracting employers who have private information about the applicant s ability worry that applicants who accept their offer are precisely those who were not offered other jobs to avoid this winner s curse employers anticipate the time of contracting the model is developed in the context of university admissions and is shown to be consistent with several stylized facts in that market we show that in contrast to received wisdom allocative efficiency may be improved by the presence of early contracting

reputation and hierarchy in dynamic models of employment the employment relationship with employees ability and their actions both private information thus combining adverse selection with moral hazard is modeled as a repeated game with self enforcing contracts being perfect bayesian nash equilibria under termination contracts the equilibrium contract structure consists of a hierarchy of ranks finite in number even though ability is continuous reputation acts as an effective device for worker discipline without the need for involuntary unemployment selection by bonding is not in general incentive compatible but selection by promotion of employees through the ranks is many other features correspond to observed employment structures

democratizing access to higher education in russia the consequences of the unified state exam reform this is the first paper that evaluates the effects of a reform requiring russian universities to make admission decisions based on the results of a national high school exam we show the reform led to a threefold increase in geographic mobility rates among high school graduates from small cities and towns to start college this is robust to different techniques samples and specifications the reform was also accompanied by increases in students expectations to attend university parental transfers and educational expenditures there is no evidence the reform affected parental labor supply divorce and employment outcomes of graduates who did not move

the provision of public goods under alternative electoral incentives politicians who care about the spoils of office may underprovide a public good because its benefits cannot be targeted to voters as easily as pork barrel spending we compare a winner take all system where all the spoils go to the winner to a proportional system where the spoils of office are split among candidates proportionally to their share of the vote in a winner take all system the public good is provided less often than in a proportional system when the public good is particularly desirable we then consider the electoral college system and show that it is particularly subject to this inefficiency

directed search with multiple job applications we develop an equilibrium directed search model of the labor market where workers can simultaneously apply for multiple jobs the main result is that all equilibria exhibit wage dispersion despite the fact that workers and firms are homogeneous wage dispersion is driven by the simultaneity of application choice risk neutral workers apply for both safe and risky jobs the former yield a high probability of a job oer but for low pay and act as a fallback option the latter provide with higher potential payo but are harder to get furthermore the density of posted wages is decreasing consistent with stylized facts unlike most directed search models the equilibria are not constrained ecient

what do we really know about wages the importance of nonreporting and census imputation in the most frequently used microdata sets over a quarter of all respondents now refuse to answer some questions about their incomes the census bureau has dealt with this problem which has been increasing in severity over time by imputing incomes of non respondents their imputation procedure called the hot deck essentially matches nonrespondents with demographically similar donors in this paper we evaluate the census imputation methodology and raise some questions first the census procedure is tied to commonality of events in the population rather than the more appropriate informational content of regressors clearly the census procedure severely understates income in certain occupations because it is based on the apparently invalid assumption that income does not affect reporting propensities it most likely understates average incomes as well

occupational choice under uncertainty an econometric problem in estimating models of occupational choice is that the agents forecasts of future wages and occupational tenure are unobservable this paper solves the problem by assuming that agents have rational expectations and by considering the effects of arbitrage both within and between cohorts the solution consists of two time series regressions of the demand and supply functions of entrants into an occupation from these regressions one obtains estimates of the rate of return to education the direct cost of education and other parameters that influence the market the model was estimated with data from the market for lawyers 1 many occupations require the agent to acquire some schooling before he can practice how does the agent choose between two occupations that require different schooling periods since adam smith 17 book i chapter 10 economists have assumed that the agent decides by comparing the expected present value of incomes between the two occupations e g friedman and kuznets 7 schultz 15 becker 1 and mincer 10 see 13 for a survey of the literature while the decision rule is well known the problem of uncertain wages plagues empirical applications of models embodying the decision rule most empirical works rely on cross section data or short panel data sets thus the total wages over the lifetime of the agent are not observed the question of ex ante expectations cannot of course be known short term macroeconomic factors tend to confound estimates of costs and returns to education rosen 13 rosen also raised the question of dropouts that is agents may leave an occupation in which they practiced therefore the question of uncertain wages is complicated by the additional uncertainty of occupational tenure there was an important attempt to solve the problem of uncertain wages by richard freeman 3 4 5 freeman recognized that demand conditions in the market affected the supply of new students he argued that new entrants made their decisions to enter by comparing current wages in the relevant occupations since future conditions may change current wages may not be good predictors of future wages these systematic forecast errors lead to cycles in the supply of new entrants these cyclical models are known as cobweb models this paper also considers the problem of occupational choice under uncertainty an agent s decision problem based on maximizing expected discounted value of income is explicitly solved the result is a generalization of mincer s schooling model 10 i also close the model by positing a demand curve for the

optimal pricing and quality choice of a monopolist under knightian uncertainty abstract this paper analyzes a simple vertical product differentiation model with demand uncertainty and derives a risk neutral monopolist s optimal market entry timing her optimal pricing and optimal quality choice by incorporating knightian uncertainty irreversibility and flexibility in quality enhancing investment into a continuous time stochastic model it is shown that an increase in knightian uncertainty induces decreases in the optimal price the optimal quality and the value of undertaking the quality enhancing investment by the monopolist the social optimal entry timing pricing and quality are also analyzed

equilibrium wage dispersion and interindustry wage differentials this paper develops a search theoretic explanation of interindustry wage differentials given coordination problems in the labor market the probability of filling a vacancy is an increasing function of the wage offered in equilibrium firms that find vacancies more costly will offer higher wages the model thus explains the persistence of interindustry wage differentials and their correlation with industry average capital labor ratio and profitability additionally the model predicts that high wage firms will receive more applications per job opening and that wages in the labor market will behave as strategic complements

the engineering labor market this paper develops a dynamic supply and demand model of occupational choice and applies it to the engineering profession the model is largely successful in understanding data in the u s engineering labor market the engineering market responds strongly to economic forces the demand for engineers responds to the price of engineering services and demand shifters more important supply and enrollment decisions are remarkably sensitive to career prospects in engineering also a rational model in which students use some forward looking elements to forecast future demand for engineers fits the data reasonably well these findings suggest that subsidies to build technical talent ahead of demand are misplaced unless public policy makers have better information on future market conditions than the market participants do

disequilibrium dynamics with inventories and anticipatory price setting this paper studies the sequence of short run quantity constrained equilibria of a model with a single storable output labor and money the durability of output gives rise to inventory fluctuations which influence the course of the equilibria attained one special feature of interest is the assumption that prices are not at the level which would equilibrate all markets if there were no stochastic shocks to the economy with prices frozen at this level the nature of the realized shocks determines the type of disequilibrium realized and the unintended component of inventory change the analysis concentrates on two questions what is the statistical nature of the process governing the real wage output employment and inventories and is it possible to test this model against the alternative hypothesis that prices are continually flexible even after the shocks have disturbed the system we find that although these theories are similar in their qualitative structure tests can be developed we also show how the frequencies of different types of quantity constrained equilibria vary with the stochastic specification this may shed some insight on why it is commonly believed that some types of disequilibrium phenomena have not been observed this abstract was borrowed from another version of this item

an extension of the maximum score estimator for disequilibrium models abstract mayer and dorsey 1998 mayer w j dorsey r e 1998 maximum score estimation of disequilibrium models and the role of anticipatory price setting journal of econometrics 87 1 4 propose a maximum score estimator for disequilibrium models with anticipatory pricing models here i prove consistency under assumptions that allow for more general price adjustment processes i also show that the smoothing function used in mayer and dorsey 1998 can be replaced with a simpler function that requires fewer arbitrary choices by the researcher

the effect of implicit contracts on the movement of wages over the business cycle evidence from micro data in this paper we address the question of whether wages are affected by labor market conditions in a manner more consistent with a contract approach than with a standard spot market model from a simple implicit contract model we derive implications about the links between wages and past labor market conditions using individual data from the current population survey and the panel study of income dynamics we find that an implicit contract model with costless mobility describes these links better than either a simple spot market model or an implicit contract model with costly mobility

a drawback of electoral competition in most major democracies there are very few parties compared to the number of possible policy positions held by voters we provide an efficiency rationale for why it might be appropriate to limit the proliferation of parties in our model the larger the number of parties the greater the inefficiency of the outcome of electoral competition the reason is that when the number of parties increases electoral incentives push each party to focus its electoral promises on a narrower constituency and then special interest policies replace more efficient policies that have diffuse benefits the analysis provides a possible explanation for the existence of institutional features that limit the extent of electoral competition thresholds of exclusion runoff electoral systems and majoritarian two party political systems jel d82 l15

sorting through search and matching models in economics toward understanding assortative matching this is a self contained introduction to research on search and matching we first explore the nontransferable and perfectly transferable utility matching paradigms and then a unifying imperfectly transferable utility matching model motivated by some unrealistic predictions of frictionless matching we flesh out the foundational economics of search theory we then revisit the original matching paradigms with search frictions we finally allow informational frictions that often arise such as in college student sorting

the internal economics of the firm evidence from personnel data we analyze twenty years of personnel data from one firm the hierarchical structure is quite simple and stable career movements suggest that the employee s rate of learning and the firm s learning about ability are important there are promotion fast tracks exit rates vary little with tenure or salary the firm has personnel policies like those described in the internal labor markets literature although several theoretical preconditions for ilms such as ports of entry and exit are lacking job levels are important to compensation but there is also substantial individual variation in pay within levels our companion paper in this issue explores the wage policy of this firm

matching with noise and the acceptance curse abstract this paper explores matching with both search and information frictions specifically everyone observes only a noisy signal of the true type of any potential mate in this context matching decisions must incorporate not only information about a partner s attribute conveyed by the noisy signal but also as in the winner s curse in auction theory information about a partner s type contained in his or her acceptance decision we show that there exists an equilibrium exhibiting a stochastic positive assorting of types generalizing becker j polit economy 81 1973 813 846 in equilibrium selection is adverse being accepted reduces an agent s estimate of a potential partner s type a phenomenon that we call the acceptance curse effect

a reexamination of the federal private wage differential in the united states the federal private wage differential is reexamined with recent data using specifications similar to those used in three previous studies i find that the federal private wage differential has narrowed since the 1974 79 period analyzed in those studies in addition i discover that wage differentials based on specifications used in the literature are biased upward because the previous studies did not control for detailed occupational and locational characteristics of workers corrected point estimates of the wage gap are much smaller than previous estimates in the literature differences in the gap across demographic groups occupations and locations are also discussed

efficiency of simultaneous search this paper presents an equilibrium labor search model in which workers can simultaneously apply to multiple firms to increase their search intensity they observe firms wage postings before choosing where to apply owing to coordination frictions a firm may not receive any applications otherwise it is able to hire unless all its applicants have better offers it is shown that the equilibrium converges to the efficient walrasian outcome as application costs vanish even for nonnegligible application costs the entry of firms the search intensity and the number of filled vacancies are constrained efficient wage dispersion is essential for constrained efficiency

trends in the growth and distribution of skills in the u s workplace 1960 1985 using new measures of job skills and standard measures of education and earnings the authors examine the effects of changing occupational and industry employment patterns on the skill composition of work between 1960 and 1985 the results show a strong upgrading of cognitive and interactive skills combined however with a substantial slowdown in the rates of growth of those skills and a declining demand for motor skills the earnings mix of jobs did not show the same high correlation with employment growth as skill and education levels because high wage low skill jobs declined in the goods industries while low wage jobs requiring at least moderate skill levels grew rapidly in the services

student portfolios and the college admissions problem we develop a decentralized bayesian model of college admissions with two ranked colleges heterogeneous students and two realistic match frictions students find it costly to apply to college and college evaluations of their applications are uncertain students thus face a portfolio choice problem in their application decision while colleges choose admissions standards that act like market clearing prices enrollment at each college is affected by the standards at the other college through student portfolio reallocation in equilibrium student college sorting may fail weaker students sometimes apply more aggressively and the weaker college might impose higher standards applying our framework we analyse affirmative action showing how it induces minority applicants to construct their application portfolios as if they were majority students of higher caliber

do formal salary systems really matter drawing on a single large u s corporation s personnel records for the years 1989 93 the authors analyze an example of the kind of formal salary system used by most large firms they find that this firm s practices were consistent with most of the important conclusions of prior empirical research on internal labor markets the system was highly centralized covering salary levels salary ranges raises and bonuses supervisors had little discretion over pay other than through subjective performance ratings the firm held fairly strictly to the salary rules leading to observable constraints on pay for employees near the top of the salary range these constraints however apparently did not impose important costs on the firm in the form of increased turnover although the system operated without any apparent connection to external factors the authors conclude that it transmitted external labor market forces with little distortion

the internal economics of a university evidence from personnel data using a rich personnel data set of a large european university we find strong evidence for the existence of an internal labor market first there is a strong port of entry at the lowest academic rank and in fact even prior to entering professorship resulting in very long internal careers second wages do not follow external wage developments we subsequently consider various incentive theories regarding the dynamics of promotions as organized through annual tournaments as expected a rigid set of research and teaching criteria determine the speed of promotions at the same time administrative rigidities play an important role

college assignment as a large contest abstract we develop a model of college assignment as a large contest wherein students with heterogeneous learning costs compete for seats at vertically differentiated colleges through the acquisition of productive human capital we use a continuum model to approximate the outcomes of a game with large but finite sets of colleges and students the continuum approximation lends tractability to a rich model for studying investment incentives in rank order competitions by incorporating two common families of affirmative action mechanisms into our model admissions preferences and quotas we can show that legal admissions preference schemes and illegal quotas have the same sets of equilibria including identical outcomes and investment strategies

pricing and matching with frictions suppose that n buyers each want one unit and m sellers each have one or more units of a good sellers post prices and then buyers choose sellers in symmetric equilibrium similar sellers all post one price and buyers randomize hence more or fewer buyers may arrive than a seller can accommodate we call this frictions we solve for prices and the endogenous matching function for finite n and m and consider the limit as n and m grow the matching function displays decreasing returns but converges to constant returns we argue that the standard matching function in the literature is misspecified and discuss implications for the beveridge curve

returns to skills and personnel management u s department of defense scientists and engineers i introduction labor economics research has documented important changes in the structure of wages in the 1980s and 1990s 1 private sector labor market returns to various measures of skills increased dramatically for example the college wage premium and the returns to experience both increased similarly dispersion in residual wages also increased after controlling for education experience and other observables this has been interpreted as an increase in the returns to unobserved skills these trends were widespread in the private sector they have been observed within and between occupations firms establishments and industries within demographic groups and within managerial ranks in contrast borjas 2003 found that though wage dispersion in the public sector increased relative to the private sector until about 1970 it declined thereafter he concluded that as a result high skill workers became less likely to stay in or shift to the public sector similarly katz and krueger 1991 found that returns to skills remained relatively stable during the 1980s in the public sector especially in the federal government they also found that although job queues rose for government blue collar jobs they fell for government white collar jobs this suggests that highly skilled federal employees fell behind the public sector in earnings during this period indeed several studies have expressed concern about the federal government s ability to recruit and retain highly skilled employees see campbell and dix 1990 2 unfortunately they were unable to offer systematic evidence on the quality of skilled federal employees this article examines returns to skills for some of the most highly skilled employees in the federal government civilian scientists and engineers ses employed in u s department of defense dod laboratories using personnel data provided by the dod for 1982 1996 i study the evolution of returns to observed and unobserved skills the quality of this workforce and the relationship of both to the dod s personnel policies similar to katz and krueger s analysis of the 1980s my analysis shows that returns to skills were largely flat among dod scientists and engineers over the entire sample period this may have been caused by the highly rigid and bureaucratic nature of dod and federal pay and personnel policies compared to that of the private sector i then exploit the panel nature of the data to examine whether this affected the dod s ability to attract and retain high quality ses for recruiting i compare characteristics and subsequent job performance of new entrants to those of comparable employees promoted into a similar job for retention i compare characteristics and prior job performance of exiting employees to those of comparable employees staying with the dod changes in these comparisons over time would suggest a trend in the ability of the dod to attract and retain qualified ses surprisingly there is little evidence of a systematic decline in the relative quality of the scientific and engineering workforce within the dod over the period despite the decline in returns to skills relative to the private sector one possible explanation is that during this period the u s defense industry underwent substantial downsizing in both the public and the private sector to the extent that ses had industry specific human capital their private sector opportunities may not have risen much relative to their dod earnings finally i compare personnel outcomes across three different pay plans most sampled employees were paid under the major federal pay plan the general schedule gs but some were paid under two other plans that were intended to introduce greater flexibility in personnel management i find little evidence that the other pay plans provided much more flexibility as trends in returns to skills and relative workforce quality were similar to the gs pay plan

levels of responsibility in jobs and the distribution of earnings among u s engineers 1961 1986 this study using data from the professional administrative technical and clerical pay survey and the current population survey examines how the assignment of responsibility within firms affected the structure of wages of u s engineers between 1961 and 1986 patterns of wage dispersion in this sample mirrored patterns found in broader segments of the labor market during the same period in engineering wage dispersion within levels of responsibility fell steadily between 1976 and 1986 while wage dispersion between levels rose at the same time engineering jobs began to migrate to lower levels within firms the author explains the trends in wages and job assignments as responses to changes in the supply of and demand for engineers within the framework of hierarchy models of responsibility

empirical analysis of occupational hierarchies using data on u s engineers and the position of engineering jobs within firms this paper estimates a model of hierarchies within firms the model extends rosen s 1982 model of recursive production to two skills and multiple hierarchy levels the model generates an empirical model that is nested within a general roy 1951 model of self selection maximum likelihood estimates of the parameters of the production technology and the skill experience profiles are estimated the results suggest that approximately two thirds of changes in employment shares across hierarchy levels across time are explained by demographic shifts in the stock of engineering skills most of the returns to experience and to assignment to higher hierarchy levels within firms are caused by skill accumulation and self selection rather than technological dierences across hierarchy levels

admission tuition and financial aid policies in the market for higher education we present an equilibrium model of the market for higher education our model simultaneously predicts student selection into institutions of higher education financial aid educational expenditures and educational outcomes we show that the model gives rise to a strict hierarchy of colleges that differ by the educational quality provided to the students we also develop a new estimation procedure that exploits the observed variation in prices within colleges identification is based on variation in endowments and technology it does not rely on observed variation in potentially endogenous characteristics of colleges such as peer quality measures and expenditures we estimate the structural parameters using data collected by the national center for education statistics and aggregate data from peterson s and the national science foundation