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

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

optimal unemployment insurance for older workers this paper studies the optimal unemployment insurance for older workers in a repeated principal agent model where the search intensity of risk averse workers the agents is not observed by the risk neutral insurance agency the principal when unemployment benefits are the only available tool the insurance agency is not able to induce older workers to search for a job this is because of the short time horizon of workers close to retirement we propose to introduce a pension tax dependent on the length of the unemployment spell we show that this device performs better than a wage tax after re employment first it makes jobs more attractive as they are free of tax second because re employment will be short lived a pension tax is a more powerful incentive than a wage tax and provides more substantial fiscal gains to the agency finally a pension tax allows those workers near retirement who still do not exercise job search to smooth their consumption during their unemployment spell as if they could borrow against their future pension

issues in measuring industrial r d abstract effective government science and technology policy requires a reliable database on industrial innovation this paper examines a number of issues concerning the measurement of industrial r d by analyzing the relationship between data reported in the nsf census rd 1 survey the basis for the official government r d statistics and data reported in two other sources firms 10 k reports and a federal procurement database we advance and test a hypothesis which accounts for systematic discrepancies between rd 1 and 10 k based estimates of company r d we also develop estimates of the extent of measurement error reflected in the various measures of r d and suggest some modifications to the rd 1 survey

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

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

competitive search equilibrium in this paper i construct an equilibrium for markets with frictions which is competitive in the sense that all agents are price takers and maximize utility subject to a set of market parameters i show that the equilibrium allocation is socially optimal i also show how the competitive search equilibrium can be achieved if employers with vacancies can advertise publicly the wages they pay

did canadian welfare reform work the effects of new reform strategies on social assistance participation this paper measures the extent to which declines in social assistance sa participation were associated with novel and aggressive reforms referred to as new reform strategies work requirements diversion earning exemptions and time limits controlling for province specific benefit levels eligibility requirements gdp growth labour market conditions and demographics sa participation rates were more than one percentage point lower equivalent to a 13 decline in provinces with new reforms work requirements with strong sanctions had the sharpest negative associations new reform strategies explain at least 10 of observed declines in sa participation twice that of benefit levels and eligibility requirements

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

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

is the correlation in welfare participation across generations spurious abstract this paper asks whether the observed correlation in welfare participation across generations reflects causal links or unobservables that are correlated across generations if the correlation is spurious then reducing one generations welfare participations will have no effect on the next generation the panel study of income dynamics is used to estimate two types of models that explicitly take account of correlated unobservables these models indicate that correlated unobservables are important in explaining the intergenerational correlation in welfare participation among blacks but not non blacks however the correlation across generations continues to be significant for blacks even after taking account of the correlated unobservables

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

productivity and r d an econometric evidence from spanish firm level data this article analyses the relationship between productivity growth and r d investments of spanish manufacturing firms during the 1990s the theoretical model is a version of the cobb douglas production function in its growth rate form the purpose is to estimate the rate of return to r d expenditures the econometric specification is a distributed lag model the estimation applies the generalized method of moments method the main empirical finding is that a positive and significant role is played by r d expenditures on productivity growth the rate of return to r d expenditures is 26 598

estimation of the internal adjustment costs model using longitudinal establishment data this paper develops estimates of the internal costs measured in terms of foregone current output associated with the introduction of new plant and equipment into manufacturing establishments using the census bureau s longitudinal establishment data file a very large and rich source of production and investment data our estimates provide strong support for the internal adjustment costs hypothesis they indicate that one dollar increases in expansion and replacement investment cause on the average 35and 21 cent reductions respectively in current output the internal cost of adjusting to equipment appears to be higher than the cost of adjusting to plant

good jobs versus bad jobs this article develops a model of noncompetitive labor markets in which high wage good and low wage bad jobs coexist minimum wages and unemployment benefits shift the composition of employment toward high wage jobs because the composition of jobs in the laissez faire equilibrium is inefficiently biased toward low wage jobs these labor market regulations increase average labor productivity and may improve welfare

cross sectional efficiency and labour hoarding in a matching model of unemployment we study positive and normative aspects of steady state equilibrium in a market where firms of endogenous size experience idiosyncratic shocks and undergo a costly search process to hire their workers the stylized model we propose highlights interactions between job security provisions and sectoral shocks in determining the natural rate of unemployment the allocation of labour and the extent of labour hoarding and rationalizes cross sectional asymmetries of gross employment flows at the firm level in our model where productivity and search costs are dynamically heterogeneous across firms decentralized wage bargains imply important cross sectional inefficiencies which overshadow the static search inefficiencies on which simpler models focus

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

universities and fundamental research reflections on the growth of university industry partnerships the recent rise in university industry partnerships has stimulated an important public policy debate regarding how these relationships affect fundamental research in this paper we examine the antecedents and consequences of policies to promote university industry alliances although the preliminary evidence appears to suggest that these partnerships have not had a deleterious effect on the quantity and quality of basic research some legitimate concerns have been raised about these activities that require additional analysis we conclude that additional research is needed to provide a more accurate assessment of the optimal level of commercialisation

r d intensity firm performance and the identification of the threshold fresh evidence from the panel threshold regression model this article tests whether there is an optimal level of research and development r d intensity at which point a firm is able to maximize its performance an advanced panel threshold regression model is employed to investigate the panel threshold effect of r d intensity on firm performance among publicly traded taiwan information technology and electronic firms the results confirm that a single threshold effect does exist and show an inverted u correlation between r d intensity and firm performance this article demonstrates that it is possible to identify the definitive level beyond which a further increase in r d expenditure does not yield proportional rewards some important policy implications emerge from the findings

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

the long run consequences of living in a poor neighborhood author s oreopoulos philip abstract many social scientists presume that the quality of the neigborhood to which children are exposed affects a variety of long run social outcomes i examine the effect on the long run labor market outcomes of adults who were assigned when young to substantially different public housing projects in toronto administrative data are matched to public housing addresses to track children from the program for over 15 years the main finding is that neighborhood quality plays little role in determining a youth s adult earnings education attainment or welfare participation but does affect exposure to crime while living in contrasting housing projects cannot explain large variances in labor market outcomes family differences as measured by sibling outcome correlations account for up to 30 percent of the total variance in the data

innovation and performance evidence at micro level this empirical study aims to shed light on the link between innovation and economic performance at micro level based on a comprehensive survey among dairy and crop farms in the netherlands we estimate a structural multi stage model to deliver evidence on the effect of engagement and investment in innovation on the production of product process and organizational or marketing innovations as well as on the effect of such innovations on farm level productivity the results suggest various market and farm behaviour related factors to stimulate an increase in innovation engagement and production furthermore the study reveals that indeed a greater innovation investment per unit innovation input leads to a higher probability of producing at least one successful product process and or organizational or marketing innovation innovation output the production of process and organizational or marketing related innovation leads to significant productivity gains various recommendations towards a more effective and efficient innovation policy are finally given

is public r d a complement or substitute for private r d a review of the econometric evidence is public r d spending complementary and thus additional to private r d spending or does it substitute for and tend to crowd out private r d conflicting answers are given to this question we survey the body of available econometric evidence accumulated over the past 35 years a framework for analysis of the problem is developed to help organize and summarize the findings of econometric studies based on time series and cross section data from various levels of aggregation laboratory firm industry country the findings overall are ambivalent and the existing literature as a whole is subject to the criticism that the nature of the experiment s that the investigators envisage is not adequately specified we conclude by offering suggestions for improving future empirical research on this issue

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

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

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

interindustry technology flows and productivity growth a reexamination the relationship between productivity growth and r and d intensity is reexamined using detailed data for 193 us manufacturing industries and a breakdown of r and d into own product and process improvement oriented components and imported r and d from other industries a significant interindustry relationship between total factor productivity growth and r and d intensity is reconfirmed with used r and d having larger coefficients than own product r and d components but own product r and d is also significant and the explanatory power of the used r and d component rather than the embodied component imported from other industries thus the evidence for r and d spillovers remains tenuous 6 references 2 tables

the effect of school quality on educational attainment and wages the paper examines the effects of school pupil teacher ratios and type of school on educational attainment and wages using the british national child development survey ncds the ncds is a panel survey which has followed a cohort of individuals born in march 1958 and has a rich set of background variables recorded throughout the individual s life the results suggest that once we control for ability and family background the pupil teacher ratio has no impact on educational qualifications or on male wages it has an impact on women s wages at the age of 33 particularly those of low ability we also find evidence that those who attend selective schools have better educational outcomes and in the case of men higher wages at the age of 33 the impact is higher for the type of individuals who are less likely not to attend selective schools but for whom a comparison group does exist among those attending

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

breaking the cycle the effect of education on welfare receipt among children of welfare recipients abstract we examine the impact of high school graduation on the probability individuals from welfare backgrounds use welfare themselves our data consist of administrative educational records for grade 12 students in a canadian province linked with their own and their parents welfare records we address potential endogeneity problems by 1 controlling for ability using past test scores 2 using an instrument for graduation based on school principal fixed effects and 3 using a heckman singer type unobserved heterogeneity estimator graduation would reduce the probability of welfare receipt of drop outs by 1 2 to 3 4 effects are larger for individuals from troubled family backgrounds and low income neighbourhoods

assessing the relative performance of u k university technology transfer offices parametric and non parametric evidence abstract we present evidence on the relative performance of u k university technology transfer offices ttos using data envelopment analysis dea and stochastic frontier estimation sfe u k ttos are found to exhibit low levels of absolute efficiency there also appear to be decreasing returns to scale implying that ttos may need to be reconfigured into smaller units the development of regionally based sector focused ttos is also advised consistent with qualitative evidence from u s ttos we find that there is a need to upgrade the business skills and capabilities of u k tto managers and licensing officers

informality over the life cycle abstract in developing countries informality is mainly concentrated among younger and older workers and low skilled workers in this study we propose a dual labor market theory that highlights how frictions and taxation in the formal sector and educational choices interact to shape the informality rate over the life cycle we develop a life cycle model with search frictions skill heterogeneities and endogenous educational choices we carry out a numerical analysis and show that our model reproduces remarkably well the life cycle patterns of informality non employment and formal employment in argentina we analyze several public policies and show that an educational grant reduces both informality and non employment and may be fully financed by the extra tax revenues generated by the increase in formal employment and wages lowering taxes may achieve similar results but is detrimental to the government budget despite increasing the base on which they are levied

life cycle labor search with stochastic match quality in the united states unemployment job finding and separation rates decline as worker age increases to explain these facts we build a search and matching model of the labor market that incorporates a life cycle structure and features random match quality as well as human capital accumulation the calibrated model successfully reproduces the empirical patterns of unemployment and job transition rates over the life cycle and generates plausible wage implications we then explore the efficiency implications of the model and find that the differences between the market and planner allocations are more important for older workers

estimating a firm s age productivity profile using the present value of workers earnings in hiring new workers risk neutral employers equate the present expected value of each worker s compensation to the present expected value of his her productivity data detailing how present expected compensation varies with the age of hire embed therefore information about how productivity varies with age this paper infers age productivity profiles using data on the present expected value of earnings of new hires of a fortune 1000 firm for each of the five occupation sex groups considered productivity falls with age with productivity exceeding earnings for young workers and vice versa for older workers

analyzing the length of welfare spells abstract this paper studies the determinants of the length of individual spells of welfare focusing on how the length of a spell affects the probability of its termination the analysis utilizes six years of monthly data on time spent in the afdc program among female household heads a variety of duration dependence models are estimated monthly afdc participation does not show strong evidence of duration dependence two distinct groups appear to utilize welfare one with a very low and constant probability of leaving welfare and a second group which is more affected by time on the program

external capital factors and increasing returns in u s manufacturing theoretical models of endogenous growth identify capital accumulation and returns as a potential stimulus to economic growth existing empirical studies however are based on a limited notion of these returns which follows from the simple production function framework used for estimation the purpose of this study is to examine growth issues using dynamic cost function estimation this methodology enables us to broaden the concept of returns to include returns arising from short run quasi fixity of private capital long run internal scale economies and external knowledge factors overall investment in research r d technology high tech capital and education human capital based on detailed industry level data we find evidence of increasing returns to scale arising from cost savings on variable inputs although diminishing returns to capital are prevalent our results also show that knowledge factors augment growth more importantly they appear to explain a substantial proportion of measured

the effects of double counting and expensing on the measured returns to r d this article focuses on the effects of double counting and expensing on the measured returns to r d the contribution of research and development r d to economic growth has been measured in two general ways the first is to compute total factor productivity in a growth accounting framework and to attribute this residual growth to r d the prevailing view is that in the presence of double counting the measured contribution of r d represents the return above and beyond the normal remuneration to traditional capital author demonstrate that this excess returns interpretation eri is essentially correct in the growth accounting framework and that the resulting bias in the measured contribution of r d to growth is large in postwar u s manufacturing the measured residual is biased downward by as much as 30 the expensing bias is downward and reinforces the excess returns bias in this case and the total bias is large in both the growth accounting and econometric contexts the magnitude of the biases may vary across samples and over time there is simply no substitute for properly measured variables

endogenous technical advance and the stochastic trend in output a neoclassical approach abstract in the recent endogenous growth literature the trend in output is stochastic while investment in scientific knowledge is treated as analogous to a capital stock this paper models both research and development r d and disembodied technical advance using neo classical equations which specify the equilibrium stocks as a function of prices and output the elasticity of r d in the production function estimated using factor shares is time varying and increasing returns to scale are increasing in all factors the most important aspect of the model is that the equilibrium rate of technical advance is not cyclically invariant but co moves with output at business cycle frequencies this allows the production function to behave as a stochastic trend growth accounting demonstrates that long term variations in the rate of productivity growth have been associated mainly with low frequency fluctuations in the rate of disembodied technical advance with secondary effects from the stocks of r d and physical capital during the high productivity period 1948 1972 technical advance contributed 1 48 percentage points per year to output with 0 98 accounted for by r d the productivity slowdown of the mid 1970s was accounted by a gradual decline in the effect of r d and a more abrupt collapse in disembodied technology the subsequent productivity revival was associated with two accelerations in disembodied technical advance the first beginning in the early 1980s and the second in the mid 1990s the production function is simulated in a small econometric model model simulations find that exogenous shocks to the inflation rate generate significant variations in growth by inducing fluctuations in disembodied technology

a matching model with endogenous skill requirements we consider a labor market in which workers differ in their abilities and jobs differ in their skill requirements the distribution of worker abilities is exogenous but we model the choice of skill requirements by firms high skill jobs produce more output than low skill jobs but high skill jobs require high skill workers and thus are more difficult to fill we use a matching model together with a nash bargaining approach to wage setting to determine the equilibrium mix of job types along with the equilibrium relationship between worker and job characteristics wages and unemployment

an untold story the characteristics of welfare use in british columbia the dynamics of welfare participation are analyzed using a unique longitudinal data set derived from provincial administrative records over the period 1980 92 the principal findings are that the majority of welfare spells are experienced by single men and women without children and that while most welfare spells are short there is a high incidence of recidivism although continuous long term use and dependence on welfare is not characteristic of most recipients experiences the program does not provide an effective route to financial independence since most users periodically return to the program

unemployment fluctuations over the life cycle abstract in this paper we show that i the volatility of worker flows increases with age in us cps data and ii a search and matching model with life cycle features endogenous separation and search effort is well suited to explain this fact with a shorter horizon on the labor market older workers outside options become less responsive to new employment opportunities thereby making their wages less sensitive to the business cycle their job finding and separation rates are then more volatile along the business cycle the horizon effect cannot explain the significant differences between prime age and young workers as both age groups are far away from retirement a lower bargaining power on the youth labor market brings the model closer to the data

do investors value a firm s commitment to social activities previous empirical research has found mixed results for the impact of corporate social responsibility csr investments on corporate financial performance cfp this paper contributes to the literature by exploring in a two stage investor decision making model the relationship between a firm s innovation effort csr and financial performance we simultaneously examine the impact of csr on both accounting based financial health and market based tobin s q financial performance measures from a sample of top corporate citizens we find that 1 a firm s social responsibility commitment csr contributes to its financial performance 2 after controlling for investment in innovation activities csr continues to have a positive impact on a firm s financial performance 3 the customer dimension of csr has a positive effect on both cfp measures whereas the employee dimension indicates a significant impact only on financial heath and 4 the community relation dimension of csr only affects the market based cfp measure of firms with high innovation intensity

distance to retirement and older workers employment the case for delaying the retirement age this paper presents empirical evidence and a theoretical foundation in favor of the view that the retirement age decision affects older workers employment prior to retirement to the extent that there are search frictions on the labor market the return on jobs is determined by their expected duration the time to retirement is then key to understanding older workers employment countries with a retirement age of 60 are indeed characterized by lower employment rates for workers aged 55 59 based on the french labor force survey we show that the likelihood of employment is significantly affected by the distance to retirement in addition to age and other relevant variables we then extend mccall s job search model by explicitly integrating life cycle features with the retirement decision using simulations we show that the distance effect in interaction with the generosity of unemployment benefits and the depressed demand for older workers explains the low rate of employment just before the eligibility age for the social security pension finally we show that implementing actuarially fair schemes not only extends the retirement age but also encourages a more intensive job search by older unemployed workers jel j22 j26 h55

efficiency in a search and matching model with endogenous participation abstract we show that in a search matching model with endogenous participation in which workers are heterogeneous with respect to market productivity satisfying the hosios rule leads to excessive vacancy creation

assessing the impact of management buyouts on economic efficiency plant level evidence from the united kingdom we assess the total factor productivity of 35 752 manufacturing establishments before and after management buyouts mbos mbo plants are less productive than comparable plants before the transfer of ownership they experience a substantial increase in productivity after a buyout which appears to be due to measures undertaken by new owners to reduce the labor intensity of production via outsourcing of intermediate goods and materials these findings which are pervasive across industries imply that mbos reduce agency costs and enhance economic efficiency our evidence is consistent with jovanovic and rousseau 2002 who suggest that ownership changes shift resources to more efficient uses and to better managers

errors in output deflators revisited unit values and the producer price index output prices are mismeasured because of inadequate adjustments for changes in product quality thus when quality improves inflation will be systematically overstated in this study i find that the most commonly used indicator of the rate of inflation the producer price index misses about 40 percent of the change in quality however i also find that the mismeasurement of output prices is constant over time implying that errors of measurement are not a significant determinant of either the slowdown or recent acceleration in manufacturing productivity i introduction estimates of the rate of inflation are used to construct key measures of economic performance such as growth in real wages output and productivity errors in output price deflators could distort these measures and result in the adoption of misguided economic policies for example systematic underestimation of output or productivity growth could induce policymakers to take unusual actions to raise an industry s real output that may be unwarranted inaccurate estimates of price changes could also distort the results of econometric studies inflation adjusted variables are also used in econometric estimation of demand production and cost functions errors in output price statistics could yield biased and imprecise estimates of the parameters of these functions economists have long recognized the possibility that conventional estimates of the rate of inflation based on price indices such as the producer price index ppi exceed the true rate of inflation 1 the major source of mismeasurement is the adjustment of price indexes to reflect quality change 2 since the early 1960s economists have strongly advocated the use of hedonic price indexes which include adjustments for quality changes in goods based on their characteristics unfortunately the statistical agencies of the federal government have adopted these methods in only two sectors housing and computers the magnitude of these adjustments can best be illustrated by the case of computers before the hedonic price index was introduced in 1986 computer prices were treated as constant over time the quality adjusted hedonic price deflator for computers declines at an average annual rate of approximately 20 percent per year over the last twenty years 3 outside of these two industries the bureau of labor statistics tracks quality changes by employing a resource cost criterion a quality change is recorded only when there is a corresponding change in the cost of producing the product costless improvements in quality typically due to technological change are not recorded this is a likely source of bias according to early and sinclair 1983 a new product is linked into the index at its current price with the overall index showing no change in price thus if a drug company develops a new drug that is twice as good as its previous product the price index for the drug category may not decline at all even if the price of the new drug increases by less than 100 percent because of competition in the drug industry another potential source of mismeasurement is associated with the lag between the time a product is introduced in the marketplace and its appearance in the industry price series the bureau of labor statistics only tracks the price changes of a good after it captures a non negligible share of the market price movements which are typically downward that occur between the time the product has been introduced and its appearance in the price statistics are not incorporated in the price index there is some empirical evidence that this new goods bias may be severe in a recent audit of the producer price index for prescription drugs berndt griliches and rosett 1992 report that products under two years old were not sampled at all in the construction of the price index although many have argued that the measurement problems are serious until recently there was no estimate of the magnitude of the bias

federal funding and the level of private expenditure on basic research economists have long been interested in questions concerning the role of government in stimulating private sector innovation in the late 1950s blank and stigler 2 asked in particular whether government funded industrial research and development r d activity was likely to stimulate or substitute for private sector expenditure on r d a number of studies have since addressed this issue and most conclude in favor of the existence of a positive relationship between federal r d expenditures and the level of private r d investment leyden and link 8 have provided a theoretical rationale for this observed complementarity they suggest that federallyfunded industrial r d activity may generate knowledge spillovers and other infratechnology that may raise the productivity of inputs into private r d r d is a heterogeneous activity and a question which has received relatively little attention in the literature is the extent to which the apparent complementarity between federal and private industrial r d spending holds for the different components of firms r d budgets cross section evidence on this issue produced by link 13 suggests that

the intergenerational transfer of welfare dependency some statistical evidence does a mother s welfare receipt increase the future dependency of her children does the welfare system thus stimulate the dependency of future generations parameter estimates reported here suggest such intergenerational effects the sample comprises young girls and their mothers after control for observed and unobserved heterogeneity a mother s welfare participation is found to increase her daughter s later welfare dependency copyright 1992 by mit press

search mismatch and unemployment abstract this paper explores the efficiency of the equilibrium allocation in a matching model with heterogeneous workers and jobs in the basic setup there are two types of workers with different skill levels both types can perform the simple tasks of unskilled jobs while the complex tasks of skilled jobs require a high ability worker we demonstrate that the equilibrium outcome with random search and ex post bargaining is never efficient under the hosios condition the average wage is correct but bargaining compresses the wage distribution relative to workers shadow values this feature distorts the relative profits of jobs making it too attractive for firms to create skilled jobs furthermore due to the low skill premium the high ability workers may accept too many jobs finally in an extension we show that the introduction of separate markets for the two types of jobs is not sufficient to guarantee efficiency

the unemployment volatility puzzle is wage stickiness the answer i discuss the failure of the canonical search and matching model to match the cyclical volatility in the job finding rate i show that job creation in the model is influenced by wages in new matches i summarize microeconometric evidence and find that wages in new matches are volatile and consistent with the model s key predictions therefore explanations of the unemployment volatility puzzle have to preserve the cyclical volatility of wages i discuss a modification of the model based on fixed matching costs that can increase cyclical unemployment volatility and is consistent with wage flexibility in new matches

unemployment participation and worker flows over the life cycle we estimate and report life cycle transition probabilities between employment unemployment and inactivity for male workers using current population survey monthly files we assess the relative importance of each probability in explaining the life cycle profiles of participation and unemployment rates using a novel decomposition method a key robust finding is that most differences in participation and unemployment over the life cycle can be attributed to the probability of leaving employment and the probability of transiting from inactivity to unemployment while transitions from unemployment to employment the job finding probability play secondary roles we then show that a simple life cycle extension of a three state labor search model with leisure shocks can qualitatively replicate the empirical unemployment and participation life cycle profiles without introducing age or worker heterogeneity in market abilities we conclude that models that seek to explain life cycle work patterns should not ignore transitions to and from inactivity

r d productivity and the spillover effects of high tech industry on the traditional manufacturing sector the case of taiwan this study sets out to estimate the impact of r d on productivity within the private sector with further analysis of the different impacts of r d within high tech and traditional manufacturing firms we also attempt to examine the spillover effects from r d investment in the high tech sector on productivity growth within the traditional industries using a sample of 136 large manufacturing firms during the period 1994 2000 we develop an extended version of the cobb douglas production function model and our findings suggest that taiwan s r d investment had a significant impact on firm productivity growth with output elasticity standing at around 0 18 when the sample is divided into high tech and traditional firms the r d output elasticity in high tech firms is significantly greater than that found in traditional firms in addition the average rate of return in high tech firms is much greater than that estimated for other industries besides our empirical results show that although significant the impact of r d investment from the high tech sector on the productivity growth of traditional firms is rather limited

the duration of welfare spells probability distributions for the duration of welfare spells are estimated the principle guiding the work is that a recipient will not exit from welfare if the expected utility on welfare exceeds the expected utility of welfare the analysis indicates that while the majority of welfare spells are of short duration a nontrivial minority of spells are quite long those recipients with long spells are found to differ in predictable ways from those experiencing brief spells this suggests that strategies to move women off welfare are unnecessary in many cases and should be targeted on those most likely to be long term recipients copyright 1987 by mit press

true protection concepts and their role in evaluating trade policies in ldcs in many ldcs it is not uncommon to find incentives designed to encourage import substitution activities coexisting alongside incentives aimed at encouraging export activities this article evaluates a recent approach to evaluating commercial policy which among other things highlights some of the implications of simultaneously pursuing import substitution and export promotion the study develops a model which emphasises the incidence of protection and identifies the concept of true protection empirical results for a number of ldcs are discussed and the implications of these results evaluated in addition the article contrasts this approach with the effective protection approach to evaluating commercial policy

the effect of government funding on private industrial research and development a re assessment a number of previous studies have attempted to determine the effect of federal support of research and development r d performed in industry on the rate of private investment in r d by estimating regressions of private r d expenditure on federal industrial r d expenditure controlling for total demand sales and in some cases other variables this paper presents arguments and econometric evidence in support of the hypothesis that due to misspecification of the private r d equation i e failure to distinguish government sales from other sales previous estimates of the effect of federal industrial r d on private r d funding are seriously upwardly biased

the effect of educational attainment on welfare dependence evidence from canada abstract the impact of educational attainment on the duration of welfare spells is analysed using a unique data set derived from the administration of the social assistance program in canada over the period 1986 1993 the empirical analysis includes controls for demographic characteristics program parameters labour market conditions and unobserved individual characteristics it is found that that educational attainment has a much greater impact on the welfare exit rate for women than for men additionally the welfare exit rate for women is more sensitive to family status and program benefits but less sensitive to the unemployment rate relative to that for men

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

two questions about european unemployment a general equilibrium search model makes layoff costs affect the aggregate unemployment rate in ways that depend on equilibrium proportions of frictional and structural unemployment that in turn depend on the generosity of government unemployment benefits and skill losses among newly displaced workers the model explains how before the 1970s lower flows into unemployment gave europe lower unemployment rates than the united states and also how after 1980 higher durations have kept unemployment rates in europe persistently higher than in the united states these outcomes arise from the way europe s higher firing costs and more generous unemployment compensation make its unemployment rate respond to bigger skill losses among newly displaced workers those bigger skill losses also explain why u s workers have experienced more earnings volatility since 1980 and why especially among older workers hazard rates of gaining employment in europe now fall sharply with increases in the duration of unemployment

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

analyzing trade offs in international climate policy options the case of the green climate fund summary we investigate the trade offs between economic growth and low carbon targets for developing and developed countries in the period up to 2035 policy options are evaluated with an original version of the dynamic cge model gdyne abatement costs appear to be strongly detrimental to economic growth for developing countries we investigate options for reducing these costs that are consistent with the current negotiations we show that the green climate fund financed through a levy on carbon taxation can benefit all parties and large benefits are associated with investment of the green climate fund to foster energy efficiency in developing countries

optimal life cycle unemployment insurance we argue that us welfare would rise if unemployment insurance were to be increased for young workers and decreased for old this is because young workers have little means to smooth consumption during unemployment and want jobs to accumulate high return human capital so unemployment insurance is highly valuable to them while the induced moral hazard problem is mild we consider a life cycle model with unemployment risk and endogenous search eort that we calibrate to match us labor market institutions we nd that allowing unemployment replacement rates and other government transfers to decline with age yields sizeable welfare gains which amount to around two thirds of the gains attained under the constrained optimal scheme for unemployment insurance over the life cycle

age dependent employment protection this paper examines the age related design of firing taxes by extending the theory of job creation and job destruction to account for a finite working life time we first argue that the potential employment gains related to employment protection are high for older workers as they are magnified by the proximity to retirement but higher firing taxes for these workers increase job destruction rates for the younger generations furthermore from a normative standpoint when firms cannot ex ante age direct their search the impact of each generation of unemployed workers on the average return on vacancies makes the internalization of the search costs for the other generations imperfect through the ex post nash bargaining process we show that the first best age profile of firing taxes is typically hump shaped partially in contradiction with existing policies in some european countries taking into account the fact that the human capital of older workers is more specific than general tends to exacerbate these results

a note on the life cycle search and matching model with segmented labor markets abstract recently there has been renewed interest in labor search and matching models that incorporate a life cycle structure by assuming finite horizons existing studies provide detailed analyses on the age dynamics of job creation and destruction assuming that workers of all ages search for jobs in the same market this paper examines a related environment that has drawn less attention where the labor market is exogenously segmented by age the paper finds sufficient conditions for the model to yield unambiguous predictions on the age profiles of key variables and compares them with the corresponding conditions in models with a single market the paper further examines the age profiles of these key variables in the efficient allocation in particular with no persistence in idiosyncratic match productivity the efficient allocation is found to exhibit monotonic age profiles for the job finding and separation rates

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

spillovers from publicly financed r d capital in high tech industries abstract this paper employs a dynamic production model to examine the short run effects of publicly financed r d capital on the cost structure of six high tech us manufacturing industries the results show that given an industry s output publicly financed r d capital reduces the variable production cost in all industries in addition an increase in publicly financed r d causes output to increase implying that producers as well consumers are better off despite the presence of strong monopoly power in some industries a low bound for the social rate of return to publicly financed r d is also calculated

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

the true protection concept a comment on greenaway and milner empirical studies estimating shift parameters to evaluate the true protection especially for developing countries often reach the result that those parameters have very high values this study is to show that it is not substitutional relationships but much more the very inflationary monetary policy of many developing countries which forces the shift parameters towards one moreover it is shown that it makes little sense to distinguish between traditional and non traditional exports and that shift parameters are not necessarily stable over time

r d intensity and international joint venture performance in an emerging market moderating effects of market focus and ownership structure in this study we examine the contingent relationship between r d intensity and performance of international joint ventures ijvs in an emerging market context based on teece s 1986 arguments regarding the appropriability of innovation we identify two types of appropriability hazard related to ijvs r d activities in this context local market related and local partner related hazards we argue that a positive relationship between r d intensity and ijv performance is more likely to occur if these appropriability hazard can be mitigated results using a sample of manufacturing ijvs in china provide support for these arguments we find that r d intensity is positively related to performance in export market focused ijvs but not in local market focused ijvs in addition using a configuration approach we find that r d intensity is positively related to performance in ijvs that have an export market focus and in which the multinational companies mncs have a majority ownership but not in other market focus ownership structure configurations these findings contribute to our knowledge of r d activities of mncs overseas subsidiaries

r versus d estimating the differentiated effect of research and development on innovation results r d is considered to be the main source of innovation we argue that r d is too broad a measure including activities differing in purposes culture people management and other features however empirical studies have not analyzed them separately mainly due to the lack of data using firm level data the aim of this paper is to estimate the differentiated effect of research and development on different innovation outputs results show that both research and development activities are important however we find that development activities are more important for product innovation while the effect of research activities is higher on process innovation moreover we analyze differences by technological intensity of the sector when analyzing product and process innovations we find evidence supporting the existence of higher payoffs to development and especially to research in low tech sectors when compared with high tech ones

afdc participation across generations william julius wilson s influential book the truly disadvantaged 1987 has sparked a vigorous debate about the existence and causes of an urban underclass while there is still no clear agreement about definitions the growing literature on the underclass focuses both on traits of the current generation and the traits of their parents if an underclass exists its current members are assumed to live in deteriorating inner cities to experience long spells of joblessness or welfare dependency and or to engage in illegal and antisocial activities furthermore these traits are assumed to be correlated across generations leading to a cycle of deprivation in this paper i focus on one such link across generations by examining the correlation in welfare participation of daughters and their parents i first present the state of knowledge about the extent to which children of parents who received aid to families with dependent children afdc are themselves more likely to participate in this welfare program second i discuss the remaining gaps in our understanding and give several contrasting altemative explanations for the observed correlation each with a different policy implication