occupational downgrading and upgrading in britain the willingness of workers to move down an occupational hierarchy is a potentially important source of flexibility in the labour market but relatively little is known about the scale or pattern of occupational up and downgrading this paper examines who downgrades and the cyclical structure of up and downgrading we find that occupational downgrading is surprisingly large relative to flows into unemployment individuals who have a high payoff to skilled work such as educated workers are less likely to downgrade contrary to expectations the rate of downgrading is found to be greater in the boom while upgrading follows the more conventional expectation of also being procyclical this finding is interpreted as evidence consistent with the rationing of jobs in the downgrading process contrary to the assumptions of simple dual labour market models

the persistent effects of initial labor market conditions for young adults and their sources unlucky young workers entering the labor market in recessions suffer a range of medium to long term consequences this paper summarizes the findings of the growing empirical literature on this subject and uses it to assess economic models of career development the literature finds large initial effects on earnings labor supply and wages that tend to fade after ten to fifteen years in the labor market and that are accompanied by changes in occupation job mobility and employer characteristics adverse initial labor market entry also has persistent effects on a range of social outcomes including timing and completed fertility marriage and divorce criminal activities attitudes and risky alcohol consumption there is also evidence that early exposure to depressed labor market lowers health and raises mortality in middle age patterns accompanied by a reopening of earnings gaps

the empirical content of the roy model this paper clarifies and extends the classical roy model of self selection and earnings inequality the original roy model based on the assumption that log skills are normally distributed is shown to imply that pursuit of comparative advantage in a free market reduces earnings inequality compared to the earnings distribution that would result if workers were randomly assigned to sectors aggregate log earnings are right skewed even if one sectoral distribution is left skewed most major implications of the log normal roy model survive if differences in skills are log concave however few implications of the model survive if skills are generated from more general distributions we consider the identifiability of the roy model from data on earnings distributions the normal theory version is identifiable without regressors or exclusion restrictions sectoral distributions can be identified knowing only the aggregate earnings distribution for general skill distributions the model is not identified and has no empirical content with sufficient price variation the model can be identified from multimarket data cross sectional variation in regressors can substitute for price variation in restoring empirical content to the roy model

social insurance and occupational mobility this paper studies how insurance from progressive taxation improves the matching of workers to occupations we propose an equilibrium dynamic assignment model to illustrate how social insurance encourages mobility workers experiment to find their best occupational fit in a process filled with uncertainty risk aversion and limited earnings insurance induce workers to remain in unfitting occupations we estimate the model using microdata from the united states and germany higher earnings uncertainty explains the u s higher mobility rate when workers in the united states enjoy germany s higher progressivity mobility rises output and welfare gains are large

structural transformation the mismeasurement of productivity growth and the cost disease of services if workers self select into industries based upon their relative productivity in different tasks and comparative advantage is aligned with absolute advantage then the average efficacy of a sector s workforce will be negatively correlated with its employment share this might explain the difference in the reported productivity growth of contracting goods and expanding services instrumenting with defense expenditures i find the elasticity of worker efficacy with respect to employment shares is substantially negative albeit estimated imprecisely the estimates suggest that the view that goods and services have similar productivity growth rates is a plausible alternative characterization of growth in developed economies jel e23 e24 h56 j24 o41 o47 one of the strongest and seemingly most accurate characterizations of the process and problems of growth in advanced economies is william baumol s cost disease of services baumol s argument begun in papers as early as 1965 and continuing to this very day e g baumol and bowen 1965 baumol 1967 baumol blackman and wolff 1985 and baumol 2012 starts from the premise that productivity growth is inherently more difficult to achieve in the production of services than in the pro

effects of industry growth and decline on gender and education wage gaps in the 1980s the w e upjohn institute for employment research the uc institute for labor and employment

a theory of turnover and wage dynamics we develop a model of turnover and wage dynamics with insurance match specific productivity and long term contracting the model predicts that wages are downward rigid within firms but can decrease when workers are fired we apply the model to study the impact of business cycles on subsequent wages and job mobility workers hired during a boom have persistent higher future wages if staying with the same firm however these boom hires are more likely to be terminated and have shorter employment spells jel c73 d23 d82 j33

cyclical quality adjustment in the labor market 1 introductionthe u s unemployment rate fell to very low levels during the 1990s even more impressively the unemployment rate for minorities and less educated individuals fell disproportionately convergence of relative unemployment rates in expansions and divergence in recessions has been a feature of the u s economy over the last 30 years there are many possible reasons for this feature for example if the costs of hiring and firing less skilled labor are low one would expect these individuals to have very procyclical employment in this paper i explore an alternative model when there is an excess supply of labor high skilled people take jobs that would normally be occupied by less skilled people in expansions the process reverses with less skilled workers getting access to jobs that they would normally not attain i refer to this process as cyclical quality adjustment reder 1955 p 834 was one of the first to discuss how hiring standards adjust to business cycle conditions quality variations in labor markets arise through upgrading and downgrading of members of the labor force relative to the jobs they are to fill when applicants become scarce employers tend to lower the minimum standards upon which they insist as a condition for hiring a worker to fill a particular job and vice versa when applicants become plentiful since then many papers have developed this idea theoretically and many economic commentators appear to share this view of the labor market for example the economic report of the president states that a strong labor market is particularly important to less advantaged groups in the labor market such as workers with less education younger workers racial and ethnic minorities and immigrants when employers find it hard to fill vacancies they are more willing to hire and train workers whom they might pass over when they have fewer openings and an abundance of applicants council of economic advisors 1999 p 103 likewise the expansion during the 1990s spawned many newspaper articles about the improvement in the types of jobs available to less skilled applicants however there is little systematic empirical work about changes in job assignment in the united states over the business cycle the empirical work in this paper seeks to redress this situation cyclical assignment changes are important for many reasons as mentioned earlier job upgrading is a potential explanation for the greater cyclical variation of employment experienced by less skilled workers it is well known that the unemployment rates of less skilled individuals and minorities are more countercyclical relative to more skilled individuals clark and summers 1981 kydland 1984 keane and prasad 1993 hoynes 1999 the standard explanation for this effect is that low ability workers are more likely to be laid off in downturns because training and hiring costs are lower for these workers no commensurate attention has been paid to the issue of how the decision of who to hire changes over the business cycle however assignment models present a natural explanation for the greater procyclicality of employment of the less skilled both the adjustment cost hypothesis and the upgrading hypothesis imply that less skilled workers will have more procyclical employment empirically they are distinguishable because the upgrading explanation implies that jobs obtained by comparable workers should vary systematically over the cycle the adjustment cost hypothesis relates to the composition of those whose jobs are terminated second these mechanisms suggest a reason why wages are particularly procyclical for job changers recent studies using panel data have indicated that the wages of job starters are much more procyclical than the wages of workers who do not change jobs researchers have suggested various explanations for this result beaudry and dinardo 1991 and macleod and malcomson 1993 present contracting models in which the wages of job starters depend on the state of the labor market when they join the firm

comparative advantage learning and sectoral wage determination we develop a model in which a worker s skills determine the worker s current wage and sector the market and the worker are initially uncertain about some of the worker s skills endogenous wage changes and sector mobility occur as labor market participants learn about these unobserved skills we show how the model can be estimated using nonlinear instrumental variables techniques we apply our methodology to study wages and allocation of workers across occupations and industries using individual level panel data from the national longitudinal survey of youth we find that high wage sectors employ high skill workers and offer high returns to workers skills

why are the wages of job changers so procyclical evidence on wage cyclicality shows job changers have more procyclical wages than job stayers previous work argued this arises because workers gain greater access to jobs in sectors such as manufacturing that offer high wages this article argues that workers who switch jobs in booms enter temporary jobs with unemployment risk and are merely compensated for subsequent losses i demonstrate that the two explanations can be distinguished using the relationship between unemployment insurance and wage cyclicality among job changers the evidence supports the compensation hypothesis that is that job changers might not experience real gains from higher paying jobs in booms

wages and employment in a segmented labor market this paper analyzes the impact of business cycle fluctuations on a labor market segmented into a unionized primary sector and a competitive secondary sector either permanent or temporary changes in real aggregate demand are shown to widen the intersectoral wage differential in recession and under reasonable specifications of key parameters to cause greater fluctuations of primary sector employment than secondary sector employment this pattern agrees with the stylized facts of the u s economy

cyclical variation in the interindustry wage structure this paper presents an analysis of cyclical variation in the interindustry wage structure the study is therefore concerned with changes in relative wages among industries and not directly with the determination of the absolute wage level or changes in the absolute wage level the theory of the wage structure presented here is based on two hypotheses tihe first introduced initially as a maintained hypothesis is that differences among industries in the competitive structure of their product and labor markets result in wage inequalities for given skill levels the second hypothesis and the major finding of the paper is that the size of the wage differentials is a function not only of the extent and nature of the noncompetitive elements but also of the excess demand conditions in the labor market this result is derived from the proposition that under competitive supply conditions labor allocation is based on relative wages to support the theory a wage structure equation is estimated with the coefficient of variation of straight time average hourly earnings in the two digit manufacturing industries as the dependent variable the implications of the study for aggregate and industry wage equations are then discussed

ability matters effects of youth labor market opportunities on long term labor market outcomes utilizing registry data on cognitive ability tests for all norwegian males born between 1962 and 1973 i study whether labor market conditions at the age of graduation have differential effects on earnings and employment for different ability groups i find that low ability males are more vulnerable to local business cycles at the expected time of labor market entry in particular i demonstrate that low ability males suffer larger long term earnings losses than the rest of the population this article is protected by copyright all rights reserved

random walk to innovation why productivity follows a power law abstract this paper examines a search model in which knowledge is created as rational but poorly informed innovators obtain new ideas from combinations of existing ideas we assume that the productivity of an idea is stochastic and depends on the productivity of the parental ideas importantly we assume that the contribution of these parents to the productivity of the final idea is enhanced by prior use of these in knowledge creation we identify conditions on the search costs leading to two properties 1 the tail of the distribution of the productivity of innovations is a power law and 2 the number of citations i e times an idea is used in the process of innovation follows a displaced power law both these properties are consistent with the available empirical evidence on the productivity of innovations and on patent citations

rent sharing in an equilibrium model of matching and turnover this article characterizes labor markets in which the heterogeneity of workers and firms results in thin markets and rents neoclassical marginal analysis and matching are blended into a computable general equilibrium model of trade in efficiency units of labor although workers bargaining problems are interrelated a simple wage contract generates wage flexibility and efficient matching in the model s equilibrium equilibrium wages are predicted to vary with the diversity of firms the scarcity of skills and the costliness of search the model is applied to superstar markets union bargaining in sports interindustry wage differentials and the relationship between pay and profit

the allocation of talent over the business cycle and its long term effect on sectoral productivity it is well documented that graduates enter different occupations in recessions than in booms in our paper we examine the impact of the resulting change in the allocation of talent for long term productivity and output in a sector in a setting where output can be quantitatively and qualitatively measured we find evidence that talent flows to stable sectors in recessions and to cyclical sectors in booms economists starting or graduating from their phd in a recession are significantly more productive in academia over the long term than economists starting or graduating in a boom

a near rational model of the business cycle with wage and price inertia this paper presents a model in which insignificantly suboptimal behavior causes aggregate demand shocks to have significant real effects the individual loss to agents with inertial price wage behavior is second order in terms of the parameter describing the shock while the effect on real economic variables is first order thus significant changes in business activity can be generated by anticipated money supply changes provided that some agents are willing to engage in nonmaximizing behavior which results in small losses

inter industry mobility and the cyclical upgrading of labor we investigate whether a market clearing model is consistent with industry employment and wage patterns related to the cyclical upgrading of labor we demonstrate that roy s 1951 market clearing

sectoral shifts and interindustry wage differentials the observed differences in wages across industries may arise from a lack of worker mobility particularly among experienced workers allowing the effects of industry shocks to persist for some time although young workers arbitrage wage shocks they will have little effect on the dispersion of experienced workers wages if young and old workers are poor substitutes in production this explanation is investigated using the five censuses of population between 1940 and 1980 the evidence strongly suggests that differences in pay are not temporary phenomena the data provide some support for the role of human capital and ability

the cyclicality of real wages within employer employee matches using data from the panel study of income dynamics the author examines the cyclicality of wages within employer employee matches for the years 1970 91 recent research on wage cyclicality has suggested that wages are very procyclical tending to rise and fall with economic upturns and downturns even for workers who remain with the same employer the author finds however that the evidence for wage procyclicality within the matches he examines is rather weak except for the small group of workers who were paid by piece rate or commissions despite having acyclical wage rates men who were paid hourly had earnings movements that were very procyclical salaries exhibited little cyclicality but salaried workers who had income sources from bonuses commissions or overtime had procyclical earnings the results suggest that the increasing prevalence of incentive based pay will increase the procyclicality of wages within matches

an equilibrium theory of wage and employment cyclicality by gender and by industry this paper presents an equilibrium theory that accounts for how cyclical patterns of employment and real wages vary between genders and across industries workers self selection of industrial sectors gender differences in comparative advantage among sectors sector nonneutral shocks and resulting mobility of workers across sectors play the key roles in explaining wage and employment cyclicality by gender and by industry numerical simulations demonstrate that reasonable parameter values exist under which the current model accords with several stylized facts these parameter values are characterized most importantly by men s comparative advantage in the sector subject to larger cyclical demand shocks

the u shapes of occupational mobility using administrative panel data on the entire danish population we document a new set of facts characterizing occupational mobility for most occupations mobility is u shaped and directional not only low but also high wage earners within an occupation have a particularly large probability of leaving their occupation and the low high earners tend to switch to new occupations with lower higher average wages exceptions to this pattern of two sided selection are occupations with steeply rising declining productivity where mainly the lower higher paid workers within this occupation tend to leave the facts conflict with several existing theories that are used to account for endogeneity in occupational choice but it is shown analytically that the patterns are explained consistently within a theory of vertical sorting under absolute advantage that includes learning about workers abilities

the intraday impact of company responses to exchange queries abstract this study investigates australia s unique continuous disclosure regime using intraday data on the australian securities exchange asx over the period january 2010 april 2012 we examine abnormal returns and trading volumes that accrue to shareholders immediately after an announcement responding to a trading induced query the use of intraday data permits us to examine the direct impact of these events and the length of time the market takes to incorporate this information with a higher degree of precision than the research currently on offer the study is framed within an event study methodology with a number of robustness measures a matched sample approach analysis of cross sectional determinants the removal of penny stocks and procedures to account for sample selection bias we find significant share price reversals following a query announcement with a reversal of 3 3 by the end of the widest event interval our study also provides evidence that the market takes up to 60 min to impound this information overall we provide support for the efficacy of the query framework administered by the asx

does unmeasured ability explain inter industry wage differentials this paper provides empirical assessments of the two leading explanations of measured inter industry wage differentials 1 true wage differentials exist across industries and 2 the measured differentials simply reflect unmeasured differences in workers productive abilities first we summarize the existing evidence on the unmeasured ability explanation second we construct a simple model which shows that if matching is important then endogenous job change decisions can create important self selection biases even in first differenced estimates of industry wage differentials third we analyze a sample that approximates the experiment of exogenous job loss we find that i the wage change experienced by a typical industry switcher closely resembles the difference in the relevant industry differentials estimated in a cross section and ii pre displacement industry affiliation plays an important role in post displacement wage determination

where to go workers reasons to quit and intra vs interindustry job mobility we show that workers reasons for quitting their job affect their decision to stay in or leave their industry using survey data among public sector employees in the netherlands workers quitting for e g pay work pressure or job duties move relatively often to another industry in contrast to workers quitting for commuting time or the atmosphere at work this suggests that workers use their experience in the initial job to update their expectations on other jobs in the industry as the first set of job aspects is more likely to be related among jobs within an industry than the latter furthermore it is shown that workers reasons to quit fully explain the differences in wage growth between intra and interindustry job movers lastly we find that workers who quit for pay or management often leave the public sector altogether the data used in this article are proprietary

lost in transition the costs and consequences of sectoral labour adjustment this paper uses an equilibrium search and matching model to study canada s sectoral labour adjustment in 2002 2006 during an increase in global commodity prices and exchange rate appreciation i estimate economically significant adjustment costs for the aggregate economy in this episode and demonstrate that difficulty in transferring skills between jobs for individual workers can be an important contributor to these aggregate costs the analysis also demonstrates that the level of unemployment benefits impacts the economy s sectoral composition its aggregate productivity and the speed of its adjustment to shocks ce texte utilise un modele d equilibre de la recherche et de l arrimage pour etudier les ajustements sectoriels du travail au canada dans la periode 2002 2006 une periode d appreciation des prix globaux des produits de base et du taux de change j estime que les couts d ajustement sont economiquement significatifs pour l economie agregee au cours de cet episode et que la difficultea transferer les competences entre emplois pour les travailleurs individuels peut etre une source importante de ces couts agreges les analyses montrent aussi que le niveau des prestations d assurance emploi a un impact sur la composition sectorielle de l economie sur la productivite et sur la vitesse des ajustements aux chocs

excess worker reallocation workers face a trade off between macroeconomic and individual incentives to work in different occupations industries namely between search frictions and personal comparative advantages workers endowed with heterogeneous multi dimensional skills search for jobs that require different skill combinations in equilibrium specialized individuals contact few selected types of vacancies where they are likely to be hired those with weak comparative advantages are seldom chosen among competing applicants thus seek any job type in a tight labour market comparative advantages dominate waiting costs offsetting labour mobility across industries occupations excess worker reallocation is lower and matches are more successful consistently with direct and indirect evidence

self selection and the distribution of hourly wages this article formulates and estimates alternative equilibrium models of industrial wage determination and self selection in explaining industrial wage differentials we find that it is important to account for heterogeneous sector specific skills and self selection decisions by agents concerning their sector of employment the classical roy model is rejected so is an efficiency units model of the labor market a revised roy model that accounts for comparative advantage in the choice of industrial sectors and choice between market and nonmarket work is much more successful in explaining cross section wage distributions and their evolution over time

what determines corruption international evidence from microdata this paper uses a microlevel data set from 49 countries to create a direct measure of corruption which portrays the extent of bribery as revealed by individuals who live in those countries in addition it investigates the determinants of being asked for a bribe at the individual level the results show that both personal and country characteristics determine the risk of exposure to bribery examples are gender income education marital status the city size the country s unemployment rate average education and the strength of the institutions in the country jel k4 d73 p16

individual heterogeneity and interindustry wage differentials estimates of interindustry wage differentials are obtained using a fixed effects estimator on a long panel the national longitudinal survey of young men nls after controlling for observable worker characteristics 84 percent of the residual variance of log wages across industries is explained by individual fixedeffects only 16 percent of the residual variance is explained by industry dummies since no controls for specific job characteristics are used job characteristics that vary across industries could potentially explain this rather small residual across industry log wage variance that is not attributable to individual effects clearly then these data do not force us to resort to noncompetitive explanations of interindustry wage differentials such as efficiency wage theory furthermore efficiency wage theories predict that wages in efficiency wage paying or primary industries should be relatively rigid therefore industry wage differentials should widen in recessions however no such tendency is found in the data

education mobility and the college wage premium abstract motivated by large educational differences in geographic mobility this paper considers a simple dynamic extension of roy s 1951 model and analyzes it using new evidence on net versus excess mobility and the individual level relationship between mobility and wages according to the model the dispersion of a labor income shock specific to a worker location match is greater for more educated workers and accounts for large educational differences in mobility in the model labor mobility raises both the average wage and the college wage premium a prediction consistent with differences between europe and the u s

do employers provide insurance against low frequency shocks industry employment and industry wages i use panel data to examine whether long term changes in industry wages are positively related to long term changes in industry employment previous research using repeated cross sectional data found no systematic relationship between these variables using standard fixed effects models to deal with individual heterogeneity i find a robust positive relationship between changes in composition constant industry wages and industry employment this suggests that growing industries attract less skilled individuals in a manner that biases down the estimated relationship between industry employment and wages in repeated cross sectional data the results imply that supply curves facing industries are elastic but upward sloping

labor market institutions and long term effects of youth unemployment graduating from a school during a time of adverse economic conditions has a persistent harmful effect on workers subsequent employment opportunities an analysis of panel data from oecd countries during the 1960 2010 periods reveals that a worker who experiences a 1 percentage point higher unemployment rate while the worker is 16 24 years old has a 0 14 percentage point higher unemployment rate at ages 25 29 years and 0 03 percentage points higher at ages 30 34 years the persistence of this negative effect is stronger in countries with stricter employment protection legislation a composite index for labor market rigidity is constructed and the index is shown to have positive correlation with the persistence moderating macroeconomic fluctuations is more important in countries that have more persistent labor market entry effects on subsequent outcomes

unemployment fluctuations match quality and the wage cyclicality of new hires we revisit the issue of the high cyclicality of wages of new hires we show that after controlling for composition effects likely involving procyclical upgrading of job match quality the wages of new hires are no more cyclical than those of existing workers the key implication is that the sluggish behaviour of wages for existing workers is a better guide to the cyclicality of the marginal cost of labour than is the high measured cyclicality of new hires wages unadjusted for composition effects key to our identification is distinguishing between new hires from unemployment versus those who are job changers we argue that to a reasonable approximation the wages of the former provide a composition free estimate of the wage flexibility while the same is not true for the latter we then develop a quantitative general equilibrium model with sticky wages via staggered contracting on the job search and heterogeneous match quality and show that it can account for both the panel data evidence and aggregate evidence on labour market volatility

the beveridge curve a survey important progress has been made in economists understanding of the beveridge curve from its measurement to its expression in canonical labor market models yet enduring puzzles remain chief among these are the empirical role of vacancies in the recruitment process the amplitude comovement and persistence of cyclical unemployment vacancy dynamics and the sources of lateral shifts in the beveridge curve the synthesis of these themes identifies several priorities for ongoing research including the role of entry costs into vacancy creation in shaping beveridge dynamics the cyclicality of search intensity both off and on the job and its relation to participation and job to job transitions the theory and measurement of mismatch and the sources of hysteresis in unemployment flows