how does advertising depend on competition evidence from u s brewing the relationship between market structure and advertising has been extensively studied but has generated sharply opposing theoretical predictions as well as inconclusive empirical findings likely because of severe endogeneity concerns we exploit the 2008 merger of miller and coors in the u s brewing industry to examine how changes in local concentration affect firms advertising behavior well established regional preferences over beer brands and the sharp increase in concentration from the merger make this an excellent setting to analyze this question we find a significant positive effect of local market concentration on advertising expenditures a 100 point increase in the herfindahl hirschmann index measure of concentration increases advertising per capita by about 5 our findings shed light on how and when firms choose to deploy advertising the online appendix is available at https doi org 10 1287 mnsc 2017 2889 this paper was accepted by eric anderson marketing

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

the great reversal in the demand for skill and cognitive tasks this paper argues that several of the poor labor market outcomes observed in the great recession can be traced back to a change in the demand pattern for skilled workers that started with the tech bust of 2000 in particular we show that around the year 2000 the demand for cognitive tasks underwent a reversal in response high skilled workers moved down the occupational ladder and increasingly displaced lower educated workers in less skill intensive jobs while these effects were present before the financial crisis of 2008 they became more obvious after jobs associated with the housing bubble disappeared

the speed of employer learning the employer learning literature finds support for statistical discrimination on the basis of schooling how economically relevant statistical discrimination is depends on how fast employers learn about workers productive types this article is the first to estimate the speed of employer learning employers learn quickly initial expectation errors decline by 50 within 3 years this estimate places an upper bound on the contribution of signaling this bound varies with the speed of employer learning and with discount rate for a wide range of parameter values the contribution of signaling to the gains from schooling is less than 25

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

racial discrimination in the labor market theory and empirics we review theories of race discrimination in the labor market taste based models can generate wage and unemployment duration differentials when combined with either random or directed search even when strong prejudice is not widespread but no existing model explains the unemployment rate differential models of statistical discrimination based on differential observability of productivity across races can explain the pattern and magnitudes of wage differentials but do not address employment and unemployment at their current state of development models of statistical discrimination based on rational stereotypes have little empirical content it is plausible that models combining elements of the search models with statistical discrimination could fit the data we suggest possible avenues to be pursued and comment briefly on the implication of existing theory for public policy jel j15 j31 j64 j71

interpreting rising concentration the case of beer despite considerable long term progress in distinguishing conceptually between the fact of market power and the calculation of market concentration antitrust claimants the department of justice the federal trade commission ftc and private litigants continue to place substantial emphasis on defining a market computing market shares and calculating measures of concentration the operating supposition is virtually always that monopoly or market power is positively associated with concentration whether other offsetting characteristics are also associated with high concentration ordinarily receives less if any consideration the most often cited consideration weighing against an automatic condemnation of increased concentration say through horizontal merger is that costs market power and concentration may all be jointly related economic analysis suggests that if higher concentration brings with it is caused by or causes lower industry costs then it may also bring positive total benefits even if antitrust concern with industry concentration focuses on market power the ability of firms to restrict output and raise price the brewing industry among others has been a major target of this concern because of its high and rising concentration this paper sketches two alternative explanations for this change in industry structure competitive expansion by the more efficient brewers and anticompetitive exclusion of equally efficient but smaller brewers empirical analysis indicates that competition is the better hypothesis in explaining changes in the structure of the beer market

a reappraisal of interpreting rising concentration the case of beer there has been a tremendous amount of change in the structure and conduct of the post world war ii brewing industry most important concentration has risen scale economies have increased and advertising intensity especially television advertising has changed in a recent article in this journal william j lynk 1984 attempted to determine empirically how changes in concentration and technology affected brewing industry performance between 1974 and 1980 2 he found support for the competition hypothesis that cost reductions due to cost superiority or the exploitation of scale economies have dominated the possible market power effect of rising concentration and have caused output to increase and prices to fall thus the alternative or the exclusion hypothesis that large brewers have squeezed smaller rivals out of in contrast to the finding of william j lynk that rising concentration in the u s brewing industry caused industry output to expand and by his presumption prices to fall the results of this study show that concentration had no significant direct impact on post world war ii beer prices estimates from a reduced form price equation reveal that advertising and costs have had a significant positive effect on beer prices these results provide evidence that the rising concentration scale economies and advertising expenditures in the u s brewing industry generated higher beer prices between 1950 and 1971 i would like to thank william hallagan for bringing lynk s paper to my attention and james f ragan jr carol horton tremblay and an anonymous referee for their helpful comments on earlier drafts any remaining errors are my responsibility 1 for example the number of firms declined from 386 to 37 and the five firm concentration ratio increased from 23 to 71 between 1950 and 1978 see elzinga 1973 1982 keithahn 1978 ornstein 1981 and greer 1971a 1981 for excellent industry studies 2 in this paper industry performance is evaluated from the consumer s point of view for a given level of product quality if structure and conduct changes are beneficial to consumers by causing the market price to fall then industry performance has improved

counterfactual decomposition of changes in wage distributions using quantile regression we propose a method to decompose the changes in the wage distribution over a period of time in several factors contributing to those changes the method is based on the estimation of marginal wage distributions consistent with a conditional distribution estimated by quantile regression as well as with any hypothesized distribution for the covariates comparing the marginal distributions implied by different distributions for the covariates one is then able to perform counterfactual exercises the proposed methodology enables the identification of the sources of the increased wage inequality observed in most countries specifically it decomposes the changes in the wage distribution over a period of time into several factors contributing to those changes namely by discriminating between changes in the characteristics of the working population and changes in the returns to these characteristics we apply this methodology to portuguese data for the period 1986 1995 and find that the observed increase in educational levels contributed decisively towards greater wage inequality copyright 2005 john wiley sons ltd

alcohol control laws and the consumption of distilled spirits and beer this article tests the social marketing effectiveness of alcohol control laws designed to reduce the consumption of alcoholic beverages the study uses state level historical data to estimate the demand for distilled spirits and beer using economic sociodemographic and control law explanatory variables spirits and beer consumption are found to react differently to changes in economic sociodemographic and regulatory variables these differences suggest a consumer and product segment based approach to alcohol control laws or social marketing that emphasizes measures directed at youths for beer and at price for spirits

decomposing the composition effect the role of covariates in determining between group differences in economic outcomes in this article we study the structure of the composition effect which is the part of the observed between group difference in the distribution of some economic outcome that can be explained by differences in the distribution of covariates using results from copula theory we derive a new representation that contains three types of components i the direct contribution of each covariate due to between group differences in the respective marginal distributions ii several two way and higher order interaction effects due to the interplay between two or more marginal distributions and iii a dependence effect accounting for between group differences in dependence patterns among the covariates we show how these components can be estimated in practice and use our method to study the evolution of the wage distribution in the united states between 1985 and 2005 we obtain some new and interesting empirical findings for example our estimates suggest that the dependence effect alone can explai

fast track is it in the genes the promotion policy of a large japanese firm abstract we study the promotion policy of a large high tech manufacturing japanese firm we find that the company has multiple ports of entry and hires a significant number of employees with previous job experience cohort peer differentiation in promotion starts much earlier than predicted by the common view there are clear signs of fast track effects so that individuals promoted faster earlier on are more likely to be promoted faster later on fast track effects are not in the genes because they survive even after controlling for time invariant individual effects such as innate individual ability the last result is difficult to justify using a pure learning model where ability is time invariant so that a richer learning model that incorporates perhaps human capital considerations is clearly required

advertising concentration and profitability in manufacturing advertising concentration and profitability in manufacturing i introduction economists have devoted much effort to empirically testing the hypothesized relationships between industrial concentration profits and advertising twenty years ago lester telser concluded that there is little empirical support for an inverse association between advertising and competition 1964 later other economists studying the relationship between advertising and concentration discovered a positive correlation between the four firm concentration ratio a measure of industry concentration and advertising intensity 1 strickland and weiss 1976 went further to show that there is a causal relationship between these elements increases in concentration cause advertising to intensify and conversely a rise in advertising intensity causes an increase in the level of concentration in recent years the empirical literature on advertising concentration and profitability has atrophied because of dissatisfaction with its theoretical basis as a new approach i adopt the theory of advertising developed by stigler and becker 1977 and extend it to incorporate the relationships among advertising concentration and profitability i then test its most important implications using data from the 1977 census of manufactures and the detailed input output structure of the u s economy 2 section ii examines the relationship between concentration and advertising intensity conventional theory known as the inverted u hypothesis asserts that advertising is expected to increase with concentration at first but to decrease at very high levels of concentration because collusion to avoid advertising costs becomes easier extending the stigler and becker theory i hypothesize that when concentration increases even if the large firms do not collude and continue to act independently they will eventually decrease their advertising intensity at high levels of concentration provided that the demand curve for the industry s products is relatively inelastic if the industry s demand curve is relatively elastic advertising intensity increases monotonically with concentration at all levels of concentration this hypothesis is supported by the 1977 data taken from the census and the input output structure of the u s economy section iii focuses on the relationship between advertising and profitability according to conventional theories advertising intensity promotes product differentiation leading to higher barriers to entry and higher profit margins in the past researchers e g strickland and weiss 1976 realized that contrary to the implications of barriers to entry theory the coefficient of advertising in a profit margin equation was longer for a sample of industries producing producer goods than for industries producing consumer goods they viewed this result as an anomaly inconsistent with both their theoretical reasoning and with other important empirical results already published i obtain a similar result which i am able to link to a theoretical structure thus contributing to the refutation of the barriers to entry hypothesis i begin by extending the stigler and becker theory to treat advertising and research and development r d as two complementary intangible capital goods the sample is divided into two groups producers of homogeneous goods who spend relatively more on r d and producers of heterogeneous goods who spend relatively more on advertising since we are unable to measure r d costs at the appropriate industry level it is not included among the regression variables if r d and advertising intensity are correlated we should expect the coefficient of advertising in the profitability equation in the homogeneous goods subsample to exceed the coefficient of advertising in the profitability equation in the heterogeneous goods subsample in this case the omission of the r d variable provides an implication for testing the new hypothesis

changes in earnings instability and job loss this paper examines the contribution of job loss or displacement to increasing male earnings instability between 1970 and 1991 earnings instability increased among both displaced and not displaced men so changes associated with job loss cannot fully explain rising instability changes in the incidence and consequences of job loss did however add substantially to growing earnings instability and to the overall variance of earnings there is evidence that displacement substantially raised earnings volatility for several years after job loss that effect combined with increased numbers of recently displaced workers in the 1980s relative to the previous decade contributed to rising overall earnings instability

determinants of environmental investments testing the structural model abstract the main purpose of this study is to provide the needed additional quantitative evidence regarding the introduction of environmental technologies and to increase the possibility for generalization and thus policy application of conclusions to achieve that purpose a conceptual model is developed and then tested on a large database of firms from various industries with the use of structural equation modeling the results show that policy measures past environmental investments the importance of environmental technologies for customers and the firm performance have a positive effect on environmental investments furthermore the results show that policy measures are a second order three factor construct

the effect of price advertising on prices evidence in the wake of 44 liquormart the 44 liquormart decision eliminating rhode island s ban on liquor price advertising made rhode island the subject of a natural experiment for measuring the effect of advertising on prices using massachusetts prices as controls we find that advertising stores substantially cut only prices of the products that they advertise prices of other products at both advertising and nonadvertising stores do not change advertising stores cut their prices on products advertised by rivals while nonadvertising stores do not we find no reductions in price dispersion across stores newspaper advertising stores appear to draw a higher share of customers after they advertise

the signaling role of promotions further theory and empirical evidence an extensive theoretical literature investigates the role of promotions as a signal of worker ability we extend the theory by focusing on how the signaling role of promotion varies with education and then investigate the resulting predictions using a longitudinal data set that contains detailed information concerning the internal labor market history of a medium sized firm in the financial services industry our results support signaling being important for understanding the differences between promotion practices concerning bachelor s and master s degree holders while the evidence concerning the importance of signaling for high school graduates and phds is mixed

the changing roles of education and ability in wage determination this study examines changes in returns to formal education and cognitive skills over the past 20 years using the 1979 and 1997 waves of the national longitudinal survey of youth we show that cognitive skills had a 30 50 larger effect on wages in the 1980s than in the 2000s returns to education were higher in the 2000s these developments are not explained by changing distributions of workers observable characteristics or by changing labor market structure we show that the decline in returns to ability can be attributed to differences in the growth rate of technology between the 1980s and 2000s

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

biofuel market and carbon modeling to analyse french biofuel policy abstract in order to comply with european union objectives france has set up an ambitious biofuel plan this plan is evaluated on the basis of two criteria tax exemption on fossil fuels and greenhouse gases ghg emission savings an economic marginal analysis and a life cycle assessment lca are provided using a coupling procedure between a partial agro industrial equilibrium model and an oil refining optimization model thus we determine the minimum tax exemption needed to place on the market a targeted quantity of biofuel by deducting the biofuel long run marginal revenue of refiners from the agro industrial marginal cost of biofuel production with a clear view of the refiner s economic choices total pollutant emissions along the biofuel production chains are quantified and used to feed an lca the french biofuel plan is evaluated for 2008 2010 and 2012 using prospective scenarios results suggest that biofuel competitiveness depends on crude oil prices and demand for petroleum products and consequently these parameters should be taken into account by authorities to modulate biofuel tax exemption lca results show that biofuel production and use from seed to wheel would facilitate the french government s compliance with its plan climat objectives by reducing up to 5 ghg emissions in the french road transport sector by 2010

job search bargaining and wage dynamics this article constructs and estimates a model of wage bargaining with on the job search to explore three different components of wages general human capital match specific capital and outside options as the workers find better job opportunities the current employer has to compete with outside firms to retain them this between firm competition results in wage growth even when productivity remains the same the model is estimated by a simulated minimum distance estimator and data from the 1979 national longitudinal study of youth the results indicate that the improved value of the outside option raises wages by 14 16 in the first 5 years

cooperation among liquefied natural gas suppliers is rationalization the sole objective this paper examines the development of cooperative strategies between countries exporting liquefied natural gas lng and members of the gas exporting countries forum gecf this economic study focuses specifically on an often raised scenario the emergence of a cooperative approach designed with the sole aim of logistic rationalization and which would not have any effect on lng prices we first assess the annual gains that may result from this market power free cooperative approach using a simple static transportation model the numerical results obtained suggest that in the absence of a gain redistribution policy this cooperative strategy will probably not be adopted because cooperation would not be a rational move for some exporters the problem of gain sharing is then formulated using cooperative game theory concepts several gain sharing methods have been studied including the shapley value and various nucleolus inspired concepts our results suggest that the choice of a redistribution policy appears relatively restricted out of the methods studied only one per capita nucleolus satisfies two key requirements core belonging and monotonicity in the aggregate lastly we look at how cooperation may give rise to a coordination cost and try to determine the maximum amount of this cost in view of the low level of this amount and the relative complexity of the sharing method implemented we consider that the credibility of a logistic cooperation scenario exempt from market power should be reappraised

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

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

the evolution of wages over the lifecycle insights from intergenerational connections this article uses intergenerational information to improve our understanding of lifecycle wage dynamics i present a simple statistical model that relates the wages of workers at different points in their lifecycle to the earnings of their parents i decompose cross sectional variance of wages into a permanent component related to parental background a permanent component unrelated to parental background and a transitory component data from the panel study of income dynamics psid suggests that intergenerational relationships are stronger when measured later in the lifecycle of the son this implies that the permanent parent related component is increasingly important for wage determination as workers grow older this is not consistent with wage evolution through persistent random shocks rather it is consistent with human capital models and learning models of wage evolution

advertising as special service provision under non price vertical restraints exclusive territories in beer distribution this article presents statistical evidence which supports lester telser s 1960 hypothesis that when vertical restraints are made illegal intrabrand competition results which diminishes the provision of point of sale special services this results because of the public goods problem exhibited by the special services increased special service provision by the national manufacturer must then substitute for the special service provision left unfilled by the wholesaler evidence relating to the efficacy of such substitution is also presented

the effects of banning advertising in junk food markets we develop a structural model to analyze the eects of banning advertising on market equilibria and welfare in junk food markets we consider the impact on demand and prices and show how to quantify welfare eects when advertising might lead consumers to take decisions that are inconsistent with their underlying preferences we use transaction level data on the potato chips market and nd that banning advertising leads to a direct reduction in demand but also toughens price competition leading to lower prices and increased demand welfare increases as consumers benet from no longer making distorted

education decisions and labour market outcomes the financial return to a college degree is an increasing concern amid rising tuition costs and stagnant wages using the education longitudinal study of 2002 els 2002 i analyse the effect of po

efficiency effects of exclusive territories evidence from the indiana beer market the welfare effects of vertically imposed exclusive territories and the appropriate antitrust policy toward them have long been debated this paper sheds light on the exclusive territory controversy by examing the effects of indiana s 1979 ban on the grant of exclusive territories to beer wholesalers using time series data for 1948 1990 we find the ban reduced beer consumption in indiana by 6 percent coupled with previous evidence that indiana s ban reduced price our results suggest that exclusive territories in the beer industry increase demand and enhance welfare by stimulating the provision of dealer services

optimal timing of college subsidies enrollment graduation and the skill premium abstract the large increase in the skill premium has led many policy makers to propose increasing college subsidies as a strategy to increase college enrollment and reduce inequality existing analyses typically assume that there is no distinction between enrollment and graduation but in fact more than 50 of college enrollees do not graduate this highlights the need to explicitly model the decision to drop out in assessing the effect of subsidies i build a general equilibrium model of education choice that features an explicit dropout decision calibrate it to match key features of the us economy and use it to evaluate the impact of college subsidies on the supply of college educated labor i show that moving to a system in which subsidies are back loaded i e higher for juniors and seniors than for freshmen and sophomores will increase the supply of college educated labor even holding total subsides constant in fact this effect is larger than what would be accomplished by a uniform 50 increase in subsidies

a brazilian perspective of power systems integration using osemosys samba south america model base and the bargaining power of neighbouring countries a cooperative games approach abstract this paper intends to contribute to a better understanding of both advantages and drawbacks of power systems interconnection processes between brazil and its south american neighbours based on data available in national and international reports three scenarios for the power supply sector expansion were modelled in osemosys the brazilian perspective of power integration considers funding strategic hydro projects in argentina bolivia guyana and peru an alternative to the power integration process considers higher penetration of distributed photovoltaics and biogas power plants as well as lower hydro capacity expansion in brazil features related to costs carbon emissions hydro reservoirs technological performance electricity demand population growth time zones and reserve margin were considered the comparison of different scenarios provides insights regarding the contribution of renewable energy generation and sheds light on cross border trade perspectives between brazil and other countries in south america using a cooperative games approach the bargaining power of each country player was calculated by applying the shapley value concept argentina brazil paraguay peru and guyana have the largest bargaining power either as exporter or importer

does school quality explain the recent black white wage trend around 1980 the trend toward racial wage convergence essentially stopped i ask whether this break in the convergence trend can be explained by school quality department of education surveys provide earnings data for the high school class of 1972 in 1979 and the class of 1980 in 1986 both linked to data from the respondents high schools by several measures differences between schools attended by blacks and whites were already rather small in the 1970s furthermore i find that measurable school inputs generally have little effect on wages thus school quality explains little of the recent black white wage trend

changes in the characteristics of american youth implications for adult outcomes we examine changes in the characteristics of american youth between the late 1970s and the late 1990s with a focus on characteristics that matter for labor market success the current generation is more skilled than the previous one blacks and hispanics have gained relative to whites and women have gained relative to men however the skill distribution has widened overall shifts in parental education generate many of the observed changes we also provide speculative estimates suggesting that if recent trends in technology and the supply of human capital continue wage inequality will increase substantially by 2025

the changing distribution of male wages in the uk this paper uses microeconomic data from the u k family expenditure surveys fes and the general household surveys ghs to describe and explain changes in the distribution of male wages since the late 1970s wage inequality has risen very fast in the u k and this rise is characterized both by increasing education and age differentials we show that a large part of the changes in the u k can be summarized quite simply as increases in eduction differentials and a decline of growth of entry level wages which persist subsequently this fact we interpret as cohort effects we also show that like in the u s an important aspect of rising wage inequality is increased within group wage dispersion finally we use the ghs to evaluate the role of alternative education measures

three methods to share joint costs or surplus abstract we study cost sharing methods with variable demands of heterogeneous goods additive in the cost function and meeting the dummy axiom we consider four axioms scale invariance si demand monotonicity dm upper bound for homogeneous goods ubh placing a natural cap on cost shares when goods are homogeneous average cost pricing for homogeneous goods acph the random order values based on stand alone costs are characterized by si and dm serial costsharing by dm and ub the aumann shapley pricing method by si and acph no other combination of the four axioms is compatible with additivity and dummy journal of economic literature classification numbers c71 d62 d63

do formal salary systems really matter drawing on a single large u s corporation s personnel records for the years 1989 93 the authors analyze an example of the kind of formal salary system used by most large firms they find that this firm s practices were consistent with most of the important conclusions of prior empirical research on internal labor markets the system was highly centralized covering salary levels salary ranges raises and bonuses supervisors had little discretion over pay other than through subjective performance ratings the firm held fairly strictly to the salary rules leading to observable constraints on pay for employees near the top of the salary range these constraints however apparently did not impose important costs on the firm in the form of increased turnover although the system operated without any apparent connection to external factors the authors conclude that it transmitted external labor market forces with little distortion

the role of comparative advantage and learning in wage dynamics and intrafirm mobility evidence from germany this article measures the importance of job level assignment based on comparative advantage and learning about workers ability in explaining intrafirm wage and mobility dynamics using survey data from the german socio economic panel the results reveal the importance of nonrandom selection of workers into the rungs of the firm s job ladder measured and unmeasured ability play important roles in workers rank assignment with unmeasured ability being more important at higher levels of the hierarchical job structure there is some evidence of learning effects for workers below age 35 generating mobility between upper and executive levels

promotion signaling gender and turnover new theory and evidence we extend promotion signaling theory to incorporate gender and across firm mobility within and across job levels evidence from worker firm linked finnish panel data supports our theory for some groups controlling for worker performance inferred from performance related pay within firm promotion probabilities are increasing and wage increases from promotion are decreasing in educational attainment for some educational groups with results stronger for first than for subsequent promotions women have lower promotion probabilities than men and a greater sensitivity of promotion probability to educational attainment across firm promotions are rare but bring wage increases exceeding those for internal promotions and across firm lateral moves

the labour attributes of demand in the asean economic community this article examines the relative importance of attributes that will directly affect labour markets and employment earnings after thailand participates in the asean economic community agreement in 2016 this research paper considers two types of company 1 companies under asean free movement of labour and 2 companies not under asean free movement of labour in 2016 the conjoint analysis is utilised with an additive model of five variables to generate a parsimonious orthogonal array of 12 profiles the five variables are presented in full profile form withall possible combinations which resulted in 12 rank ordered combinations two hundred and seventeen individual recruiters participated in this study overall this study finds that the most important attributes for employees in both types of company are asean nationality and having a higher degree of education speaking an asean language is found to be crucial for companies under asean free movement of labour while speaking english is revealed to be critical for companies not under asean free movement of labour finally attributes of workplace and identity skill are not significantly important for both types of company

advertising restrictions and competition in the children s breakfast cereal industry abstract in this article i analyze the consequences of advertising in the children s breakfast cereal market i take advantage of the prohibition on advertising directed at children in the province of quebec to examine the nature of advertising and to determine whether the restriction hinders competition i show that prices are higher in quebec than in canadian provinces that permit advertising this finding suggests that the informative role of advertising dominates any persuasive role since the most likely explanation is that the restriction prevented firms from announcing products existence or characteristics and thus from overcoming perceived differentiation if advertising is informative restricting it should increase the market shares of older better known brands and decrease the market shares of newer and or less well known brands empirical analysis supports this prediction market shares of established brands are larger in quebec than in the rest of canada and the opposite is true for nonest

performance pay and wage inequality an increasing fraction of jobs in the u s labor market explicitly pay workers for their performance using bonus pay commissions or piece rate contracts using data from the panel study of income dynamics we show that compensation in performance pay jobs is more closely tied to both observed and unobserved productive characteristics of workers than compensation in non performance pay jobs we also find that the return to these productive characteristics increased faster over time in performance pay than in non performance pay jobs we show that this finding is consistent with the view that underlying changes in returns to skill due for instance to technological change induce more firms to offer performance pay contracts and result in more wage inequality among workers who are paid for performance thus performance pay provides a channel through which underlying changes in returns to skill get translated into higher wage inequality we conclude that this channel accounts for 21 of the growth in the variance of male wages between the late 1970s and the early 1990s and for most of the increase in wage inequality above the eightieth percentile over the same period

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

allocating the co2 emissions of an oil refinery with aumann shapley prices abstract linear programming is widely used by multiproduct oil refining firms which minimize a refinery s variable cost under a set of constraints in addition to operating costs this variable cost can include the cost associated with the refinery s co 2 emissions we suggest a quite general approach combining use of aumann shapley cost sharing method and breakdown of the objective function of the linear program this approach determines an appropriate rule for the allocation of the refinery s co 2 emissions or in general variable costs among the various finished products which can be used for purposes of life cycle assessment a numerical application to a simplified refining model is presented

decomposing economic mobility transition matrices the intergenerational mobility literature has consistently found that the distribution of adult economic outcomes differ markedly depending on parental economic status yet much remains to be understood about the drivers or determinants of this relationship existing literature on potential drivers focuses primarily on mean effects to help provide a more complete picture of the potential forces driving economic persistence we propose a method to decompose transition matrices and related indices specifically we decompose differences between an estimated transition matrix and a benchmark transition matrix into portions attributable to differences in characteristics between individuals from different households a composition effect and portions attributable to differing returns to these characteristics between individuals from different households a structure effect we also incorporate a detailed decomposition based on copula theory that decomposes the composition effect into portions attributable to specific covariates and their interactions we illustrate our method using data on white men from the 1979 national longitudinal survey of youth estimation is based on an extended mincer equation that includes cognitive and non cognitive measures to address the potential endogeneity of education we implement an iv strategy that allows us to estimate causal effects and investigate the role of unobserved ability

the covariance structure of earnings in great britain 1991 1999 i analyse the dynamic structure of earnings in great britain for the period 1991 99 by decomposing the earnings covariance structure into its permanent and transitory components according to the british household panel study data earnings inequality of male full time employees increases over the 1990s however earnings mobility may have also increased that is for this period earnings persistence falls this evidence is at odds with previous literature on earnings dynamics both for britain and other oecd countries moreover human capital and job related characteristics account for nearly all persistent earnings differences and the transitory component is highly persistent

occupational licensing of a credence good the regulation of midwifery 1 introduction occupational licensing is as old as trade estimates are that in the united states alone at least 800 occupations require some form of license to practice rottenberg 1980 p 2 midwifery is most certainly among the oldest occupations known to homo sapiens and unsurprisingly it has been the subject of licensing regulations over the 20th century there has been however a marked reemergence of the practice over the past 20 years in the united states after nearly being driven from existence by physicians in the early part of the 20th century the percentage of midwife attended births has risen from 0 9 of all births in 1975 to 5 95 of all births in 1995 this latter figure translates into 231 921 midwife attended births for the year 1995 of this figure cnms attended 94 3 or 218 613 births a number of factors account for this resurgence including women s expression of their right to choose birth practitioners and place of birth increased political expression of that right and the escalating costs of traditional childbirth services by obstetricians obs and hospitals butter and kay 1988 in contrast midwife attended births account for a full 75 of all births in europe with far lower infant and maternal mortality rates reported coburn 1997 midwives are classified into two basic categories in this country lay midwife and certified nurse midwife cnm lay midwives typically receive no formal educational training but are clinically trained through apprenticeships on the other hand a cnm is a registered nurse with advanced training in midwifery who possesses evidence of certification by the american college of nurse midwives acnm adams 1989 p 1038 the practice of nurse midwifery as defined by the acnm is the independent management of care of essentially normal newborns and women antepartally before birth intrapartally during birth postpartally after birth and or gynecologically within a health care system which provides for medical consultation collaborative management and referral safriet 1992 p 425 the causes and effects of state regulation that determines the extent of professional independence from physicians of advanced practice nurses apns has been analyzed by dueker et al 2000 for the same general period we employ advanced practice nursing however includes nurse practitioners clinical nurse specialists and nurse anesthetists as well as cnms dueker et al 2000 suggest that for this larger category of nurse specialists apn earnings are lower and physicians assistants earnings are higher in states where apns have attained higher levels of professional independence measured in part by prescriptive authority 1 midwifery has been included along with other heath care professions in interesting studies of the impact of the composition of public licensing boards on particular occupational requirements graddy and nichol 1989 graddy 1991 but to the best of our knowledge midwifery has not been isolated in any study of effects of regulation s 2 the purpose of this paper is thus to analyze empirically the economic impact of alternative forms of regulation within the state markets for midwife services certified nurse midwives are formally recognized by the american college of obstetricians and gynecologists acog and are now able to practice legally in all 50 states including the district of columbia but cnms practice under significant and significantly different regulations that limit their scope of practice and constrain their use by women devries 1985 within the 50 states there are suggestions in the literature that the severity of regulations at the state level a partial product of past pressure by the medical establishment obs in particular has had deleterious effects in the market for midwives services however there has been again to the best of our knowledge no empirical support for such propositions or an analysis of the particular impact of alternative regulations

advertising restrictions and concentration the case of malt beverages the relationship between state imposed advertising restrictions and state level market concentration in the malt beverage industry is examined the authors find that the presence of proscriptions on price advertising significantly increases market concentration at the state level both absolutely and relative to a measure of national concentration the evidence also indicates that banning local nonprice advertising in addition to price advertising yields no marginal significant change in either measure of state level concentration analysis of individual brewers market shares suggests that large national brewers gain at the expense of smaller brewers when price advertising is restricted copyright 1995 by mit press

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

changing roles of ability and education in u s intergenerational mobility using data on young adults from the 1979 and 1997 national longitudinal survey of youth we investigate the changing roles of ability and education in the transmission of economic status across generations we find that ability plays a substantially diminished role for the most recent cohort whereas education plays a much larger role the first finding results primarily from a smaller effect of children s ability on status the second from an increased correlation between parental status and educational attainment a replication of the analysis by gender reveals that the changes in the role of ability are largely driven by men whereas the changes in education s role are largely driven by women jel j62 i24

the growing importance of social skills in the labor market the labor market increasingly rewards social skills between 1980 and 2012 jobs requiring high levels of social interaction grew by nearly 12 percentage points as a share of the u s labor force math intensive but less social jobs including many stem occupations shrank by 3 3 percentage points over the same period employment and wage growth were particularly strong for jobs requiring high levels of both math skill and social skills to understand these patterns i develop a model of team production where workers trade tasks to exploit their comparative advantage in the model social skills reduce coordination costs allowing workers to specialize and work together more efficiently the model generates predictions about sorting and the relative returns to skill across occupations which i investigate using data from the nlsy79 and the nlsy97 using a comparable set of skill measures and covariates across survey waves i find that the labor market return to social skills was much greater in the 2000s than in the mid 1980s and 1990s

reconsidering institutional labor economics the author illustrates the utility of institutional labor economics and makes a case for a reconsideration of it two recent developments motivate this effort the rise of new personnel economics npe as a significant subfield of labor economics and the substantial shifts in work organization that have taken place since the 1990s understanding how and why firms have reorganized work opens the door for a renewed interest in institutional approaches the author explains that the rules of institutional labor markets ilms emerge from the competition between organizational interest groups unions personnel professionals and the government and competing views of firms objectives resulting in the rise of ilms the slow diffusion of high performance work systems strategies used to obtain a high level of commitment from workers the use of contingent employees and the spread of new promotion rules in response to equal employment opportunity pressures as such the role of power and influence in establishing work rules is of central concern though more conventional npe considerations also remain important

borrowing constraints college enrollment and delayed entry in this article i propose and estimate a dynamic model of education borrowing and work decisions of high school graduates i examine the effect of relaxing borrowing constraints on educational attainment by simulating increases in the amount students are permitted to borrow from government sponsored loan programs my results indicate that borrowing constraints have a small impact on attainment the removal of education related borrowing constraints raises bachelor s degree completion by 2 4 percentage points tuition subsidies are necessary to obtain larger increases i find that higher subsidies for average ability students are the most cost effective targeted tuition subsidies

advertising price and welfare evidence from the u s brewing industry the welfare effect of advertising has been a subject of controversy among economists for some time one obvious concern is simply the cost of advertising in 1990 for example americans spent 130 1 billion on advertising to put this figure into perspective this amounted to 523 per capita 2 35 percent of gross national product and roughly 80 percent of the national deficit 1 much of the early debate regarding the social desirability of advertising stems from different preconceptions regarding its purpose 13 14 8 49 for example according to the kaldor 29 hypothesis advertising is primarily persuasive or deceptive in nature it changes consumer preferences creates brand loyalty and persuades consumers to favor commodities that they did not previously desire an opinion survey by bauer and greyser 5 indicates that consumers believe that much of advertising is persuasive and greyser and reece 27 158 find that 85 percent of the over 2 700 harvard business review subscribers surveyed believe that advertising persuades people to buy things they do not need if advertising is purely deceptive then it can be classified as a bad and reduces welfare

use of coupled incentives to improve adoption of environmentally friendly technologies abstract we devise a system of coupled incentives that stimulate economic agents to coordinate their actions the agents are price takers and their actions would be independent of one another uncoupled if incentives were not implemented the action coordination is expected to help a technology transition from the current one to a modern one the latter is assumed more environmentally friendly than the former with the incentives in place the problem becomes one of a principal multi agent game in the game the principal chooses instruments sufficient to generate an environmentally friendly agent reaction we define a specific coupled incentive scheme cis in which individual agents are rewarded for their joint actions effect rather than for their own actions accomplishments we show that a technology switch can be realised through cis for a budget for which no technology change would be achieved if only individual agent actions were compensated we show under which conditions the agents game has a unique solution and what the principal s choices are for the solution s implementation

on the wage growth of immigrants israel 1990 2000 this paper develops a descriptive methodology for the analysis of wage growth of immigrants that is based on human capital theory the sources of the wage growth are 1 the rise of the return to imported human capital 2 the impact of accumulated experience in the host country and 3 the mobility up the occupational ladder in the host country the model implies a nonlinear wage function that includes interactions between imported skills and local wage growth using data on native israelis and immigrants from the former soviet union of israel we estimate wage equations jointly for the two groups we find that upon arrival immigrants receive non return for imported skills in the ten years following arrival wages of highly skilled immigrants grow at 8 percent a year rising prices of skills occupational transitions accumulated experience in israel and an economy wide rise in wages account for 3 4 1 1 1 5 and 1 5 percent each in the long run the return for schooling converges to 0 027 substantially below the 0 069 return for natives we do not reject the hypothesis that the return for experience converges to that of natives and that immigrants receive a higher return for their unmeasured skills we find that there is some downgrading in the occupational distribution of immigrants relative to that of natives moreover the average wages of immigrants approach but do not converge to the wages of comparable natives the main reason for this is the low return to their imported skills jel j24 j31 j60

optimal incentives for teams much of the existing theory of incentives describes a static relationship that lasts for just one transaction this static assumption is not only unrealistic but the resulting predictions appear to be at odds with many work organizations the current paper introduces possible long term interaction among agents and studies how the design of explicit incentives and work organizations can exploit and interact with the implicit incentives generated by the repeated interaction of the agents the optimal incentive scheme is shown to display observed features of the increasingly popular teams such as the use of low powered group incentives