wall street occupations many finance jobs entail the risk of large losses and hard to monitor effort we analyze the equilibrium consequences of these features in a model with optimal dynamic contracting we show that finance jobs feature high compensation up or out promotion and long work hours and are more attractive than other jobs moral hazard problems are exacerbated in booms even though pay increases employees whose talent would be more valuable elsewhere can be lured into finance jobs while the most talented employees might be unable to land these jobs because they are too hard to manage

learning and wage dynamics we develop a dynamic model of learning about worker ability in a competitive labor market the model produces three testable implications regarding wage dynamics 1 although the role of schooling in the labor market s inference process declines as performance observations accumulate the estimated effect of schooling on the level of wages is independent of labor market experience 2 timeinvariant variables correlated with ability but unobserved by employers such as certain test scores are increasingly correlated with wages as experience increases and 3 wage residuals are a martingale we present evidence from the nlsy that is broadly consistent with the model s predictions

generalized samuelson conditions and welfare theorems for nonsmooth economies abstract we give intuitive samuelson conditions for a very general class of economies smoothness and monotonicity are not required we provide necessary and sufficient conditions for all pareto efficient allocations including those on the boundary we prove that if all agents have a cheaper point the supporting prices fully decentralize the allocation we also show first and second welfare theorems as corollaries to the characterization of efficient allocations

the economics of rising stars this paper analyzes an occupation in which there is substantial uncertainty about individual performance and past performance is correlated with future outcomes in equilibrium only the young enter the occupation and only the successful stay on the young are numerous and earn incomes well below what their current alternative o ffers success is rare and rewarded highly the implied distribution of earnings must have positive skewness copyright 1988 by american economic association

equilibrium in a finite local public goods economy abstract this paper examines the existence of a noncooperative equilibrium in a finite local public goods economy where consumers have quasi linear preferences jurisdictions consist of consumers who chose the same public project and finance the cost of production of public goods through either a proportional income tax or a poll tax we show that under a proportional income tax scheme a nash equilibria may fail to exist under a poll tax scheme an equilibrium always exists but in general nash equilibria violate a very weak efficiency condition we conclude by commenting on the stabilizing effect of zoning policies journal of economic literatureclassification number c71

skilled immigration and the employment structures of u s firms we study the impact of skilled immigrants on the employment structures of us firms using matched employer employee data unlike most previous work we use the firm as the lens of analysis to account for greater heterogeneity and the fact that many skilled immigrant admissions are driven by firms themselves e g the h 1b visa ols and iv specifications show rising overall employment of skilled workers with increased skilled immigrant employment by the firm employment expansion is greater for young natives than for their older counterparts the departure rates for older workers relative to younger workers appear highest for those in stem occupations

renegotiation design with unverifiable information this paper considers a buyer seller relationship with observable but unverifiable investments and or random utility parameters in such situations it is known that contract renegotiation may prevent the implementation of first best outcomes in this paper we show however that efficient investments and optimal risk sharing can typically be achieved provided the initial contract is able to monitor the ex post renegotiation process specifically we focus on the following two features of renegotiation design first default options in case renegotiation breaks down second the allocation of all bargaining power to either contracting party moreover we show that these two features can be obtained in standard rubinstein bargaining games through contractual provisions such as specific performance clauses and penalties for delay or equivalently financial hostages refundable without interest

young stars in economics what they do and where they go we construct a data set of job flyouts for junior economists between 2013 and 2018 to investigate three aspects of the market for stars first what is the background of students who become stars second what type of research does the top of the market demand third where do these students take jobs among other results we show that stars are more likely to be international and male than phds overall that theoretical and semi theoretical approaches remain dominant that american programs both produce the most stars and hire even more that almost none are hired by the private sector and that there is a strong shift toward having pre phd full time academic research jobs jel a11 a12 a23 j24

superstars and mediocrities market failure in the discovery of talent a basic problem facing most labor markets is that workers can neither commit to long term wage contracts nor can they self nance the costs of production i study the eects of these imperfections when talent is industry speci c it can only be revealed on the job and once learned becomes public information i show that rms bid exces sively for the pool of incumbent workers at the expense of trying out new talent the workforce is then plagued with an unfavorable selection of individuals there are too many mediocre workers whose talent is not high enough to justify them crowding out novice workers with lower expected talent but with more upside potential the result is an ine ciently low level of output coupled with higher wages for known high talents this problem is most severe where information about talent is initially very imprecise and the complementary costs of production are high i argue that high incomes in pro fessions such as entertainment management and entrepreneurship may be explained by the nature of the talent revelation process rather than by an underlying scarcity of talent jel d30 j31 j6 m5

immiserizing deindustrialization a dynamic trade model with credit constraints abstract the paper develops an open economy dynamic model with bequests and credit constraints the agricultural sector uses only labor the industrial sector needs an indivisible investment under autarky productive agriculture provides the funds needed for investment in industry and in equilibrium credit constraints are not binding if agriculture is not sufficiently productive the price of the industrial good must be high enough to make the industrial sector sustainable in an open economy if the country has the comparative advantage in agriculture deindustrialization may occur over time deindustrialization is welfare reducing when the negative wealth distributional effects swamp the gains from trade

information in online labour markets online labour markets are virtual platforms that solve information problems to enable gains from trade in remote labour services they make employers and workers aware of each other and allow them to communicate contract and produce remotely recent research suggests however that organizing production to include remote work remains challenging because employers and workers in these markets continue to lack information that is less easily communicated employers appear unable to accurately anticipate the full costs and benefits to them of using the market prior to entry and continue to have difficulty evaluating worker applications even when experienced in these markets information is particularly incomplete when wage arbitrage opportunity is greatest

returns to education a further international update and implications this paper updates evidence on the returns to investment in education by adding estimates for new countries and refining existing estimates to bring the total number of country cases to over 60 the new cross country evidence confirms and reinforces earlier patterns namely that returns are highest for primary education the general curricula the education of women and countries with the lowest per capita income the findings have important implications for directing future investment in education which for efficiency and equity purposes should concentrate on these priority areas

a theory of wage and promotion dynamics inside firms we show that a framework that integrates job assignment human capital acquisition and learning captures several empirical findings concerning wage and promotion dynamics inside firms including the following first real wage decreases are not rare but demotions are second wage increases are serially correlated third promotions are associated with large wage increases fourth wage increases at promotion are small relative to the difference between average wages across levels of the job ladder fifth workers who receive large wage increases early in their stay at one level of the job ladder are promoted quickly to the next

a theory of wage dynamics a dynamic equilibrium model of long term implicit labour contracts under incomplete but symmetric information is developed workers are assumed to be risk averse and of unknown ability or productivity risk neutral firms learn as do workers about each worker s productivity by observing the worker s output over time it is shown that equilibrium contracts provide for wages which never decline with age and increase only when the worker s market value increases above his current wage in addition to characterizing the equilibrium wage contract we also derive some of its implications for the behaviour of aggregate wages across various groups of workers these implications explain some findings in the recent empirical literature on ageearnings profiles in particular our model can explain why earnings may be positively related to experience even after controlling for productivity as some empirical studies have indicated

inefficient hiring in entry level labor markets hiring inexperienced workers generates information about their abilities if this information is public workers obtain its benefits if workers cannot compensate firms for hiring them firms will hire too few inexperienced workers i determine the effects of hiring workers and revealing more information about their abilities through a field experiment in an online marketplace i hired 952 randomly selected workers giving them either detailed or coarse public evaluations both hiring workers and providing more detailed evaluations substantially improved workers subsequent employment outcomes under plausible assumptions the experiment s market level benefits exceeded its cost suggesting that some experimental workers had been inefficiently unemployed

superstars and mediocrities a solution based on personal income taxation abstract the markets for talent often produce large income inequality and therefore raise political attention while such inequality can be due to superstar dynamics or factor complementarities tervio superstars and mediocrities market failure in the discovery of talent the review of economic studies 2009 first proposed a market failure that was previously unknown to the literature pointing to long term contracts as a solution i extend the model in tervio 2009 to include personal income tax policy reforms and demonstrate that tax design can be employed as a solution to the market failure when long term contracts are unfeasible with reasonably small enough entry payments that novice workers would sustain to compensate employers for the possibility to be discovered as high talent types both a progressive tax and a tax incentive on entry wages are found effective the tax incentive on entry wages though can be used even with very large deductible entry payments and with overall negative net entry wages

convergence theorems on the core of a public goods economy sufficient conditions abstract it is shown if all consumers are either asymptotically satiated or strictly nonsatiated in public goods then the core converges to the lindahl allocations as the economy grow without bound asymptotic satiation implies that only a vanishing fraction of the private good is devoted to public goods production as the economy gets large strict nonsatiation on the other hand implies that essentially all of the private good is devoted to public goods production in the limit it is interesting that these two conditions are independently sufficient for core convergence despite their completely opposite implications for the asymptotic nature of the lindahl allocations journal of economic literature classification numbers h41 d51 c71

investment in general training the role of information and labour mobility following the seminal work of becker i964 it is widely accepted in the literature that firms will be unwilling to finance training which workers may use in other firms this paper takes issue with this prediction and suggests that firms will frequently share in the cost of such general training 1 becker argues that a firm which pays for the training of workers in skills of potential use to other firms will lose these workers since other firms bear none of the costs of general training they can attract a worker with such training by outbidding the firm which trained him recognising this absence of property rights over an investment in general training firms will refuse to provide it hence if general training is to take place the trainee will have to pay for it if potential trainees are unwilling or unable to pay general training will not take place a shortage in general training is likely to emerge this may be especially pronounced in developing countries 2 in contrast the outlook for

on models with an uncongestible public good and a continuum of consumers abstract this short note shows that models with an uncongestible or mildly congestible public good and a non atomic continuum of consumers have an interesting but unfortunate property only an infinite level of public good provision in the continuum economy can be approximated by feasible public good levels in a sequence of economies with finite populations we discuss the theoretical and practical problems this creates for familiar models that employ a continuum of consumers and a finite level of an uncongestible public good

credit constraints and human capital accumulation in the open economy abstract this paper analyzes the implications of capital market imperfections for understanding the causes and consequences of international trade credit constraints in financing education and exogenous income distribution affect patterns of comparative advantage and are crucial in determining the impact of international trade unlike the standard results in the trade literature in the model here trade liberalization in a skill scarce country leads to higher investments in human capital

equivalence of the core and competitive equilibrium in a tiebout economy with crowding types abstract we propose a new model of a local public goods economy with differentiated crowding the new feature is that taste and crowding characteristics of agents are distinguished from one another we prove that if the economy satisfies strict small group effectiveness then the core is equivalent to the set of tiebout equilibrium outcomes equilibrium prices are defined to depend solely on crowding characteristics this implies that only publicly observable information and not private information such as preferences is needed to induce agents to sort themselves into efficient jurisdictions thus our model allows us to satisfy bewley s 6 anonymity requirement on taxes in his well known criticism of the tiebout hypothesis

job matching and occupational choice this paper presents a model of job matching the generalizes the existing literature by allowing for different jobs types or occupations such differences affect the value of job specific experience inducing a career profile where certain types are sampled before others more specifically the analysis shows that it is optimal for the young and inexperienced to gravitate toward jobs exhibiting a certain kind of risk then after deriving the equilibrium job turnover rate for an economy in which people do not switch occupations panel data are used to estimate its underlying parameters the hypothesis that people do not switch occupations is rejected against the alternative that they do thus providing empirical support for the theoretical extension undertaken here

the pay of corporate executives and financial professionals as evidence of rents in top 1 percent incomes incomes and wages has now raged for at least two decades in this paper we will make four arguments first the increase in the incomes and we will make four arguments first the increase in the incomes and wages of the top 1 percent over the last three decades should be interpreted wages of the top 1 percent over the last three decades should be interpreted as driven largely by the creation and or redistribution of economic rents and as driven largely by the creation and or redistribution of economic rents and not simply as the outcome of well functioning competitive markets rewarding not simply as the outcome of well functioning competitive markets rewarding skills or productivity based on marginal differences this rise in rents accruing skills or productivity based on marginal differences this rise in rents accruing to the top 1 percent could be the result of increased to the top 1 percent could be the result of increased opportunities for rentfor rent