does skill obsolescence increase the risk of employment loss in this article we analyse whether technological change induces skill obsolescence and early labour market exit and to what extent training participation and on the job learning reduce these risks using panel data on older workers we find that workers report skill obsolescence more often when learning is a structural characteristic of the job this perceived skill obsolescence is not related to a higher probability of losing employment instead workers who experience skill obsolescence appear to learn more on the job and participate more often in training which decreases the risk of losing employment these results are consistent with the dynamic model of skill obsolescence and employment loss we develop in this article moreover we find that when workers with long job tenures decrease their training participation this is an early indicator of future job loss

if not computers then what returns to computer use in the uk revisited in recent years much attention has been paid to the effect on wages of skill biased technology especially the use of computers although empirical studies have shown a positive relationship between computer use and earnings doubts have been cast on whether this is a causal relationship or merely represents unobserved other factors which are themselves positively linked to computer usage this study provides evidence that computers themselves raise wages although their impact on wages falls as other controls are included in the regression it still remains significant whilst the effect of another proxy for unobserved factors becomes insignificant furthermore improvements in computer use have an additional impact on earnings supporting the productivity interpretation

linear adjustment costs and seasonal labor demand evidence from retail trade firms standard models of dynamic labor demand rely on the presence of adjustment costs to explain the observed smoothness in employment patterns although the costs are often difficult to quantify the experience rating feature of the u s unemployment insurance ui system provides a measurable linear cost of adjustment using a unique data set with administrative data on over 8000 firms i estimate the effect of a ui induced linear adjustment cost on seasonal labor demand in retail trade i find strong support for the large role of adjustment costs in reducing the employment response of firms to seasonal fluctuations in demand

delegated portfolio management abstract a problem of screening agents with privately known forecasting abilities and reservation utilities and then eliciting truthful information from these agents once they are employed is considered for the case of risk averse agents and large principals an approximately optimal solution is constructively characterized under the assumption that payoffs are normally distributed a significant extension of the definnetti savage probability elicitation result is developed under this extension knowledge of agent preferences is not required when the underlying conditional distributions are symmetric and this fact is exploited to solve the screening problem in a mean variance formulation

technological change and retirement decisions of older workers according to human capital theory technological change will influence the retirement decisions of older workers in two ways first workers in industries with high rates of technological change will retire later if there is a net positive correlation between technological change and on the job training second an unexpected change in the rate of technological change will induce older workers to retire sooner because the required amount of retraining will be an unattractive investment we matched industry data on productivity growth and occupational data on required training with data from the national longitudinal surveys of older men to test these hypotheses our results support both hypotheses

life cycle equilibrium unemployment this paper extends the job creation job destruction approach to the labor market to take into account a deterministic finite horizon as hirings and separations depend on the time over which investment costs can be recouped the life cycle setting implies age differentiated labor market flows while search by the unemployed falls with age the separation rate is rather u shaped over the life cycle worker heterogeneity in the context of undirected search implies an intergenerational externality which is not eliminated by the hosios condition we show that age specific policies are required to attain the first best allocation

the economics of has beens the evolution of technology causes human capital to become obsolete we study this phenomenon in an overlapping generations setting assuming that technology evolves stochastically and that older workers find updating uneconomic experience and learning by doing may offer the old some income protection but technology advance always turns them into has beens to some degree we focus on the determinants demand elasticities persistence of technology change etc of the severity of the has beens effect it can be large even leading to negatively sloped within occupation age earnings profiles and an occupation dominated by a few young high income workers architecture displays the sort of features the theory identifies as magnifying the has beens effect and both anecdotes and some data suggest that the has beens effect in architecture is extreme indeed

creating modern art the changing careers of painters in france from impressionism to cubism paul cezanne died in october 1906 at the age of 67 in time he would be generally regarded as the most influential painter who had worked in the nineteenth century e g clive bell 1982 clement greenberg 1993 art historians and critics would also agree that his greatest achievement was the work he did late in his life in the judgment of historian meyer schapiro for example the years from 1890 to his death in 1906 are a period of magnificent growth meyer schapiro 1952 theodore reff 1977 roger fry 1989 in the spring of 1907 25 year old pablo picasso showed a few friends a large new painting that would be given the title les demoiselles d avignon this would become the most important painting of the twentieth century as the forerunner of cubism the most complete and radical artistic revolution since the renaissance which picasso and his friend georges braque went on to create in the next few years john golding 1988 galenson 2001 picasso would paint for another 66 years until his death in 1973 at the age of 92 during this enormously productive career he would become by far the most celebrated artist of the twentieth century yet he would never again execute a painting as important as the demoiselles nor produce another body of work as significant as that he made in the years between 1907 and the outbreak of world war i the dramatic contrast between the careers of cezanne and picasso raises intriguing questions about artists productivity art historians have not systematically addressed the question of when in their careers modem artists have typically done their best work and previous research consequently affords no basis for judging whether it is simply a matter of chance that cezanne and picasso made their greatest contributions so close in time in spite of the difference of more than 40 years in their ages but research by psychologists on the ages at which successful practitioners in other disciplines have done their best work is suggestive mathematicians theoretical physicists and poets typically make their most important contributions at younger ages than do astronomers biologists and novelists psychologists have argued that this is because creative ideations can be produced and elaborated more rapidly in disciplines that deal with abstract conceptual entities than in those whose central ideas are more complex and concrete harvey c lehman 1953 dean keith simonton 1988 1994 economists have also identified a number of factors that can change the relationship between age and productivity within a given activity yoram ben porath 1967 anne p bartel and nachum sicherman 1993 1995 in view of these results for other disciplines and the potential for change considered by economists we argue that it was not a matter of chance that cezanne and picasso made their greatest contributions at such different ages but rather that this was a result of the process that gave rise to the creation and early development of modem painting under the influence of the increased demand for innovation that had prompted the beginning of modern painting new generations of artists made painting an increasingly conceptual activity in which young practitioners could make important advances we will use evidence drawn from the twentieth century auction market to examine the relationship between artists ages and the value of their paintings for a group of artists including cezanne and picasso who dominated that early development this will allow a test of the hypothesis that this relationship changed systematically during the first century of that art galenson department of economics university of chicago chicago il 60637 and national bureau of economic research weinberg department of economics ohio state university columbus oh 43210 we thank gary becker britt salvesen tom sargent and two anonymous referees for comments and thomas walker for research assistance

outsourcing and unionization a tale of misallocated resistance resources while many believe the growth in outsourcing contributed to the decline in u s unionization up to the 1990s this argument has never been investigated systematically in this article we analyze the effect of outsourcing on unionization between 1973 and 1993 instrumental variables estimation shows outsourcing contributes to higher quasirents and industry productivity we find the union wage premium increases with the extent of outsourcing both for workers that are substitutable by outsourcing services and workers in jobs that are not substitutes of the tasks being outsourced finally we find no support for the claim that outsourcing reduces unionization jel j5 l2 l6

technology and the wage structure this article reports direct evidence on how technological change is related to changes in wage gaps by schooling experience and gender wage gaps by schooling increased the most in industries with rising r d intensity and accelerating growth in the capital labor ratio estimates of their relationship to high tech capital are inconclusive contrary to popular notions that technological change harms older workers wage growth of experienced workers is much greater in r d intensive industries than in industries with little r d activity the gender gap narrowed more in industries that most intensively used high tech capital in 1979

bayes stein estimation for portfolio analysis in portfolio analysis uncertainty about parameter values leads to suboptimal portfolio choices the resulting loss in the investor s utility is a function of the particular estimator chosen for expected returns so this is a problem of simultaneous estimation of normal means under a well specified loss function in this situation as stein has shown the clas sical sample mean is inadmissible this paper presents a simple empirical bayes estimator that should outperform the sample mean in the context of a portfolio simulation analysis shows that these bayes stein estimators provide significant gains in portfolio selection problems

employment transitions and computer use of older workers in our work we study the role of information and communication technology ict skills and their utilization in the retirement decision we provide empirical evidence based on italian panel data in favour of the hypothesis that ceteris paribus better educated male employees with ict know how retire later such effect is stronger the longer the time horizon considered and its magnitude is remarkably larger than the one observed in us and germany in previous studies we also document that ict do not play a crucial role in the retirement decision of women our results are robust to the estimation strategy adopted

seniority wages and the role of firms in retirement in general retirement is seen as a pure labor supply phenomenon but firms can have strong incentives to send expensive older workers into retirement based on considerations about wage costs and replacement costs we discuss steep seniority wage profiles as incentives for firms to dismiss older workers before retirement conditional on individual retirement incentives e g social security wealth accrual rates or health status the steepness of the wage profile will have different incentives for workers as compared to firms to maintain the employment relationship using an instrumental variable approach to account for selection of workers in our firms and for reverse causality we find that firms with higher labor costs for older workers have on average a lower job exit age and a higher incidence of golden handshakes author s abstract

employer pay policies public transfers and the retirement decisions of men and women in denmark the empirical retirement literature measures individual responses to variations in income flows due to public transfers private individual or employer provided pensions we estimate a model accounting for the incentive effects from these sources a dynamic structural model is extended to allow both individual and employer heterogeneity this is applied to a danish matched panel of workers and establishments spanning a period of reforms to a public early retirement programme employer specific compensation is found to be an important determinant of work and retirement income flows employer effects on retirement age are only found among sub samples where access to public transfers is limited

did regional economic diversity influence the effects of the great recession using data for u s counties from 2005 to 2012 we test whether higher levels of economic diversity mediated the effects of the great recession via four measures of stability spatial spillover effects are modeled by the use of the spatial durbin estimator with heteroscedastic errors the data generally support the central hypothesis that higher levels of diversity within a county are associated with enhanced employment stability across all counties as well as subsets of metro and nonmetro counties results for wage stability however appear to contradict our other findings we suggest that underlying labor elasticities can bridge these apparent contradictory results jel r11 r12 o47

the impact of r d investment on productivity new evidence using linked r d lrd data the impact of r d investment on productivity new evidence using linked r d lrd data this paper uses confidential census longitudinal microdata to examine the association between r d and productivity for the period 1972 1985 these data allow for significant improvements in measurement and model specification yielding more precise estimates of the returns to r d our results confirm the findings of existing studies 1 positive returns to r d investment 2 higher returns to company financed research 3 a productivity premium on basic research these results are robust to adjustments for influential outliers also our evidence suggests that the return to company financed r d is an increasing function of firm size i introduction robert solow s studies in the late 1950s dramatically changed perceptions of the sources of economic growth until this time the commonly held view was that improvements in economic welfare were achieved primarily through the use of more inputs in particular capital input however solow 1957 reported that only 10 percent of the twofold rise in u s per capita output during the years 1909 1949 was due to growth in the capital labor ratio the remainder was attributed to more efficient use of inputs or technological change solow also established a framework for estimating technological change a productivity residual or a measure of changes in output that could not be explained by changes in input use the solow residual in modified form has become virtually synonymous with the measurement of total factor productivity tfp growth jorgenson and griliches 1967 demonstrated that under the assumptions of constant returns to scale and competitive factor pricing changes in total factor productivity measure shifts in a production function rather than treat technological change as exogenous or manna from heaven many economists have explored its determinants r d investment is generally regarded as having a strong impact on productivity growth empirical analysis of the r d productivity connection has often been based on estimation of reduced form equations derived from the r d capital stock model griliches 1979 which extends the solow model to include the stock of technical knowledge or knowledge capital as a factor of production in addition to the standard factors of production physical capital labor intermediate materials and energy if the rate of depreciation of knowledge capital is assumed to be negligible tfp growth dtfp is a function of the intensity of r d investment rdint which is usually measured as the ratio of r d expenditure to sales 1 dtf p sub t alpha beta rdin t sub t u sub t where u sub t is a classical disturbance term the coefficient on r d intensity beta is interpreted as both the marginal product of knowledge capital and the rate of return to r d investment 1 estimates of beta at the company or line of business level are interpreted as measures of the private rate of return to r d or those that accrue to the firm or its investors due to incomplete appropriability or other factors this return may not equal the social return to this activity most empirical studies especially those based on aggregate and sectoral data have found evidence of a strong positive correlation between tfp growth and r d investment however results using firm level data have been mixed the finding that these two variables are uncorrelated is cause for concern because it implies that firms may not be able to earn significant returns on their investment in r d making them less likely to undertake this investment in the future even if it is socially desirable for them to do so we believe that it is important to reestimate this relationship because it is highly likely that existing firm level studies have been based on measures of tfp that are crude imprecise and unrepresentative

computerisation and wage dispersion an analytical reinterpretation the rich countries have recently seen a dramatic rise in income inequality all the more surprising because the long term trend had been toward equality this paper examines one of the leading explanations computerisation in the workplace i offer a theory of computers impact on white collar work which goes far toward explaining the timing form and locus of recent labour market changes the theory looks at the bureaucratic and organisational applications of computers that have been first largest and most influential they have two effects on firms demand for labour at different skill levels

levels of computer self efficacy computer use and earnings in china abstract levels of self efficacy in computer use were found to be positively related to computer use at work among a sample of workers in shanghai the simultaneous estimation of computer use and earnings indicated that an earnings premium for computer use accrues only to females not to males

the dynamics of portfolio management contracts we consider the multiperiod relationship between a client and a portfolio manager and the resulting problem of motivating a manager of unknown ability to acquire valuable information we explore the contractual forms and the optimal retention policy of the client and find that the optimal initial set of contracts features a smaller performance based fee component paid to the manager than in a first best contract and the contract choice elicits only partial information about the manager as a result ex post performance measurement is critical to future recontracting in general managers are retained only if the returns on their portfolio exceed the benchmark by an appropriate amount article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

adverse risk incentives and the design of performance bases contracts this paper uses option pricing theory to value and analyze many performance based fee contracts that are currently in use a potential problem with some of these contracts is that they may induce portfolio managers to adversely alter the risk of the portfolios they manage the paper is prescriptive in that it presents conditions for contract parameters that provide proper risk incentives for classes of investment strategies for buy and hold and rebalancing strategies adverse risk incentives are avoided when the penalties for poor performance outweigh the rewards for good performance

local economic instability and business location the case of maine this paper investigates the effects of local economic instability on business location in maine instability is represented by the quarterly six month and annual persistence of employment in maine municipalities and seasonal spikes in local employment regression results suggest that businesses are attracted to areas with high short term and seasonal stability but that annual fluctuations in local employment are not a significant deterrent to new business activity services businesses are particularly sensitive to local employment fluctuations presumably because they are often highly integrated into the economy findings suggest that policymakers can jointly pursue the objectives of local economic growth and stability

the effects of human resource management on small firms productivity and employees wages this paper analyses whether employees and firms differently benefit from particular human resource hr practices the focus is on small firms that may be badly informed on the impact of hr practices on firm performance in this study on dutch pharmacies it is found that firms do not reward employees skills according to their contribution to firms productivity as 1 employees are over rewarded for their sector specific skills and under rewarded for the productivity enhancing effect of their computer skills and 2 employees work experience positively affects their wages but does not have real productivity effects moreover it is found that training employees in case of vacancy problems seems to be an adequate hr practice since it increases productivity without affecting the average wage level the opposite holds for offering higher wages to newly recruited employees furthermore we find that only the employees benefit from performance evaluation interviews whereas employing many employees by tem

portfolio selection through maslow s need hierarchy theory inspired by maslow s need hierarchy theory we construct a new portfolio selection framework using the bi level optimization technique in which the lower level need relates to safety low risk whi

pension incentives and the pattern of early retirement this mix of state and private pension provision in the united kingdom provides a rare degree of variation in pension incentives for retirement using a sample of individuals from the uk retirement survey the paper models the probability of retirement in terms of the incentives underlying the individual s pension plan as well as other socio economic factors it follows an option value approach and allows a separate role for pension wealth for spouse s economic characteristics and for demographic characteristics it distinguishes between serps and private schemes and models eligibility to disability the results point to significant retirement incentive effects from the pension system

how social security and medicare affect retirement behavior in a world of incomplete markets this paper provides an empirical analysis of how the u s social security and medicare insurance system affect the labor supply of older males in the presence of incomplete markets for loans annuities and health insurance we estimate a detailed dynamic programming dp model of the joint labor supply and social security acceptance decision focusing on a sample of males in the low to middle income brackets whose only pension is social security the dp model delivers a rich set of predictions about the dynamics of retirement behavior and comparisons of actual vs predicted behavior show that the dp model is able to account for wide variety of phenomena observed in the data including the pronounced peaks in the distribution of retirement ages at 62 and 65 the ages of early and normal eligibility for social security benefits respectively we identify a significant fraction of health insurance constrained individuals who have no form of retiree health insurance other than medicare and who can only obtain fairly priced private health insurance via their employer s group health plan the combination of significant individual risk aversion and a long tailed pareto distribution of health care expenditures implies that there is a significant security value for these individuals to remain employed until they are eligible for medicare coverage at age 65 overall our model suggests that a number of heretofore puzzling aspects of retirement behavior can be viewed as artifacts of particular details of the social security rules whose incentive effects are especially strong for lower income individuals and those who do not have access to fairly priced loans annuities and health insurance

does tourism promote cross border trade we estimate a simultaneous bivariate qualitative choice model of arizona agribusiness firms propensity to trade and visit as a tourist the cross border state of sonora mexico venture business visits quantified through the tourism equation were found to have the largest impact on a firm s propensity to trade tourist visits have a greater impact on trade when combined with other firm attributes such as age perceived need for geographic diversity foreign language fluency and firm size than if considered alone our results suggest that there is a role for government agencies to play in overcoming imperfect information related to trade opportunities through facilitating exploratory business venture and tourist visits

skill biased technological change and wage inequality evidence from a plant retooling1 one of the most popular explanations for the increased wage inequality that has occurred since the late 1970s is that technological change has resulted in a downward shift in the demand for low skill workers this pattern is also alleged to account for the growth in racial inequality in wages over the same period this article reports on a case study of the retooling of a food processing plant a unique longitudinal multimethod design reveals the nature of the technological change the changes in job requirements and the mechanisms by which the changes affect the wage distribution for hourly production workers this research finds that indeed the retooling resulted in greater wage dispersion and that the changes have also been associated with greater racial inequality in wages however contrary to the claims of advocates of the skill bias hypothesis organizational and human resources factors strongly mediated the impact of the changing technology absent these high road organizational choices th

international portfolio diversification with estimation risk international portfolio diversification has long been advocated as a way of enhancing average returns while reducing portfolio risk for the investor who considers diversifying into foreign securities this proposition however relies on the assumption that the required inputs to the classical mean variance analysis are known with certainty typically expected returns variances and covariances are simply replaced by their ex post sample values and the optimal portfolio is derived without mentioning the uncertainty inherent in these parameter values but the rational investor should take this uncertainty into account when forming expectations and probably will consider estimators that are less subject to estimation error than the classical sample mean this paper investigates alternative estimators of expected returns and their implications for the alleged gains from diversification an important observation is the crucial influence that errors in estimating expected returns have on portfolio analysis a closer examiprevious studies of international portfolio diversification have relied on ex post meanvariance analysis without considering the problem of estimation risk typically past averages are substituted for expected returns and no allowance is made for the uncertainty inherent in these parameter values first i demonstrate the shortcomings of such an approach and second i investigate another method of estimating expected returns initially proposed by stein by shrinking the sample averages toward a common mean i find that the out of sample performance of the optimal portfolio is substantially increased one of the implications of this method is that the classical conclusions vastly overestimate the possible gains in average returns instead benefits from diversification are more likely to accrue from a reduction in risk this paper draws on part of my dissertation at the university of chicago i am grateful to arnold zellner michael mussa george constantinides and especially john bilson for useful discussions and comments numerous improvements were also suggested by the referee this research received the generous financial support of the college interuniversitaire d etudes doctorales dans les sciences du management

seniority sectoral decline and employee retention an analysis of layoff unemployment spells we investigate the effect of tenure on employee retention under varying labor market conditions using a competing risks analysis of recall and new job acceptance applied to layoff unemployment spell data from waves 15 and 16 1982 83 of the panel study of income dynamics we find that adverse conditions sectoral employment decline significantly reduce the positive tenure effect on recall probabilities this result is consistent with firm default on delayed payment contracts and does not appear to reflect the effect of technological change on the value of firm specific investments

training and retirement patterns life cycle theory predicts that employers enter into implicit contracts with newly hired employees to ensure rent sharing and to decrease turnover after firm specific training investments typically these implicit contracts would include both upward sloping earning profiles and mandatory retirement in this article we empirically test the prediction that workers with firm specific skills are restrained in their options to continue working therefore they are more likely to retire at common mandatory retirement dates than those with general skills using the us national longitudinal survey of older men we find that workers who participated in firm specific training in their early careers do indeed retire earlier than those with general skills the results show that compulsory retirement plans force these older workers to retire when they reach the common mandatory retirement age of 65 the results presented in this article are highly relevant for public policies in european and other industrialized cou

optimal contracts in a continuous time delegated portfolio management problem this article studies the contracting problem between an individual investor and a professional portfolio manager in a continuous time principal agent framework optimal contracts are obtained in closed form these contracts are of a symmetric form and suggest that a portfolio manager should receive a fixed fee a fraction of the total assets under management plus a bonus or a penalty depending upon the portfolio s excess return relative to a benchmark portfolio the appropriate benchmark portfolio is an active index that contains risky assets where the number of shares invested in each asset can vary over time rather than a passive index in which the number of shares invested in each asset remains constant over time fund managers compensation schemes in a delegated portfolio management setting have been of special interest to both academics and practitioners academic interest stems in part from the rapid growth of managed funds over the last two decades gompers and metrick 1998 report that by december 1996 mutual funds pension funds and other financial intermediaries held discretional control over more than half of the u s equity market it is thus of importance to study the impact of institutional trading on asset prices and to integrate into one model both asset pricing and delegated portfolio management compensation as advocated by brennan 1993 allen and santomero 1997 and allen 2001 it is also important to understand the relationship between a manager s trading strategies and his implicit incentives or career concerns see e g brown harlow and starks 1996 brown goetzmann and park 1997 chevalier and ellison 1999 and chen and pennacchi 2000 these concerns include internal promotion from a small to a large fund higher outside offers and the flow of money through the fund under management 1 the importance of fund manager compensation is also underscored by congressional passage in 1970 of the amendment to

rural population growth 1950 1990 the roles of human capital industry structure and government policy human capital raises rural incomes but this effect is swamped by higher returns to human capital in urban markets this leads to brain drain from rural areas populations grow more rapidly in rural counties that have a diversified employment base farm population grows faster or declines more slowly in counties with relatively high farm income and nonfarm populations grow faster in counties with relatively high nonfarm income however higher farm incomes lead to slower nonfarm population growth and vice versa rural county government services financed by local taxes or debt have neutral or negative effects on population growth rural population in the united states increased 53 between 1900 and 1990 this increase is concentrated in the nonfarm rural sector where population has grown to three times its turn of the century level nevertheless there exists a concern that rural areas are threatened by population declines that will gradually erode the ability of communities to provide public services necessary for their citizens eventually the fear is that these communities will become too small to be selfsustaining and will disappear one might ask why these concerns exist in the face of slowly rising rural populations one reason is that the overall rural population increase masks a huge migration of labor off the farm the rural farm population has fallen to one tenth its 1900 level if a strong farm economy is necessary to sustain rural communities then the farm population decline is a threat to the future viability of rural communities on the other hand off farm employment opportunities are increasingly important to the

a structural retirement model the life cycle model analyzed here constrains most work on the main job to be full time partial retirement entails a wage reduction and frequently a job change maximum likelihood estimates of utility function parameters are designed to incorporate information on the age of leaving full time work and the age of full retirement the model closely tracks retirement behavior including peaks in retirement activity at 62 and 65 the paper explores the relation of these peaks to nonlinearities in the budget constraint created by various retirement programs policy analyses based on this and on earlier models with simpler structures are compared the retirement choice is one of the more prominent manifestations of life cycle behavior the decision is the result of an interplay between an individual s preferences and a set of incentives which change in complicated ways as the individual progresses through his or her late 50 s and 60 s the purpose of this study is to formulate and estimate a structural model which incorporates in a fundamental way this interplay between lifetime preferences and incentives and to illustrate how such a model may be used to investigate retirement behavior a structural model of this type is essential for analyzing potential policy changes which can be expected to affect incentives in varying ways over a number of years in the life cycle the current study incorporates two structural features which have frequently been omitted from previous studies first the model requires that an individual who wishes to reduce work effort below full time must accept a reduced hourly wage rate in order to do so this reflects empirical evidence from micro data sets which indicates that around one third of older individuals engage in part time work at one time or another and that regardless of whether or not these older workers change jobs to obtain part time work they usually take wage cuts as compared to their previous full time work 2 the fact that an individual is willing to accept a lower wage rate in return for the opportunity to work fewer than full time hours contains important information about the preferences of the

the returns to computer use revisited have pencils changed the wage structure too are the large measured wage differentials for on the job computer use a true return to computer skills or do they just reflect that higher wage workers use computers on their jobs we examine this issue with three large cross sectional surveys from germany first we confirm that the estimated wage differential associated with computer use in germany is very similar to the u s differential second we also measure large differentials for on the job use of calculators telephones pens or pencils or for those who work while sitting down we argue that these findings cast some doubt on the literal interpretation of the computer use wage differential as reflecting true returns to computer use or skill

the diffusion of computers and the distribution of wages abstract when the costs are decreasing workers adopt technology at the point where the costs equal the increased productivity output per worker increases immediately while productivity benefits increase only gradually if costs continue to fall as a result workers in computer adopting labor market groups experience an immediate fall in wages due to increased supply on the other hand adopting workers experience wage increases with some delay this model explains why increased computer use does not immediately lead to higher wage inequality more specifically the results of the model are shown to be consistent with the question why within group wage inequality among skilled workers as a result of computer technology adoption in the united states increased in the 1970s while between group wage inequality and within group wage inequality among the unskilled did not start to increase until the 1980s the model also predicts that the more compressed german wage structure leads to a lagged diffusion of computer technology along with smaller changes in wage inequality our empirical analysis suggests that this is consistent with the actual developments in germany since the 1980s finally the theoretical predictions seem to be of the right magnitude to explain the empirical quantities observed in the data

employment risk diversification and unemployment this paper studies determinants of the geographic distribution of unemployment in the united states since 1950 we argue that equilibrium differences in unemployment among markets are partially supported by corresponding differences in the covariance structure of sectoral demands for labor when workers are mobile greater diversification of sectoral demands reduces unemployment we confirm this point using pooled time series cross section data on state unemployment and employment by industry we also find evidence for nonneutrality of aggregate disturbances based on geographic differences in industrial composition and that permanent changes in the sectoral composition of employment lead to transitory fluctuations in unemployment

sources of cyclical employment instability in rural counties cyclical employment instability at the county level is examined using monthly indiana employment data for 1970 80 and a single index portfolio model results show rural counties are more responsive to systematic or cyclical employment instability than urban counties at the state level a high percentage employed in manufacturing has been associated with greater employment instability over the business cycle this relationship does not hold at the county level where most manufacturing sectors seem to cyclically stabilize the counties in which they appear

employment stability and the role of sectoral dominance in rural economies rural development has received renewed attention particularly in the west where there are opportunities for enhancing tourism in communities once reliant on extractive resources the historical focus of rural development has been on economic growth with little concern about the sustainability or socioeconomic impacts of such growth this study analyzes and discusses the employment dynamics of rural economies with varying employment bases to illustrate some possible impacts of targeting specific employment sectors as part of a rural economic development strategy the empirical research focuses on the rural counties of utah where the trade and service sectors associated with increased tourism and retirement communities have been rapidly expanding throughout the past two decades

technical progress and early retirement this paper claims that technical progress induces early retirement of older workers it presents a model where human capital is technology specific so that technical progress erodes some existing human capital this affects mostly older workers who have a smaller incentive to learn the new technology since their career horizon is shorter hence they tend to work less we find support to this erosion effect in hrs data which shows that retirement and unemployment of older workers are positively related to technical progress in their sectors unlike the effect across sectors the model is ambiguous about the aggregate effect of technical progress on labor supply of older workers while in sectors with many innovations it falls due to the erosion effect in other sectors it increases due to higher wages to examine which effect dominates we run a time series test using us data and find that the rate of average technical progress reduces aggregate labor force participation by the old namely the erosion effect dominates

firm size earnings and displacement risk rudolf winter ebmer analogous to the well documented firm size wage differential there also exists a differential in layoff risk according to firm size using austrian data i discuss several reasons for this puzzle including on the job training and workers heterogeneity if less stable and also less able workers select themselves into small unstable and low paying firms predicted layoff risk of workers can be used as a proxy for heterogeneity of workers and therefore be included in wage regressions doing this one half of the size earnings premium can be explained jel j31 j63 i introduction large employers pay more numerous empirical studies have documented this relationship 1 but they have not been able to explain it in a very careful study brown and medoff 1989 1056 look at ten possible reasons for this puzzle only to conclude our bottom line is that the size wage differential appears to be both sizable and omnipresent our analysis leaves us uncomfortably unable to explain it or at least the part of it that is not explained by observable indicators of labor quality neither compensating differentials for working conditions nor product market power or the threat of unionization were able to explain the size premium brown and medoff 1989 also found size effects for piece rate workers for unionized workers 2 and in longitudinal samples 3 where they controlled by first differencing for unobserved heterogeneity of the individuals given this wide interest in the effects of employer size on earnings very little research has been done concerning size differentials in turnover are the jobs in big firms not only higher paid but also more stable this would reinforce the puzzle of firm size once more anderson and meyer 1994 look at separation rates without distinguishing between quit and layoff and find highly decreasing turnover rates with firm size for permanent separations but no size effect on temporary separations 4 brown and medoff 1989 as well as others find quit rates to decline with firm size which speaks against compensating wage differentials arguments idson 1996 explicitly looks at the issue of long term employment relationships in large establishments which may be possibly due to the greater capacity of large employers to provide job mobility within the enterprise and the lower probability of business failure facing larger firms rebitzer 1986 argues that the observed higher job tenure in large plants is in a ccordance with labor market segmentation theory the aim of this article is to provide further evidence for a size layoff relationship using austrian data i try to consider several explanations for this regularity especially on the job training and the hypothesis of selective recruitment of workers into large and small firms following one hypothesis small employers attract less stable and capable employees a pattern that would cause only a spurious size layoff relationship on the other hand if workers with a relatively low stock of human capital sort themselves into relatively inefficient firms with unstable employment prospects then the size wage effect itself may be upwardly biased which was noted by mayo and murray 1991 the plan of the article is as follows section ii presents institutional details on wage bargaining and employment protection legislation in austria the data for the empirical study are discussed in section iii results for size wage and size layoff relationships are presented in section iv section v looks at the interaction between firm size layoff risk and wage determination section vi concludes ii wage bargaining institutions and job security legislation in austria wage bargaining in austria is very centralized even though only about 60 of workers are organized in unions bargaining outcomes are extended to all workers unionized or not a works council has to be established under the austrian labor law in all establishments employing at least five adult workers but usually the actual existence of a works council is positively determined by both firm size and firm age

the replacement problem in frictional economies a near equivalence result we examine how technological change affects wage inequality and unemployment in a calibrated model of matching frictions in the labor market we distinguish between two polar cases studied in the literature a creative destruction economy where new machines enter chiefly through new matches and an upgrading economy where machines in existing matches are replaced by new machines our main results are i these two economies produce very similar quantitative outcomes and ii the total amount of wage inequality generated by frictions is very small we explain these findings in light of the fact that in the model calibrated to the us economy both unemployment and vacancy durations are very short i e the matching frictions are quantitatively minor hence the equilibrium allocations of the model are remarkably close to those of a frictionless version of our economy where firms are indifferent between upgrading and creative destruction and where every worker is paid the same market clearing wage these results are robust to the inclusion of machine specific or match specific heterogeneity into the benchmark model jel j41 j64 o33

delegated portfolio management and optimal allocation of portfolio managers in this article we investigate whether the application of the mean variance framework on portfolio manager allocation offers any out of sample benefits compared to a naive strategy of equal weighting based on an exclusive data set of high net worth hnw investors we utilize a wide variety of methodologies to estimate the input parameters including exponentially weighted moving average ewma generalized autoregressive conditional heteroscedasticity garch and bayes stein shrinkage estimation we apply nine different mean variance models but find that none of these present any consistent benefit over a naive strategy of equal weighting