the value of hiring through employee referrals using personnel data from nine large firms in three industries call centers trucking and high tech we empirically assess the benefit to firms of hiring through employee referrals compared to nonreferred applicants referred applicants are more likely to be hired and more likely to accept offers even though referrals and nonreferrals have similar skill characteristics referred workers tend to have similar productivity compared to nonreferred workers on most measures but referred workers have lower accident rates in trucking and produce more patents in high tech referred workers are substantially less likely to quit and earn slightly higher wages than nonreferred workers in call centers and trucking the two industries for which we can calculate worker level profits referred workers yield substantially higher profits per worker than nonreferred workers these profit differences are driven by lower turnover and lower recruiting costs for referrals jel codes j24 m51 j30 j63

learning and wage dynamics we develop a dynamic model of learning about worker ability in a competitive labor market the model produces three testable implications regarding wage dynamics 1 although the role of schooling in the labor market s inference process declines as performance observations accumulate the estimated effect of schooling on the level of wages is independent of labor market experience 2 timeinvariant variables correlated with ability but unobserved by employers such as certain test scores are increasingly correlated with wages as experience increases and 3 wage residuals are a martingale we present evidence from the nlsy that is broadly consistent with the model s predictions

linking permit markets multilaterally we formally study the determinants magnitude and distribution of efficiency gains generated in multilateral linkages between permit markets we provide two novel decomposition results for these gains characterize individual preferences over linking groups and show that our results are largely unaltered with strategic domestic emissions cap selection or when banking and borrowing are allowed using the paris agreement pledges and power sector emissions data of five countries which all use or considered using both emissions trading and linking we quantify the efficiency gains we find that the computed gains can be sizable and are split roughly equally between effort and risk sharing

output dynamics in real business cycles models the time series literature reports two stylized facts about output dynamics in the united states gnp growth is positively autocorrelated and gnp appears to have an important trend reverting component this paper investigates whether current real business cycle rbc models are consistent with these stylized facts many rbc models have weak internal propagation mechanisms and must rely on external sources of dynamics to replicate both facts models that incorporate labor adjustment costs are partially successful they endogenously generate positive autocorrelation in output growth but they need implausibly large transitory shocks to match the trend reverting component in output

capital labor substitution and competitive nonlinear endogenous business cycles abstract we develop simple geometrical methods to study local indeterminacy bifurcations and stochastic sunspot equilibria near a steady state in nonlinear two dimensional economic models we present in particular a simple constructive geometrical characterization of the support of stochastic sunspot equilibria not only arbitrarily near a steady state but also along local bifurcations these methods are applied to a simple aggregative model to study in particular the influence of capital labor substitution and of the aggregate labor supply wage elasticity on the occurrence of competitive endogenous deterministic or stochastic fluctuations journal of economic literature classification numbers e32 c62

production function regressions returns to scale and externalities a number of recent papers have used simple linear regressions in an attempt to identify market structure the extent of returns to scale and possible external effects in u s manufacturing industries the results obtained from these regressions have important implications for several branches of modern macroeconomics as a result the macro literature frequently cites specific numerical evidence from caballero and lyons 1992 and hall 1990 which suggests that there are quantitatively significant increasing returns to scale or external effects in u s manufacturing in contrast it is the argument of this paper that this evidence is not convincing the most robust evidence suggests that the typical u s manufacturing industry displays constant returns with no external effects on the other hand there is significant heterogeneity across industries

discretion in hiring job testing technologies enable firms to rely less on human judgement when making hiring decisions placing more weight on test scores may improve hiring decisions by reducing the influence of human bias or mistakes but may also lead firms to forgo the potentially valuable private information of their managers we study the introduction of job testing across 15 firms employing low skilled service sector workers when faced with similar applicant pools we find that managers who appear to hire against test recommendations end up with worse average hires this suggests that managers often overrule test recommendations because they are biased or mistaken not because they have superior private information the firms in our setting may therefore be able to improve outcomes of hires by limiting managerial discretion and relying more on test recommendations

business cycles with free entry ruled by animal spirits abstract we approach business cycles on the basis of extrinsic uncertainty related to static indeterminacy of free entry oligopolistic equilibria firms producing under increasing returns to scale compete in prices in contestable markets the number of active firms varies across sectoral equilibria which depend upon correct producers conjectures on competitors actions coordination of these conjectures by some markov chain generates endogenous shocks in markups and productivity consumers expectations may in addition magnify this extrinsic uncertainty as the source of fluctuations does not rely on dynamic indeterminacy the required degree of increasing returns may be arbitrarily small provided goods substitutability within each sector becomes arbitrarily large

when strong ties are strong networks and youth labour market entry the conditions under which young workers find their first real post graduation jobs are important for their future careers and insufficiently documented given their potential importance for young workers welfare to study these conditions and in particular the role played by social ties we use a swedish population wide linked employer employee data set of graduates from all levels of schooling that includes detailed information on family ties neighbourhoods schools class composition and parents and children s employers over a period covering years with both high and low unemployment together with measures of firm performance we find that strong social ties parents are an important determinant for where young workers find their first job the effects are larger if the graduate s position is weak low education bad grades during high unemployment years and when information on potential openings are likely to be scarce on the hiring side by contrast the effects are larger if the parent s position is strong long tenure high wage and if the parent s plant is more productive the youths appear to benefit from the use of strong social ties through faster access to jobs and by better labour market outcomes as measured a few years after entry in particular workers finding their entry jobs through strong social ties are considerably more likely to remain in this job while experiencing better wage growth than other entrants in the same plant firms also appear to benefit from these wage costs relative to comparable entrants starting at a lower base they also benefit on the parents side parents wage growth drops dramatically exactly at the entry of one of their children in the plant although this is a moment when firm profits tend to be growing indeed the firm side benefits appear large enough for at least small firms to increase job creation at the entry level in years when a child of one of their employees graduates

market distortions and local indeterminacy a general approach we provide a methodology to study the role of market distortions on the emergence of indeterminacy and bifurcations it consists in introducing general specifications for the elasticities of the crucial functions defining the aggregate equilibrium dynamics of the model this allows us to study how market distortions influence the range of values for the elasticity of input substitution under which local indeterminacy and bifurcations occur highlighting the main channels and classes of distortions responsible for indeterminacy most of the specific market imperfections considered in the related literature are particular cases of our framework comparing them we obtain several equivalence results in terms of local dynamic properties applying this methodology to the woodford 30 framework we find that distortions in the capital market per se do not play a major role we further show that for empirically plausible values of elasticity of substitution between inputs indeterminacy requires a minimal degree of distortions this degree seems to be high under output market distortions while with labor market distortions the required degree is empirically plausible

are those paid more really more productive the case of experience this study uses computerized personnel microdata on the white male managerial and professional employees at a major u s corporation to address the following question can the additional earnings which are associated with more labor market experience at a point in time really be explained by higher productivity at the same point in time our answer to this question based on both cross sectional and longitudinal information is that performance plays a substantially smaller role in explaining cross sectional experience earnings differentials and earnings growth than is claimed by those who have adopted the human capital explanation of the experience earnings profile this response depends critically on our assumption that the performance ratings which supervisors give to their white male managerial and professional subordinates adequately reflect the subordinates relative productivity in the year of assessment we present a great deal of evidence which strongly supports this assumption

indeterminacy and sunspots in a monetary economy with limited participation abstract this paper shows that in a monetary real business cycle model with limited participation the region of indeterminacy depends crucially on i the coefficient of relative risk aversion ii the labor supply elasticity and iii the degree of increasing return to scale however the quantitative impact of the money growth rate is very small

stationary sunspot equilibria in a finance constrained economy abstract stationary sunspot equilibria are shown to exist in a production economy with infinite lived agents when it is not possible to borrow against future wage income equilibrium fluctuations exhibit persistence over time scales of the same order of magnitude as observed business cycles an active fiscal policy that stabilizes aggregate money expenditures can prevent such fluctuations

social and spatial networks in labour markets social connections and referrals are ubiquitous in the labour market both on the job seeker side and on the employer side this article reviews recent developments in the study of referrals highlighting what we have learned regarding the use and impact of referrals on various labour market outcomes and pointing out the increasingly nuanced picture we are gaining on the effects of referrals it then discusses directions for future research emphasizing the importance of using newly available data and combinations of datasets and of making tighter connections with the burgeoning macro labour research that is based on a search and matching framework finally it evaluates the role of referrals from the point of view of policy makers discussing their social welfare implications and ways in which they could be explicitly incorporated into various labour market policies the importance of tighter collaboration between policy makers researchers employers and practitioners is stressed to conduct more rigorous experimentation and evaluation of potential referral based policies and programmes

transferable licenses versus nontransferable licenses what is the difference this paper questions the presumption that transferable licenses are worth more and result in higher welfare we show that the price of a transferable license may be lower than that of its nontransferable counterpart if the underlying quota is not very severe however transferability is preferable to nontransferability if consumer surplus and license revenue have equal weight in the welfare function we also examine whether licenses will be monopolized by domestic producers with market power the models have implications for several issues including the design of pollution permits and how to maximize revenue from ticket sales

multiple steady states and endogenous fluctuations with increasing returns to scale in production abstract the purpose of this paper is to study the influence of the elasticity of capital labor substitution and of the labor supply elasticity on the existence of multiple pareto ranked stationary equilibria local indeterminacy bifurcations and expectations driven fluctuations in economies with external and internal increasing returns to scale in production this is done through general geometrical methods that do not depend upon particular specifications for preferences and technology for the sake of concreteness the analysis focuses on the model with heterogeneous agents and financial constraints presented in woodford j econ theory 40 1986 128 137 and extended by grandmont pintus and de vilder capital labor substitution and competitive nonlinear endogenous business cycles crest working paper 9728 1997 to account for capital labor substitution increasing returns to scale are incorporated in two different market structures an economy with aggregate production externalities and perfectly competitive markets an economy with increasing returns internal to the firm and imperfect competition in the product s market s only journal of economic literature classification numbers c61 e32

who gets the job referral evidence from a social networks experiment we use recruitment into a laboratory experiment in kolkata india to analyze how job networks select individuals for employment opportunities we present evidence that individuals face a tradeoff between choosing the most qualified individual for the job and the individual who is ideal from the perspective of their social network the experiment allows randomly selected subjects to refer members of their social networks to subsequent rounds of the experiment and varies the incentive schemes offered to these participants we find that when faced with performance pay individuals are more likely to refer co workers and less likely to refer family members high ability participants who are offered performance pay recruit referrals who perform significantly better on a cognitive ability task and also prove to be more reliable as evidenced by their choices in the trust game and performance on an effort task

standing and survival in the adult film industry abstractit is conventional wisdom that knowing the right people is essential for one s career this claim is supported in the literature on social capital however the empirical evidence in this field remains ambiguous while the literature recognizes that connections help finding any job at all it remains unclear if long term benefits exist in contrast to other industries collaborations between performers in adult films are easily observed consequently a collaborative network can be constructed which serves as an input in order to estimate the effect of a person s centrality on individual success unfortunately success is not easily observed either hence in this manuscript the survival in the industry is used as a proxy for professional success this assumption is justified by the economic argument that in the absence of lock in effects performers will remain in the industry as long as it remains profitable the profitability does not only depend on monetary aspects but also includes costs

dynamic effects of government expenditure in a finance constrained economy abstract this paper introduces constant government expenditure in woodford s finance constrained model j econ theory 1986 with capital labor substitution as presented in grandmont pintus and de vilder j econ theory 1998 and investigates how government expenditure influences local dynamics near multiple steady states depending upon the elasticity of substitution between capital and labor in production

indeterminacy and sunspots with constant returns recently there has been a renewed interest in the possibility of indeterminacy and sunspots or alternatively put in the existence of a continuum of equilibria that arises in dynamic economies with some market imperfections much of the research in this area has been concerned with the empirical plausibility of indeterminacy in markets with external effects or with monopolistic competition and which exhibit some degree of increasing returns while the early results on indeterminacy relied on relatively large increasing returns and high markups more recently benhabib and farmer 1996a showed that indeterminacy can also occur in two sector models with small sector specific external effects and very mild increasing returns

a primer on the mfa maze it is generally agreed that the arrangements that have regulated trade in textiles and clothing have slowed the natural shift in comparative advantage from industrial countries to developing countries but there is quite a bit of disagreement about how restrictive the multi fibre agreements mfa are the authors address the potential sources of allocative inefficiency occasioned by the mfa and search for evidence that the mfa has indeed led to such inefficiency in a theoretical section they identify five sources of inefficiency relating to allocations across countries across consumers and among firms within constrained countries in the empirical part of the paper first they provide evidence of the restrictiveness of the quota arrangements from trends in import shares for aggregate categories of textiles and clothing before and during the mfa then they provide evidence from a detailed examination of quota utilization rates and price differentials among ec importing countries among their findings relatively high utilization rates across exporters suggest a relatively high degree and stability of quota bindingness across exporters overshipment was highest for the most important by shipment value products there is concentration among a few leading exports china hong kong taiwan and thailand and a few importers benelux germany and the united kingdom the data suggest a positive correlation between the coefficients of variation in prices and quota utilization rates for china hong kong and korea suggesting that prices are related as one would expect to the degree of bindingness and the data suggest that binding quotas would be associated with higher import prices

hiring molecules not atoms comobility and wages what role do social connections play in the labor market a vast influential literature has detailed the ways in which ties facilitate the flow of information about job opportunities to workers as well as endorsements or referrals of workers to firms we propose that this role is not constrained to an informational one alone rather relationships between workers can enable a collective job matching process that facilitates the transfer of shared human capital from one organization to another yet comobility has been studied only occasionally and among elite workers in particular industries this study delivers both fieldwork as well as large sample analysis among all nongovernmental workers in denmark finding a 5 5 wage premium for those who move jointly instead of independently both in the full sample as well as when applying strict matching or fixed effects for workers or firms co movers whose skills are related but not identical capture a higher premium and the wage gains associated with comob

distribution of ability and earnings in a hierarchical job assignment model we examine the mapping of the distribution of ability onto earnings in a hierarchical job assignment model workers are assigned to a continuum of jobs in fixed proportions ordered by sensitivity to ability the model implies a novel marginal productivity interpretation of wages we derive comparative statics for changes in technology and in the distribution of ability we find conditions under which a more unequal distribution of ability maps onto a more less unequal distribution of earnings we also analyze an assignment model with variable proportions and find that in the cobb douglas case a rise in the inequality of ability always narrows the range of earnings

discrimination and the effects of drug testing on black employment abstract a common assumption is that the rise of drug testing among u s employers must have had negative consequences for black employment i use variation in the timing and nature of drug testing regulation to identify the impacts of testing on black hiring i find that adoption of protesting legislation increases black employment in the testing sector by 7 to 30 and relative wages by 1 4 to 13 0 with the largest shifts among low skilled black men the results are consistent with ex ante discrimination and suggest that drug testing may benefit african americans by enabling nonusing blacks to prove their status to employers

bayesian identification a theory for state dependent utilities we provide a revealed preference methodology for identifying beliefs and utilities that can vary across states a notion of comparative informativeness is introduced that is weaker than the standard blackwell ranking we show that beliefs and state dependent utilities can be identified using stochastic choice from two informational treatments where one is strictly more informative than another moreover if the signal structure is known then stochastic choice from a single treatment is enough for identification these results illustrate novel identification methodologies unique to stochastic choice applications include identifying biases in job hiring loan approvals and medical advice

matchmaker matchmaker the effect of old boy networks on job match quality earnings and tenure firms often view job applicant referrals from current employees as more informative than direct applications or referrals through formal labor market intermediaries such as placement firms we argue that old boy networks reduce employers uncertainty about worker productivity using jovanovic s job matching model we show that workers hired through the old boy network should 1 earn higher initial salaries 2 experience lower subsequent wage growth on the job and 3 stay on the job longer than otherwise comparable workers hired from outside the network we find considerable support for this theory using data from the 1972 survey of natural and social scientists and engineers

external effects in u s procyclical productivity abstract in this paper we highlight a new dimension of the aggregate procyclical productivity phenomenon we show that estimates of the degree of returns to scale are larger for manufacturing as a whole than for two digit industries since this difference must be due to factors that are only internalized at the most aggregate level we term it an external effect this result rules out explanations based on own input variation such as true increasing returns and unmeasured factor utilization tied to own activity as the sole explanations for aggregate procyclical productivity we explore several potential explanations of this external effect

matching with interviews abstract this paper explores how interviews affect the matching process when worker productivity is private information wages are determined by a single round of strategic bargaining after the worker is interviewed the implications of this hiring process for the efficiency of matching and the incidence and severity of statistical discrimination are considered the better are firms at identifying productive workers the worse the average quality of the unemployment pool so interviewing tends to slow down matching for every one multiple pareto rankable equilibria are possible such that any social group in a bad equilibrium faces stricter hiring standards longer spells of unemployment and lower welfare

layoffs and lemons over the business cycle abstract this paper develops a simple model in which unemployment arises from a combination of selection and bad luck during recessions the proportion of workers who are laid off due to low productivity declines during recessions diminishing the adverse signaling effect of an unemployment spell wage regressions estimated using the displaced workers supplement support this basic prediction of the model

the environmental kuznets curve and equilibrium indeterminacy abstract we illustrate that the existence of the environmental kuznets curve ekc could be the result of indeterminacy of equilibria in a simple neoclassical growth model with a single environmental externality in households utility function and with public abatement we characterize the condition on the parameters in preferences and in the pollution technology leading to local indeterminacy of equilibrium estimates of the crucial parameters of the model using data from economies that display the ekc satisfy the theoretical indeterminacy condition we find that the presence of abatement activities is not a necessary condition for indeterminacy equilibria and hence an ekc to arise on the other hand non separability of consumption and pollution in the utility function is crucial

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

is credit status a good signal of productivity in this article the author uses a unique identification strategy along with credit proxy variables in a national data set to test whether credit status reveals information about an employee s char

job information networks neighborhood effects and inequality this paper explores the theoretical and empirical literature to examine the use by different social groups of informal sources of information provided by friends relatives and acquaintances during job search and its consequences for the job market it also addresses the role of network structure and size the resource endowments of contacts and nature of the links between contacts to explain differences in the effects of job information networks in doing so the paper also turns to the sociology literature on job information networks and provides an economic perspective on such sociological concepts as strong versus weak ties inbreeding distance from structural holes etc the paper distinguishes between models of exogenous job information networks that is where individuals obtain job related information through a given social structure and endogenous job information networks which are social networks that result from individuals uncoordinated actions the paper pays special attention to such issues as physical and social proximity and sharing of information and discusses them in the context of the recent social interactions and neighborhood effects literature finally the paper outlines a model that integrates job information networks where interactions occur in business cycle frequencies with the dynamics of human capital formation which include the joint effects of parental community and neighborhood human capital and are set in life cycle frequencies for the purpose of organizing suggestions for future research and examining earned income inequality

ban the box convictions and public employment ban the box btb policies mandate deferred access to criminal history until later in the hiring process however these policies chiefly target public employers the study is the first to focus on the primary goal of btb reform by measuring the impact of btb policies on the probability of public employment for those with convictions to execute the analyses the study uses data from the national longitudinal survey of youth 1997 cohort 2005 2015 and difference in difference dd estimation the study finds that btb policies raise the probability of public employment for those with convictions by about 30 on average some scholars argue that btb policies encourage statistical discrimination against young low skilled minority males the study employs triple difference ddd estimation to test for statistical discrimination but uncovers no evidence to support the hypothesis jel j15 j71 j78 k4

sunspots and the business cycle in a finance constrained economy abstract this paper examines the cyclical properties of a finance constrained economy populated by two classes of households with heterogeneous preferences and featuring social increasing returns to scale the model exhibits indeterminacy for externalities mild enough so that the labor demand curve is downward sloping furthermore simulation results show that endogenous fluctuations driven by expectations are quantitatively relevant in opposition to standard real business cycles and sunspot models with single type of households our finance constrained economy reveals to be able to mimic both an acyclical pattern of the real wage and strong procyclical movements of aggregate consumption journal of economic literature classification numbers e2 e32

capacity utilization under increasing returns to scale abstract this paper overcomes an important objection against the empirical relevance of the benhabib farmer model as a potential account of actual business cycle fluctuations this is attributable to an elasticity effect and a returns to scale effect of capacity utilization these effects are closely related to the empirical puzzles that capital appears to play an insignificant role in explaining cyclical movements in output and that the estimated labor elasticity appears to be larger than labor s share due to these effects multiple equilibria and persistent fluctuations can easily occur in a growth model for externalities mild enough so that the aggregate labor demand curve is downward sloping analyses show that the propagation mechanism generated by capacity utilization under mild increasing returns is capable of explaining the periodic patterns of u s business cycles documented by watson journal of economic literature classification numbers e32 e22 c52

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

are emily and greg more employable than lakisha and jamal a field experiment on labor market discrimination we study race in the labor market by sending fictitious resumes to help wanted ads in boston and chicago newspapers to manipulate perceived race resumes are randomly assigned african american or white sounding names white names receive 50 percent more callbacks for interviews callbacks are also more responsive to resume quality for white names than for african american ones the racial gap is uniform across occupation industry and employer size we also find little evidence that employers are inferring social class from the names differential treatment by race still appears to still be prominent in the u s labor market jel j71 j64

indeterminacy and increasing returns abstract we investigate properties of the one sector growth model with increasing returns under two organizational structures capable of reconciling the existence of aggregate increasing returns with competitive behavior by firms the first involves input externalities the second involves monopolistic competition we show for parameters in close accord with recent literature on real business cycles that the model displays an indeterminate steady state that can be exploited to generate a model of business fluctuations driven by self fulfilling beliefs in our first class of models growth is generated by exogenous increases in factor productivity in the second class the marginal product of capital is large enough for endogenous growth journal of economic literature classification numbers e00 e3 o40

worker characteristics and wage differentials evidence from a gift exchange experiment there is ample empirical evidence indicating that a substantial fraction of the population exhibits social preferences recent work also shows that social preferences influence the effectiveness of incentives in labor relations hence when making contracting decisions employers should take into account that workers are heterogenous with respect to both their productivity and their social preferences this paper presents causal evidence that they do in a real effort experiment we elicit measures of workers productivity and trustworthiness and make this information available to potential employers our data show that employers pay significant wage premia for both traits firms make highest profits with trustworthy workers in particular with highly productive and trustworthy workers we also document differences in the strength of gift exchange across worker types in particular output and profit levels of trustworthy workers are less dispersed than those of not trustworthy workers jel code c910 j410 d860

will affirmative action policies eliminate negative stereotypes a key question concerning affirmative action is whether the labor market gains it brings to minorities can continue without it becoming a permanent fixture in the labor market the authors argue that this depends on how the policy affects employers beliefs about the productivity of minority workers they study the joint determination of employer beliefs and worker productivity in a model of statistical discrimination in job assignments the authors prove that even when identifiable groups are equally endowed ex ante affirmative action can bring about a situation in which employers correctly perceive the groups to be unequally productive ex post copyright 1993 by american economic association

grade inflation social background and labour market matching a model is presented where workers of differing abilities and from different social backgrounds are assigned to jobs based on grades received at school it is examined how this matching is affected if good grades are granted to some low ability students such grade inflation is shown to reduce the aggregate wage of the lower class workers because employers use social origin as a signal for productivity if grades are less than fully informative moreover the high ability students from the higher class may benefit from grade inflation since this shields them from the competition on the part of able students from the lower classes

informal job search and black youth unemployment in this paper i analyze how young black and white unemployed jobseekers use various methods of search and the employment outcomes which result from their use the focus is on distinguishing informal search methods i e friends and relatives or direct application without referral from more formal ones in analyzing racial differences the results show that the two informal methods of search account for about 90 of the difference in employment probabilities between white and black youth this also accounts for 57 71 of the difference in unemployment rates between the two furthermore most of these results reflect differences in the ability of these methods to generate job offers as opposed to differences in search effort or job acceptance rates however our ability to explain these differences through personal family and household characteristics was generally quite limited this abstract was borrowed from another version of this item

salaries and piece rates compensation can take many forms remuneration can come as pecuniary payments as fringes such as health and pension benefits or as a nonpecuniary reward such as plush office furniture that costs the firm less than it benefits the worker a significant literature has examined the trade offs between pecuniary and nonpecuniary compensation the modern work having been pioneered by rosen 1974 more recently another body of literature has examined the selection of method of total compensation ignoring the distinction between pecuniary and nonpecuniary payment this work has focused on risk and incentive factors it has resulted in comparisons of compensation based on absolute output levels to that based on relative performance it has also led to explorations of the relation of compensation to experience over the work life 2 little attention has been paid to what may be among the most important and obvious distinction in methods of compensation namely the choice between a fixed salary for some period of time that is paying on the basis of input and some workers receive compensation that is specified in advance and not directly contingent on performance instead it depends on an input measure such as hours worked for others compensation is directly related to output this essay is an attempt to predict a firm s choice of compensation method piece rates are defined more rigorously among the more important factors discussed are worker heterogeneity incentives sorting considerations monitoring costs and asymmetric information one result is that salary workers tend to be of lower quality and more homogeneous than are their piece rate counterparts numerous additional results are provided helpful comments by victoria lazear and yoram weiss are gratefully acknowledged support was provided by the department of labor and the national science foundation 1 see lazear and rosen 1981 stiglitz 1981 holmstrom 1982 green and stokey 1983 2 see lazear 1979 1981 and harris and holmstrom in press

international emissions trading with endogenous allowance choices abstract this paper compares endogenous choices of tradable and non tradable emission allowances by non cooperative countries i find that the cost savings of trading do not necessarily lead to less pollution in particular environmentally more concerned countries usually choose less allowances if these are tradable but this may be offset by the choice of more allowances on the side of environmentally less concerned countries moreover if the establishment of a trading system requires the unanimous approval of all countries there may be no agreement on trading even if it were to lead to less pollution overall conversely a trading system may find unanimous approval even if it induces more pollution

customer and supplier driven externalities the purpose of this paper is to provide empirical evidence helpful for distinguishing different types of externalities we pursue this by extending the productionfunction framework of robert e hall 1990 and caballero and lyons 1990 1992 to exploit two key dimensions of the data disaggregate input output relationships and differences between estimates emphasizing time series versus cross sectional aspects of the data we obtain three main results first from the within estimates using annual data which emphasize the time series properties common across sectors we find a strong reduced form relationship between industry productivity and the activity level input growth of customers in sharp contrast supplier activity levels are insignificant the second result derives from between estimates which emphasize the cross sectional dimension of the data here we find the opposite is true there is a strong reduced form relationship between industry productivity and the activity level of suppliers but no relationship with customer activity levels we interpret the first two results as suggesting that over shorter horizons the linkage between an industry and its customers is pivotal in the transmission of external effects while in the long run external effects are mostly related to intermediate goods linkages the third result concerns the transition from short to long run we find that as the number of periods over which the variables are averaged is incrementally increased from one year toward the full sample period 27 years the significance of customers versus suppliers smoothly reverses itself the remainder of the paper is organized in four sections section i presents the core model and the econometric methods for disentangling the external effects section ii describes the data and estimation section iii presents the main results and our conclusions are presented in section iv

indeterminacy home production and the business cycle a calibrated analysis abstract in this paper i present a business cycle model with one market sector that produces a standard good and another that produces a non market or home good the model can have multiple equilibria and therefore cycles driven only by self fulfilling expectations with low externalities to market production in particular an upward sloping aggregate labor demand as e g in farmer and guo j economic theory 63 1994 42 72 is not required for indeterminacy the effect of technology shocks is also studied in all cases the time series that are generated have properties that are comparable to the real us postwar series

production growth and business cycles ii new directions abstract this paper outlines new directions for investigations of real business cycle models consideration of stochastic growth of exogenous and endogenous forms analysis of suboptimal outcomes arising due to externalities of distorting taxes and implications of labor market heterogeneity

does job testing harm minority workers evidence from retail establishments because minorities typically fare poorly on standardized tests job testing is thought to pose an equality efficiency trade off testing improves selection but reduces minority hiring we develop a conceptual framework to assess when this trade off is likely to apply and evaluate the evidence for such a trade off using hiring and productivity data from a national retail firm whose 1 363 stores switched from informal to test based worker screening over the course of one year we document that testing yielded more productive hires at this firm raising mean and median tenure by 10 or more consistent with prior research minorities performed worse on the test yet testing had no measurable impact on minority hiring and productivity gains were uniformly large among minority and nonminority hires these results suggest that job testing raised the precision of screening without introducing additional negative information about minority applicants most plausibly because both the job test and the informal screen that preceded it were unbiased

hiring through referrals abstract an equilibrium search model of the labor market is combined with a social network the key features are that the workers network transmits information about jobs and that wages and firm entry are determined endogenously empirically the inter industry variation in aggregate matching efficiency is attributed to variation in referral use the model predicts that the efficiency of the aggregate matching function is pro cyclical which is consistent with empirical evidence

employment inequality why do the low skilled work less now abstract low skilled prime age men are less likely to be employed than high skilled prime age men and the differential has increased since the 1970s i build a search model encompassing three explanations 1 automation and trade reduced the demand for low skilled workers 2 health welfare and recreational gaming computer technology reduced the supply of low skilled workers and 3 factors affecting job search such as online job boards reduced frictions for high skilled workers i find a shift in demand away from low skilled workers was the leading cause a shift in supply had little effect and search frictions actually reduced employment inequality

orchestrating impartiality the impact of blind auditions on female musicians a change in the audition procedures of symphony orchestras adoption of blind auditions with a screen to conceal the candidate s identity from the jury provides a test for sex biased hiring using data from actual auditions in an individual fixed effects framework we find that the screen increases the probability a woman will be advanced and hired although some of our estimates have large standard errors and there is one persistent effect in the opposite direction the weight of the evidence suggests that the blind audition procedure fostered impartiality in hiring and increased the proportion women in symphony orchestras

quota licenses for imported capital equipment could bureaucrats ever do better than the market abstract despite valid criticisms many developing countries have issued non transferable import licenses to a limited number of final good producers so as to restrict imports of an input such as capital equipment this paper demonstrates that for a given import quota such licensing restrictions can actually increase domestic production of both the input and the final product but at the cost of reduced quota rents under pure competition domestic welfare falls relative to the use of marketable quota licenses but if foreigners would get the quota rents or if external economies cause decreasing costs then bureaucratic allocation can dominate

signalling to experts we study competitive equilibria in a signalling economy with heterogeneously informed buyers in terms of the classic spence 1973 the quarterly journal of economics 87 355 374 model of job market signalling firms have access to direct but imperfect information about worker types in addition to observing their education firms can be ranked according to the quality of their information i e their expertise in equilibrium some high type workers forgo signalling and are hired by better informed firms which make positive profits workers education decisions and firms use of their expertise are strategic complements allowing for multiple equilibria that can be pareto ranked we characterize wage dispersion and the extent of signalling as a function of the distribution of expertise among firms our model can also be applied to a variety of other signalling problems including securitization corporate financial structure insurance markets or dividend policy

networks in labor markets wage and employment dynamics and inequality we present a model of labor markets that accounts for the social network through which agents hear about jobs we show that both wages and employment are positively associated a strong form of correlation across time and agents we also analyze the decisions of agents regarding staying in the labor market or dropping out if there are costs to staying in the labor market then networks of agents that start with a worse wage status will have higher drop out rates and there will be a persistent differences in wages between groups according to the starting states of their networks

do job networks disadvantage women evidence from a recruitment experiment in malawi using a eld experiment in malawi where men and women apply for future surveyor positions with a local rm we nd that highly skilled women are systematically disadvantaged through the use of referrals this happens both because most men recommend other men and because women refer fewer candidates who qualify for the position we document that segregated networks do not cause this behavior we develop a theoretical model of referral choice and exploit random variation in referral contract terms to nd that that both men s and women s biases result from social incentives rather than expectations of performance we also document that the screening potential of networks is maximized when men refer men this paper suggests that the use of social networks in hiring is an additional channel through which women are disadvantaged in the labor market

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

why do temporary help firms provide free general skills training the majority of u s temporary help supply ths firms offer nominally free unrestricted computer skills training a practice inconsistent with the competitive model of training i propose and test a model in which firms offer general training to induce self selection and perform screening of worker ability the model implies and the data confirm that firms providing training attract higher ability workers yet pay them lower wages after training thus beyond providing spot market labor ths firms sell information about worker quality to their clients the rapid growth of ths employment suggests that demand for worker screening is rising

employer learning productivity and the earnings distribution evidence from performance measures two ubiquitous empirical regularities in pay distributions are that the variance of wages increases with experience and innovations in wage residuals have a large unpredictable component the leading explanations for these patterns are that over time either firms learn about worker productivity but productivity remains fixed or workers productivities themselves evolve heterogeneously in this paper we seek to disentangle these two models and place magnitudes on their relative importance we derive a dynamic model of learning and productivity that nests both models and allows them to coexist we estimate our model on a 20 year panel of pay and performance measures from a single large firm the baker gibbsholmstrom data incorporating performance measures yields two key innovations first the panel structure implies that we have repeat measures of correlates of productivity as opposed to the empirical evidence on employer learning which uses one fixed measure second we can separate productivity from pay whereas the previous literature on productivity evolution could not we find that both models are important in explaining the data however the predominant effect is that worker productivity evolves idiosyncratically over time implying firms must continuously learn about a moving target therefore while the majority of pay dispersion is driven by variation in individual productivity wages differ significantly from individual productivity at all experience levels due to imperfect information we believe this represents a significant reinterpretation of the empirical literature on employer learning

business cycles and labor market search the quantitative implications of labor market search for economic fluctuations are evaluated in the context of a real business cycle model incorporating labor market search into the model is found to improve its empirical performance along several dimensions in particular hours now fluctuate substantially more than wages and the contemporaneous correlation between hours and productivity falls in addition the model replicates the observation that output growth displays positive autocorrelation at short horizons overall the empirical results suggest that the labor market search environment embodies a quantitatively important propagation mechanism copyright 1996 by american economic association

applications and interviews firms recruiting decisions in a frictional labour market i develop a directed search model to study the recruitment decisions of firms competing for workers who ex post differ in two dimensions 1 their match productivity and 2 their probability of accepting a job offer endogenously determined by their choice of application portfolio to attract these workers firms post a recruiting intensity and a hiring standard in addition to terms of trade a higher recruiting intensity is costly but allows the firm to select more applicants for an interview which reveals their productivity the hiring standard solves the tradeoff between immediate hiring and waiting for a potentially better match in the future i characterize equilibrium and find that various outcomes including uniqueness of equilibrium and the cyclicality of recruiting intensity crucially depend on firms recruiting cost and workers search cost calibration of the model to the u s labour market indicates a continuum of equilibria given selection of a particular equilibrium hiring standards are countercyclical while recruiting intensity is procyclical the calibrated model creates more amplification than a standard model without intensive margins and gives rise to procyclical match efficiency when viewed through the lens of a cobb douglas matching function

referral based job search networks this article derives novel testable implications of referral based job search networks in which employees provide employers with information about potential new hires that they otherwise would not have using comprehensive matched employer employee data covering the entire workforce in one large metropolitan labour market combined with unique survey data linked to administrative records we provide evidence that workers earn higher wages and are less inclined to leave their firms if they have obtained their job through a referral these effects are particularly strong at the beginning of the employment relationship and decline with tenure in the firm suggesting that firms and workers learn about workers productivity over time overall our findings imply that job search networks help to reduce informational deficiencies in the labour market and lead to productivity gains for workers and firms

the effects of social networks on employment and inequality we develop a model where agents obtain information about job opportunities through an explicitly modeled network of social contacts we show that employment is positively correlated across time and agents moreover unemployment exhibits duration dependence the probability of obtaining a job decreases in the length of time that an agent has been unemployed finally we examine inequality between two groups if staying in the labor market is costly and one group starts with a worse employment status then that group s drop out rate will be higher and their employment prospects will be persistently below that of the other group

unemployment and indeterminacy abstract using an efficiency wage model we examine the relationship between indeterminacy and unemployment insurance it is shown that the less unemployment insurance is the more likely equilibrium is to be indeterminate equilibrium can be indeterminate even without externalities or increasing returns which makes a sharp contrast to the recent literature on indeterminacy our result is based on the fact that the no shirking condition with marginal utility of wealth kept constant is downward sloping when income insurance is not perfect

the establishment level behavior of vacancies and hiring this paper is the first to study vacancies hires and vacancy yields at the establishment level in the job openings and labor turnover survey a large sample of u s employers to interpret the data we develop a simple model that identifies the flow of new vacancies and the job filling rate for vacant positions the job filling rate moves counter to aggregate employment but rises steeply with employer growth rates in the cross section it falls with employer size rises with worker turnover rates and varies by a factor of four across major industry groups we also develop evidence that the employer level hiring technology exhibits constant returns and that at the employer level and that employers rely heavily on other instruments in addition to vacancies as they vary hires we also develop evidence that effective recruiting intensity per vacancy varies over time accounting for about 41 of movements in aggregate hires in the 2007 to 2009 period our evidence and analysis provide useful inputs for assessing developing and calibrating theoretical models of search matching and hiring in the labor market

a tradable permit system in an intertemporal economy it is known that in an intertemporal competitive economy a tradable permit system may not achieve efficiency without setting appropriate permit interest rates i e rewards for holding permits to find the rates however we need to know in advance the path of efficient permit prices which is difficult to obtain this study intends to solve this problem in two ways first we analyze a special case in which the permit interest rates are given by a simple rule for example if the marginal abatement cost of pollution emission is constant then the appropriate rate is to equal the monetary interest rate as is the case for global warming if the damage is caused in the future far beyond the planning period of the environmental program the appropriate rate coincides with the marginal self recovery of environmental stock under certain conditions as a second approach we propose a tradable permit system with a permit bank as a mechanism by which the permit interest rates are generated endogenously without governmental intervention other than the issuance of permits however we also show that this approach raises the problem of indeterminacy of the equilibrium

real wages and the business cycle the objectives of this review are threefold 1 to characterize the empirical literature on the cyclical behavior of real wages 2 to identify the sources of the differences in results across studies and 3 to enumerate key factors that determine the cyclicality of real wages given a host of measurement and methodological issues drawing firm conclusions is difficult but several generalizations can be made the estimated cyclicality of real wages depends crucially on the time period of analysis and the choice of whether to examine the production or the consumption wage composition effects play an important but complicated role as well

firm dynamics and markup variations implications for sunspot equilibria and endogenous economic fluctuations this paper analyzes how the interaction between firms entry and exit decisions and variations in competition gives rise to self fulfilling expectation driven fluctuations in aggregate economic activity and in measured total factor productivity tfp the analysis is based on a dynamic general equilibrium model in which net business formation is endogenously procyclical and leads to endogenous countercyclical variations in markups this interaction leads to indeterminacy in which economic fluctuations occur as a result of self fulfilling shifts in the beliefs of rational forward looking agents when calibrated with empirically plausible parameter values and driven solely by self fulfilling shocks to expectations the model can quantitatively account for the main empirical regularities characterizing postwar u s business cycles and for 65 of the fluctuations in measured tfp

impacts of social networks on floating population wages under different marketization levels empirical analysis of china s 2016 national floating population dynamic monitoring data this paper establishes a measurement model to examine the impacts of social network heterogeneity on the wages of the floating population and the different impacts under different levels of market

auctions with endogenous valuations the persistence of monopoly revisited it is shown that the standard arguments for a monopoly to persist break down when many units of capacity become available sequentially the reason is that deterring entry at one st age affects the cost of doing so in later stages this force can be so powerful that entry is deterred only at the final stage the persistence of monopoly or its erosion over time depends on the timi ng of arrival of capacity the size of early versus subsequent capacity availability the length of the capacity acquisition stage relative to the life of the industry and the discount factor copyright 1993 by american economic association

real business cycles and the animal spirits hypothesis abstract we calibrate a quantitative equilibrium macroeconomic model with an aggregate technology that is subject to increasing returns and show that this model may display fluctuations at business cycle frequencies even when there are no shocks to the fundamentals of the economy these fluctuations are due to the self fulfilling beliefs of investors which we call animal spirits we compare the impulse response functions predicted by our model and by two other more standard models with a four variable vector autoregression on u s data our animal spirits economy is the most successful of the three at matching broad features of the dynamic responses in the data journal of economic literature classification numbers e00 e3 e32

the analysis of firms and employees quantitative and qualitative approaches the long term impact of globalization outsourcing and technological change on workers is increasingly being studied by economists at the nexus of labor economics industry studies and industrial organization the analysis of firms and employees presents new findings about these effects by examining the interaction between the internal workings of businesses and outside influences from the market using data from countries around the globe the result is enhanced insight into the dynamic interrelationship between firms and workers a distinguished team of researchers here examines the relationships between human resource practices and productivity changing ownership and production methods and expanding trade patterns and firm competitiveness with analyses of large scale nationwide datasets as well as focused intensive observation of a few firms the analysis of firms and employees will challenge economists policy makers and scholars alike to rethink their assumptions about the workplace

some contacts are more equal than others informal networks job tenure and wages the explanation typically given for longer tenure among workers who use informal contacts to find jobs is that relatives and friends reduce uncertainty about the quality of the match between worker and employer an alternative explanation is that workers rely on informal information sources as a last resort such workers remain at their current jobs mainly because they have few alternative choices rather than because of better match quality this article shows that the two different explanations are simultaneously valid for different types of contacts and can account for differences in the wage effects of job contacts

the labor market effects of credit market information we exploit a natural experiment to provide one of the first measurements of the causal effect of negative credit information on employment and earnings we estimate that one additional year of negative credit information reduces employment by 3 percentage points and wage earnings by 1 000 in comparison the decrease in credit is only one fourth as large negative credit information also causes an increase in self employment and a decrease in mobility further evidence suggests this cost of default is inefficiently borne by those most creditworthy among previous defaulters received april 5 2017 editorial decision september 2 2017 by editor andrew karolyi authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

alternative government financing and aggregate fluctuations driven by self fulfilling expectations abstract using woodford s finance constrained model woodford m 1986 stationary sunspot equilibria in a finance constrained economy journal of economic theory 40 128 137 with external effects in production as in barinci and cheron 2001 sunspots and business cycle in a finance constrained economy journal of economic theory 97 30 49 this paper investigates the effects of alternative government financing methods on the range of values of increasing returns leading to an indeterminate steady state it will be shown that indeterminacy may easily arise at a wide range of values of increasing returns if constant government expenditure is financed through labor income taxes and with difficulty if constant government expenditure is financed by taxes on capital in addition we explore how the consequences of endogenous income taxes are changed if tax rates on labor and capital income are kept constant and government expenditure is endogenously adjusted to satisfy the budget constraint

licensing and nontransferable rents traditionally restrictive licensing is assumed to create monopoly profits by restricting output and therefore to produce two kinds of social costs the deadweight loss due to reduced output and the resources devoted to rent seeking however the fact that nonsalvagable resources spent on rent seeking create their own barriers to entry has not been recognized by increasing nontransferable rents licensing prevents the least costly producers from entering and thus produces a third kind of social cost while harold demsetz 1982 dismissal of the traditional notion of entry barriers is correct when assets are transferable the idea of entry barriers is still useful when assets are nontransferable as this note shows in the case of professional licensing