incentives productivity and labor contracts the relationship between age earnings profiles and worker incentives is examined by contrasting wage and salary workers with the self employed it is argued that the steepness of wage and salary workers age earnings profiles reflects the desire to provide work incentives to those workers since self employed workers do not face this agency problem they are used as a benchmark to gauge productivity empirical support of the proposition is provided and the effects of human capital accumulation are separated empirically from incentive effects the most important conclusion is that under some strong assumptions most of the slope in age earnings profiles is accounted for by the desire to provide incentives rather than by on the job training

new keynesian models durable goods and collateral constraints abstract econometric evidence suggests that in response to monetary policy shocks durable and non durable spending co move positively and durable spending exhibits a much larger sensitivity to the shocks a standard two sector new keynesian model with perfect financial markets is at odds with these facts the introduction of a borrowing constraint where durables play the role of collateral assets helps in reconciling the model with the empirical evidence

gender differences in training capital and wages this paper constructs an equilibrium job matching model where workers differ in their attachment to the labor force the model predicts that workers with weaker attachment to the labor market will receive lower starting wages and lower post training wages and will be placed in jobs that offer less training and use less capital the implications of the model for gender differences in pay and job assignment are tested with the eopp data set ourfindings suggest that while training intensity during the first three months of employment is similar in positions filled by males and females females are employed in positions that have a shorter duration of on the job training and that use less capital these differences in on the job training and capital in positions filled by men and women as well as a lower market value for women s prior labor market experience account for a substantial part of the gap in wages between males and females

the carnegie conjecture some empirical evidence this paper examines tax return generated data on the labor force behavior of people before and after they receive inheritances the results are consistent with andrew carnegie s century old assertion that large inheritances decrease a person s labor force participation for example a single person who receives an inheritance of about 150 000 is roughly four times more likely to leave the labor force than a person with an inheritance below 25 000 additional albeit weaker evidence suggests that large inheritances depress labor supply even when participation is unaltered warren kendall heir to an insurance company fortune says he s worth about 5 million and has an income of about oh 300 and some thousand a year h e has never held a job or wanted to going down to sea in cruise ships is his full time pursuit he estimates that he has taken about 250 cruises over the past couple of decades spending at least 50 percent to 70 percent of the year afloat morgenthaler 1991 p al

labor market frictions human capital accumulation and long run growth positive analysis and policy evaluation we construct a search model with endogenous human capital and labor participation to study the growth effects of short run frictions and the effectiveness of human capital policies employment learning effort and output growth increase with more effective learning better labor market matching lower job separation or less costly vacancy creation although output growth employment vacancy creation and learning and search effort are most responsive to changes in a human capital policy that directly affects learning effort such a policy need not be more beneficial for welfare the effects of human capital policies become larger as the severity of labor market frictions rises

job destruction and propagation of shocks this paper considers propagation of aggregate shocks in a dynamic general equilibrium model with labor market matching and endogenous job destruction cyclical fluctuations in the job destruction rate magnify the output effects of shocks as well as making them much more persistent interactions between capital adjustment and the job destruction rate play an important role in generating persistence propagation effects are shown to be quantitatively substantial when the model is calibrated using job flow data incorporating costly capital adjustment leads to significantly greater propagation

job matching and on the job training conventional analysis predicts that workers pay part of their on the job training costs by accepting a lower starting wage and subsequently realize a return to this investment in the form of greater wage growth missing from the conventional treatment of on the job training is a discussion of the process by which heterogeneous workers are matched to jobs requiring varying amounts of training this matching process constitutes a key feature of the on the job training model presented in this article and tested with a unique data set containing extensive information concerning on the job training employer search wages and wage and productivity growth

is money net wealth this paper develops a simple monetary model a hybrid of the sidrauski and overlapping generation frameworks in which new dynasties of infinitely lived agents continuously enter the economy it is shown that the long run nonsuperneutrality of money in life cycle models is a modality of the violation of the ricardian debt neutrality proposition the very same intergenerational redistribution effects which on the fiscal side are the source of debt nonneutrality are at work on the monetary side to create monetary wealth effects and make money nonsuperneutral in the long run copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the timing of monetary policy shocks a vast empirical literature has documented delayed and persistent effects of monetary policy shocks on output we show that this finding results from the aggregation of output impulse responses that differ sharply depending on the timing of the shock when the monetary policy shock takes place in the first two quarters of the year the response of output is quick sizable and dies out at a relatively fast pace in contrast output responds very little when the shock takes place in the third or fourth quarter we propose a potential explanation for the differential responses based on uneven staggering of wage contracts across quarters using a stylized dynamic general equilibrium model we show that a very modest amount of uneven staggering can generate differences in output responses similar to those found in the data

an examination of firms employment costs the existence of quasi fixed costs of work may affect firms desired employee hours and number of workers which has important implications for the estimation of labour supply parameters firm level data from the 1982 employment opportunity pilot project is used to estimate the importance to firms of employee quasi fixed costs related to searching hiring training and firing specifically this paper examines how these costs affect number of workers and hours per worker turnover and vacancies to the extent that the costs are determined by the firm s presumably exogenous industrial classification an attempt is made to control for biases due to employee heterogeneity as well results show that higher costs are associated with lower turnover fewer vacancies and longer hours as predicted by a model of labour demand

household debt and monetary policy revealing the cash flow channel we study the effect of monetary policy on spending when households hold debt with variable interest rates when interest rates on outstanding loans vary with the short term market interest rate monetary policy has a direct and immediate effect on households expenses and disposable income if households are borrowing constrained they will respond to a shock to disposable income by adjusting their spending as a result a monetary policy induced interest rate change leads to a larger change in consumption than what is predicted by the elasticity of intertemporal substitution we examine this cash flow channel of monetary policy using administrative data on swedish households we estimate a strong and statistically significant response in spending to changes in interest expenses more specifically we estimate a marginal propensity to consume including durable consumption that is around unity or even higher in response to monetary policy induced changes in interest expenses for example highly indebted households with adjustable rate mortgages reduce consumption growth by several percentage points more in response to a one percentage point increase in the household interest rate than households with little debt or fixed rate mortgages our findings imply that monetary policy will have a stronger effect on real economic activity when households are highly indebted and have adjustable rate mortgages jel classification d14 e21 e52 g11

wage determination for career and non career workers in the uk is there labour market segmentation this study proposes that the earnings of career employees are influenced by a different set of parameters from the earnings of non career employees the above proposition is tested by using a matched employer employee sample within the econometric framework of a bivariate sample selection model where the career status is modelled as endogenous and is subject to choice decisions

optimal monetary policy with durable consumption goods abstract we document that the durable goods sector is much more interest sensitive than the nondurables sector and then investigate the implications of these sectoral differences for monetary policy we formulate a two sector general equilibrium model that is calibrated both to match the sectoral responses to a monetary shock derived from our empirical var and to imply an empirically realistic degree of sectoral output volatility and comovement while the social welfare function involves sector specific output gaps and inflation rates the performance of the optimal policy rule can be closely approximated by a simple rule that targets a weighted average of aggregate wage and price inflation in contrast a rule that stabilizes a more narrow measure of final goods price inflation performs poorly in terms of social welfare

aggregate implications of wealth redistribution the case of inflation this paper shows that a zero sum redistribution of wealth within a country can have persistent aggregate effects motivated by the case of an unanticipated inflation episode we consider redistribution shocks that shift resources from old to young households aggregate effects arise because there are asymmetries in the reaction of winners and losers to changes in wealth we focus on two sources of asymmetries differences in the average age of winners and losers and differences in their labor force status jel d31 d58 e31 e50

cyclical drivers of euro area consumption what can we learn from durable goods abstract we study the cyclical dynamics of consumption in the euro area ea and the large ea countries by distinguishing durable from nondurable expenditures we adopt a theoretical partial equilibrium framework to justify the identification strategy of our empirical model a time varying parameter structural vector autoregression tvp svar following the main insight from the theoretical model that liquidity constraints induce important interactions between durables and nondurables we distinguish durable specific demand and supply shocks while taking into account monetary and credit conditions our main findings are i durables react faster and more strongly than nondurables after monetary shocks in the euro area and in the largest ea countries a confirmation of an outcome commonly reported for the us ii there is a large degree of cross country heterogeneity in how different factors including durable specific ones explain consumption iii the strength of spillovers from durable to nondurable consumption as predicted by theory is empirically correlated with how much households across countries are likely to be liquidity constrained

on the superneutrality of money in a stochastic dynamic macroeconomic model abstract this paper explores the robustness of the superneutrality of money result to the introduction of uncertainty while qualitatively superneutrality fails to obtain in our model quantitatively the observed tobin effect is insignificant the equilibrium time paths of real variables are nearly unaffected by changes in the money growth rule we argue that our conclusions reinforce the theoretical case for superneutrality

estimating the effect of unearned income on labor supply earnings savings and consumption evidence from a survey of lottery players this paper provides empirical evidence about the effect of unearned income on earnings consumption and savings using an original survey of people playing the lottery in massachusetts in the mid 1980 s the effects of the magnitude of lottery prizes on economic behavior are analyzed the critical assumption is that among lottery winners the magnitude of the prize is randomly assigned it is found that unearned income reduces labor earnings with a marginal propensity to consume leisure of approximately 11 percent with larger effects for individuals between 55 and 65 years old after receiving about half their prize individuals saved about 16 percent

monk mortgages in a new keynesian model abstract there has been much interest recently in the role of household long term mortgage debt in the transmission of monetary policy this paper offers a tractable framework that integrates the long term debt channel with the standard new keynesian channel providing a tool for monetary policy analysis that reflects the recent debates in the literature as there is a nontrivial role in the model for both short and long term debt it provides a laboratory to investigate the effects of monetary policy operating not only through its current short term actions but also through expected persistent changes in its stance

employer search training and vacancy duration we develop a model of optimal employer search strategy when information about match quality is endogenous the model is tested using four data sets two of which have not previously been used as theory predicts we find that when filling positions requiring more training employers search more intensively and extensively employers also search more extensively when hiring workers with more education and with prior experience these findings provide strong evidence of systematic variation in search strategies based on the characteristics of the positions and job applicants factors that influence employer search also affect the duration of a vacancy

firm specific training layoffs and unreliable workers firm specific training layoffs and unreliable workers 1 introduction early work in implicit contract theory argues that a long term relationship between a worker and a firm evolves due to the risk sharing nature of the implicit contract between a risk averse worker and a risk neutral firm some authors have criticized this initial argument see for example haltiwanger 1983 feeling that a long term relationship between a worker and a firm and the terms of an implicit contract between the two in large parts is explained via hiring costs training costs and the like this is the approach taken in the early work of becker 1975 oi 1962 and the most recent work of jovanovic 1979a these latter explanations are also appealing because long term relations between a worker and a firm are typically characterized by quits that decline with tenure and wages that increase with tenure as discussed in mortensen 1988 explanations of these phenomena fall into two categories job search theories or job training theories job search theories stress that there is a match specific component to the productivity of any worker firm match that a good match will result in a long term relationship explains why wages are positively correlated with tenure to explain a rising wage profile within a given match requires that the firm and the worker learn about the quality of their match over time a good match will be a long term one and the wage will rise over time as the match is discovered to be a good one jovanovic 1979b and barron and loewenstein 1985 model such a learning process job training theories maintain that long term relationships with rising wages exist because of firm specific training that increases with tenure again see jovanovic 1979a as an example this paper integrates these two theories in this paper firm specific training evolves as an increasing function of a worker s tenure with a firm this is so because there is a positive probability that a worker is unreliable in that he will be searching for another employer the firm being unable to identify in advance which workers are unreliable will update its prior belief as to a worker s reliability as a function of the worker s tenure the total level of training at any point in time will be an increasing function of this updated belief thus learning about the quality of a match an aspect of the job search theories plays an important role in explaining the level of firm specific training this learning process can also play a role in determining optimal layoffs if an unreliable worker is more likely to receive an acceptable outside offer when the worker is laid off than when he is employed the firm can use layoffs to elicit information about the worker s reliabiliy based upon this fact layoffs may occur even when the worker s marginal product exceeds his value of leisure before discussing the model in detail one crucial assumption deserves comment unlike previous work such a salop and salop 1976 enforceable self revealing contracts are ruled out by assumption thus the firm here cannot commit itself to a wage contract promising low wages initially in exchange for high wages as job tenure increases which contract would attract only reliable workers this assumption is of course a polar extreme but as such is consistent with more recent work in contract theory which investigates the terms of self enforcing contracts see for example holmstrom 1983 the idea is to provide a comparison with contracts in an idealized economy with no enforcement problems this assumption is justified if the cost of writing a legally enforceable contract is prohibitive or if as suggested in charmichael 1984 reputational forces are insufficient to deter a firm from cheating although workers here are risk neutral the model could be amended to include risk averse agents

private sector training and graduate earnings this paper uses a survey of british graduates to estimate the impact of employer provided training on the earnings of men and women graduates the results indicate that although the training impact is reduced after controlling for endogeneity some forms of training have a considerable impact however there are substantial gender differences in the earnings impact of various typ es of training moreover men graduates are more likely to receive training than otherwise identical women

monetary policy inflation expectations and the price puzzle this article re examines the var evidence on the price puzzle and proposes a new theoretical interpretation using actual data and two identification strategies based on zero restrictions and model consistent sign restrictions we find that the positive response of prices to a monetary policy shock is historically limited to the sub samples that are typically associated with a weak interest rate response to inflation using pseudo data generated by a sticky price model of the us economy we then show that the structural vars are capable of reproducing the price puzzle only when monetary policy is passive the omission in the vars of a variable capturing expected inflation is found to account for the price puzzle observed in simulated and actual data structural vector autoregressions svars are widely used for measuring and understanding the effects of monetary policy innovations on the aggregate economy while most results in the var literature are consistent with economic intuition and macroeconomic theory the typically found positive and significant reaction of the price level on impact to a monetary policy shock is a fact that most monetary models

dynamic implications of absence behaviour this paper analyses the absence behaviour of workers in the context of a two period model the theoretical results that emerge highlight the potential benefits of analysing absenteeism within a multi time period model as opposed to a single time period model which has generally been adopted by the theoretical models of absenteeism to date workers are employed under a two period contract which is characterized by an experience rated sick pay scheme the theoretical results of the model indicate that if a worker faces such a sick pay scheme the theoretical results of the model indicate that if a worker faces such a sick pay scheme then the probability of absence in the current period is reduced the empirical analysis explores the absence rates observed from a set of workers who face an experience rated sick pay scheme the empirical results present some support in favour of the predictions which arise from the theoretical model

women and absenteeism health or economics full time workers in the united states lost 3 5 percent of scheduled work time due to unscheduled work absences in 1978 nearly 7 out of 100 workers experience at least one spell of absence a week however u s absentee rates have remained fairly constant over the past several years and are generally well below the rates of western europe for example west germany lost 11 percent of scheduled work time to unscheduled work absences holland lost 10 percent and italy lost 15 percent in 1972 73 part of the higher absentee rates in western europe is thought to be caused by the high prevalence of sick leave availability in these countries work loss from unscheduled absences is substantially higher among female workers than among male workers in the united states in may 1978 women lost 4 3 percent of scheduled work time compared to 3 1 percent for men absence incidence rates are also higher for women 8 6 percent of women workers experience a spell of absence during a typical work week compared to 5 4 percent of men workers the large majority of unscheduled work absences are due to illness and injury the average female worker lost 5 4 days from work for health reasons compared to 4 7 days for the average male worker in 1979 there have been several recent research efforts on the causes and consequences of worker absenteeism steve allen 1981 found evidence that observed differences in absentee rates between the sexes could be accounted for by differences in marginal earnings and the flexibility of the work schedule my 1978 study found that women generally lost fewer days from work than men for most common illnesses there has been little research to date on gender differences in work loss due to illness that takes into account differences in the occupational distribution of workers and differences in marginal earnings as well as variations in health status this paper reports on an empirical investigation of the determinants of gender differences in illness related absentee rates in this investigation labor market characteristics such as differences in earnings and occupational mix between men and women differences in health status and the impact of family are analyzed using a regression framework

aggregate and welfare effects of redistribution of wealth under inflation and price level targeting abstract an unanticipated rise in the price level redistributes wealth from lenders to borrowers its size depends on the monetary policy regime as inflation targeting it and price level targeting pt have different implications for the price level path following price level movements the effects of an unexpected 1 price level increase are measured and assessed under both regimes overall the redistribution of wealth and the implied aggregate and welfare effects are larger under it than they are under pt the youngest the poorest and the government gain at the expense of the rest of the population and when the government gain is given to households as lump sum transfers the effects on gdp are negative and long lasting

job matching with finite horizon and risk aversion the consequences of introducing risk averse workers with a known finite retirement age into a simple job matching framework are explored the job matching model includes two jobs in the primary job workers and firms learn about the worker s productivity by observing his output over time in the secondary job productivity of any worker is known with certainty at the outset workers start off in the primary job but based on their observed performance may choose to switch to the secondary job the model is developed in two stages first the finite retirement age is introduced while the usual assumption of risk neutral workers is retained in this model it is shown that all workers who achieve at least a certain cumulative output record denoted r by a certain age denoted t will thereafter remain in the primary job until retirement those who do not achieve r by age t switch to the secondary job at or before age t and remain there second risk aversion is introduced along with finite retireme

deconstructing life cycle expenditure we revisit two well known facts regarding life cycle expenditures the hump shaped profile of nondurable expenditures and the increase in cross household consumption inequality we document that the behavior of total nondurables masks surprising heterogeneity in the life cycle profile of individual consumption subcomponents we provide evidence that the categories driving life cycle consumption either are inputs into market work or are amenable to home production using a quantitative model we document that the disaggregated life cycle consumption profiles imply a level of uninsurable permanent income risk that is substantially lower than that implied by a model using a composite consumption good

a monetary business cycle model for india a new keynesian monetary business cycle model is constructed to study why monetary transmission in india is weak our models feature banking and financial sector frictions as well as an informal sector the predominant channel of monetary transmission is a credit channel our main finding is that base money shocks have a larger and more persistent effect on output than an interest rate shock as in the data the presence of an informal sector hinders monetary transmission contrary to the consensus view financial repression in the form of a statutory liquidity ratio and administered interest rates does not weaken monetary transmission

dividing the costs and returns to general training data from the national longitudinal survey of youth indicate that the employer often pays the explicit costs of not only on site training but also off site general training although few of these costs appear to be passed on to workers in the form of a lower wage while in training completed spells of general training paid for by previous employers have a larger wage effect than completed spells of general training paid for by the current employer a model where contract enforcement considerations cause employers to share the costs and returns to purely general training can explain these findings

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

an explanation of international differences in education and workplace training abstract we develop a simple search equilibrium model of workplace training and education based on two features first investment in education improves job related learning skills and reduces training costs by firms second firms with vacant skilled job slots can choose between recruitment from the market and training compared to germany and japan the us has both a higher inflow rate into unemployment and a higher efficiency of the matching process while the combined effect of these differences on the share of educated labor is ambiguous the effect on the percentage of firms undertaking workplace training is to unambiguously reduce it

price level changes and the redistribution of nominal wealth across the euro area we document the presence of sizable distributional effects from unexpected price level movements in the euro area ea using sectoral accounts and newly available data from the household finance and consumption survey the ea as a whole is a net winner of unexpected price level increases with italy greece portugal and spain being the biggest beneficiaries and belgium and malta being the largest losers governments are net winners of inflation while the household hh sector is a net loser in the ea as a whole hhs in belgium ireland malta and germany incur the biggest per capita losses while hhs in finland and spain turn out to be net winners of inflation considerable heterogeneity exists also within the hh sector relatively young middle class hhs are net winners of inflation while older and richer hhs are losers as a result wealth inequality in the ea decreases with unexpected inflation although in some countries austria germany and malta inequality increases due to presence of relatively few young borrowing hhs we document that hhs inflation exposure varies systematically across countries with hhs in high inflation ea countries holding systematically lower nominal exposures

moral hazard and sickness insurance abstract we study if the replacement level in the swedish national sickness insurance which replaces foregone earnings due to temporary illnesses affects work absence behavior we use micro data and estimate the effects of a major reform whereby the replacement level during the first 90 days in each absence spell was reduced on work attendance to separate out the effect of the reform from any trend in work absence we distinguish between the implications on the incidence of work absence i e the frequency of spells and the duration of the spells we also use a regression discontinuity approach to estimate the effects on the prevalence of work absence finally we estimate elasticities with respect to the replacement level in the sickness insurance

job duration seniority and earnings an important stylized fact about labor markets is that workers with longer seniority with their current employer have higher earnings than other workers with the same total labor market experience this study shows that workers in longer jobs earn more throughout than workers in a series of shorter jobs and that the measured positive cross sectional return seniority is largely a statistical artifact due to the correlation of seniority with an omitted variable representing the quality of the worker the job or the worker employer match the implication is tha t earnings do not in fact rise very much with seniority copyright 1987 by american economic association

the unemployment volatility puzzle the role of matching costs revisited recently pissarides 2009 has argued that the standard search model with sunk xed matching costs increases unemployment volatility without introducing an unrealistic wage response in new matches we revise the role of matching costs and show that when these costs are not sunk and therefore can be partially passed on to new hired workers in the form of lower wages the amplication mechanism of xed matching

the transmission of monetary policy through redistributions and durable purchases this paper studies a redistribution channel for the transmission of monetary policy using a tractable olg setting in which the government is a net debtor we show that standard open market operations omo conducted by central banks have signi cant revaluation eects that alter the level and distribution of wealth in the economy and the real interest rate expansionary omo generate a negative wealth eect the private sector as a whole is a net creditor to the government increasing households incen tives to save for retirement and pushing down the real interest rate this in turn leads to a substitution towards durables generating a temporary boom in the durable good sector with search and matching frictions a form of productive investment is added to the model and the fall in interest rates causes an increase in labour demand raising aggregate employment the mechanism can mimic the empirical responses of key macroeconomic variables to monetary policy interventions the model shows that dierent monetary interventions e g omo versus helicopter drops can have sharply dierent eects on activity

absenteeism in a medium sized manufacturing plant 1991 absenteeism in a medium sized manufacturing plant applied economics vol 23 no 1 pp 161 166

extensive search intensive search and hiring costs new evidence on employer hiring activity this paper presents recent evidence on employer search to fill a position a 1982 employer survey sponsored by the national institute of education and the national center for research in vocational education provides the basis for analyzing employer search and hiring costs the paper examines the effects of such factors as employer size dismissal costs unionization on the job training adjustment costs capital and labor market conditions on intensive employer search extensive employer search and hiring costs intensive employer search is measured by the average number of hours the employer spends recruiting screening and interviewing per applicant extensive search is measured by the number of applicants seen per applicant interviewed and the number interviewed per employment

optimal mismatch and promotions i introduction a substantial proportion of workers are employed in jobs for which they appear to be either overqualified or underqualified for instance using data from the panel study of income dynamics sicherman 1991 finds that 40 percent of his sample are overeducated and another 16 percent are undereducated rumberger 1987 reports similar values using data from the quality of employment surveys other studies which find substantial education mismatch include duncan and hoffman 1981 verdugo and verdugo 1989 and hersch 1991 and evidence that a single firm hires both under and overqualified workers is presented here this paper provides an explanation for why firms hire both overqualified and underqualified workers firms hire overqualified workers because these workers require less training for their initial positions such workers also form a pool from which promotions are made which lowers hiring costs for higher level positions within the firm workers accept positions for which they are overqualified to enhance their probability of promotion and because of search and mobility costs but if they fail to be promoted to a position that better matches their qualifications they are more likely to quit firms hire underqualified workers despite their longer training requirement since such workers are less likely to quit and provide continuity of the labor force over time thus contrary to job matching arguments that would explain these hires as a result of imperfect information hiring of seemingly mismatched workers is optimal and these matches are made with perfect information the model developed in this paper yields three testable hypotheses 1 training time for entry level jobs is inversely related to overqualification at the time of hire 2 workers who are overqualified on their current job are those who have failed to be promoted to a job which better matches their qualifications and such workers are more likely to quit and 3 workers overqualified at time of hire are more likely to be promoted to test these hypotheses i use new data collected for this purpose previous empirical research such as that cited above was restricted by data availability to examining only the match between education and the worker s current job thus the quality of the match with the worker s initial job and the match between worker qualifications other than education has gone unexplored however various worker characteristics in addition to education are often substituted for each other in determining a worker s qualification for a job thus i examine additional qualifications including the match between the worker s experience level of previous job and use of skills information on the match between the worker s qualifications and those required for the initial job with the employer is particularly important since entry level qualifications determine training time for the initial job as well as the likelihood of promotion further individual specific training time for the initial job is necessary but typically not available since data sets providing information on training such as the panel study of income dynamics and quality of employment surveys request information on training time for the average worker and not for the individual worker the data set reveals several interesting statistics qualification mismatch at hire is fairly common for this firm 29 percent of the sample report themselves overqualified for their first job with the firm while 13 percent report themselves as underqualified lateral intra firm mobility is common and occurs far more frequently than promotions workers in the sample average 1 3 promotions but four different jobs with the employer this suggests that the job matching process occurs not only by turnover but through intrafirm mobility consistent with the assumptions and implications of the model the empirical results indicate that workers who are overqualified at hire receive less training and more promotions and that workers overqualified for their current job are more likely to quit

optimal monetary policy with heterogeneous money holdings abstract we study the optimal anticipated policy in a pure currency economy with flexible prices and a non degenerate distribution of money holdings the economy features a business cycle and lump sum monetary injections have distributional effects that depend on the state of the cycle we parsimoniously characterize the dynamics of the economy and study the optimal regulation of the money supply as a function of the state under commitment the optimal policy prescribes monetary expansions in recessions when insurance is most needed by the cash poor unproductive agents conversely the optimal policy prescribes monetary contractions during booms so that the inflationary effect of the occasional expansions is undone

the transfer of human capital abstract most of our productive knowledge was handed down to us by previous generations the transfer of knowledge from the old to the young is therefore a cornerstone of productivity growth we study this process in a model in which the old sell knowledge to the young old agents train the young and charge them for this service we take an information theoretic approach in which training occurs if a young agent watches an old agent perform a task equilibrium is not constrained pareto optimal the old have private information and this gives rise to an adverse selection problem some old agents manage to sell skills that the planner would prefer to extinguish so as to allow more young agents to start new technologies in this sense there is too much resistance to change

sticky price models and durable goods the inclusion of a durable goods sector in sticky price models has strong and unexpected implications even if most prices are flexible a small durable goods sector with sticky prices may be sufficient to make aggregate output react to monetary policy as though most prices were sticky in contrast flexibly priced durables with sufficiently long service lives can undo the implications of standard sticky price models in a limiting case flexibly priced durables cause monetary policy to have no effect on aggregate output our analysis suggests that durable goods prices are the most relevant data for calibrating price rigidity jel e21 e23 e31 e52

do wages rise with job seniority many previous studies have found a strong positive effect of job seniority tenure on wages this paper re examines the evidence using a simple instrumental variables scheme to deal with the fact that tenure is likely to be related to unobserved individual and job characteristics that affect the wage we use the variation of tenure over a given job match as the principal instrumental variable for tenure the variation in tenure over the job is uncorrelated by construction with the fixed individual and job match specific components of the error term of the wage equation our main finding is that the partial effect of tenure on wages is small and that general labour market experience and job shopping account for most wage growth over a career the strong cross section relationship between tenure and wages is due primarily to heterogeneity bias prior researchers see mincer and jovanovic 1981 bartel and borjas 1981 borjas 1981 cline 1979 and mellow 1981 and many others have established that job seniority has a strong positive relationship with wage rates in a cross section or a cross section time series of individuals in this paper we re evaluate the evidence concerning the partial effects on wages of job seniority tenure and total labour market experience the extent to which wages rise with tenure is important for several reasons first and foremost the wage tenure profile is a fundamental question about the structure of earnings over careers second the wage tenure profile is a key determinant of the extent to which the earnings power of individuals is tied to specific jobs and it is important for assessment of the losses suffered by displaced workers hamermesh 1984 third evidence that wages rise with job tenure has been used to explain the decline in quits with tenure since the wage growth on the current job lowers the probability that the worker will locate a superior alternative a growing theoretical literature surveyed in parsons 1984 has taken the evidence of a strong wage tenure profile at face value and sought to provide an explanation for the relationship the most prominent explanation is the theory of specific human capital oi 1962 becker 1962 mincer 1974 parsons 1972 kuratani 1973 and hashimoto 1980 in which the growth of wages with tenure holding experience constant is attributed to the worker s share of investments in firm specific skills more recently lazear 1981 has presented a supervision model of wage growth in which firms defer compensation as a means of inducing workers not to shirk freeman 1977 and harris and holmstrom 1982 provide an explanation for wage growth based on an insurance motive salop and salop 1976 nickell 1976 and guasch and weiss 1982 present adverse selection models of wage growth in which firms use a wage tenure profile as a

efficiency and labor market dynamics in a model of labor selection this article characterizes efficient labor market allocations in a labor selection model the model s crucial aspect is cross sectional heterogeneity for new job contacts which leads to an endogenous selection threshold for new hires with cross sectional dispersion calibrated to microeconomic data 40 of empirically relevant fluctuations in the job finding rate arise which contrasts with results in an efficient search and matching economy the efficient selection model s results hold in partial and general equilibrium as well as with sequential search abstract from author

business cycles unemployment insurance and the calibration of matching models this paper theoretically and empirically documents a puzzle that arises when an rbc economy with a job matching function is used to model unemployment the standard model can generate sufficiently large cyclical fluctuations in unemployment or a sufficiently small response of unemployment to labor market policies but it cannot do both variable search and separation finite ui benefit duration efficiency wages and capital all fail to resolve this puzzle however either sticky wages or match specific productivity shocks can improve the model s performance by making the firm s flow of surplus more procyclical which makes hiring more procyclical too

the unemployment volatility puzzle is wage stickiness the answer i discuss the failure of the canonical search and matching model to match the cyclical volatility in the job finding rate i show that job creation in the model is influenced by wages in new matches i summarize microeconometric evidence and find that wages in new matches are volatile and consistent with the model s key predictions therefore explanations of the unemployment volatility puzzle have to preserve the cyclical volatility of wages i discuss a modification of the model based on fixed matching costs that can increase cyclical unemployment volatility and is consistent with wage flexibility in new matches

monetary policy when households have debt new evidence on the transmission mechanism in response to an unanticipated change in interest rates households with mortgage debt adjust their expenditure signicantly especially on durable goods renters react to a lesser extent and outright home owners do not react at all all housing tenure groups experience a signicant change in disposable income over and above the direct impact on mortgage repayments the response of house prices is sizable driving a signicant adjustment in loanto income ratios but little change in loan to value ratios a simple collateral constraint model augmented with durable goods and a renting decision generates predictions consistent with these novel empirical ndings and suggests that heterogeneity in housing debt positions plays an important role in the transmission of monetary policy

gone fishing reported sickness absenteeism and the weather i introduction the principal agent problem of contracting employee work effort that is imperfectly monitored arises in a number of areas of economic theory including models of remuneration by seniority lazear 1979 involuntary unemployment e g shapiro and stiglitz 1984 performance based pay macleod and malcomson 1998 and labor hoarding depken redmount and snow 2001 given the importance of this mechanism in the theoretical work the empirical research on the agency problem is remarkably scant in part this reflects the limited availability of personnel data as baker and holmstrom argue in their review article internal labour markets too many theories too few facts 1995 but more fundamentally it reflects the inherent difficulty of empirically capturing the employee effort levels that underlie the models using direct measures of employee or firm level productivity is unquestionably the preferred approach but these measures are notoriously problematic and the studies that use them tend to be case studies introducing external validity issues it is also unlikely to isolate the type of malfeasant shirking behavior that concerns variants of the models where the employee effort decision entails disciplinary risk to inform employee incentives to engage in malfeasant behavior economists have relied on two measures employee disciplinary rates e g cappelli and chauvin 1991 ichino and maggi 2000 and absenteeism rates e g arai and thoursie 2005 bradley green and leeves 2007 ichino and riphahn 2005 the difficulty is that disciplinary rates capture only shirking activity that is identified by employers not that which goes undetected while reported absenteeism particularly sickness absenteeism rates may be entirely legitimate one can therefore never be sure whether differences in these rates across workers facing different shirking costs reflect actual shirking activity as opposed to differences in employers willingness or ability to detect and punish shirkers or differences in employee health that may be correlated with these costs in this paper we identify a different type of shirking activity that potentially addresses both of these shortcomings employees misreporting health in order to exploit weather conditions favorable to high utility outdoor recreation 1 we begin by considering a shirking model of sickness absenteeism in which employees marginal utility of outdoor leisure is increasing in the interaction of two state dependent parameters health and outdoor weather quality the intuition being that ideal weather conditions for engaging in outdoor recreation are valued more when one is physically and perhaps also mentally healthy this assumption leads to two main propositions first increases in sickness absenteeism associated with marginal improvements in weather quality reflect the decisions of the inframarginal workers those workers who in the absence of the weather improvement would be present at work who are the healthiest implying an increase in absenteeism that is unambiguously illegitimate second comparing across workers marginal weather improvements should have the largest impact on sickness absenteeism where shirking costs are highest the reason is that where existing incentives to misreport health are the weakest such as where sick pay is not offered or job protection is weak existing sickness absenteeism levels will be lowest and the inframarginal workers will be the healthiest thereby benefitting most from the weather improvement we examine the empirical relevance of these propositions using a two step approach first we construct an index of weather preferences by linking temperature relative humidity precipitation wind speed and cloud cover data to time use data identifying the weekend and weekday evening outdoor recreational activities of employees with regular daytime work schedules we then examine the empirical relation between the resulting index of the recreational quality of the weather hereafter referred to simply as weather quality and the incidence of short term spells of sickness absenteeism reported in survey data comparing the magnitude of this relation across workers facing different levels of sick pay job protection and job finding rates

the effect of job tenure on wage offers a wage offer can be either acceptable or unacceptable to a worker but in cross sectional and panel data only acceptable wage offers are observed an ols wage equation will not reveal how job tenure affects wage offers but rather will reveal how tenure affects acceptable wage offers by jointly modeling the firm s determination of the wage offer and the worker s decision to accept or reject the offer we are able to estimate the effect of job tenure on wage offers consistently in contrast to the usual ols results we find that job tenure has no statistically significant effect on wage offers

order from chaos the effects of early labor market experiences on adult labor market outcomes this paper examines the consequences of initial periods of churning or mobility in the labor market to help assess whether faster transitions to stable employment relationships as envisioned by advocates of school to work programs would be likely to lead to better adult labor market outcomes an analysis of national longitudinal survey of youth data for the years 1979 92 yields modest evidence at best linking early job market stability to better labor market outcomes the authors find that for both genders adult labor market outcomes defined as of the late 20s or early to mid 30s are for the most part unrelated to early labor market experiences this evidence does not support efforts to explicitly target the school to work transition insofar as doing so implies changing the structure of youth labor markets so that workers form earlier and firmer attachments to employers industries or occupations

interactions of monetary and fiscal policy via open market operations we examine interactions of monetary and fiscal policy in a sticky price model where public debt is non neutral as it provides transaction services this property is brought about by a legal restriction on open market operations by which only government bonds are eligible debt creation eases access to money and can therefore induce households to increase purchases of goods government expenditures which are not completely tax financed and deficit financed tax cuts then tend to stimulate private consumption however for these fiscal impulses to raise real activity monetary policy should not too aggressively aim at stabilising the economy

why do low educated workers invest less in further training several studies document that low educated workers participate less often in further training than high educated workers this article investigates two possible explanations low educated workers invest less in training because of 1 the lower economic returns to these investments or 2 their lower willingness to participate in training controlling for unobserved heterogeneity we find that the economic returns to training for low educated workers are positive and not significantly different from those for high educated workers however low educated workers are significantly less willing to participate in training we show that this lesser willingness to train is driven by economic preferences and personality traits

on employer specific information and internal labor markets the human capital literature of which becker s 2 paper is the seminal work stresses the productivity enhancing effects of schooling and on the job training later work by spence 21 and others emphasizes the fact that it is difficult for employers to ascertain the productivity of potential employees and suggests that activities such as schooling may provide employers with signals as to workers productivities in the signalling literature it is assumed that information generated concerning an individual s abilities is general in that it is known to all potential employers yet the information that an employer gathers concerning his workers abilities is not likely to be completely transferable to other employers as a consequence as rosen 18 249 points out there are limitations on the ability of the price system to achieve efficient assignments if the price system is incomplete there is a role for entrepreneurial activity of assembling an optimal work force this paper analyzes the employment relations that arise when employers information concerning new workers abilities is incomplete until after a period of employment the acquisition of such employer specific information is shown to lead to what has been referred to in the literature as internal labor markets internal labor markets as identified by dunlop 5 32 are the complex of rules which determine the movement of workers among job classifications within administrative units these movements may be transfers promotions demotions or layoffs to the exterior labor markets doeringer and piore 3 emphasize skill specificity and on the job training as the key factors in the emergence of the internal labor market along similar lines williamson wachter and harris 22 point out that job idiosyncracy can result in employment relations with attributes like those of internal labor markets by way of contrast this paper emphasizes the role of employer specific information in generating internal labor markets the theory provides an explanation as to why employers dismiss current employees at the same time that new employees are hired evidence that dismissal rates are not insignificant is presented in section iv the theory also provides a new rationale for long term em

human capital vs signalling explanations of wages increases wages by directly increasing the worker s productivity this learning explanation is usually associated with human capital theory however it seems unlikely that learning explains all the wage differences associated with schooling and work history better educated workers are not a random sample of workers they have lower propensities to quit or to be absent are less likely to smoke drink or use illicit drugs and are generally healthier it is unlikely that employers make full use of differences in propensities to quit or to be absent or sick when hiring workers these characteristics are often not directly observed and the americans with disabilities act precludes firms from using either poor health or the likelihood of future sickness as a hiring criterion unless it is directly related to job performance however if low levels of education are associated with these unfavorable employee characteristics and employers are allowed to take education into account when hiring workers we would expect employers to favor better educated workers as a means of reducing their costs of sickness and job turnover in turn students will take these hiring criteria into account when deciding how long to stay in school students will choose a length of schooling to signal their ability to employers and employers will demand a minimum level of schooling

the liquidity trap the real balance effect and the friedman rule this paper studies the behavior of the economy and the efficacy of monetary policy under zero nominal interest rates using a model with population growth that nests as a special case a more conventional specification in which there is a single infinitely lived representative agent the paper shows that with a growing population monetary policy has distributional effects that give rise to a real balance effect thereby eliminating the liquidity trap these same distributional effects however can also work to make many agents much worse off under zero nominal interest rates than they are when the nominal interest rate is positive

gender differences in displacement cost evidence and implications this paper uses a unique and newly available data set on displaced workers to estimate differences in the wage costs of displacement between women and men while predisplacement wages rise at about the same rate with tenure for women as men in this data set women lose more from displacement than men and the magnitude of this loss increases with tenure overall we interpret our results as not supportive of the specific capital hypothesis that women accumulate less firmspecific human capital than men and we suggest that future attempts to explain our result focus on gender differences in the process of search for a new job

internal labour markets causes and consequences the paper analyzes the causes and consequences of internal labor market rules that yield long tenure promotion from within seniority pensions and due process in dismissals about half the workforce are estimated to be in such markets competitive reasons for internal labor markets as a response to specific training and arms length relationships between workers and firms are surveyed these reasons are found to be consistent with the pattern of internal labor markets among non union firms however some internal labor markets e g among small unionized firms are probably a response to union pressure and government regulations in these circumstances low labor mobility could pose problems for policy copyright 1991 by oxford university press

the role of automatic stabilizers in the u s business cycle most countries have automatic rules in their tax and transfer systems that are partly intended to stabilize economic uctuations this paper measures how eective they are at lowering the volatility of u s economic activity we identify seven potential stabilizers in the data and include four theoretical channels through which they may operate in a business cycle model calibrated to the u s data the model is used to compare the volatility of output in the data with counterfactuals where some or all of the stabilizers are shut down our rst nding is that proportional taxes like sales property and corporate income taxes contribute little to stabilization our second

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

worker heterogeneity job screening and firm size a model of job screening is developed in which firms make wage offers to workers based on an imperfect evaluation of their abilities if large firms have higher costs of acquiring information about workers they screen workers with less accuracy and choose a wage compensation scheme different from the one small firms choose this generates the often observed positive correlation between firm size and wages the model also predicts that wage structure and perhaps wage dispersion will differ by firm size and that individuals who acquire more schooling will also choose to work in a larger firm these hypotheses are tested and supported using data from the national longitudinal survey

labor turnover wage structures and moral hazard the inefficiency of competitive markets a multiperiod general equilibrium model of the labor market is developed in which risk averse workers are faced with job related uncertainty and labor turnover is costly if a worker is unlucky and suffers a bad job match he quits and joins another firm hoping that he will like its work environment more because the quality of a job match is unobservable workers cannot insure against the risk of a bad match the firm provides implicit insurance against job dissatisfaction typically by paying workers more than their net marginal products in their early years with the firm and less subsequently since the probabilities of the insured against events the quit rates over time are affected by the amount of such insurance provided this implicit insurance is characterized by moral hazard individuals quit when in the absence of insurance they would not the equilibrium contract balances out efficiency in risk bearing with efficiency in turnover incentives we show that the equilibrium contract is not con