selecting suitable compensation plans of executive stock options theoretical and empirical works have emphasized that executive stock option plans play an important role in compensation management and corporate governance owing to the incentives to increase firm stock price and volatility levels this study not only proposes models of executive stock options and constructs value matched financial variables for comparing the incentive effects towards these options but also develops an empirical study exploring the characteristics of executive stock options and suitable compensation management for companies this investigation examines the daily value and compares incentive effects of six kinds of executive stock options with the empirical data of tsmc the world s largest dedicated semiconductor foundry which is listed on the tse and nyse empirical results indicate that purchased options would be the best choice for companies that are unsuitable to undertake risky investments while the relative indexed options are appropriate for bear markets and good for companies

better schools less crime i estimate the impact of attending a first choice middle or high school on adult crime using data from public school choice lotteries in charlotte mecklenburg school district cms seven years after random assignment lottery winners had been arrested for fewer serious crimes and had spent fewer days incarcerated the gain in school quality as measured by peer and teacher inputs was equivalent to moving from one of the lowest ranked schools to one at the district average the reduction in crime comes largely from years after enrollment in the preferred school is complete the impacts are concentrated among high risk youth who commit about 50 less crime across several different outcome measures and scalings of crime by severity i find suggestive evidence that school quality explains more of the impact in high school whereas peer effects are more important in middle school copyright 2011 oxford university press

two stage bargaining with coverage extension in a dual labour market abstract this paper studies coverage extension in a simple general equilibrium model with a dual labour market the union sector is characterized by two stage bargaining whereas the firms set wages in the non union sector in this model firms and unions of the union sector have a commonality of interest in extending coverage of a minimum wage to the non union sector furthermore the union sector does not seek to increase the non union wage to a level above the market clearing wage in fact it is optimal for the union sector to impose a market clearing wage on the non union sector finally coverage extension increases welfare in this model

the incompatibility of valued money and equilibrium policy abstract in an overlapping generations economy an equilibrium is defined such that at each date the young agent determines values for that period s monetary and fiscal instruments a proposition showing money cannot have value in any such equilibrium is proved

union power cost of job loss and workers effort the authors hypothesize that the effectiveness of external threats in raising workers effort is mediated by among other labor market conditions the presence or absence of a powerful union in particular they argue that because powerful unions reduce the potency of the external threat of job loss by making it more difficult for employers to dismiss workers the pace of work is less responsive to such a threat in strongly unionized plants than in weakly unionized plants the results of an analysis of data from the 1990 workplace industrial relations survey in britain support this hypothesis the analysis also yields evidence that effort is increased where workers are rewarded individually according to results and where there are various communication channels between workers and management

the extent and determination of performance related pay systems in scandinavian countries the incidence of performance related pay prp varies substantially across countries using individual worker level data it is the intention of this paper to examine initially the extent to which institutional factors across denmark sweden and finland affect the coverage of performance related pay it then identifies the types of workers and firms that choose this form of payment system within each country the initial findings suggest that institutional factors within countries play a role in determining the extent to which the adoption of prp systems varies across countries although this is far clearer for finland than between denmark and sweden for example the results also show that there are significant differences across scandinavia in terms of the workers who choose prp systems and the firms who adopt them strong support is found for the previously identified and positive relationship between firm size and use of prp

the consequences of minimum wage laws some new theoretical ideas economists generally agree that the effect of a binding minimum wage law is to move firms backward along the demand curve for low skill workers however this prediction of worker displacement depends critically on the assumption that the productivity of firms labor is not dependent on the wage in this paper we show that in a conventional efficiency wage model a minimum wage may increase the level of employment in low wage jobs the formal logic of our model is similar to the case of labor demand under monopsony but arises in a model with a large number of employers

employment rents and the incidence of strikes a new measure of labor market tightness on workers behavior the employment rent is modeled as a determinant of workplace conflict an empirical estimate of the employment rent workers expected cost of job loss is calculated it is argued that the cost of job loss affects strike incidence this relationship is tested by estimating an econometric model of strike incidence for the united states from 1955 to 1983 the cost of job loss is shown to explain a large percentage of the variation in strike incidence the cost of job loss is a far superior explanatory variable than the unemployment rate which is commonly used in strike models copyright 1987 by mit press

incentives pay and performance a study of australian employees the paper analyses the determinants of self reported work effort using a 1988 survery of australian employees while controlling for the endogeneity of the firm s choice of incentives and pay it is found that direct incentive schemes have predicted effects and the efficiency wage hypothesis is supported pay and work effort are positively correlated two efficiency wage models are tested akerlof s gift exchange model and work discipline arguments regarding monitoring difficulties and threats of dismissal the latter argument is broadly consistent with the data

wage norms capital accumulation and unemployment a post keynesian view the paper presents a post keynesian view of unemployment it argues first that the effective labour demand need not be downward sloping with respect to real wages and aggregate demand need not be downward sloping with respect to inflation second that there is a broad case for unemployment hysteresis understood as endogeneity of the non accelerating inflation rate of unemployment nairu based on social norms in wage bargaining and on the supply side effects of capital accumulation and third that much as keynes argued capital investment rather than labour market institutions is the key variable to explain changes in aggregate unemployment performance across countries and over time overall the paper advocates a keynesian view of the nairu where effective demand determines unemployment in the short run and the deviation of actual unemployment from the nairu determines the change in inflation in the medium term the nairu is endogenous and follows actual unemployment copyright 2011 oxford university press

equilibrium policy in an overlapping generations economy abstract this paper offers a mechanism for reducing the number of stationary equilibria that arise in a simple two period lived overlapping generations economy since each equilibrium is associated with a different combination of monetary and fiscal policies i assume that at each date the agent in his second period of life determines how that period s monetary and fiscal instruments will be set i show that the set of stationary equilibria where this occurs is a proper and nonempty subset of the set of stationary competitive equilibria and that at least one such equilibrium is a pareto optimum

a multisector model of efficiency wages the pattern of effort and wages is derived in a multisector efficiency wage model firms choose effort endogenously easily monitored or low turnover jobs have high effort and may have low wages in equilibrium empirical wage differentials from a measure of supervision are smaller than observed industry differentials that have been attributed to efficiency wage models and are closer to those predicted by the model workers can search for and avail of on the job offers if sectors grow at different rates or the unemployment rate changes the pattern of wage differentials is unaffected

endogenous transfer institutions in overlapping generations abstract we characterize the set of equilibrium transfers between overlapping generations when transfer institutions are endogenous in stationary economies pareto improving transfers require institutions cost as much to construct as they convey even if less costly institutions exist that make the same transfer if institutions can be built upon they may cost less and convey more but transfers may become excessive interpreting such institutions as social security we introduce private saving with time social security crowds out savings still the potential to save limits any excess transfer endogenous costly to create gold money institutions are examined and the role of compulsion in evolving to costless to create fiat currency detailed

the central role of noise in evaluating interventions that use test scores to rank schools many programs reward or penalize schools based on students average performance mean reversion is a potentially serious hindrance to the evaluation of such interventions chile s 900 schools program p 900 allocated resources based on cutoffs in schools mean test scores this paper shows that transitory noise in average scores and mean reversion lead conventional estimation approaches to overstate the impacts of such programs it further shows how a regressiondiscontinuity design can be used to control for reversion biases it concludes that p 900 had significant effects on test score gains albeit much smaller than is widely believed

minimum wage effects on labor market outcomes under search matching and endogenous contact rates building upon a continuous time model of search with nash bargaining in a stationary environment we analyze the effect of changes in minimum wages on labor market outcomes and welfare although minimum wage increases may or may not lead to increases in unemployment in our model they can be welfare improving to labor market participants on both the supply and demand sides of the labor market we discuss identification of the model using current population survey data on accepted wages and unemployment durations and show that by incorporating a limited amount of information from the demand side of the market it is possible to obtain credible and precise estimates of all primitive parameters we show that the optimal minimum wage in 1996 depends critically on whether or not contact rates can be considered to be exogenous and we note that the limited variation in minimum wages makes testing this assumption problematic

the minimum wage restaurant prices and labor market structure using store level and aggregated consumer price index data we show that restaurant prices rise in response to minimum wage increases under several sources of identifying variation we introduce a general model of employment determination that implies minimum wage hikes cause prices to rise in competitive labor markets but potentially fall in monopsonistic environments furthermore the model implies employment and prices are always negatively related therefore our empirical results provide evidence against the importance of monopsony power for understanding small observed employment responses to minimum wage changes our estimated price responses challenge other explanations of the small employment response too

katrina s children evidence on the structure of peer effects from hurricane evacuees in 2005 hurricanes katrina and rita forced many children to relocate across the southeast while schools quickly enrolled evacuees receiving families worried about the impact of evacuees on non evacuee students data from houston and louisiana show that on average the influx of evacuees moderately reduced elementary math test scores in houston we reject linear in means models of peer effects and find evidence of a highly non linear but monotonic model student achievement improves with high ability and worsens with low ability peers moreover exposure to undisciplined evacuees increased native absenteeism and disciplinary problems supporting a bad apple model in behavior

a welfare criterion for models with distorted beliefs this paper proposes a welfare criterion for economies in which agents have heterogeneously distorted beliefs instead of taking a stand on whose belief is correct our criterion asserts an allocation to be belief neutral ine cient if it is ine cient under any convex combination of agents beliefs while this criterion gives an incomplete ranking of social allocations it can identify negative sum speculation in a broad range of prominent models with distorted beliefs

the effect of taxes on labour in efficiency wage models abstract this paper analyses the effects of labour taxation on wage and employment in a moral hazard efficiency wage model where effort is a continuous variable and workers are risk averse in the model examined ad valorem and specific taxes on labour do not have the same consequences on the real wage both taxes have a negative effect on employment but the imposition of a specific tax causes an increase in the net real wage including firms to raise the quality of their workers these results are compared with those obtained in other versions of the shirking efficiency wage model

match quality worker productivity and worker mobility direct evidence from teachers i investigate the importance of the match between teachers and schools for student achievement i show that teacher effectiveness increases after a move to a different school and estimate teacher school match effects match quality explains away a quarter of and has two thirds the explanatory power of teacher quality match quality is negatively correlated with school switching is unrelated to exit and increases with experience this paper provides the first estimates of worker firm match quality using output data as opposed to inferring productivity from wages or employment durations the results suggest that workers seek high quality matches for reasons other than higher pay

unemployment long term employment relations and productivity growth using an effort regulation type of efficiency wage model it is demonstrated that a firm may respond to slackening labor markets by acting to increase the intensity with which workers work the magnitude of this work intensity effect depends on the structure of employment relations where long term employment relations are prevalent the effect of labor market slack on work intensity may be diminished these propositions are tested empirically by estimating the effects unemployment and long term employment have on productivity growth in two digit manufacturing industries copyright 1987 by mit press

school district and housing price responses to fiscal stress labels evidence from ohio abstract this paper examines the effect of the ohio fiscal stress labeling system on school district outcomes and housing prices under this policy financially troubled districts are labeled and required to implement financial recovery plans in response to these plans districts increase local tax revenues and decrease capital and operating expenditures although these recovery plans lead to better long term financial health for school districts there appear to be some negative impacts on welfare in these districts during the duration of the label i find that residential home sale prices fall following fiscal stress label receipt but rise again once the label is removed these districts also undergo substantial restructuring including reductions in enrollments teachers and schools which coincide with a transitory reduction in math proficiency rates following label receipt

industry wage differentials and efficiency wages a dissenting view with south african evidence abstract does industry wage dispersion constitute evidence of either efficiency wages or rent sharing comparison of the industry wage premia of whites and africans in south africa casts doubt upon the rent extraction and the gift exchange explanations of the industry wage structure unions combined with union threats fail to explain the data other explanations unobserved ability compensating differentials and the shirking monitoring and turnover models are rejected here as they have been before remaining possibilities are expense preference theory and internal equity rules implications for future research are pointed out

comment on minimum wages for ronald mcdonald monopsonies a theory of monopsonistic competition bhaskar and to 1999 develop a model of monopsonistic competition and solve explicitly for equilibrium while a minimum wage set just above the unconstrained optimum leads firms to increase employment it also causes firm exit as profits fall in this note i show that the employment and welfare effects of the minimum wage which bhaskar and to had thought to be ambiguous when firm exit was accounted for are in fact unambiguously positive the model can be adjusted so that the original ambiguous employment effect results a decomposition is developed which allows us to calculate the long run employment effect bhaskar and to 1999 bt from now on develop a model of monopsonistic competition in the labour market which models the employment and welfare effects of a minimum wage not only in the short run as other models such as card and krueger 1995 manning 1995 or rebitzer and taylor 1995 had done but also accounts for firm exit in the long run the long run employment and welfare consequences of the minimum wage which were taken to be ambiguous in the original bt model are shown here to be unambiguously positive using a decomposition of the employment effects of a minimum wage i show that bt s model can be modified in a straightforward way to show that the long run employment effects are ambiguous also i show that the employment effects on an individual firm are the same in partial equilibrium as in general equilibrium where the effects of other firm s wages and firm exit are accounted for

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

optimal minimum wage legislation a comment when firms in one sector do not know the ability of individual workers and there is a positive relation between ability and alternative earnings then firms will tend to pay the same wage to all workers and the average ability of those employed will be positively related to the wage in such an environment weiss i980 has demonstrated that the profit maximising wage may exceed the wage which clears the labour market causing equilibrium unemployment in a recent paper in this journal drazen i986 extends the weiss model by varying two assumptions first weiss assumes that a worker would attempt to maximise his wage drazen assumes that a worker is interested in his expected income the wage times the probability of being employed second drazen considers a world in which labour quality at each firm is not a function of the wage offered by that firm but instead depends on the average wage in the market drazen argues that with his assumptions the average market wage preferred by firms may exceed the wage which clears the labour market but that each firm has an incentive to lower the wage to the market clearing level in order to prevent free riding a minimum wage should be imposed the purpose of this note is to suggest that the first of the two assumptions mentioned above results in a market clearing wage in the weiss model thus free riding will not be a problem and there is no basis for imposing a minimum wage the difference between my results and those in drazen s paper can be easily explained consider the first of the two assumptions considered above workers are interested in their expected income and ignore the second assumption hence average labour quality at a firm is a function of the firm s wage there is no free rider problem in this case firms have two choice variables the wage w and fraction hired h of those who apply when workers are interested in their expected income wh it can be demonstrated see the next section that a firm will be at a corner solution for h h will be set as high as possible h i so all who apply are hired no firm wants to set the wage above the market clearing level thus the second assumption that the average market wage affects labour quality does not affect the equilibrium although each firm would like to free ride when firms try to lower the wage excess demand for labour results the desired wage will clear the labour market and there is no role for a

the value of school facility investments evidence from a dynamic regression discontinuity design author s cellini stephanie riegg ferreira fernando rothstein jesse abstract despite extensive public infrastructure spending surprisingly little is known about its economic return in this paper we estimate the value of school facility investments using housing markets standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow margins we extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices student achievement and district composition our results indicate that california school districts underinvest in school facilities passing a referendum causes immediate sizable increases in home prices implying a willingness to pay on the part of marginal homebuyers of 1 50 or more for each 1 of capital spending these effects do not appear to be driven by changes in the income or racial composition of homeowners and the impact on test scores appears to explain only a small portion of the total housing price effect c 2010 by the president and fellows of harvard college and the massachusetts institute of technology

are wages too low empirical implications of efficiency wage models firms may pay efficiency wages to enhance productivity the conventional presumption is that efficiency wages are inefficiently high because they lead to unemployment that is also inefficiently high government policies that lower wages raise output using a simple and general efficiency wage model this paper finds a necessary and sufficient condition for the opposite conclusion if the condition holds wages are inefficiently low leading to productivity that is also inefficiently low it is the high wage policies that raise output even if they also lower employment published empirical results support the condition no evidence is found for the conventional presumption

carrots and sticks pay supervision and turnover the efficiency wage model ewm has been advanced as an explanation for large and persistent wage differentials the shirking version of the ewm assumes a trade off between self supervision and external supervision the turnover version assumes turnover is costly to the firm variation across firms in the cost of monitoring shirking or turnover then is hypothesized to account for wage variations across firms for homogeneous workers using a new sample of firm data this paper presents empirical evidence of the trade off of wage premiums for supervisory intensity and turnover little evidence is found to support either version of the ewm

private school vouchers and student achievement an evaluation of the milwaukee parental choice program in 1990 wisconsin began providing vouchers to a small number of low income students to attend nonsectarian private schools controlling for individual fixed effects i compare the test scores of students selected to attend a participating private school with those of unsuccessful applicants and other students from the milwaukee public schools i find that students in the milwaukee parental choice program had faster math score gains than but similar reading score gains to the comparison groups the results appear robust to data imputations and sample attrition although these deficiencies of the data should be kept in mind when interpreting the results

the impact of school choice on student outcomes an analysis of the chicago public schools we explore the impact of school choice on student outcomes in the context of open enrollment within the chicago public schools cps roughly half of the students opt out of their assigned high school to attend a different cps school and these students are much more likely than those who remain in their assigned schools to graduate to determine the source of this apparent benefit we compare outcomes across i similar students with differential access to schooling options and ii travelers and non travelers within the same school the results suggest that other than for students who select career academies the observed cross sectional benefits are likely spurious

product market evidence on the employment effects of the minimum wage we infer the employment response to a minimum wage change by calibrating a model of employment for the restaurant industry whereas perfect competition implies that employment falls and prices rise after a minimum wage increase the monopsony model potentially implies the opposite we show that estimated price responses are consistent with the competitive model we place fairly tight bounds on the employment response with the most plausible parameter values suggesting that a 10 increase in the minimum wage lowers low skill employment by 2 4 and total restaurant employment by 1 3

firms choice of method of pay using data from the bls industry wage survey the author tests the theory that firms choose their methods of pay by balancing the gains from more precise links between performance and pay against m

optimal minimum wage legislation in this paper we present a model in which minimum wage legislation may be pareto optimal this arises because a higher wage would be preferred to the market clearing wage by demanders for and suppliers of labour even though unemployment is induced and minimum wage legislation is needed to support the preferred equilibrium consider a labour market where the quality of labour depends positively on the wage offered if labour quality is highly sensitive to wage increases effective unit labour cost will fall as the wage rises this would lead the representative firm to prefer paying an above market clearing wage and to ration job slots such an effect has been studied when quality depends on an individual firm s wage offer see for example weiss i980 or stiglitz i974 suppose however that labour quality depended not on any individual firm s wage offer but on the average market wage if firms were atomistic each invidual firm would have an incentive to undercut the optimal above marketclearing wage trying to get the quality benefits of high average wages while paying lower wages itself the high wage solution would not be viable legislation fixing minimum wages might be required to support the preferred equilibrium quality might depend on average market wages when workers must decide whether or not to enter a labour market before they can sample and obtain specific job offers migration into labour markets for example rural to urban migration in less developed countries provides one example as the decision to migrate and therefore the quality of the labour pool will depend on some average of expected wage offers the decision over which profession to enter at the beginning of the educational process provides another example of course imperfect information plays a key role here it is assumed that both firms and workers have imperfect information about the suitability of individual workers for jobs both before and to a lesser extent after employment has begun this lack of information will rule out both profitable selfselection mechanisms and wages strictly proportional to output so that firms will care about the quality of the labour pool the non optimality of market clearing prices which will be demonstrated makes this paper similar to a number of papers on the implications of adverse selection in labour and product markets one may mention two excellent papers on screening in labour markets by guasch and weiss i980 i98i this paper builds on some of the results in those papers stiglitz and weiss i98i show how credit rationing may arise from a similar type of argument wilson

evidence on incentive effects of subjective performance evaluations the authors investigate the effect of managerial performance evaluation styles on employee work effort using panel data on 4 080 employees in a swiss unit of an international company for the period 1999 2002 they test two hypotheses using paid and unpaid overtime work as effort indicators the company applies two performance based remuneration mechanisms an individual surprise bonus and one in which salary is affected by the extent to which an individual has reached personalized targets the authors hypothesize that effort is higher in departments in which individual performance evaluations are more flexible over time as well as when surprise bonuses are used more frequently both hypotheses are supported and the estimated effects are substantial increases in rating flexibility or bonus payments by one standard deviation above the mean increase average overtime hours by more than 20 the findings are robust and suggest that surprise bonuses and flexible performance evaluations over time provide ef

a characterization of the core in overlapping generations economies abstract in this paper we characterize the set of consumption allocations that belong to the core and show that for the case of one agent per generation and one good no monetary equilibrium is in the core for economies with many goods we give bounds on the value of money transactions for competitive equilibria to belong to the core

excessive wages and the return on capital received wisdom suggests that excessive wages defined as the part of real wages that do not follow labour productivity developments are adversely associated with the return on capital this paper argues that excessive wages and profits are better thought of as responses to changes in the economic political and institutional environment and there is no a priori reason for a negative relationship between them we thus investigate whether there is a causal effect of excessive wages on capital return using aggregate panel data for 19 oecd countries for the period 1970 2000 we account for the endogeneity of excessive wages by exploiting variations in institutional and labour market characteristics our main finding is that excessive wages do not affect the return on capital this result remains robust to alternative empirical specifications and to alternative definitions of profitability and excessive wages and questions the standard advice by international economic organizations on wage moderation copyright the author 2011 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

how do we know that real wages are too high it is common belief that the wages that we observe are above the level that would prevail in a competitive labour market and also it is common to believe that wage moderation should be encouraged as a way to keep unemployment down this paper considers whether we can have confidence in these beliefs it presents a number of models designed to cast doubt on the conventional wisdom first we show that in an efficiency wage model in which there is involuntary unemployment a binding minimum wage may increase employment we then present a general equilibrium matching model in which there is involuntary unemployment but wages are below market clearing levels and raising wages can reduce unemployment we then consider the empirical evidence on employment and wage determination to argue that it is just as consistent with this model as with models in which wages are at or above market clearing levels

optimal financing of the government s budget taxes bonds or money financing of the government s budget in particular we consider taxation bond issuance and money creation as alternative means of financing these issues are not new some of them were extensively explored in the public finance literature some of them were explored in the monetary theory literature what we believe to be new however is that our work integrates the relevant elements from both strands of literature into a unified general equilibrium framework with this approach we are able to jointly determine the optimal combination of tax rates the rate of inflation and the interest rate on government bonds this type of analysis enables us to ask whether the rate of inflation should be positive or negative and to provide simple conditions on compensated demand elasticities which determine the answer it also enables us to reconsider milton friedman s optimum quantity of money rule in a public finance framework without lump sum taxes and to show how this rule should be modified in addition we provide insight into the desirability of a social security scheme by showing that such a program is undesirable when social security payments are financed

desegregation and black dropout rates in 1954 the united states supreme court ruled that separate schools for black and white children were inherently unequal this paper studies whether the desegregation plans of the next 30 years benefited black and white students in desegregated school districts data from the 1970 and 1980 censuses suggest desegregation plans of the 1970 s reduced high school dropout rates of blacks by two to three percentage points during this decade no significant change is observed among whites the results are robust to controls for family income parental education and state and region specific trends as well as to tests for selective migration

do minimum wages affect non wage job attributes evidence on fringe benefits although many studies have tested neoclassical labor market theory s prediction that employers will react to binding minimum wages by reducing employment levels much less empirical research has explored the possibility that employers also respond to minimum wages by adjusting non wage components of the job such as fringe benefits job safety and access to training using current population survey data for 1979 2000 this study investigates the effect of minimum wage legislation on the provision of employer health insurance and employer pension coverage the authors examine effects of state and federal variation in minimum wages on groups likely to be affected by the minimum wage and compare these effects to estimates found for groups unlikely to be affected whether the analysis uses only state level variation or federal and state variation in minimum wages the results indicate no discernible effect of the minimum wage on fringe benefit generosity for low skill workers

accountability and flexibility in public schools evidence from boston s charters and pilots charter schools are publicly funded but operate outside the regulatory framework and collective bargaining agreements characteristic of traditional public schools in return for this freedom charter schools are subject to heightened accountability this paper estimates the impact of charter school attendance on student achievement using data from boston where charter schools enroll a growing share of students we also evaluate an alternative to the charter model boston s pilot schools these schools have some of the independence of charter schools but operate within the school district face little risk of closure and are covered by many of same collective bargaining provisions as traditional public schools estimates using student assignment lotteries show large and significant test score gains for charter lottery winners in middle and high school in contrast lottery based estimates for pilot schools are small and mostly insignificant the large positive lottery based estimates for charter schools are similar to estimates constructed using statistical controls in the same sample but larger than those using statistical controls in a wider sample of schools the latter are still substantial however the estimates for pilot schools are smaller and more variable than those for charters with some significant negative effects

efficiency wage models of unemployment keynesian economists hold it to be self evident that business cycles are characterized by involuntary unemployment but construction of a model of the cycle with involuntary unemployment faces the obvious difficulty of explaining why the labor market does not clear involuntarily unemployed people by definition want to work at less than the going wage rate why don t firms cut wages thereby increasing profits

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

bargaining efficiency wages and the price cost markup abstract the size of the negative effect of unions on the price cost markup in efficient bargain models depends on the extent to which the union cares about employment rather than wages a negative effect in labour demand models can also arise under efficiency wages

minimum wage laws what does an employment increase imply about output and welfare abstract card and krueger find empirically that minimum wage laws may increase employment the current paper seeks the analytical implications of employment increasing minimum wages for output and welfare the standard supply and demand model cannot be used for this purpose one needs a model in which employment increasing minimum wages are at least possible such as this paper s efficiency wage model here an employment increase is neither necessary nor sufficient for expected welfare gains for either employed or unemployed workers an employment increasing minimum wage raises output but unambiguously lowers labor force participation and hurts those who remain unemployed

the effect of school closings on student achievement abstract many school districts across the country are shutting schools but school closing policies remain a very controversial issue the current study investigates the effects of school closing policies on student achievement by examining over 200 school closings in michigan relative to the previous literature the analysis uses a broader set of school closings to thoroughly investigate heterogeneity in treatment effects based on the performance level of the closed school the results indicate that on average school closings in michigan did no persistent harm to the achievement of displaced students moreover students displaced from relatively low performing schools experience achievement gains the displacement of students and teachers creates modest negative spillover effects on the receiving schools however hence the closing of low performing schools may generate some achievement gains for displaced students but not without imposing spillover effects on a large number of students in receiving schools

international macroeconomic policy coordination when policymakers do not agree on the true model the authors relax the assumption of the literature on international coordination that policymakers know the true model t wo countries will still be able to agree on a cooperative policy pack age that each believes will improve the objective function relative t o the nash noncooperative solution however the bargaining solution may move the target variables in the wrong direction these points ar e illustrated with monetary and fiscal multipliers taken from simulat ions of ten leading econometric models out of 1 000 possible combina tions of models that could represent u s beliefs non u s beliefs and the true model monetary coordination improves u s welfare in on ly 546 cases copyright 1988 by american economic association

disruption versus tiebout improvement the costs and benefits of switching schools most students change schools at some point in their academic careers but some change very frequently and some schools experience a great deal of turnover while many argue that mobility harms students economists tend to emphasize tiebout type moves to procure better school quality sq this paper disentangles the disruption effects of moves from changes in sq importantly it identifies the negative externality movers impose on other students student turnover is shown to entail a substantial cost for movers and non movers alike this cost appears to be larger for lower income and minority students who typically attend much higher turnover schools

international macroeconomic policy coordination when policymakers do not agree on the true model reply in their paper in this review jeffrey a frankel and katherine e rockett 1988 show that when international macroeconomic policymakers do not agree on the correct macroeconomic model they will still be able to agree on a cooperative policy package that each believes will improve his welfare yet the package may turn out to move target variables in the wrong direction from extensive simulation experiments with ten empirical models frankel and rockett conclude the bargaining solution is as likely to reduce welfare as to improve it but more definitions of cooperation should be investigated p 338 in this paper we propose an alternative definition of a policy bargain to that investigated by frankel and rockett and show that it results in a higher success rate and higher expected utility in cooperation exper iments it follows from our finding that given uncertainty or ignorance about the true model a measure of disagreement is beneficial because it facilitates a simple robustness check for proposed policy bargains as frankel and rockett 1988 p 328 acknowledge it is the countries failure to perceive the true model not their failure to agree with each other per se that alters the standard conclusion regarding coordination i e it is uncertainty not disagreement that leads to failure we go further given the inevitable failure to perceive the true model some disagreement is better than unanimity in error extreme disagreement about the nature of reality however makes robust bargains impossible

the effects of class size on student achievement new evidence from population variation abstract i identify the effects of class size on student achievement using longitudinal variation in the population associated with each grade in 649 elementary schools i use variation in class size driven by idiosyncratic variation in the population i also use discrete jumps in class size that occur when a small change in enrollment triggers a maximum or minimum class size rule the estimates indicate that class size does not have a statistically significant effect on student achievement i rule out even modest effects 2 to 4 percent of a standard deviation in scores for a 10 percent reduction in class size

asset float and speculative bubbles we model the relationship between asset float tradeable shares and speculative bubbles investors with heterogeneous beliefs and short sales constraints trade a stock with limited float because of insider lockups a bubble arises as price overweighs optimists beliefs and investors anticipate the option to resell to those with even higher valuations the bubble s size depends on float as investors anticipate an increase in float with lockup expirations and speculate over the degree of insider selling consistent with the internet experience the bubble turnover and volatility decrease with float and prices drop on the lockup expiration date

superstition in the housing market we provide the first solid evidence that chinese superstitious beliefs can have significant effects on house prices in a north american market with a large immigrant population using real estate data on close to 117 000 house sales we find that houses with address number ending in 4 are sold at a 2 2 discount and those ending in 8 are sold at a 2 5 premium in comparison to houses with other addresses these price effects are found either in neighborhoods with a higher than average percentage of chinese residents consistent with cultural preferences or in repeated transactions consistent with speculative behavior jel d03 r2 z1

self selection and the power of incentive schemes an experimental study we examine how self selection of workers depends on the power of incentive schemes and how it affects team performance if the power of the incentive schemes is increased in a laboratory experiment we let subjects choose between low powered team incentives and high powered individual incentives we observe that subjects exhibiting high trust or reciprocity in the trust game are more likely to choose team incentives when exposed to individual incentives subjects who chose team incentives perform worse if both the unobservable interdependency between their efforts and their incentive to cooperate under team incentives are high

the consequences of the minimum wage when other wages are bargained over abstract this paper examines the impact of a binding minimum wage in a situation where unions dominated by skilled workers set wages it is shown that the relationship between the minimum wage the bargained wage and employment of skilled and unskilled workers depends on the magnitude of the elasticity of substitution between skilled and unskilled labor cases where minimum wage hikes increase both overall and unskilled employment are exhibited

the worker discipline effect a disaggregative analysis the authors test for the presence of a worker discipline effect wherein macroeconomic conditions influence worker effort and examine interindustry variation in its strength an employment function analysis is first used to find evidence of a worker discipline effect in the majority of u s three digit manufacturing industries a factor analysis of industry firm and labor market characteristics is then used to identify several underlying factors by which industries can be distinguished the authors find that the strength of the worker discipline effect is positively and significantly correlated with the degree to which industries have secondary characteristics copyright 1990 by mit press

testing dynamic models of worker effort this article derives three dynamic models of worker effort determination based on a shirking efficiency wage model a compensating differentials model and a union firm bargaining model it shows that all of these three models have the same long run comparative statics but differ in their short run dynamics we use these different predictions about the dynamics as a basis for testing the models euler equations for each model are estimated using panel data on 486 u k companies the evidence supports the shirking model in firms with low levels of unionization but the bargaining model in highly unionized industries