relative wage positions and quit behavior evidence from linked employer employee data the authors analyze the importance of relative wage positions within firms in western germany in the context of individual quit decisions as an inverse measure of job satisfaction using a linked employer employee data set liab for the years 1996 2005 whose sample consists of full time male prime age workers in western germany without college degrees they ascertain whether workers find status or signal effects stronger motivators for quit decisions they find that workers with higher relative wage positions within their firms are on average more likely to quit their jobs than those with lower relative wage positions and that workers who experience a loss in their relative wage positions are also more likely to accept a wage cut associated with their job transition overall results suggest that a signal effect is on average stronger than a status effect

household resource allocation in stepfamilies darwin reflects on the plight of cinderella the living conditions of american children have changed dramatically during the past 50 years in 1950 the vast majority of children were born to married parents and lived with both parents until they reached adulthood today over a third of all children are born to unmarried parents and over half will live apart from at least one of their parents before reaching age 18 larry bumpass and james sweet 1989 a majority of these children will live with a stepparent or foster parent and a substantial minority will experience multiple family disruptions and multiple changes in parental personnel numerous studies have shown that remarriage is not the panacea it was once thought to be children who grow up in two parent families consisting of a biological parent and a stepparent have outcomes very similar to children who grow up with only one parent and worse than children who are raised by both of their biological parents these differences cannot be explained by differences in income since stepfamilies and original two parent families enjoy similar levels of income one explanation for why children in stepfamilies do poorly is that stepparents are less altruistic and indeed may be quite hostile toward nonbiological children according to the theory of parental solicitude such feelings are rooted in psychological mechanisms that have evolved over time through the process of natural selection thus while household incomes may be similar for biological and nonbiological children investments in children may be quite different this paper examines differences in one input food consumption between different types of two parent families using data from the panel study of income dynamics psid these data contain information on all dyadic relationships within households between 1968 and 1985 and they allow us to identify several types of parent child relationships including biological adoptive step and foster relationships the paper addresses three questions

unknown wage offer distribution and job search duration abstract if job searchers do not know the wage offer distribution they are facing they might take the wage structure in their last firm as a prior doing so reservation wages will be biased which will also bias unemployment duration using data for austrian workers it is shown that workers seem to have good knowledge of expected mean wages but less so for higher moments of the wage offer distribution

a note on keynesian unemployment as a worker discipline device abstract keynesian sales constraints are introduced into a model with endogeneous wages and involuntary equilibrium umemployment the result is a lower real wage and a higher unemployment rate

evaluating unemployment policies what do the underlying theories tell us the paper surveys unemployment policies for advanced market economies and evaluates them by examining the predictions of the underlying macroeconomic theories the basic idea is that for the most part different unemployment policy prescriptions rest on different macroeconomic theories and our confidence in the prescriptions should depend at least in part on theories ability to predict some salient stylized facts about unemployment behavior the paper considers four types of policies laissez faire demand management policies supply side policies and structural policies copyright 1995 by oxford university press

testing rent sharing using individualized measures of rent evidence from domestic helpers wing suen the market for resident domestic helpers offers a rare opportunity where the surplus from employment relationship can be quantitatively measured for each individual employee using the difference between employer s cost of time and employee s wage as a measure of rent it is found that wages for domestic helpers are positively related to rent however the apparent sharing of rent is better explained by matching than by efficiency wage models rent sharing is observed even in households where monitoring or turnover costs are low rent sharing is not observed among newly arrived foreign domestic helpers whose ability remains to be revealed jel j41 i introduction this article studies the pattern of wages for resident domestic helpers in hong kong no one would lure economists into paying attention to this arcane labor market were it not for one feature of the market for housework a measure of employment rent can be plausibly assigned to each individual employee having an individualized measure of rent at the worker level instead of a general measure at the firm level will shed considerable light on the large and growing literature of rent sharing in wage determination since 1975 the hong kong government has allowed the importation of foreign domestic helpers into the territory because of large wage differences between hong kong and some of its asian neighbors the program is highly popular the census and statistics department 1995 estimates that 92 700 households or 5 6 of all domestic households in hong kong employed domestic helpers in 1993 the figure is even more dramatic for high income households 44 of households with monthly income of over hk 50 000 had one or more domestic helpers 1 one consequence of the availability of market procured housework is that women who employ helpers have more time for market work in suen 1994 i estimate that the probability of labor force participation among married women who had domestic helpers is 22 percentage points higher than that for women without domestic help other things equal if hiring a helper enables a married woman to engage in market work then a plausible measure for the rent or surplus from this employment relationship is the difference between the woman s wage and her helper s wage if a woman with a domestic helper decides to stay home nonetheless the size of the surplus can be measured by the difference between the shadow value of leisure and the helper s wage wage information is readily available from census data and shadow wages can be estimated using standard techniques this article utilizes this rare opportunity to impute a measure of rent for each employer employee pair studying how the wages of domestic helpers vary wi th the magnitude of rent will provide direct evidence for rent sharing in the labor market there is a large literature which documents the fact that the characteristics of the employer such as industry affiliation and firm size are significantly correlated with the employees wages krueger and summers 19881 brown and medoff 1989 groshen 1991 helwege 1992 and many others offer convincing evidence that inter industry wage differentials and employer wage effects exist rent sharing is often invoked to account for such wage patterns however few studies in the literature offer a plausible account for the existence of or a measure for the size of the rent that is supposedly shared 2 at the industry level dickens and katz 1987 use variables such as concentration ratio capital labor ratio research and development expenditures and average rate of return on capital as covariates in wage equations these variables provide at best an indirect and error prone measure of employment rent campbell 1993 makes use of firm level characteristics instead of industry characteristics but t here is no information on profits in his firm level data

employment and wage strategies of the firm over a business cycle abstract by using control theory we analyze the behaviour of a firm which expects a demand cycle and occupies a monopsonistic position on the labour market consequently the relative wage rate is used as a tool for regulating the flow of applicants and the rate of quits of employees the dynamic wage policy is governed by the demand trend but the marginal propensity of workers to quit and the level of hiring costs are also relevant factors in setting the wage rate the recession period is characterized by a relative wage decrease associated with voluntary quits rather than firing however the wage rate starts increasing when demand is still declining and labour hoarded

relative wages wage growth and quit behavior using italian social security records for male workers from a sample of firms in turin from 1981 to 1983 we show that conditional on the worker s own wage the average wage in the establishment for similar workers is negatively related to quits we also find that this variable predicts future wage growth this is consistent with an economic model in which workers compare the longrun value of employment opportunities when making quit decisions

are workers paid their marginal products status is like coase s social costs a reciprocal phenomenon given that one person s gain in status can occur only at the expense of a loss in status for others and that workers are free to choose their coworkers it follows that the competitive wage structure within a firm must be one in which individual wage differences understate individual differences in marginal products the purpose of this paper is to examine a variety of empirical evidence that relates to this proposition about the firm s internal wage structure the paper is organized as follows section i briefly summarizes the theoretical considerations that govern competitive wage determination when status matters to people and firms are viewed as voluntary associations of workers section ii then confronts the predictions of section i by examining pay and productivity schedules for a group of sales occupations for which these schedules are relatively easily observed section ii also examines the relationship between wages and productivity for a sample of university professors an occupation in which individual productivity differences are for a variety of obvious reasons relatively more difficult to measure all of the evidence examined is consistent with the hypothesis that within firms wage rates vary substantially less than do individual productivity values section iii discusses additional observations and evidence that bear on this same hypothesis it suggests that the implicit market for status may strongly influence the ways in which firms are organized to carry out the tasks they perform section iv concludes by considering the claim that egalitarian internal wage structures arise because of equity considerations it argues that the concept of equity appears very closely linked to the concept of status and suggests a strategy for assigning monetaty value to the equity considerations that so often dominate public policy decisions

ensuring sustainable access to drinking water in sub saharan africa conflict between financial and social objectives summary we study a model explaining dynamics in water coverage that accounts for financial performances of utilities our dataset covers 25 sub saharan countries from 1996 to 2012 results suggest that access to water depends upon financial results but this relationship is not linear we find important access increases for relatively low levels of capital cost recovery and deterioration of access performances beyond a certain threshold our results are consistent with the literature about risks of corporatization and potential conflict between financial and social objectives in the water sector and they provide supporting quantitative evidence and recommendations for sector policies in the region

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

changing consequences of job separation in the united states using the panel study of income dynamics the author examines the consequences of job loss between the periods 1976 81 and 1986 91 he finds stability in the overall incidence of job separation but a statistically significant increase in the incidence of involuntary job loss relative to quits for older workers he also finds that the consequences of involuntary job loss worsened the reemployment rate of workers who experienced involuntary job loss dropped from 67 in 1976 81 to 62 in 1986 91 and among those who found new jobs the odds of receiving a large wage cut rose from 9 in 1976 81 to 17 in 1986 91

wages nonwage job characteristics and labor mobility this paper examines the effects of a set of nonwage job characteristics on the quit decisions of young and middle aged men the data set was constructed by merging data in the national longitudinal surveys of young and mature men with data from the dictionary of occupational titles file and the bureau of economic analysis file on fringe benefits the empirical analysis shows that some nonwage job attributes have significant influence on worker quit behavior and that there are important differences in the effects of the nonwage job characteristics across age groups young men are significantly more likely than older men to quit repetitive jobs for example whereas the presence of bad working conditions is a more important factor in the quit decisions of the older cohort the results also indicate that for the older men fringe benefits have a stronger effect on quit decisions than wages do further evidence on age differences is provided through an analysis of panel data from the quality of employment survey since the time of adam smith the theory of equalizing differences that individuals are induced to accept less attractive jobs by receiving compensating increases in their wages has been used by economists to explain the existence of wage differences in the labor market by definition the theory has important implications for understanding the mobility of labor since an individual s decision to change jobs is based on all the characteristics of a job the wage rate fringe benefits and nonpecuniary job at

equity in economic relationships towards a positive theory abstract a new theory of equity in economic relationships has begun to develop the theory is consistent with conventional assumptions such as rationality and self interest but it explains phenomena that have baffled orthodox microeconomics productivity variation by workers in response to perceived inequity can cause wage stickiness and the persistence of inefficient wage structures studies by economists and social psychologists provide empirical support potentially the theory is a rich one having implications for areas such a welfare economics and the microfoundations of macroeconomics

the economic consequences of labor mobility unlike most previous research on the relative changes in earnings of job stayers and job changers this study examines the variance in earnings changes rather than simply average changes men and women rather than only men and the five year period following job change rather than only the first year or two the author finds great variability in earnings changes both within and across race and gender groups notably men gained more from quits and except in the case of low wage workers lost less from layoffs than women also men suffered a much smaller penalty than women for repeated job changes for all groups the percentage difference between earnings before and after leaving a job generally persisted for several years

worker inflow outflow and churning linked employer employee data from finnish business sector is used in analysing worker turnover the data set is an unbalanced panel with over 219 000 observations in 1991 97 the churning excess worker turnover worker inflow and worker outflow rates are explained by plant and employee characteristics the probabilities of observing non zero churning inflow and outflow rates increase with plant size the magnitudes of the non zero churning and inflow rates depend positively on size but the magnitude of outflow rate depends negatively on size high wage plants have low turnover plants with large within plant variation in wages have high turnover average tenure of employees has a negative impact on turnover high plant employment growth increases churning and separation but reduces hiring in the next year also controlled are average age and education of employees shares of women and homeowners among employees foreign ownership ownership changes and regional unemployment

aid policy and the macroeconomic management of aid summary this is an introduction to the unu wider special issue of world development on aid policy and the macroeconomic management of aid we provide an overview of the 10 studies grouping them under three sub themes the aid growth relationship the supply side of aid including its level volatility and coordination of donors and the macroeconomic framework around aid the studies in the special issue demonstrate the centrality of research methodology the importance of disaggregation and the need to account for country specific situations and problems this introduction concludes that the sometimes over heated debate on aid needs redirecting toward more rigorous analysis in which the advantages and disadvantages of using aid for development can be evaluated in a calmer manner

interdependent preferences and the competitive wage structure this article shows by example that when workers care about relative income and are free to choose their coworkers the equilibrium distribution of wages within firms must be less dispersed than the corresponding distribution of marginal products an implicit market for within firm status is shown to produce welfare gains by sorting workers among firms in accordance with how much they are willing to pay for high rank the resulting equilibrium pareto dominates allocations in which each worker is paid his marginal product

fairness and frictions the impact of unequal raises on quit behavior we analyze how separations responded to arbitrary differences in own and peer wages at a large us retailer regression discontinuity estimates imply large causal effects of own wages on separations and on quits in particular however this own wage response could reflect comparisons either to market wages or to peer wages estimates using peer wage discontinuities show large peer wage effects and imply the own wage separation response mostly reflects peer comparisons the peer effect is driven by comparisons with higher paid peers suggesting concerns about fairness separations appear fairly insensitive when raises are similar across peers suggesting search frictions and monopsony are relevant in this low wage sector

cyclical variations in wage differentials and unemployment this paper attempts to reformulate in a general equilibrium framework reder s model which explains cyclical variations in wage differentials and their general tendencies to narrow specifically i focus on the three aspects of his model the microeconomic behavior of a firm under imperfect information about labor quality the mechanism of the economy creating unemployment and the interaction between wage differentials and unemployment i also explore its implications for the macroeconomic issues on the characteristics of current unemployment and the question of why aggregate employment fluctuates

the effect of sibling sex composition on women s education and earnings this paper documents the impact of siblings on the education of men and women born in the united states between 1920 and 1965 we examine the effect of the number and sex composition of a boy or girl s siblings on that child s educational attainment we find that throughout the century women s educational choices have been systematically affected by the sex composition of her siblings and that men s choices have not women raised only with brothers have received on average significantly more education than women raised with any sisters controlling for household size since sibling sex composition affects women s educational attainment and plausibly may be unrelated to other determinants of earnings it may provide a useful instrument for education in earnings functions for women our results suggest that standard estimates significantly underestimate the return to schooling for women

okun s micro macro system a review article prices and quantities is the brilliant and disturbing last work of arthur m okun 1928 1980 for more than a decade okun was the foremost practitioner of macroeconomics in the united states his critical intelligence at both the theoretical and empirical ends of economics was unsurpassed these facts were virtually a manufacturer s warranty that the book whatever its argumentation and evidence would be significant we want to know what okun thought but this background was no guarantee of an important treatise and it must have taken some courage to venture a big theoretical work in an accessible style on urgent questions in fact okun has delivered a creative and virtuosic study in economic theory the book s contribution is to provide a complete description of an economy in which rational economic agents consider the distributional consequences of wage and price decisions the perspective adopted one which is winning growing favor of late is contract theoretic because they wish to economize on their costly transactions with one another people trade repeatedly with the same agent so trust and fidelity to understandings are important the ensuing analysis lodges some basic dissents from the informational expectational paradigm developed over the last score of years it is particularly stimulating and troubling on the main policy controversy of the decade the question of disinflation

do firms pay efficiency wages evidence with data at the firm level this study tests the efficiency wage hypothesis by estimating wage and quit equations with data from the employment opportunity pilot project survey of firms an efficiency wage model is derived that predicts effects of turnover costs and unemployment on wages as functions of first and second derivatives from the quit equation the model is tested by examining the relationships between the coefficients in the wage and quit equations the results are generally favorable to efficiency wage theory other important findings are that firm characteristics raising workers productivity tend to raise wages and that a rise in turnover costs reduces quits

fertility household size and poverty in nepal population control policies keep attracting attention by increasing the household size having more children would directly contribute to a household s poverty using nationally representative household level data from nepal we investigate the links between a household s fertility decisions and variations in their size and composition we show that the relationship between number of births and household size is positive when the mothers are young but becomes negative as the mothers grow older elderly couples who had fewer children host on average more relatives who are outside the immediate family unit this result sheds light on the heterogeneous relation between the number of children and household size over the life cycle it also implies that reductions in a household s fertility may have an ambiguous impact on its per capita consumption which depends on how the household s composition responds to new births and changes over time in this sample an old household s per capita consumption is not affected by the number of births we use the gender of the first born child to instrument the total number of consecutive children

capital subsidies versus labor subsidies a trade off between capital and employment this paper investigates regime switching in the response of u s output to a monetary policy action we find substantial statistically significant time variation in this response that corresponds to high response and low response regimes we then investigate whether the timing of the regime shifts are consistent with three particular manifestations of asymmetry by modeling the transition probabilities governing the switching process as functions of state variables we find strong evidence that policy actions taken during recessions have larger effects than those taken during expansions we find less evidence of asymmetry related to the direction or size of the policy action

premiums to employment in larger establishments evidence from peru abstract examination of the employer size wage effect for males in urban peru suggests the following higher wages in larger establishments do not merely compensate for higher worker quality or inferior working conditions size differences in the use of rising wage tenure profiles cannot provide a market clearing explanation for the employer size wage effect unless workers are extremely impatient thus larger employers appear to pay premiums unionization explains none of the premiums and minimum wage compliance explains at best a small fraction shirking based efficiency wage explanations for premiums are implausible because peruvian job security legislation greatly inhibits dismissals in larger establishments explanations meriting further research involve the use of high wages to reduce turnover and to improve productivity enhancing morale

relative income effects on subjective well being in the cross section abstract recent work suggests that a person s subjective well being swb depends to a large degree on relative income focusing on the underlying identification this paper makes four contributions to this literature it describes the aggregation problem with past studies implements an estimation strategy to overcome this problem finds micro level evidence in support of the hypothesis that relative income does matter in individual assessments of swb and uses cross section estimates to replicate the aggregate time series the evidence further indicates that relative income effects may be smaller at low income levels the results are obtained from ordered probit techniques and the general social survey gss

is more always better a survey on positional concerns abstract we use survey data to provide some empirical information about concerns regarding relative standing respondents chose between a world where they have more of a good than others and one where everyone s endowment of the good is higher but the respondent has less than others questions asked about education attractiveness and intelligence for one s child and oneself income vacation time approval and disapproval from a supervisor and papers to write half of the respondents preferred to have 50 less real income but high relative income concerns about position were strongest for attractiveness and supervisor s praise and weakest for vacation time

job satisfaction and co worker wages status or signal we use matched employer employee panel data to show that individual job satisfaction is higher when other workers in the same establishment are better paid this runs counter to substantial existing evidence of income comparisons in subjective well being we argue that the difference hinges on the nature of the reference group we here use co workers their earnings not only induce jealousy but also provide a signal about the worker s own future earnings in our data this positive future earnings signal outweighs any negative status effect this phenomenon is stronger for men and in the private sector but weaker for those nearer retirement

job mobility and earnings over the life cycle previous studies have shown that in the short run quits generally lead to wage increases on the next job and layoffs to no increase or to a wage cut the author of this study argues however that the prospect of a job change for any reason creates a disincentive for a worker to invest in training that is specific to the current job and therefore those who change jobs frequently may earn less over their life cycle than those who other things equal seldom change jobs an analysis of data from the national longitudinal survey of mature men supports that expectation showing that for white males job separations usually lead to wage gains in the short run but nonmobile workers tend to achieve significantly higher wages over the long run

canadian jobs and firm size do smaller firms pay less even after controlling for observable workers characteristics and for occupation and industry specific effects a substantial wage differential remains between large and small firms what underlies the remaining wage differential is unclear direct evidence on pension plan coverage and on lay off rates by firm size is inconsistent with the bad working conditions hypothesis the union avoidance hypothesis does not seem to explain an important portion o f the wage differential as suggested by efficiency wage models part of the remaining wage differential may be due to firms heterogeneity similarly perhaps large firms pay higher wages simply partly beca use they employ workers with more unobserved abilities because differen t explanations of the wage differential may lead to different policy implications determining the source of the wage firm size effect is an important question for future research

job recruitment networks and migration to cities in india abstract economists have focused on job search and supply side explanations for network effects in labour transactions this paper develops and tests an alternative explanation for the high prevalence of network based labour market entry in developing countries in our theoretical framework employers use employee networks as screening and incentive mechanisms to improve the quality of recruitment our framework suggests a negative relationship between network use and the skill intensity of jobs a positive association between economic activity and network use and a negative relationship between network use and pro labour legislation furthermore social identity effects are expected to intensify when compared to information sharing and other network mechanisms using data from an all india employment survey we implement a novel empirical strategy to test these relationships and find support for our demand side explanation

effects of a sibship extension to foster children on children s school enrolment a sibling rivalry analysis for indonesia in this paper we question whether and how the sibship extension to foster children a common practice in many developing countries affects children s school enrolment status based on indonesian data we show that children s school enrolment increases with the number of foster grandchildren in their sibship given that grandchildren fostering is associated with positive transfers from biological to host parents this result reflects either a release of liquidity constraints in the host household or the uncommon preferences of host grandparents conversely the proportion of other foster children in a sibship does not have any effect the latter result s explanation depends on the reason children other than grandchildren are fostered

introduction the volatility of overseas aid summary evidence is mounting that the pattern of overseas aid through time of which its volatility or instability is a key dimension has an important influence on its effectiveness the three papers in this special section examine the extent of this influence and how it may be possible to control volatility in the interests of more effective aid

theoretical foundations for sticky wages abstract the paper compares three different types of theoretical explanation of sticky wages they are implicit contracts efficiency wage models and insider outsider models it then reconsiders keynes rationale for sticky wages which focuses on relative wage issues finally the paper considers possible directions for future research

migration and imperfect labor markets theory and cross country evidence from denmark germany and the uk we investigate the labor market effects of immigration in denmark germany and the uk three countries which are characterized by considerable differences in labor market institutions and welfare states institutions such as collective bargaining minimum wages employment protection and unemployment benefits affect the way in which wages respond to labor supply shocks and hence the labor market effects of immigration we employ a wage setting approach which assumes that wages decline with the unemployment rate albeit imperfectly we find that the wage and employment effects of immigration depend on wage flexibility and the composition of the labor supply shock in germany immigration involves only moderate wage but large unemployment effects since immigrants are concentrated in labor market segments with low wage flexibility the reverse is true for the uk and denmark

wage policies of a russian firm and the financial crisis of 1998 evidence from personnel data 1997 to 2002 the authors use a rich personnel data set from a russian firm for the years 1997 to 2002 to analyze how the firm adjusts wages and employment during this period in which local labor market conditions changed in the aftermath of the financial crisis in 1998 they relate the development of turnover and wages for various employment categories to alternative models of wage and employment determination the authors argue that the firm s behavior is consistent with the predictions of efficiency wage models of the shirking and turnover type

the empirical content of the job search model labor mobility and wage distributions in europe and the us abstract job search models of the labor market hypothesize a very tight correspondence between the determinants of labor turnover and individual wage dynamics on one hand and the determinants of wage dispersion on the other this paper offers a systematic examination of whether this correspondence is present in the data by estimating a rudimentary partial equilibrium job search model on a three year panel of individual worker data covering 10 european countries and the u s we find that our basic job search model fits the data surprisingly well this also allows us to point at a number of interesting empirical regularities about wage distributions our results suggest that cross sectional data on individual wages contain the basic information needed to obtain a reliable measure of the magnitude of labor market frictions as measured by a parameter of the canonical job search model finally we use our results in a cross country comparison of the intensity and nature of job to job turnover we arrange countries into two different groups according to their turnover intensity we further show that the nature of job to job turnover is very different between those two groups turnover is predominantly voluntary in low turnover countries whereas it is to a large extent involuntary in high turnover countries

efficiency wages employment versus welfare this paper analyzes the effects of government policies in an efficiency wage model in such a model wages exceed market clearing rates firms may pay high wages for many reasons levine gives thirteen motivations for efficiency wages 12 in the model used here high wages prevent shirking by workers the model is similar to those of shapiro and stiglitz sparks fairris and alston and others 15 17 7 efficiency wage models are often viewed as providing the microeconomic foundations of involuntary unemployment and keynesian economics 1 2 unemployment is also emphasized in many discussions of government policies 3 4 11 a major example is that of johnson and layard 9 they find that a per capita employment subsidy financed by an ad valorem wage rate tax would reduce unemployment they conclude that this policy would benefit a country because of the employment effect 2 yet this paper shows that the employment effect is misleading here a policy that causes employment to rise fall also must cause income net of effort to fall rise so total welfare falls rises the policy implications discussed by johnson and layard and others are therefore reversed

biological basics and the economics of the family many economic models of the family are based on a generic person one person two household or parent child family rather than their anatomically correct counterparts sons and daughters fathers and mothers and grandfathers and grandmothers these economic models can offer powerful insights into family behavior but also can leave certain patterns unexplained and neglect potentially important crosscurrents melding biological insights with family economics can cast new light on existing knowledge and open up novel paths for research for example study after study has found that putting family income in the hands of mothers rather than fathers tends to increase the consumption of children as noted in this journal in lundberg and pollak 1996 yet the way such results are usually described might strike a noneconomist as exceedingly circumspect economists point out that these findings reject the common preference model of household decision making in favor of one with independent decisionmaking spouses but usually make little mention of motherhood or fatherhood per se or consider the dramatic expansion of south african government pension programs in the early 1990s which put lots of extra money in the hands of grandparents many of whom lived with their grandchildren in a compelling and oft cited study duflo 2003 found evidence of pension spillovers to grandchildren but the most intriguing patterns were demographic pensions to maternal grandmothers redounded to the benefit of granddaughters economic analysis uncovers the income effects but turns out to be of little help for explaining why these particular gender effects predominated

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

a model of the natural rate of unemployment since the publication of edmund phelps volume the new macroeconomics has treated the labor market as a dynamic process of rational search by unemployed workers for available vacancies wages are viewed as at least potentially flexible though free contracting between workers and firms may lead to fixed wages in the short run imperfect information is a crucial element of the theory for it implies both a need for contracting and a need for rational search rather than simple market clearing in each period a positive rate of frictional unemployment may exist in equilibrium denoted as the natural rate this unemployment is due to the frictions in the search process and imperfections in information rather than to any deficiency in aggregate demand milton friedman defined the natural rate as the level that would be ground out by the walrasian system of general equilibrium equations provided there is embedded in them the actual structural characteristics of the labor and commodity markets including market imperfections stochastic variability in demands and supplies the cost of gathering information about job vacancies and labor availabilities the costs of mobility and so on p 8 this paper reexamines the micro foundations of the natural rate in a model of labor market equilibrium in which turnover flows and imperfect information are explicitly considered workers may quit their current jobs to enter the unemployment pool in order to search among available vacancies for a more preferred position firms economize on turnover by an appropriate wage policy

aid instability as a measure of uncertainty and the positive impact of aid on growth this article contributes to the literature on aid and economic growth we posit that uncertainty measured as the instability of aid receipts will influence the relationship between aid and investment how recipient governments respond to aid and will capture the fact that some countries are especially vulnerable to shocks when we account for uncertainty which is negative and significant we find that aid has a significant positive effect on growth largely due to its effect on the volume of investment the finding that uncertainty of aid receipts reduces the effectiveness of aid is robust when the regression is estimated for the sub sample of african countries these findings hold although the effectiveness of aid appears weaker than for the full sample

local and personal networks in employment and the development of labor markets evidence from the cut flower industry in ethiopia summary we examine the roles of local and personal networks in the employment process and the emergence and development of the labor market in ethiopia s growing cut flower industry using primary survey data of 320 workers randomly sampled from all 64 farms we find that workers who were recruited informally using the social ties were paid less than the formally recruited workers at hiring however these workers quickly increased their productivity and the effect of social ties on wages disappeared over time further we find that the development of labor market for this newly emerged industry took place particularly within the industrial cluster

interview with edmund s phelps edmund s phelps has been mcvickar professor of political economy at columbia university in new york city new york since 1982 and director of the center on capitalism and society at columbia university s earth institute since 2001 in 2006 he was awarded the nobel memorial prize in economic science for his analysis of intertemporal tradeoffs in macroeconomic policy we interviewed professor phelps at his hotel in san francisco on january 3 2009 while attending the annual meeting of the allied social science associations

do parents favor boys in an optimizing model of parental allocation systematic differences in human capital investments betwen the sexes may originate in at least 3 ways 1 parents may respond to expected gender wage differentials 2 parents may respond to systematic differences by gender in the price of human capital investments 3 parental preferences may favor girls or boys in the sense that they value identical outcomes at the same cost more highly for one sex than for the other this paper analyzes the role of parental preferences in general and unequal concern in particular in the allocation of human capital investments among children the authors generalize their earlier model of the human capital investments among children to incorporate the possibility that the returns to such investments may include not only the childs own ecpected earnings but also the expected earnings of his or her spouse thus the model assumes that parents may value returns that accrue trough the marriage market as well as through education the relevant returns to education may include marrying a spouse with higher expected earnings the empirical analysis indicates that gender wage differentials like endowment differentials are mildly reinforced by the parental allocation of human capital investments marriage market outcomes are significant determinants of the allocation of human capital investments among children there is no evidence that parental preferences favor boys this study shows that parental preferences either exhibit equal concern or slightly favor gils