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

the dissipation of minimum wage gains for workers through labor labor substitution evidence from the los angeles living wage ordinance author affiliation david fairris department of economics university of california riverside ca 92521 usa david fairris ucr edu corresponding authorleon fernandez bujanda oficina de investigaciones economicas banco central de venezuela av urdaneta esq carmelitas edf sede piso 2 caracas dc venezuela lefernan bcv org ve acknowledgment we have received helpful comments from philip babcock charlie brown david card eve caroli arin dube shelly lundberg mindy marks david neumark and participants in presentations at the society of labor economists uc berkeley ucla and pse in paris we acknowledge financial support from the ford foundation and the university of california labor and employment research fund and research support of various kinds from researchers at the los angeles alliance for a new economy 1 introductioneconomic theory suggests that firms will replace low skill workers with high skill workers if the two are substitutes in production and the wages of low skill workers increase as the result of a minimum wage labor labor substitution may also take place along dimensions other than skill if for example employers have a taste for discrimination and the minimum wage reduces the wage premium they must pay for favored personal characteristics of workers if affected firms replace low skill workers with high skill workers following enactment of a wage minimum the initial benefits of the regulation for workers at these firms will be dissipated over time as the wage gains for new hires are less than for members of the original workforce a similar dissipation of wage gains will occur if employers replace workers that are discriminated against in the labor market with those that are not most theoretical depictions of labor labor substitution focus on employer initiated causes it may result from changes in firms demand for worker skills from employer efforts to dissipate worker minimum wage rents by requiring greater work effort or less absenteeism from workers and by seeking workers that better match these new employer goals or from employers invoking their taste for discrimination however successful labor substitution rests on workers supply decisions as well indeed such substitution could result solely from labor supply effects if for example firms were to hire nonselectively from an altered more highly skilled or otherwise favored applicant pool which is brought on by the higher wage the empirical literature on the employment effects of wage minimums has found little employment loss among affected jobs or more highly impacted worker populations such as teenagers brown 1999 this suggests that there may be little labor labor substitution across broad skill occupational categories for example adults for teenagers workers with some college experience for high school graduates or backhoe operators for ditch diggers 1 however labor labor substitution may still take place along more refined dimensions of workers skills abowd and kilingsworth 1981 for example neumark and wascher 1996 find evidence that minimum wages lead firms to substitute away from younger teenagers and toward older more experienced teenagers labor substitution following a minimum wage may dissipate the initial wage gains for workers empirical evidence suggests however that just as in the case of unions card 1996 the rent dissipation is by no means complete it is now well established empirically that a spike exists in the wage distribution around the relevant minimum wage card and krueger 1995 dinardo fortin and lemieux 1996 suggesting that the wages of low skill workers are indeed affected by wage mandates 2 moreover job queues exist for minimum wage jobs suggesting that economic rents are earned by low wage workers in these positions holzer katz and krueger 1991

the effects of human resource management practices on productivity a study of steel finishing lines the authors investigate the productivity effects of innovative employment practices using data from a sample of thirty six homogeneous steel production lines owned by seventeen companies the productivity regressions demonstrate that lines using a set of innovative work practices which include incentive pay teams flexible job assignments employment security and training achieve substantially higher levels of productivity than do lines with the more traditional approach which includes narrow job definitions strict work rules and hourly pay with close supervision their results are consistent with recent theoretical models which stress the importance of complementarities among work practices

a multi objective multi period stochastic programming model for public debt management while raising debt on behalf of the government public debt managers need to consider several possibly conflicting objectives and have to find an appropriate combination for government debt taking into account the uncertainty with regard to the future state of the economy in this paper we explicitly consider the underlying uncertainties with a complex multi period stochastic programming model that captures the trade offs between the objectives the model is designed to aid the decision makers in formulating the debt issuance strategy we apply an interactive procedure that guides the issuer to identify good strategies and demonstrate this approach for the public debt management problem of turkey

on the economic architecture of the workplace repercussions of social comparisons among heterogeneous workers we analyze the impact on a firm s profits and optimal wage rates and on the distribution of workers earnings when workers compare their earnings with those of coworkers we consider a low productivity worker who receives lower wage earnings than a high productivity worker when the low productivity worker derives dis utility not only from his own effort but also from comparing his earnings with those of the high productivity worker his response to the sensing of relative deprivation is to increase the optimal level of effort consequently the firm s profits are higher its wage rates remain unchanged and the distribution of earnings is compressed

the wage effects of high performance work organization in manufacturing an unresolved question about now widespread innovative work systems such as teams and quality programs is whether they influence wage determination this study examines that possible association in manufacturing the author uses data from the 1997 national establishment survey that allow examination of how new work systems affected not only employees who were directly involved in them but other workers as well the key finding is that for core blue collar manufacturing employees higher wages were associated with high performance work organization hpwo systems while higher skill levels and computer based technologies were associated with higher wages the key mechanism appears to have been productivity gains independent of skill and technology that were shared via various across the board wage payment systems hpwo systems appear to have increased managers wages as well although through different channels the author finds no evidence that hpwo related wage gains led to greater wage inequality amon

efficiency wage models of unemployment one view h lorne carmichael persistent wage rigidity and involuntary unemployment appear to be recurrent problems in most economies what could be preventing the wage adjustment necessary to clear the labor market many recent papers claim to have found the answer in efficiency wage models this paper surveys this literature and attempts to evaluate its accomplishments it concludes that the efficiency wage models fail to explain wage rigidity or persistent involuntary unemployment persistent involuntary unemployment of workers is a recurrent problem in labor markets all over the world unemployed workers seem unable to find work even though they are willing to accept lower wages than those being paid employed workers with similar skills what could be preventing wages from adjusting to clear these markets many recent papers known collectively as the efficiency wage literature now claim to have the answer this paper will survey the efficiency wage literature and critically evaluate some of its accomplishments efficiency wage models have already been examined by yellen 1984 katz 1986 and stiglitz 1987 and have received generally favorable reviews this paper is more critical its overall conclusion is that efficiency wage models provide some useful insights into the workings of the labor market but they do not provide a satisfactory account of wage rigidity or involuntary unemployment there are at least five separate versions of the efficiency wage model they share a common structure however and this is outlined in the first section of the paper this section also attempts to relate efficiency wage models to other recent models of unemployment section ii examines and criticizes the different approaches in detail section iii evaluates the achievements of this approach and suggests some directions for future work i a general efficiency wage model efficiency wage models as the name suggests are first of all models of wages they generate unemployment by showing that firms will sometimes want to set wages at non market clearing levels it is useful to begin therefore by reviewing how wages and employment are determined in some related models in a perfectly competitive labor market the wage for each type of labor is adjusted constantly to maintain equality of supply and demand overall employment fluctuates in response to demand changes as workers move up and down their labor supply curves unemployment is voluntary in that anyone who is not working prefers that state to employment at the going wage for people of his skills as well the value of a worker s marginal product is equal to the marginal value of his leisure so there are no unexploited wage bargains between unemployed workers and firms this model is successful in predicting the long term response of wages to shifts in demand and supply but it is clear that in the short run its depiction of voluntary unemployment and flexible wages is unrealistic a natural way to generate more realism is to assume that wages are inflexible in the short run in this case a reduction in demand away from a long run equilibrium will lead to rationing of jobs by employers as they attempt to stay on their labor demand curves the unemployment here is involuntary in that the unemployed would prefer to be working at the going wage and is inefficient in that there are lost gains from trade between these workers and firms the weakness of this model is that it is silent about the mechanism that keeps wages rigid unemployed workers who offer to work for less than the fixed wage ought to find work the early implicit contract models of azariadis 1975 baily 1974 and gordon 1974 provide one explanation for wage rigidity these models introduced the idea that wages can do more than just clear the market for labor wages in an implicit contract model are used to shift the risk generated by uncertain output market conditions from risk averse workers to the risk neutral firm

bond pricing and the term structure of interest rates a new methodology for contingent claims valuation this paper presents a unifying theory for valuing contingent claims under a stochastic term structure of interest rates the methodology based on the equivalent martingale measure technique takes as given an initial forward rate curve and a family of potential stochastic processee for its subsequent movements a no arbitrage condition restricts this family of processes yielding valuation formulae for interest rate sensitive contingent claims which do not explicitly depend on the market prices of risk examples are provided to illustrate the key results in relation to the term structure of interest rates arbitrage pricing theory has two purposes the first is to price all zero coupon default free bonds of varying maturities from a finite number of economic fundamentals called state variables the second is to price all interest rate sensitive contingent claims taking as given the prices of the zero coupon bonds this paper presents a general theory and a unifying framework for understanding arbitrage pricing theory in this context of which all existing arbitrage pricing models are special cases in particular vasicek 1977 brennan and schwartz 1979 langetieg 1980 ball and torous 1983 ho and lee 1986 schaefer and schwartz 1987 and artzner and delbaen 1988 the primary contribution of this paper however is a new methodology for solving the second problem i e the pricing of interest rate sensitive contingent claims given the prices of all zero coupon bonds the methodology is new because i it imposes its stochastic structure directly on the evolution of the forward rate curve ii it does not require an inversion of the term structure to eliminate the market prices of risk from contingent claim values and iii it has a stochastic spot rate process with multiple stochastic factors influencing the term structure the model can be used to consistently price and hedge all contingent claims american or european on the term structure and it is derived from necessary and more importantly sufficient conditions for the absence of arbitrage the arbitrage pricing models of vasicek 1977 brennan and schwartz 1979 langetieg 1980 and artzner and delbaen 1988 all require an iformerly titled bond pricing and the term structure of interest rates a new methodology

self selection bias in longitudinal estimation of wage gaps cross sectional regression analyses of wage gaps may be biased by omission of unobserved worker characteristics recent studies therefore have used longitudinal data to difference out the effects of such variables this paper however shows that self selection of job changers may cause longitudinal estimation of wage gaps to be inconsistent

the intrinsic value of decision rights philosophers psychologists and economists have long argued that certain decision rights carry not only instrumental value but may also be valuable for their own sake the ideas of autonomy freedom and liberty derive their intuitive appeal at least partly from an assumed positive intrinsic value of decision rights providing clean evidence for the existence of this intrinsic value and measuring its size however is intricate here we develop a method capable of achieving these goals the data reveal that the large majority of our subjects intrinsically value decision rights beyond their instrumental benefit the intrinsic valuation of decision rights has potentially important consequences for corporate governance human resource management and optimal job design it may explain why managers value power why employees appreciate jobs with task discretion why individuals sort into self employment and why the reallocation of decision rights is often very difficult and cumbersome our method and results may also prove useful in developing an empirical revealed preference foundation for concepts such as freedom of choice and individual autonomy

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

assessing the stability of the inter industry wage structure in the face of radical economic reforms we assess the stability of the wage structure in an economy experiencing substantial economic changes we find that the structure of inter industry wage differentials remained remarkably stable in brazil in the face of major shocks

oligopsony and the distribution of wages we propose a simple model of wage dispersion arising from oligopsonistic competition in the labor market our model has workers who are equally able but who have heterogeneous preferences for non wage characteristics while employers have heterogeneous productivity characteristics we completely and explicitly solve for the equilibrium wage distribution and show that inside and outside forces interact in wage determination this interaction generates spillover effects of minimum wages in a manner which is consistent with the empirical evidence

job displacement relative wage changes and duration of unemployment using special cps data on displaced workers this article investigates the wage consequences of job displacement in a framework that emphasizes the effects of past job duration s and unemployment duration s on postdisplacement wages our model also attempts to take account of the simultaneity between unemployment duration and the postdisplacement wage it is found that duration strongly reduces subsequent earnings and that considerable overstatement of the loss in firm specific training investments is implied by conventional routes to measuring wage losses

explaining wage inequality in telecommunications services customer segmentation human resource practices and union decline this study examines factors related to within occupation wage inequality among service and sales workers in the telecommunications industry the author draws on a 1998 survey of a nationally representative sample of 354 service and sales centers in the industry to examine the importance of management practices and union institutions in shaping wage variation the results strongly indicate that business strategies of customer segmentation and human resource practices explain variation in wages over and above that explained by the human capital of the work force in addition despite extensive deregulation and de unionization of the industry the union wage premium is 22

efficiency wages and industry wage differentials a comparison across methods of pay efficiency wage considerations should be less important for piece rate pay than for time wages therefore if industry wage differentials reflect efficiency wage factors then these pay differences should be less sizable and have less explanatory power for piecework than for timework we test this proposition using wage data for male production workers employed in the swedish metalworking industries in 1985 the data are partitioned into two groups of workers in our preferred sub sample of workers who received pay under both piece rates and time wages our results are uniformly consistent with efficiency wage implications for industry wage differentials for the subsample of workers who received pay under either piece rates or time wages industry wage differentials are of equal importance under either pay scheme these latter results however may also be influenced by unaccounted for sorting of workers and employers across methods of pay overall our examination of industry wage differentials across m

rational prepayment and the valuation of mortgage backed securities this article presents a new model of mortgage prepayments based on rational decisions by mortgage holders these mortgage bolders face beterogeneous transaction costs which are explicitly modeled the model is estimated using a version of hansen s 1982 generalized method of moments and is sbown to capture many of the empirical features of mortgage prepayment estimation results indicate that mortgage holders act as tbougb tbey face transaction costs tbat far exceed tbe explicit costs usually incurred on refinancing they also wait an average of more than a year before refinancing even when it is optimal to do so the model fits observed prepayment behavior as well as thee recent empirical model of schwartz and torous 1989 implications for pricing mortgage backed securities are discussed

unobserved ability efficiency wages and interindustry wage differentials interindustry wage differentials in wage regressions estimated for individuals have been interpreted as evidence consistent with efficiency wage models a principal competing explanation is that these differentials are generated by differences across workers in unobserved ability this paper tests the unobserved ability hypothesis by incorporating test scores into standard wage regressions as error ridden indicators of unobserved ability the results indicate that differences in unobserved ability explain relatively little of interindustry or interoccupation wage differentials this abstract was borrowed from another version of this item

the link between ability and specialization an explanation for observed correlations between wages and mobility rates wage levels and turnover rates are negatively correlated across types of employment and this fact is often interpreted as evidence that high wage jobs are rationed a simple training model illustrates however that this correlation may arise because able workers have an incentive to choose highly specialized jobs in any job the most able workers possess the most valuable stocks of specific skills and therefore face the highest mobility costs thus able workers may have a comparative advantage in specialized employments data from the national longitudinal survey of youth provide an opportunity to evaluate the merits of the training model developed here data on worker training and mobility provide support for several implications of the model the model also provides new ways to interpret existing results in the literature on interindustry wage differentials

efficiency wage models of unemployment a second view kevin lang and shulamit kahn efficiency wage models in which firms find it profitable to pay wages above workers reservation wages provide a promising explanation for unemployment and interindustry wage differentials one criticism of such models is they imply firms should sell jobs by requiring up front bonds from new workers however only some efficiency wage models imply this moreover firms might not require bonds for many reasons we show that moral hazard and adverse selection models together explain many labor market phenomena the efficiency wage model conforms well to empirical finding but certain anomalies suggest the need to consider rent sharing models carmichael s paper in this volume is an important contribution to the debate over the importance of efficiency wages he clearly outlines some of the deficiencies in the theory and thus points out areas needing further research nevertheless his conclusions are far too negative he greatly exaggerates the theoretical weakness of the efficiency wage model and gives insufficient recognition to the empirical implications generated by this model and to tests of these implications i shirking models there is direct empirical evidence that shirking is a serious problem for firms firms spend significant sums monitoring workers levine 1987 reviews the evidence that worker shirking is widespread and costly the evidence in burroway 1979 and mars 1982 also demonstrates the importance of shirking and stealing carmichael s primary argument against shirking models is that if the payment of efficiency wages to deter shirking led to an excess supply of workers workers would buy their jobs by posting bonds since we do not observe workers posting bonds he concludes that firms do not pay efficiency wages either given the importance of shirking the absence of market clearing bonds needs explaining one explanation is that the market has found some reasonable substitute for bonds such as deferred wage payments it is theoretically feasible to substitute deferred wage payments for up front bonds as noted by akerlof and katz 1989 however the empirical evidence of industries with deferred payments i e where low beginning wages are balanced by high subsequent wages is mixed dickens and katz 1987b krueger and summers 1988 and abraham and farber 1987 indicate that industries which pay high wages to high tenure workers tend to pay high wages to low tenure workers on the other hand high wage industries also tend to have steeper earnings profiles which may be evidence of deferred earnings in these industries as shapiro and stiglitz 1984 note a second possible explanation for the absence of market clearing bonding is that bonding gives firms an incentive to fire workers immediately upon collecting their bonds however this explanation assumes that a firm will immediately fire every worker who posts a bond if there are any reputation costs at all some firms sometimes will not fire bond posting workers and we should observe some bonding yet with finite length contracts there must be some reputation costs because otherwise firms would never pay workers in the last period thus firm incentives to cheat and fire workers cannot explain the complete absence of bonding clearly the absence of market clearing bonding is not fully understood and further theoretical work is needed dickens katz lang and summers 1989 review a wide variety of possible reasons that bond posting is limited the important point is that there are many potential reasons for limited bonding other than the absence of efficiency wages on the other hand the lack of bonding despite the importance of shirking does not demonstrate that firms pay efficiency wages there may be reputation or other costs to the worker caught shirking even in the absence of bonding as dickens katz lang and summers 1989 demonstrate in the absence of bonding whether paying efficiency wages dominates relying solely on increased monitoring depends on the parameters of the model and is therefore an empirical issue

a general equilibrium perspective on structural change in the rural economy a research study explored innovative methods for constructing computable general equilibrium cge models for rural structural change and development policy analysis these are the make matrix the personal consumption goods industrial goods matrix the occupation industry matrix and the map distance matrix modeling the cge for rural areas requires particular attention to the results of econometric tests on economics theories especially since rural communities are demographically and economically different from urban regions

the signaling role of promotions further theory and empirical evidence an extensive theoretical literature investigates the role of promotions as a signal of worker ability we extend the theory by focusing on how the signaling role of promotion varies with education and then investigate the resulting predictions using a longitudinal data set that contains detailed information concerning the internal labor market history of a medium sized firm in the financial services industry our results support signaling being important for understanding the differences between promotion practices concerning bachelor s and master s degree holders while the evidence concerning the importance of signaling for high school graduates and phds is mixed

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

native migrant labour substitution by industry and wage effects evidence from the uk unlike previous studies we estimate the native migrant substitution elasticity nme differentiated by sector to do so we employ a straightforward estimation strategy that consists of adding slo

interindustry wage differentials technology adoption and job polarization abstract based on observations that high wage industries in 1980 experienced more evident job polarization between 1980 and 2009 we hypothesize that the persistent structure of interindustry wage differentials leads to heterogeneity in job polarization across industries as the relative price of ict capital declines firms respond to exogenous wage differentials by replacing routine workers with capital our empirical analysis shows that during the last three decades the annualized growth rate of ict capital per worker increased by 0 34 percent and that of routine employment decreased by 0 41 percent in the u s industries that paid 10 percent higher wages in 1980

intergenerational income mobility in the united states social scientists and policy analysts have long expressed concern about the extent of intergenerational income mobility in the united states but remarkably little empirical evidence is available the few existing estimates of the intergenerational correlation in income have been biased downward by measurement error unrepresentative samples or both new estimates based on intergenerational data from the panel study of income dynamics imply that the intergenerational correlation in long run income is at least 0 4 indicating dramatically less mobility than suggested by earlier research copyright 1992 by american economic association

an estimate of a sectoral model of labor mobility this paper develops a model of sectoral labor mobility and tests its main implications the model nests two distinct hypotheses on the origin of mobility a sectoral shocks and b worker employer mismatch we estimate the relative importance of each hypothesis and find that the bulk of labor mobility is caused by mismatch rather than by sectoral shift we then try to put a value on society s match specific information that is we ask to what extent the availability of the option to change jobs raises gnp we find that the mobility option raises expected earnings by roughly between 8 5 percent and 13 percent of labor earnings which translates to an increase in gnp of between 6 percent and 9 percent

inter industry wage differentials in eu countries what do cross country time varying data add to the picture this paper documents the existence and main patterns of inter industry wage differentials across a large number of industries for 8 eu countries belgium germany greece hungary ireland italy netherlands and spain at two points in time in general 1995 and 2002 and explores possible explanations for these patterns the analysis uses the european structure of earnings survey ses an internationally harmonised matched employer employee dataset to estimate inter industry wage differentials conditional on a rich set of employee employer and job characteristics after investigating the possibility that unobservable employee characteristics lie behind the conditional wage differentials a hypothesis which cannot be accepted the paper investigates the role of institutional industry structure and industry performance characteristics in explaining inter industry wage differentials the results suggest that inter industry wage differentials are consistent with rent sharing mechanisms and that rent sharing is more likely in industries with firm level collective agreements and with higher collective agreement coverage jel classification j31 j41 j51

does having a cadre parent pay evidence from the first job offers of chinese college graduates abstract we estimate the wage premium associated with having a cadre parent in china using a recent survey of college graduates carried out by the authors the wage premium of having a cadre parent is 15 and this premium cannot be explained by other observables such as college entrance exam scores quality of colleges and majors a full set of college human capital attributes and job characteristics these results suggest that the remaining premium could be the true wage premium of having a cadre parent

applicant screening and performance related outcomes a fundamental problem faced by employers is how to elicit effort from employees most economic models suggest that employers meet this challenge by monitoring employees carefully to prevent shirking but there is another option that relies on heterogeneity across employees and that is to screen job candidates to find workers with a stronger work ethic who require less monitoring we might therefore expect employers who screen candidates more intensively to monitor them less using data from a national sample of us employers we find that employers who screen applicants more intensively for factors that should predict work ethic also monitor employees less and also make greater use of systems such as teamwork where monitoring by supervisors is more difficult this screening is also associated with higher wages higher employee productivity and lower involuntary turnover rates screening for other attributes such as work experiences and academic performance does not produce these results jel codes m51 m54 j30

dynamic inefficiencies in an employment based health insurance system theory and evidence we investigate the effects of the institutional settings of the us health care system on individuals life cycle medical expenditures health is a form of general human capital labor turnover and labor market frictions prevent an employer employee pair from capturing the entire surplus from investment in an employee s health thus the pair underinvests in health during working years thereby increasing medical expenditures during retirement we provide empirical evidence consistent with the comparative statics predictions of our model using the medical expenditure panel survey meps and the health and retirement study hrs our estimates suggest significant inefficiencies in health investment in the united states

screening competition and job design economic origins of good jobs in recent decades many firms offered more discretion to their employees often increasing the productivity of effort but also leaving more opportunities for shirking these high performance work systems are difficult to understand in terms of standard moral hazard models we show experimentally that complementarities between high effort discretion rent sharing screening opportunities and competition are important driving forces behind these new forms of work organization we document in particular the endogenous emergence of two fundamentally distinct types of employment strategies employers either implement a control strategy which consists of low effort discretion and little or no rent sharing or they implement a trust strategy which stipulates high effort discretion and substantial rent sharing if employers cannot screen employees the control strategy prevails while the possibility of screening renders the trust strategy profitable the introduction of competition substantially fosters the trust strategy reduces market segmentation and leads to large welfare gains for both employers and employees

robust min max portfolio strategies for rival forecast and risk scenarios we consider an extension of the markowitz mean variance optimization framework to multiple return and risk scenarios it is well known that asset return forecasts and risk estimates are inherently inaccurate the method proposed provides a means for considering rival representations of the future the optimal portfolio is computed simultaneously with the worst case to take account of all rival scenarios this is a min max strategy which is essentially equivalent to a robust pooling of the scenarios robustness is ensured by the noninferiority of min max for example a basic worst case optimal return is guaranteed in view of multiple return scenarios if robustness happens to have too high a cost guided by the min max pooling it is also possible to explore other pooling alternatives a min max algorithm is used to solve the problem and illustrate the robust character of min max with return and risk scenarios we study the properties of the min max risk return frontier and compare with the potentially suboptimal worst case where the investment strategy and the worst case are computed separately 2000 elsevier science b v all rights reserved jel classixcation c44 c61 c63 g11

learning about heterogeneity in returns to schooling using data from the national longitudinal survey of youth nlsy we introduce and estimate various bayesian hierarchical models that investigate the nature of unobserved heterogeneity in returns to schooling we consider a variety of possible forms for the heterogeneity some motivated by previous theoretical and empirical work and some new ones and let the data decide among the competing specifications empirical results indicate that heterogeneity is present in returns to education furthermore we find strong evidence that the heterogeneity follows a continuous rather than a discrete distribution and that bivariate normality provides a very reasonable description of individual level heterogeneity in intercepts and returns to schooling

are family firms good employers family firms employ about 60 percent of the global workforce while it is widely assumed that they are good employers data about their conduct is mixed in this study we extend stewardship and agency theories to test competing propositions about the impact of family on employment practices using data from 14 961 private belgian firms over a 19 year period higher investments lower dividend payout and higher risk tolerance indicate that family firms are better financial stewards of their companies than nonfamily firms however family firms are worse organizational stewards than nonfamily firms they offer lower compensation invest less in employee training and exhibit higher voluntary turnover and lower labor productivity further and contrary to earlier research we find that financial practices in private family firms do not change over time and that the deleterious influence of family on employment practices rises with both firm age and with heightened family involvement together our findings suggest that a more nuanced understanding of stewardship and agency theory is needed to understand the impact of family on the governance of private firms

can equity volatility explain the global loan pricing puzzle we examine whether equity volatility can explain the difference in syndicated corporate loan spreads paid by u s and european borrowers first documented by carey and nini 2007 we argue that ols estimates of the association between equity volatility and loan spreads are biased and inconsistent we suggest instrumental variables that potentially identify consistent estimates our instrumental variable results indicate that there is no statistically significant difference in loan spreads paid by u s and european borrowers and that ols estimates of the association between idiosyncratic equity volatility and corporate loan spreads are biased downward by about a factor of 5

shareholder wealth and wages evidence for white collar workers we present empirical evidence on the relationship between individual wages conditional on worker characteristics and equity returns using a unique survey from the bureau of labor statistics equity returns affect the wages only of workers with three or more years of tenure a 4 percent increase in a firm s market value raises pay by 0 3 percent within three years our estimates suggest that each 10 increase in shareholder wealth raises the present value of a firm s wage bill by 1 the elasticity of white collar wages with respect to equity returns is one third smaller than the ceo salary elasticities in our sample

high performance work practices and core employee wages evidence from italian manufacturing plants past research has provided mixed evidence on the relationship between high performance work practices hpwps and wages drawing from more than 1 800 interviews with the hr managers in a stratified

estimating compensating wage differentials using voluntary job changes evidence from germany the author develops a model predicting that in a labor market that attaches a wage premium to jobs with a disamenity a compensating wage differential the premium s upper bound will be defined by the average wage change of voluntary job movers whose consumption of the disamenity rises as a result of their move its lower bound by the wage change of those whose consumption of the disamenity falls these predictions will not hold if as predicted by a segmented labor market model the labor market attaches a wage penalty to workplace disamenities using longitudinal data on job characteristics and wages in germany in 1984 2001 the author estimates the market returns to four workplace disamenities heavy workload job insecurity poor hours regulation and a mismatch between skills possessed and skills required the results broadly support the existence of compensating differentials in the german labor market

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

complete prepayment models for mortgage backed securities the estimation of prepayment rates for pools of mortgages is a critical component in determining the value of mortgage backed securities mbs for short and derivative products this paper discusses the development of prepayment models for pools of fixed rate mortgages the models are complete calibrated functional forms are given for all of the factors that determine prepayment rates hence the models can be used as benchmarks against the simple models of the public securities association the federal housing administration experience or the variety of projected prepayment rates generated by proprietary industry models the key factors that determine prepayment rates are 1 refinancing incentive 2 seasonal variations 3 seasoning of the mortgage pool and 4 burnout effect each factor is modeled separately and is calibrated using historical data a multiplicative relationship determines the prepayment rate of the mortgage pool a novel feature of our model is the use of basis functions that cap

wages and performance based pay evidence from the nlsy abstract the link between performance and pay should be strongest where performance is more accurately observed brown industrial and labor relations review 1990 43 1655 1825 rand journal of economics 1992 23 366 375 more productive workers self select into jobs with performance based pay consequently workers whose pay is based on performance should earn more than those whose pay is not based on such measures this paper adds to the literature on the subject by providing new empirical evidence for brown s model using the national longitudinal surveys of youth nlsy data

are governmental expenditures also sticky evidence from the operating expenditures of public schools abstractexisting research on cost stickiness focuses primarily on for profit companies this study investigates cost behaviour in the public sector a new setting that deserves more research attent

firm size wage differentials in switzerland evidence from job changers using information on job changes and search behavior of workers and controlling for endogenous mobility we study firm size wage differentials in switzerland we find that the observed cross sectional firm size premium cannot be explained exclusively by worker heterogeneity almost 50 of the cross section differential is a firm size effect this abstract was borrowed from another version of this item

inter industry wage differentials revisited wage volatility and the option value of mobility analysis of data from the psid reveals that idiosyncratic wage volatility varies inversely with inter industry wage differentials and is positively correlated with both returns to industry tenure and rates of inter industry mobility an incomplete markets life cycle model in which inter industry mobility decisions and wage differentials are endogenously determined in equilibrium is then developed and shown to be capable of rationalizing these features of the data in the model the ability of worker to switch industries generates option value that is large enough to offset the standard risk premium that workers demand for exposure to excess wage volatility

insider forces and wage determination this paper investigates the relative importance of firm specific factors i e insider forces in wage determination using firm level data on 219 u k companies over 1974 82 it finds that a 1 percent rise in a firm s prices or productivity relative to the aggregate economy leads to a rise in relative wages of 0 1 0 2 percent as a corollary to this outside factors like the aggregate wage and the unemployment rate also play an important role there is evidence for insider based hysteresis effects but these are inversely related to the extent to which firms take national agreements into account copyright 1990 by royal economic society

a two factor stochastic programming model of danish mortgage backed securities abstract danish mortgage loans have several features that make them interesting short term revolving adjustable rate mortgages are available as well as fixed rate 10 20 or 30 year annuities that contain embedded options call and delivery options the decisions faced by a mortgagor are therefore non trivial both in terms of deciding on an initial mortgage and in terms of managing rebalancing it optimally we propose a two factor arbitrage free interest rate model calibrated to observable security prices and implement on top of it a multi stage stochastic optimization program with the purpose of optimally composing and managing a typical mortgage loan we model accurately both fixed and proportional transaction costs as well as tax effects risk attitudes are addressed through utility functions and through worst case min max optimization the model is solved in up to 9 stages having 19 683 scenarios numerical results which were obtained using standard soft and hardware indicate that the primary determinant in choosing between adjustable rate and fixed rate loans is the short long interest rate differential i e term structure steepness but volatility also matters refinancing activity is influenced by volatility and of course transaction costs

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

industry wage premia evidence from the wage distribution abstract we argue that under the unobserved quality explanation of industry wage differentials industries with high average premia will have even higher premia among high wage workers we find however that the ols premia correctly illustrate the industry impact across the distribution

does firm size matter anymore the new economy and firm size wage effects researchers have long known that large firms pay higher wages than small firms for workers with similar measured characteristics however an agreed upon explanation for this firm size wage effect fswe has not been reached recent changes in the economy provide new leverage for testing competing theories for the effect while questions about the existence and nature of the new economy provide new motivation for exploring this topic this study uses the 1988 2003 current population survey and finds that the fswe has declined by about one third over the study period examining the competing explanations for the fswe this study finds that while the sorting of workers by traits unions and industry factors all contribute to some portion of the effect in cross section they fail to explain why it has declined over time market power explanations also fail to find support shifts in organizational structures particularly a decline of internal labor markets appear to best fit the results these findings

the role of comparative advantage and learning in wage dynamics and intrafirm mobility evidence from germany this article measures the importance of job level assignment based on comparative advantage and learning about workers ability in explaining intrafirm wage and mobility dynamics using survey data from the german socio economic panel the results reveal the importance of nonrandom selection of workers into the rungs of the firm s job ladder measured and unmeasured ability play important roles in workers rank assignment with unmeasured ability being more important at higher levels of the hierarchical job structure there is some evidence of learning effects for workers below age 35 generating mobility between upper and executive levels

strengthening state capabilities the role of financial incentives in the call to public service we study a recent recruitment drive for public sector positions in mexico different salaries were announced randomly across recruitment sites and job offers were subsequently randomized screening relied on exams designed to measure applicants intellectual ability personality and motivation this allows the first experimental estimates of i the role of financial incentives in attracting a larger and more qualified pool of applicants ii the elasticity of the labor supply facing the employer and iii the role of job attributes distance attractiveness of the municipal environment in helping fill vacancies as well as the role of wages in helping fill positions in less attractive municipalities a theoretical model guides each stage of the empirical inquiry we find that higher wages attract more able applicants as measured by their iq personality and proclivity towards public sector work i e we find no evidence of adverse selection effects on motivation higher wage offers also increased acceptance rates implying a labor supply elasticity of around 2 and some degree of monopsony power distance and worse municipal characteristics strongly decrease acceptance rates but higher wages help bridge the recruitment gap in worse municipalities

a sorted tale of globalization white collar jobs and the rise of service offshoring abstract we study how the rise of unaffiliated trade in services with china and india has impacted u s labour markets the topic has two understudied aspects it deals with service trade most studies deal with manufacturing trade and it examines the historical first of u s workers competing with educated but low wage foreign workers our empirical agenda is made complicated by the endogeneity of service imports and the endogenous sorting of workers across occupations to develop an estimation framework that deals with these we imbed a partial equilibrium model of trade in tasks within a general equilibrium model of occupational choice the model highlights the need to estimate labour market outcomes using changes in the outcomes of individual workers and in particular to distinguish workers who switch up from those who switch down switching down means switching to an occupation that pays less on average than the current occupation we apply these insights to matched cps data for 1996 2007 the cumulative 10 year impact of rising service imports from china and india has been as follows 1 downward occupational switching increased by 7 percentage points from 21 to 28 and upward occupational switching increased by 6 percentage points from 17 to 23 2 transitions to unemployment were imprecisely measured to have increased by half a percentage point potentially raising the white collar unemployment rate from 3 0 to 3 5 3 the earnings average across all white collar workers fell by a small 1 however for the sub population of workers who switched down or became unemployed earnings fell by 15 and 47 respectively 4 service exports had partially offsetting effects on switching and unemployment

an assessment of trends in technology use innovative work practices and employees attitudes in europe several studies of innovative work practices show a positive link with firm performance and employees task involvement organizational commitment and citizenship behaviours one of the recent changes faced by firms is the introduction of information and communication technologies icts although several empirical studies analyse the links between ict use innovative work practices and firm performance employee level analyses are scarce using data from the european working condition survey ewcs this article investigates the relationships between use of the internet and computers and positive attitudes among employees social support job satisfaction extra effort in the european context our empirical results are based on data for more than 9500 employees from 16 european countries in 2005 and more than 14 000 in 2010 among the different effects of ict use based on the results for the 2005 2010 and the pooled 2005 2010 sample and in a within cohorts change analysis we find that internet use

longitudinal analyses of the effects of trade unions but union members are different from nonmembers in unobserved ways biasing your estimates y ou should make a selectivity bias correction simultaneously determine union status and economic outcomes develop an unobservables model use longitudinal data archetypical comment on virtually any study of the economic effects of umomsm or suitably modified on any other empirical subject

updated notes on the interindustry wage structure 1890 1990 the author documents and analyzes changes in wage structure across manufacturing industries over the years 1890 1990 interindustry differentials in wages were highly stable over that period for production workers but much less stable for nonproduction workers interindustry wage patterns were very similar for production and nonproduction workers in 1990 though this similarity dates back only to 1958 although dispersion of wages across industries followed varying trends over the period it was higher in 1990 than at any previous time in this century the variables that have been most strongly correlated with wage growth are productivity growth rising union density rising capital intensity and profit growth

introduction to the distribution of earnings and of individual output by a d roy this article summarises the lasting contribution of roy s 1950 fundamental paper roy a d 1950 the distribution of earnings and of individual output economic journal vol 60 239 pp 489 505

opening the box information technology work practices and wages using 1994 95 survey data on customer service representatives in 303 u s bank branches the authors investigate the effects on wages of information technology it of work practices and of those two factors in combination offline high involvement practices measured by the presence of quality circles were related positively to wages as was more extensive use of it that supports sales efforts where it was used more extensively to automate routine processes wages were lower in branches that did not have high involvement work practices the effects are partially explained by higher education requirements and more extensive introductory training in higher wage jobs

the trade off between supervision and wages evidence of efficiency wages from the nlsy standard efficiency wage models suggest that workers employed in places with lower probabilities of identifying shirking will earn more as will workers who have better alternative opportunities this paper provides new empirical evidence in support of efficiency wage theory using the national longitudinal surveys of youth data the empirical results support the prediction of the model that workers employed in larger work groups are paid more a finding consistent with a supervision wage trade off additional evidence supports the prediction that workers with better alternative opportunities earn more the classical competitive theories of wage determination predict that workers will be paid the value of their marginal product these theories suggest that after accounting for differences in working conditions there should be no variation in wages among homogeneous workers recent findings that industry affiliation and firm size affect wages suggest that part of the explanation of wage structure is missing these results call into question the view that industry wage differentials can plausibly be rationalized with textbook competitive models krueger and summers 1988 p 280 this paper follows the efficiency wage literature by assuming that one important determinant of wage differences is variation in employers ability to monitor workers efforts 2 this paper provides new empirical evidence in support of efficiency wage theory using data from the national longitudinal surveys of youth nlsy a data set that is noticeably absent from the efficiency wage literature efficiency wage models attempt to complete the explanation of wage structure by focusing

mismatch versus derived demand shift as causes of labour mobility labour mobility may be caused by shifts in the derived demand for labour on the part of firms or sectors or it may be caused by mismatches between workers and their jobs both reasons may be important and this paper merges them into one model it explores the consequences for a wage tenure relationships and b the issue of sluggishness of wages caused by the implied selectivity of workers into preferred jobs and sectors

firm heterogeneity in capital labour ratios and wage inequality author s leonardi marco abstract this paper documents the increasing dispersion of capital labor ratios across firms in the us and provides some empirical evidence of a positive correlation at the two digit industry level between the dispersion of capital labor ratios across firms and residual wage inequality to explain this empirical fact the paper adopts a search model where firms differ in their optimal capital investment the exogenous decline in the relative price of equipment capital makes the distributions of capital labor ratios more dispersed in a frictional labor market this force generates wage dispersion among identical workers ols estimates of the relationship between capital dispersion and the relative price of equipment capital support the main hypothesis of the model

the causes of increasing interindustry wage dispersion in the united states using establishment level data from a variety of sources this study documents and analyzes the consistent rise in interindustry wage dispersion in the united states between 1970 and 1987 the authors attribute about 60 of the rise in this measure of wage dispersion to competitive market factors such as changes in the demographic and occupational mix of industrial sectors they find however that noncompetitive factors also play an important part in this trend the most important noncompetitive factor is a strong link between the long term trends in industry wages and productivity growth which appears to stem largely from rent sharing behavior among industries

the intergenerational effects of worker displacement this article uses variation induced by firm closures to explore the intergenerational effects of worker displacement using a canadian panel of administrative data that follows more than 39 000 father son pairs from 1978 to 1999 we find that children whose fathers were displaced have annual earnings about 9 lower than similar children whose fathers did not experience an employment shock they are also more likely to receive unemployment insurance and social assistance the estimates are driven by the experiences of children whose family income was at the bottom of the income distribution

returns to talent and the finance wage premium to study the role of talent in finance workers pay we exploit a special feature of the french higher education system wage returns to talent have been significantly higher and have risen faster since the 1980s in finance than in other sectors both wage returns to project size and the elasticity of project size to talent are also higher in this industry last the share of performance pay varies more for talent in finance these findings are supportive of finance wages reflecting the competitive assignment of talent in an industry that exhibits a high complementarity between talent and scale received october 11 2017 editorial decision september 4 2018 by editor stijn van nieuwerburgh authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

a mixed integer linear programming model for optimal sovereign debt issuance abstract governments borrow funds to finance the excess of cash payments or interest payments over receipts usually by issuing fixed income debt and index linked debt the goal of this work is to propose a stochastic optimization based approach to determine the composition of the portfolio issued over a series of government auctions for the fixed income debt to minimize the cost of servicing debt while controlling risk and maintaining market liquidity we show that this debt issuance problem can be modeled as a mixed integer linear programming problem with a receding horizon the stochastic model for the interest rates is calibrated using a kalman filter and the future interest rates are represented using a recombining trinomial lattice for the purpose of scenario based optimization the use of a latent factor interest rate model and a recombining lattice provides us with a realistic yet very tractable scenario generator and allows us to do a multi stage stochastic optimization involving integer variables on an ordinary desktop in a matter of seconds this in turn facilitates frequent re calibration of the interest rate model and re optimization of the issuance throughout the budgetary year allows us to respond to the changes in the interest rate environment we successfully demonstrate the utility of our approach by out of sample back testing on the uk debt issuance data

unions work practices and wages under different institutional environments the case of canada and england using data collected in 2003 2004 in national telephone surveys of 750 canadian and 450 english workers the author finds that alternative work practices awps such as autonomous teams quality c

do high performance work practices exacerbate or mitigate the gender pay gap the impact of performance oriented work practices on the gender pay gap has been the subject of considerable conjecture but little empirical investigation using the 2004 and 2011 british workplace employment relations surveys the analysis finds that whilst average earnings are significantly higher for men and women across private sector workplaces that have introduced so called high performance work practices the presence of such practices is not associated with a narrowing of the gender pay gap and if anything tends to exacerbate the differential in earnings between men and women data from the 2004 survey suggest that women are more likely to work in high performance workplaces but this is not the case for 2011 there is no evidence that gender segregation is significantly less in high performance workplaces than in workplaces taking a more traditional route policy makers and employing organisations therefore need to be careful in reconciling their performance and equality strategies in particular they need to examine whether the former are truly gender neutral this requires additional measures possibly the introduction of human resource audits in the public and private sectors

is environmental innovation embedded within high performance organisational changes the role of human resource management and complementarity in green business strategies abstract this paper investigates whether firms joint implementation of organisational innovation and training may foster their adoption of environmental innovation ei and if this correlation falls within porter hypothesis ph framework we study the relationship of complementarity between strategies of high performance work practices hpwp and human resource management hrm when ei adoption is the firms objective using an original dataset on 555 italian industrial firms regarding ei hpwp and hrm coherent with the last cis2006 2008 survey results show that sector specificity matter the only case in which strict complementarity is observed in organisational change concerns co 2 abatement a relatively complex type of ei but this is true only when the sample is restricted to more polluting and regulated sectors this evidence is coherent with the porter hypothesis complementarity related adoption of ei is an element of organisational change in firms that are subject to more stringent environmental regulations nevertheless the fact that strict complementarity is not a diffuse factor behind the adoption of all environmental innovation indeed does not come as a surprise at this stage in the development of green strategies the share of eco firms is still limited even in advanced countries that are seeking tools for a new competitiveness the full integration of eis within the internal capabilities and firm s own assets is far from being reached even in advanced and competitive industrial settings

match bias in wage gap estimates due to earnings imputation about 30 of workers in the current population survey have earnings imputed wage gap estimates are biased toward zero when the attribute being studied e g union status is not a criterion used to match donors to nonrespondents an expression for match bias is derived in which attenuation equals the sum of match error rates attenuation can be approximated by the proportion with imputed earnings union wage gap estimates with match bias removed are presented for 1973 2001 estimates for recent years are biased downward 5 percentage points bias in gap estimates accompanying other non match criteria public sector industry etc is examined

mortgage loan portfolio optimization using multi stage stochastic programming we consider the dynamics of the danish mortgage loan system and propose several models to reflect the choices of a mortgagor as well as his attitude towards risk the models are formulated as multi stage stochastic integer programs which are difficult to solve for more than 10 stages scenario reduction and lp relaxation are used to obtain near optimal solutions for large problem instances our results show that the standard danish mortgagor should hold a more diversified portfolio of mortgage loans and that he should rebalance the portfolio more frequently than current practice

inter industry wage differentials job content and unobserved ability the authors estimate inter industry wage differentials using the bureau of labor statistics s national compensation survey ncs dataset the ncs dataset has a number of distinct advantages over ho

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