inequality aversion and voting on redistribution some people have a concern for a fair distribution of incomes while others do not does such a concern matter for majority voting on redistribution fairness preferences are relevant for redistribution outcomes only if fair minded voters are pivotal pivotality in turn depends on the structure of income classes we experimentally study voting on redistribution between two income classes and show that the effect of inequality aversion is asymmetric inequality aversion is more likely to matter if the rich are in majority with a poor majority we find that redistribution outcomes look as if all voters were exclusively motivated by self interest

the new great debate about unionism and collective bargaining in u s state and local governments recently some state and local governments in the united states have sharply reduced or eliminated public employee unionism and bargaining rights in the belief that their fiscal adversity stems mainly from overcompensation of public employees caused by collective bargaining the authors examine public private sector pay and benefit relationships the effects of unions on public employee pay the effectiveness of employment dispute resolution procedures and the ability of public sector labor and management to combat fiscal adversity they provide new evidence showing that on balance public employees are undercompensated relative to their private sector counterparts the effects of unions on compensation are smaller in the public than in the private sector and public sector dispute resolution procedures and joint labor management initiatives to reform work function reasonably well

labor market returns to two and four year college the paper examines labor market returns to a two and four year college education analysis of the 1972 national longitudinal survey of youth observation that the average person who attended a two year college earned about 10 percent more than those without any college education comparison with the wages of those who attended a four year college education

beauty and the labor market the authors examine the impact of looks on earnings using interviewers ratings of respondents physical appearance plain people earn less than average looking people who earn less than the good looking the plainness penalty is 5 to 10 percent slightly larger than the beauty premium effects for men are at least as great as for women unattractive women have lower labor force participation rates and marry men with less human capital better looking people sort into occupations where beauty may be more productive but the impact of individuals looks is mostly independent of occupation suggesting the existence of pure employer discrimination copyright 1994 by american economic association

the effects of collective bargaining rights on public employee compensation evidence from teachers firefighters and police widespread public sector unionism emerged only in the 1960s as individual states opened the door to collective bargaining for state and municipal workers in this study the author exploits differences in timing of legislative reforms across states to construct estimates of the causal effects of public sector collective bargaining rights on pay benefits and employment for teachers firefighters and police perhaps surprisingly estimates that allow for state fixed effects and state specific trends show little effect on teachers pay benefits or employment despite significantly increasing union presence among teachers for firefighters the results show a substantial positive effect on wages for police the wage effect was more modest but the workweek was significantly shortened

how teachers unions affect education production this study helps to explain why measured school inputs appear to have little effect on student outcomes particularly for cohorts educated since 1960 teachers unionization can explain how public schools simultaneously can have more generous inputs and worse student performance using panel data on united states school districts i identify the effect of teachers unionization through differences in the timing of collective bargaining especially timing determined by the passage of state laws that facilitate teachers unionization i find that teachers unions increase school inputs but reduce productivity sufficiently to have a negative overall effect on student performance union effects are magnified where schools have market power

primary schooling cognitive skills and wages in south africa using a fairly rich data set from south africa the paper finds that despite the sobriquet gutter education the african schooling systems help to create cognitive skills and these skills are a determinant of wage levels various robust estimators are used but the influential outlier problem does not turn out to be serious computational skills appear to be more important than comprehension skills in influencing wages the african primary schooling system was an extremely poor generator of computational skill the seven year course raising the computational test score by 13 if that a policy implication is that productivity could be raised by certain near costless reallocations of resources in favour of mathematical learning

longer term effects of head start specially collected data on adults in the panel study of income dynamics are used to provide evidence on the longer term effects of head start an early intervention program for poor preschool age children whites who attended head start are relative to their siblings who did not significantly more likely to complete high school attend college and possibly have higher earnings in their early twenties african americans who participated in head start are less likely to have been booked or charged with a crime there is some evidence of positive spillovers from older head start children to their younger siblings language en

the determinants of earnings a behavioral approach we survey the determinants of earnings and propose a framework for understanding labor market success we suggest that the advantages of the children of successful parents go considerably beyond the benefits of superior education the inheritance of wealth or the genetic inheritance of cognitive ability we suggest that noncognitive personality variables such as attitudes towards risk ability to adapt to new economic conditions hard work and the rate of time preference affect both earning and the transmission of economic status across generations

teachers unions and wages in the 1970s unionism now pays this paper provides evidence that confirms the results of previous studies that teacher unionism produced relatively small wage gains during the early 1970s but it also shows that union gains increased substantially in the late 1970s the evidence is based on an application of two complementary research designs cross section wage level regressions and cross section wage change regressions to national samples of teacher data for 1974 75 and 1977 78 the authors conclude that the union nonunion wage differential among teachers reached 12 to 22 percent by the late 1970s and during the period 1974 78 the real wages of unionized teachers increased while those of nonunionized teachers declined they offer several possible explanations for these trends

the effect of literacy on immigrant earnings we examine the impact of literacy on immigrant earnings and the sources of lower returns to education and experience among immigrants we find that the native born literacy distribution dominates that for immigrants however the two groups obtain similar returns to literacy skills contrary to discrimination based explanations for immigrant native born earnings differentials among the university educated literacy differences account for about two thirds of the earnings gap however low returns to foreign experience have a larger impact on this differential among the less educated literacy differences and differences in the returns to experience have similar effects on the earnings differential

papers in experimental economics competitive market institutions double auctions vs sealed bid offer auctions consider a market with the following characteristics 1 privacy that is each agent knows only his own valuation or cost conditions 2 exchange follows the rules of the oral double auction that is buyers freely announce bids or accept offers and sellers freely announce offers or accept bids 3 aggregate market supply and demand per trading period is stationary for at least two to three periods and 4 there are at least four buyers and as many sellers the literature reporting the results of a large number of experimental markets with these characteristics documents what appears to be a remarkably rapid convergence to a competitive equilibrium ce however any claim of double auction da convergence to the ce can only have meaning in one of three senses i the ce is attained immediately ii after t periods of trading some measure of the market s state such as mean price is nearer relative to experimental sampling variability to a ce than to some distinct alternative equilibrium such as a monopoly or nash equilibrium iii after t periods of trading this measure is nearer to a ce in da experimental markets than in markets organized under a different institution of contract for example a sealed bid auction since everything from electrons and the stars to rats and people yield state measures subject to error or random variation the deterministic criterion i can have no serious scientific standing by such criteria any hypothesis can be rejected and there could be no science of physics biology or economics 2 with the exception of certain very simple markets such as single object auctions or certain idealized markets such as the cournot quantity adjuster model economics has only two concepts of equilibrium monopoly and competitive the only formal model of da trading that has been proposed see david easley and john ledyard p 6 predicts stochastic convergence in finite time with probability one to a ce hence the only test alternative to the ce research hypothesis in da markets is a monopoly or monopsony equilibrium experimentalists have not reported statistical tests of the ce professor department of economics university of arizona assistant professor department of economics indiana university instructor department of economics university of arizona and sandia national laboratories albuquerque nm respectively we are indebted to the national science foundation for research support and to art denzau and mort kamien for helpful comments there is an early and recently growing body of experimental evidence for convergence to a competitive equilibrium under double auction rules the earliest evidence contained in experiments initiated in january 1956 is reported in smith 1962 1964 1965 1976 however these early experiments used between twenty and fifty or so participant buyers and sellers because in keeping with prevailing professional beliefs it was thought that a ce was unlikely to be approached unless numbers were quite large using large numbers was not unreasonable since it is a good beginning procedure to give a theory whatever is believed to be its best shot more recent evidence using six buyers six sellers and two traders in speculative da markets with cyclical demand is reported by r m miller charles plott and smith and williams 1979 for evidence from a comparison of oral and computerized da experiments with four buyers and four sellers see williams 1980 for further evidence in the context of the study of price controls see m isaac and plott 1981b and smith and williams 1981b in the context of a conspiracy study see isaac and plott 1981a in the context of comparisons between da and posted offer pricing see jon ketcham smith and williams in the context of a study of four variations on da rules see smith and williams 1980 all of these more recent papers report double auction experiments using no more than four buyers and four sellers 2as frederick mosteller once noted if you wanted to reject the inverse square law of attraction try tossing a sheet of paper out the window

the impact of psychological and human capital on wages historically economists have taken the position that psychological capital is either unobservable or immeasurable thus heretofore little evidence has been available on the contribution of psychological capital to wages using data drawn from two different waves of the national longitudinal survey of youth we offer evidence that psychological capital has both a direct effect via self esteem and an indirect effect through locus of control on an individual s real wage we find a person s wage is more sensitive to changes in self esteem than to comparable alterations in human capital both relative wages and human capital contribute to self esteem

unobserved ability and the return to schooling in the empirical literature it is customary to estimate the return to schooling by ordinary least squares ols or instrumental variable iv techniques 2 the choice of ols is justified only if realized schooling and unobserved labor market ability are uncorrelated if not ols estimates suffer the ability bias and other estimation methods such as iv may be used the volume of work devoted to the return to schooling is a good indication of the importance of this topic as perceived by economists 3 frequently instrumental variables iv techniques are applied in a context where the instrument is only weakly correlated with schooling attainments staiger and stock 1997 as a consequence the validity of very high returns to schooling reported in a simple regression framework should be seriously questioned see manski and pepper 2000 4 when iv techniques are chosen the log wage regression is usually assumed to be linear in schooling however there is no obvious reason to presume that the local returns to schooling are independent of grade level indeed heterogeneity in any component of schooling choices subjective discount rates ability or specific taste for schooling will lead to improper inference if the local returns are erroneously assumed to be constant as individuals with lower taste for schooling tend to stop school earlier ols or iv estimates of the return to schooling which impose equality between local and average returns at all levels of schooling will be strongly affected by the relative frequencies of individuals with high and low taste for schooling more precisely if there are large differences in local returns between various grade levels the ols estimate measuring an average log wage increment per year of schooling will tend to be biased toward the co editor and three anonymous referees for comments and suggestions on this version or earlier versions belzil thanks the social sciences and humanities research council of canada for generous funding the usual disclaimer applies 2 to use the same terminology as in the reduced form literature the return local to schooling refers to the percentage wage increase per additional year of schooling in the paper the terms local and marginal returns may be used interchangeably the average return refers to the slope of the straight line between the intercept and the expected log wage at a given number of years of schooling 3 a world wide web survey of the most recent literature indicates that since 1970 more than 200 published articles or working papers set in a reduced form have been devoted to the estimation of the return to schooling or surrounding issues very often studies based on iv methods conclude that the returns to schooling can be between 20 and 40 above the ols estimates reported estimates around 15 per year for the us are not uncommon although standard errors are typically very high see card 1999 for a survey 4 manski and pepper 2000 obtain upper bound estimates of the return to schooling from a sample taken from the nlsy their results cast doubts on the high returns reported in the literature

the effects of family characteristics on the return to education in this paper the authors examine the role of parental education in the human capital production function by estimating the effects of parental education on the education profile of wages the analysis uses sibling pairs from the panel study of income dynamics and the national longitudinal surveys of labor market experience of young men and young women the authors obtained mixed evidence on whether parental education raises the return to education copyright 1996 by mit press

the effect of teachers unions on education production evidence from union election certifications in three midwestern states using a unique data set on teachers union election certifications from iowa indiana and minnesota i estimate the effect of teachers unions on school district resources and on student educational attainment my empirical strategy allows for nonparametric leads and lags of union age i find no impact on teacher pay or per student district expenditures but that unions increase teacher employment by 5 i find no class size effect because of enrollment increases in unionized districts and i estimate that unions have no net effect on high school dropout rates these findings highlight the importance of correctly measuring unionization status

a little fairness may induce a lot of redistribution in democracy we use a model of self centered inequality aversion suggested by fehr and schmidt 1999 to study voting on redistribution we theoretically identify two classes of conditions when an empirically plausible amount of fairness preferences induces redistribution through referenda we test the predictions of the adapted inequality aversion model in a simple redistribution experiment and flnd that it predicts voting outcomes far better than the standard model of voting assuming rationality and strict self interest

compensation for state and local government workers are state and local government workers overcompensated this question has re state and local government workers overcompensated this question has taken on considerable heat in the last year or two as many states and localitaken on considerable heat in the last year or two as many states and localities face budgetary stress in this paper we step back from the highly charged ties face budgetary stress in this paper we step back from the highly charged rhetoric and address this question with the two primary data sources for looking at rhetoric and address this question with the two primary data sources for looking at compensation of state and local government workers the current population survey compensation of state and local government workers the current population survey cps conducted by the bureau of the census for the bureau of labor statistics cps conducted by the bureau of the census for the bureau of labor statistics and the employer costs for employee compensation ecec microdata collected as and the employer costs for employee compensation ecec microdata collected as part of the national compensation survey ncs of the bureau of labor statistics part of the national compensation survey ncs of the bureau of labor statistics the fundamental difference between these two sources of data is that the cps is the fundamental difference between these two sources of data is that the cps is a household survey while the ecec is a survey of employers data from the ncs a household survey while the ecec is a survey of employers data from the ncs have been used in studies of union nonunion interindustry and occupational wage have been used in studies of union nonunion interindustry and occupational wage differentials gittleman and pierce 2007 2011 levenson and zoghi 2011 and in differentials gittleman and pierce 2007 2011 levenson and zoghi 2011 and in studies of compensation inequality pierce 2001 2010 however while ncs publistudies of compensation inequality pierce 2001 2010 however while ncs publications regularly present tabulations separately for the private sector on the one cations regularly present tabulations separately for the private sector on the one hand and state and local government on the other the microdata from the ncs hand and state and local government on the other the microdata from the ncs have not been previously used to compare compensation in the private sector to that have not been previously used to compare compensation in the private sector to that in the state and local government sectors in the state and local government sectors we begin by presenting some tabulations on pay differences across sectors we begin by presenting some tabulations on pay differences across sectors from these two data series both raw pay differences between public and private from these two data series both raw pay differences between public and private sectors and also some breakdowns by education level of workers for the current sectors and also some breakdowns by education level of workers for the current population survey and skill level of the job for the employer costs for employee population survey and skill level of the job for the employer costs for employee

regression toward mediocrity in economic stature this paper provides estimates of the correlation in lifetime earnings between fathers and sons intergenerational data from the national longitudinal survey are used earlier studies conducted for the united states report elasticities of children s earnings with respect to parent s earnings of 0 2 or less suggesting extensive integenerational mobility these estimates however are biased downward by error contaminated measures of lifetime economic status estimates presented in this paper correct for the problem of measurement error and find the intergenerational correlation in income to be on the order of 0 4 this suggests considerably less intergenerational mobility than previously believed jel j62

match bias from earnings imputation in the current population survey the case of imperfect matching this article examines match bias arising from earnings imputation wage equation parameters are estimated from mixed samples of workers reporting and not reporting earnings the latter assigned earnings of donors regressions including attributes not used as imputation match criteria e g union are severely biased match bias also arises with attributes used as match criteria but matched imperfectly imperfect matching on schooling age flattens earnings profiles within education age groups and creates jumps across groups assuming conditional missing at random a general analytic expression correcting match bias is derived and compared to alternatives reweighting a respondent only sample proves an attractive approach

the industrial mobility of displaced workers this article uses a two industry model of unemployment duration and job search to estimate rates of transition of displaced workers from unemployment to employment distinguishing between employment in a worker s previous industry and in other industries the competing risks model allows inferences about search strategies to be drawn from data concerning employment outcomes and allows tests of some fundamental implications of search theory there is evidence that improvements in the prospects for employment in their previous industry induce displaced workers to reduce search intensity or increase reservation wages in other industries

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 economic approach to social capital a standard optimal investment model can be used to analyse an individual s decision to accumulate social capital we analyse six facts that support the predictions of this individual based approach 1 social capital first rises and then falls with age 2 social capital declines with expected mobility 3 social capital rises in occupations with greater returns to social skills 4 social capital is higher among homeowners 5 social connections fall sharply with physical distance 6 people who invest in human capital also invest in social capital we fail to find robust evidence that social capital investments fall with the value of time or that geographic religious groups generate social capital complementarities

worker quality and labor market sorting abstract we test the hypothesis that labor market sorting into outcomes normally associated with wage premia e g incentive pay coverage urban dwelling employment in large firms marriage and union coverage is related to a series of non standard worker quality measures

iq in the production function evidence from immigrant earnings the cross country growth literature especially sala i martin 1997 sala i martin doppelhofer and miller 2004 has found that traditional education measures rarely have a robust relationship with growth and productivity elementary education being a rare exception by contrast a new empirical growth literature jones and schneider 2006 lynn and vanhanen 2002 ram 2007 weede 2004 weede and kampf 2002 has shown that a nation s average iq has a remarkably robust relationship with its productivity figure 1 that a test designed by psychologists should have such a robust relationship with economic variables is a puzzle that demands explanation for instance jones and schneider showed that national average iq was more robust than other human capital variables and was statistically significant at the 1 level in all 455 growth regressions that controlled for all 18 factors that passed sala i martin doppelhofer and miller s 2004 robustness tests of course as with all the growth regression literature a key difficulty is disentangling cause and effect thus in this article we run no growth regressions whatsoever instead we perform a simple calibration of the iq productivity relationship based on widely agreed upon microeconomic parameters that means we can directly estimate one causal channel running from cognitive ability to productivity in the process we learn the following 1 if one knows the average iq of a nation s citizens as estimated by lynn and vanhanen 2002 2006 one can predict the average wages that immigrants from that country will earn upon their arrival in the united states whether or not one controls for immigrant education and even if the test is completely visual rather than verbal in other words national average iq predicts part of what hendricks 2002 calls unmeasured worker skill 2 we find that a 1 point increase in national average iq predicts 1 higher immigrant wages precisely the value found repeatedly in microeconometric studies note that by construction 1 iq point approximately equal to 1 15th of a standard deviation within any large national population together points 1 and 2 provide further evidence that cross country iq tests are valid predictors of worker productivity 3 when iq is added to the production function in the form implied by traditional externality free human capital theory differences in national average iq are quantitatively significant in explaining cross country income differences that said our productivity accounting exercise does not resolve the puzzle of why high iq countries are 15 times richer than low iq countries in a related vein hanushek and kimko 2000 use national math and science test scores to verify that cognitive skills appear to matter more for groups than for individuals like us they use immigrants to the united states as a way to test whether immigrants bring their home country productivity levels along with them when they immigrate to the united states when they interpret their results within a solow type framework they conclude that the cross country growth equation results are much larger than the corresponding results for individual earnings in sum our article rigorously explores the quantitative magnitude of the puzzle uncovered by hanushek and kimko 2000 and hanushek and woessman 2007 but by using iq tests rather than other widely used math and science test scores we can often double our sample size while simultaneously using the most widely analyzed best understood form of cognitive test we begin with an overview of the recent psychological literature on the validity of iq tests and then proceed to our discussion of the link between iq and immigrant wages the discussion of iq and immigrant wages yields a key parameter gamma the iq semi elasticity of wages which we use in our development accounting exercise we then discuss the questions of reverse causality and trends in the iq productivity relationship over the past 40 yr and conclude by discussing how our results fit into the growth literature

collective bargaining laws threat effects and the determination of police compensation this article demonstrates that state collective bargaining laws are important determinants of union and nonunion public employee compensation state laws that provide stronger bargaining rights and ensure closure to the bargaining process increase the direct effect of police unions on compensation moreover indirect threat effects on the pay of nonunion police also increase with stronger bargaining laws in each law category investigated nonunion police receive most of the compensation premium enjoyed by unionized police previous studies that have not adequately controlled for these effects of bargaining laws have therefore underestimated the full effect of public sector unions on compensation

is the test score decline responsible for the productivity growth decline the test score decline between 1967 and 1980 was large about 1 25 grade level equivalents and historically unprecedented new estimates of the trends in academic achievement of the effect of academic achievement on productivity and of trends in the quality of the work force are developed the test score decline did not cause the post 1965 productivity growth slowdown but it did contribute to its perpetuation if test scores had continued to grow after 1967 at the rate prevailing in the previous quarter century labor force quality would have been 2 9 percent 86 billion greater in 1987 5 5 percent greater in 2000 and 6 7 percent greater in 2010 copyright 1989 by american economic association

discriminatory taxes are unpopular even when they are efficient and distributionally fair abstract we explore the political acceptance of taxation in commodity markets participants in our experiment earn incomes by trading and must collectively choose one of the two tax regimes to raise a given tax revenue a uniform tax ut imposes the same tax rate on all markets and is fair in that it yields the same but low income to participants in all markets the discriminatory tax dt imposes a higher burden on markets with inelastic demand and is therefore efficient but it is also unfair in that incomes are unequal across markets we find that dt is unpopular as predicted surprisingly however dt remains unpopular when they are both efficient and produce a fair equal distribution we conclude that non discrimination equal treatment is a salient fairness principle in taxation that shapes voting on commodity taxes above and beyond concerns for efficiency and equal distribution

estimates of the economic returns to schooling from a new sample of twins this paper uses a new survey to contrast the wages of genetically identical twins with different schooling levels multiple measurements of schooling levels were also collected to assess the effect of reporting error on the estimated economic returns to schooling the data indicate that omitted ability variables do not bias the estimated return to schooling upward but that measurement error does bias it downward adjustment for measurement error indicates that an additional year of schooling increases wages by 12 to 16 percent a higher estimate of the economic returns to schooling than has been previously found copyright 1994 by american economic association

bargaining laws and unionization in the local public sector this paper analyzes the effects of bargaining law characteristics on rates of unionization in over 10 000 local government departments representing five different government services that were without bargaining units in 1977 duty to bargain laws significantly increased the probability of bargaining union formation between 1977 and 1982 the results of the analysis reject the hypotheses that this effect reflects only underlying union strength the release of pent up demand for unionization or the transformation of nonbargaining unions into bargaining unions the changes in unionization attributable to duty to bargain laws are so large that they account for nearly all of the differences in average unionization rates between states with and without these laws

galton versus the human capital approach to inheritance a century ago francis galton proposed a simple yet powerful model of inheritance gary backer s human capital model is often used to analyze important empirical and policy questions but does it dominate galton s from a positive point of view i derive nine implicatiions of the human capital approach that are distinct from galton s evidence from the pis scf and nlsy micro data sets as well as results reported in previous literatures suggest that four of the unique implications are refuted two implications are verified and mixed results are obtained for three others some extensions of economics recently developed by becker and others when applied to inheritance may improve economics predictions

accounting for intergenerational income persistence noncognitive skills ability and education we analyse in detail the factors that lead to intergenerational persistence among sons where this is measured as the association between childhood family income and later adult earnings we seek to account for the level of income persistence in the 1970 bcs cohort and also to explore the decline in mobility in the uk between the 1958 ncds cohort and the 1970 cohort the mediating factors considered are cognitive skills non cognitive traits educational attainment and labour market attachment changes in the relationships between these variables parental income and earnings are able to explain over 80 of the rise in intergenerational persistence across the cohorts

the effect on black white wage differences of differences in the quantity and quality of education using data from the national longitudinal survey of youth for the years 1979 88 the author examines the extent to which black white differences in educational attainment educational quality and unmeasured individual ability can explain black white wage differences an analysis that corrects for both selectivity and ability biases inherent in estimating the education wage relationship shows that the main source of the black white wage differential is the racial difference in the quality rather than quantity of schooling in fact the author concludes closing the racial gap in the basic skills learned in school could reduce the wage differential by two thirds

intergenerational mobility in britain in this paper we use longitudinal data on children and their parents to assess the extent of intergenerational mobility in britain based on data from the national child development survey a cohort of all individuals born in a week of march 1958 we find that the extent of intergenerational mobility is limited we report an intergenerational correlation of the order 40 to 60 for fathers and sons and 45 to 70 for fathers and daughters in terms of labour market earnings and years of schooling an examination of quartile transition matrices between parental and child earnings outcomes reveals a similar pattern finally it seems on the basis of these transition matrices that there is an important asymmetry in intergenerational earnings mobility with upward mobility from the bottom of the earnings distribution being more likely than downward mobility from the top

the relevance of standard estimates of rates of return to schooling for education policy a critical assessment abstract this paper examines the accuracy and usefulness of estimated rates of return to schooling based on the standard human capital model of becker and mincer regarding accuracy it investigates whether failure to account for differences in ability and school quality lead to significant biases estimates using ghanaian data confirm this possibility even when accurate estimated rates of return to additional years of schooling may have limited policy implications more useful for governments are rates of return to investments in school quality the paper uses data on cognitive skills to estimate rates of return to three types of school quality improvements

information learning and wage rates in low income rural areas in this essay we present evidence that employers in rural areas of developing countries have imperfect information with regard to the productivity of heterogeneous workers in addition to obtaining direct measures of the completeness of employer information we consider the implications of information asymmetries for the structure of casual labor markets we then evaluate the extent to which casual labor markets do in fact exhibit these attributes we find that 1 there is adverse selection out of the time rate labor market 2 employers discriminate statistically given two workers with different observed characteristics but the same actual productivity the worker from the group with the higher average productivity will have a higher wage 3 employers exhibit learning over time the extent of employer ignorance is negatively related to labor market exposure on the part of the workers and 4 calorie consumption affects productivity but is not rewarded in the time rate labor market in concluding we argue that an analysis of wage and employment patterns and the implications of these patterns for human capital investment in rural areas of developing countries that ignored the role of information problems could yield misleading conclusions

redistribution and market efficiency an experimental study abstract we study the interaction between competitive markets and income redistribution that reallocates unequal pre tax market incomes away from the rich to the poor majority in one setup participants earn their income by trading in a double auction da with exogenous zero or full redistribution in another setup after trading they vote on redistributive tax policies in a majoritarian election with two competing candidates this results in virtually full redistribution even when participants have the opportunity to influence taxes by transferring money to the candidates we find that the high redistribution reduces trading efficiency but not as much as predicted if market participants trade randomly this is because rather than capitulating to the much lower trading incentives many participants respond to redistribution by asking and bidding more conservatively in the da and in this way help to prevent further efficiency losses

are we taxing ourselves how deliberation and experience shape voting on taxes abstract we let consumers vote on tax regimes in experimental markets we test if taxes on sellers are more popular than taxes on consumers i e on voters themselves even if taxes on sellers are inefficiently high taxes on sellers are more popular if voters underestimate the extent of tax shifting in the market we show that inexperienced voters are prone to such a tax shifting bias that experience is an effective de biasing mechanism but that pre vote deliberation about tax regimes makes initially held opinions more extreme rather than correct our results suggest that voting on taxes is prone to bias and that easy to interpret facts are needed to de bias voters

moral bias in large elections theory and experimental evidence in this article we provide evidence that voters in large elections tend to vote against their material self interest and to vote for a morally or ethically appealing alternative it may seem puzzling that voters might behave differently in small elections than they do in large ones however we show that such behavior is a logical consequence of voters having a conflict between obtaining a better material outcome and choosing a moral action we develop a simple model of this conflict and show that decreasing the probability that a single vote is decisive i e pivot probability reduces the importance of outcomes relative to actions in voter decision making because pivot probability is generally small in large elections alternatives that are understood by voters to be morally superior are more likely to win in large elections than in small ones thus compared to the preferences of voters election results will be biased in favor of moral alternatives 1 the model produces a set of predictions that we test in a laboratory experiment to clarify ideas consider a situation in which two outcomes are possible a and b assume that b gives

endowments and the allocation of schooling in the family and in the marriage market the twins experiment 03 we show how comparisons between the within twin correlations of human capital outcomes across identical and nonidentical twins can be used to identify the variability in the individual specific component of endowments and the responsiveness of schooling to individual specific endowments in the family and in the marriage market even when schooling is measured with error estimates from two twins samples indicate that 27 42 percent of the variance in log earnings obesity is due to variability in individual specific endowments allocations of schooling reinforce specific endowments and individual specific earnings endowments of men and their wives schooling are negatively associated

identity and schooling some lessons for the economics of education abstract this review culls noneconomic literature on education by sociologists anthropologists and practitioners to present a new economic theory of students and schools this theory elaborates two themes that have eluded economic analysis first is the student as decision maker whose primary motivation is her identity second is a conception of the school as a social institution this framework suggests a new perspective on questions such as resource allocation and school reform it explains why some educational policies succeed and others fail we show how sociological variables may affect outcomes and suggest ways economists can incorporate them into theoretical and empirical research

state collective bargaining laws and public sector pay using the public use microdata sample from the 2005 to 2015 american community survey the authors provide new evidence on how state collective bargaining laws affect public sector wages to isolat

the rising college premium in the eighties return to college or return to unobserved ability the changes in the distribution of earnings during the 1980s have been studied extensively the two most striking characteristics of the decade are a a large increase in the college high school wage gap and b a substantial rise in the variance of wage residuals while this second phenomenon is typically implicitly attributed to an increase in the demand for unobserved skill most work in this area fails to acknowledge that this same increase in demand for unobserved skill could drive the evolution of the measured college premium in its simplest form if higher ability individuals are more likely to attend college then the increase in the college wage premium may be due to a increase in the relative demand for high ability workers rather than an increase in the demand for skills accumulated in college this paper develops and estimates a dynamic programming selection model in order to investigate the plausibility of this explanation the results are highly suggestive that an increase in the demand for unobserved ability could play a major role in the growing college premium the changes in the distribution of earnings during the 1980s have been studied extensively the two most striking characteristics of the decade are a a large increase in the college high school wage gap and b a substantial rise in the variance of wage residuals while this second phenomenon is typically implicitly attributed to an increase in the demand for unobserved skill most work in this area fails to acknowledge that this same increase in demand for unobserved skill could drive the evolution of the measured college premium in its simplest form if higher ability individuals are more likely to attend college then the increase in the college wage premium may be due to an increase in the relative demand for high ability workers rather than an increase in the demand for skills accumulated in college this paper develops and estimates a dynamic programming selection model in order to investigate the plausibility of this explanation the results are highly suggestive that an increase in the demand for unobserved ability could play a major role in the growing college premium there are at least two reasons to be interested in this topic first for policy makers intent on helping the american workforce adjust to the changing wage structure this distinction is crucial if the value added of attending college truly rises they may consider policies aimed at subsidizing the skills learned in college however if it results from an increase in the payoff to other types of skills then policies focused on skill acquisition earlier in life would be more appropriate second it will also aid in understanding the

changes in college skills and the rise in the college wage premium the college wage premium for new labor market entrants rose sharply during the 1980s we ask how much of this change arose from changes in the skill level of the typical college graduate we find that skills attained prior to college as measured by standardized test scores and high school grades had no effect on the change in the college wage premium for men in contrast the returns to math ability rose considerably for women failing to account for math skills thus substantially overstates the growth in the female college wage premium skills acquired in college as reflected in the distribution of students across majors had important effects on the relative wages of men the trend away from low skill subjects such as education and toward high skill subjects such as engineering accounts for one fourth of the rise in the male college wage premium

incentive enhancing preferences personality behavior and earnings suppose there is a principal agent relationship between employer and employee in which effort is not contractible but is elicited through employer incentive mechanisms we term preferences that allow the employer to elicit effort at lower cost incentive enhancing we analyze how such preferences affect earnings nd then provide evidence that one of the relevant behavioral traits efficacy as well as other psychological aspects of individuals are significant influences on earnings we conclude that measures of cognitive performance are not sufficient indicators of the effectiveness of schools in promoting student labor market success incentive enhancing preferences are irreducibly heterogeneous incentive enhancing preferences help explain the persistence of poverty over generations within families and unlike cognitive skills incentive enhancing traits need not be welfare increasing for their bearers

the role of human capital in earnings differences between black and white men d uring the past 50 years the earnings of black men have increased substantially both in absolute terms and relative to those of white men as shown in figure 1 in 1940 the black white weekly earnings ratio among men ages 25 34 was 49 percent by 1980 it had increased to 79 percent during the 1980s however the overall black white earnings gap did not narrow and at younger ages the gap actually widened although the 1980s is not the first decade since 1940 in which black men made little or no gains in relative earnings the 1950s was another the lack of progress in the 1980s is nevertheless puzzling and a source of concern this article examines the factors underlying the differential in earnings between black men and white men with a focus on the role of human capital since 1940 successive generations of black men entering the labor force have been increasingly more educated relative to white men both in terms of years of school completed and in the quality of schooling obtained as the education and income levels of black parents increased racial differences in the transmission of human capital in the home were also likely to have narrowed this convergence in educational differences combined with the migration of blacks out of the south contributed to the narrowing in the racial gap in earnings over the 1940 80 period particularly in the first half of the period but human capital factors education and migration were not the only source of convergence in black white differences in earnings the patterns of change in the earnings gap support the contention that declining labor market discrimination against blacks has also contributed to the rise in the black white earnings ratio moreover the acquisition of human capital itself has been strongly affected by societal and governmental discrimination since blacks were long provided with greatly inferior schooling resources

personality and the marginal utility of income personality interacts with increases in household income to determine life satisfaction abstract economics implicitly assumes that the marginal utility of income is independent of an individual s personality we show that this is wrong this is the first demonstration that there are strong personality income interactions in an analysis of 13 615 individuals over 4 years we show that individuals who have high levels of conscientiousness obtain more satisfaction to their lives from increases to their household income there are strong gender differences and women that are open to experiences introverted or neurotic get lower satisfaction from household income increases our findings have important implications for the use of financial incentives to influence behavior in the future public policy may benefit from being personality specific

the inheritance of inequality how level is the intergenerational playing field what are the causal mechanisms that underlie the intergenerational transmission of economic status are these mechanisms amenable to public policies in a way that would make the attainment of economic success more fair these are the questions we will try to answer

voting when money and morals conflict an experimental test of expressive voting abstract moral considerations may matter much in voting because the costs of expressing support for a morally worthy cause may be low in a referendum these costs depend on whether a voter expects to affect the outcome of the referendum to test the low cost theory of expressive voting we experimentally investigate a proposal to tax everyone and to donate tax revenues the analysis of expectations and voting decisions shows that the low cost theory fails to explain voting decisions instead we find that voters tend to approve of the proposal if they expect others to approve too

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

earnings schooling ability and cognitive skills conventional estimates now available for a large number of countries generally indicate that the social returns to education are positive large and competitive with returns to investment in physical capital that such estimates are good guides for public resource allocation has however been questioned the heart of the problem lies in the interpretation of the positive relationship between the education and the earnings of workers whether as the conventional estimates assume the coefficient of the education variable in the earnings function measures the effect on the productivity of workers of human capital acquired in school it has been hypothesized that education in part or instead represents screening for native ability and motivation or credentialism and that as a consequence conventional measures of the social benefit of education are substantially upward biased 2 in this paper we attempt to distinguish the influence on earnings of cognitive achievement native ability and years of education as a means of adjudicating the human capital screening and credentialist hypotheses our econometric analysis is based on two rigorously comparable micro data sets from kenya and tanzania generated by surveys of the urban wage labor force specifically for this study these data sets contain the usual variables found in earnings function estimates of the benefits of schooling individual earnings years of education and years of employment experience in addition they contain two variables measures of the worker s cognitive skills and of his or her reasoning ability not previously found in studies of developing countries and only rarely found in studies of the education earnings relationship in developed countries 3 with these variables we can estimate the direct effects on earnings of cognitive skills ability and years of schooling by using them to estimate educational production functions and educational attainment functions and linking these functions with the earnings function in a recursive framework we can also assess the various indirect effects on earnings of ability and years of schooling having data sets from two countries very similar with respect to size resource endowments structure of production and employment and level of development means that not only can we subject our results to the usual statistical tests but we can also assess their replicability both kenya and tanzania have nearly achieved the objective of universal primary education while university enrollments remain at less than 1 percent of the relevant age group the important policy issues re boissiere development research department the world bank 1818 h street washington d c 20433 knight institute of economics and statistics oxford university sabot williams college williamstown ma 01267 we are grateful to the educational testing service of princeton for the design of tests used in this study and to j armitage j behrman j hausman d hendry d jamison and an anonymous referee for their insights and advice helpful comments were also received from participants in seminars at oxford and yale universities the views presented here are our own they should not be interpreted as reflecting those of the world bank george psacharopoulos 1973 1981 contains a listing of 44 countries in which rate of return studies had been conducted and of the estimates obtained 2for instance kenneth arrow 1973 mark blaug 1976 samuel bowles and herbert gintis 1976 john riley 1979 michael spence 1976 and lester thurow 1975 3for attempts to control for ability and or for cognitive achievement in studies for the united states see jere behrman et al 1980 gary chamberlain and zvi griliches 1977 griliches and william mason 1972 michael olneck 1977 paul taubman and terence wales 1974 taubman 1975 and david wise 1975 see also the survey articles by griliches 1977 1979 in most instances the data refer to special subgroups in the population and clear distinction cannot be made between natural ability and cognitive skills acquired in school

patience among children abstract recent policy initiatives offer cash payments to children and often their families to induce better health and educational choices these policies implicitly assume that children are especially impatient i e have high discount rates however little is known about the nature of children s patience how it varies across children and whether children can even make rational inter temporal choices this paper examines the inter temporal choices of 5 to 16 year old children in an artefactual field experiment we examine their choices between varying levels of compensation received in 2 or 4 months in the future and in 0 or 2 months in the future we find that children s choices are consistent with hyperbolic discounting boys are less patient than girls older children are more patient and that mathematical achievement test scores private schooling and parent s patience are not correlated with children s patience we also find that although more than 25 of children do not make rational inter temporal choices within a single two period time frame we cannot find variables that explain this behavior other than age and standardized mathematical achievement test scores