incentives productivity and labor contracts the relationship between age earnings profiles and worker incentives is examined by contrasting wage and salary workers with the self employed it is argued that the steepness of wage and salary workers age earnings profiles reflects the desire to provide work incentives to those workers since self employed workers do not face this agency problem they are used as a benchmark to gauge productivity empirical support of the proposition is provided and the effects of human capital accumulation are separated empirically from incentive effects the most important conclusion is that under some strong assumptions most of the slope in age earnings profiles is accounted for by the desire to provide incentives rather than by on the job training

nonpecuniary benefits to farming implications for supply response to decoupled payments we develop a household model wherein farmers allocate labor to maximize utility from leisure consumption and nonpecuniary benefits from farming the model shows that farmers with decreasing marginal utility of income respond to higher decoupled payments by decreasing off farm labor and increasing farm labor resulting in greater agricultural output we then estimate the difference between farm and off farm returns to labor using data from three nationally representative farm household surveys the finding of a large on farm off farm wage differential provides compelling evidence of substantial nonpecuniary benefits from farming

optimal incentive contracts for knowledge workers we study optimal incentive provision for knowledge workers a crucial resource for many organizations we augment a standard moral hazard framework to reflect two key patterns first retention is a challenge because workers are free to leave thereby harming their employer second the value of the workeru 05f3s outside option might depend on effort on the job optimal contracts that retain workers exhibit properties such as first best effort and surplus or non responsiveness to changes in underlying conditions due to large rents full retention is however costly for employers hence even when socially inefficient separation might occur in equilibrium 2014 elsevier b v

discrete equilibrium price dispersion an explicit solution of an equilibrium model with price setting firms and searching customers makes possible a number of comparativestatics predictions about how cost differences among firms search costs of customers and taxes will affect the mean and variance of the distribution of market prices another implication of the model is that a firm s demand depends on the difference between its price and the average price in the market

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

where are all the self employed women push and pull factors influencing female labor market decisions previous research focuses on factors that influence self employment participation in part because entrepreneurship has been associated with economic growth this literature has tended to focus only on men or the comparison of women to men while ignoring substantial heterogeneity in employment decisions among women by investigating the impact of individual household and local economic and cultural characteristics on the labor market outcomes of different groups of women we get a more comprehensive picture of their self employment decision recognizing self employment as one of multiple labor market choices we use multinomial logit and two confidential geocoded micro level datasets to study women s career choices in urban areas we find that the effects of various push and pull factors differ between married and unmarried women in particular more progressive gender attitudes pull married women into self employment while household burdens associated with children push them into self employment for unmarried women the local business climate and individual characteristics have the strongest influence in both cases the motivations for women are quite different than men

two sided uncertainty and up or out contracts a bilateral moral hazard problem provides a rationale for up or out employment contracts the employer sets a wage higher than opportunity cost to induce the worker to invest in firm specific capital if the individual does not make the grade it is in the firm s interest ex post to fire him had the initial arrangement not included provisions for firing individuals the firm would underreport the value of the employee wrecking the incentive scheme the basic model permits both firm and worker to be risk neutral therefore it admits a straightforward multiperiod extension which we also investigate

labour market performance effects of discrimination and loss of skill we examine the impact of discrimination on labor market performance when workers are subject to a risk of losing skills during an unemployment experience within a search and matching framework we show that both natives and immigrants are affected by discrimination discrimination in one sector has positive spillovers inducing employment to increase in the other sector and the effect on labor market performance therefore depends on whether discrimination is present in only one sector or in both discrimination may induce workers to train more or less than natives after having lost their skills dependent upon in which sector there is discrimination net output tends to be most negatively affected by discrimination among high skilled workers jel j15 j31 j61 j64 j71

back to the future rethinking auctions for renewable electricity support abstract the effectiveness and cost effectiveness of two main types of instruments feed in tariffs and quotas with tradable green certificates have usually been compared in the literature on renewable electricity promotion due to negative past experiences with a third instrument auctions this instrument has been broadly dismissed in academics and until recently also in policy practice however and based on an in depth review of experiences with auction schemes for renewable electricity around the world this paper argues that some of the problems with auctions in the past can be mitigated with the appropriate design elements and that indeed auctions can play an important role in the future implementation of renewable electricity support instruments around the world the paper provides a proposal for the coherent integration of several design elements

contractibility and the design of research agreements we analyze how contractibility affects contract design a major concern when designing research agreements is that researchers may use their funding to subsidize other projects we show that when research activities are not contractible an option contract is optimal the financing firm obtains the option to terminate the agreement and in case of termination broad property rights the threat of termination deters researchers from cross subsidization and the cost of exercising the termination option deters the financing firm from opportunistic termination we test this prediction using 580 biotechnology research agreements contracts with termination options are more common when research is non contractible

disability and self employment evidence for the uk this article examines the self employment decision for disabled and nondisabled workers in the uk using labour force survey lfs data it is found that self employment may provide an important means by which those with work limiting disabilities can accommodate their impairment

ethnic unemployment rates and frictional markets the unemployment rate in france is roughly 6 percentage points higher for african immigrants than for natives in the us the unemployment rate is approximately 9 percentage points higher for blacks than for whites commute time data indicates that minorities face longer commute times to work potentially reflecting more difficult access to jobs in this paper we investigate the impact of spatial mismatch on the unemployment rate of ethnic groups using the matching model proposed by rupert and wasmer 2012 we find that spatial factors explain 1 1 5 percentage points of the unemployment rate gap in both france and the us amounting to 17 25 of the relative gap in france and about 10 17 5 in the us among these factors differences in commuting distance play the most important role in france though longer commuting distances may be mitigated by higher mobility in the housing market for african workers overall we still conclude that labor market factors remain the main explanation for the higher unemployment rate of africans

disadvantage and discrimination in self employment caste gaps in earnings in indian small businesses using the 2004 2005 india human development survey data we estimate and decompose the earnings of household businesses owned by historically marginalized social groups known as scheduled castes and tribes scsts and non scsts across the earnings distribution we find clear differences in characteristics between the two types of businesses with the former faring significantly worse the mean decomposition reveals that as much as 55 of the caste earnings gap could be attributed to the unexplained component quantile regressions suggest that gaps are higher at lower deciles providing some evidence of a sticky floor finally quantile decompositions reveal that the unexplained component is greater at the lower and middle deciles than higher suggesting that scst owned businesses at the lower and middle end of the conditional earnings distribution face greater discrimination

experience with auctions for wind power in brazil abstract in an international context auctions are becoming increasingly common as a support scheme for renewable energies in this case study we analyze the brazilian experience with wind power in the period from 2009 to 2015 with regard to the development of auction prices rates of completion and market concentration inflation adjusted auction prices in brazil decreased by 54 until the end of 2012 before subsequently growing again to 87 of the first round price the declines in prices can be attributed to the increasing experience of actors and the increasing level of competition among project developers investors and turbine manufacturers various factors played a role in the price increase including both regulatory changes such as a modification of grid connection terms as well as external factors such as the falling value of the brazilian real against the us dollar only 14 of wind projects from the first eight auction rounds were completed on schedule the reasons cited for this include delayed grid connections delays resulting from environmental feasibility permits supply bottlenecks for wind power plants the bankruptcy of the turbine manufacturer impsa or delayed financing approval by the brazilian development bank bndes however the number of project cancellations is low to date so that a final rate of completion of between 89 and 98 is likely to be achieved the number of owners of wind power projects has increased from 16 to 49 actors the market share of the five largest owners has declined from nearly 60 to 37 the ratio of pre qualified to awarded capacity was consistently at over five and the herfindahl index suggests an unconcentrated market these findings indicate that the level of competition is sufficient to ensure free price formation in the market the owners are primarily large financially strong project planners energy providers or investment firms

gender discrimination estimation in a search model with matching and bargaining this article develops a search model of the labor market with matching bargaining and employers taste discrimination in which under necessary but standard distributional assumption it is possible to separately identify gender discrimination and unobserved productivity differences the equilibrium shows that both prejudiced and unprejudiced employers wage discriminate maximum likelihood estimates on cps data indicate that half of the employers are prejudiced average female productivity is 6 5 lower and two third of the gender earning differential may be explained by prejudice an affirmative action policy is implemented resulting in a redistribution of welfare from men to women at no cost for employers welfare

search bargaining and employer discrimination this article analyzes becker s 1957 1971 theory of employer discrimination within a search and wage bargaining setting discriminatory firms pay workers who are discriminated against less and apply stricter hiring criteria to these workers the highest profits are realized by firms with a positive discrimination coefficient moreover once ownership and management are separated both highest profits and highest utility can be realized by firms with a positive discrimination coefficient thus market forces like entry or takeovers do not ensure that wage differentials due to employer discrimination disappear

the economics of career concerns part i comparing information structures many incentives in organizations arise not through explicit formal incentive contracts but rather implicitly through career concerns this paper models career concerns through agents trying to manipulate the market assessment of their future productivity the information flow from current actions to market assessment is therefore crucial in determining the nature of these incentives improved information may either increase or reduce incentives the impact of information provides a major distinction between the explicit and implicit incentives model the paper derives general results on comparisons of information structures which serve as counterparts to the standard results on information structures in the principal agent model sufficient statistic impact of a blackwell garbling comparison of inclusive information structures 1999 the review of economic studies limited

self employment and self selection in developing country labor markets labor markets in less developed countries ldcs have traditionally been characterized as non competitive this view is expressed in well known models in the development economics literature for example the labor surplus model of lewis 16 asserts that labor in rural areas of ldcs in early stages of development is so abundant that if the wage rate were determined competitively it would be below the subsistence level hence institutions are assumed to arise to determine the wage rate non competitively and to provide the resulting excess supply of labor to agriculture with a subsistence level of living the harristodaro 11 model of rural urban migration asserts that labor unions minimum wage laws public sector hiring practices and other institutional factors tend to keep formal sector wages in urban areas above labor market clearing levels the resulting excess supply of labor in urban areas is assumed to survive at a subsistence level by becoming selfemployed in the low productivity informal sector recent empirical studies provide little support for the non competitive view of ldc labor markets evidence from india thailand malaysia kenya and guatemala suggests that labor markets are much less imperfect than often assumed an important empirical finding in several of these studies is that self employed workers appear to have higher earnings than their wage employee counterparts in urban areas 2 this fact is inconsistent with the notion that self employment is typically a low productivity occupation engaged in by individuals who are searching for scarce well paying formal sector jobs the purpose of this study is to analyze and estimate a model of individual choice between wage and self employment in the ldc context the model incorporates a production function in the self employment sector that includes managerial ability as an input analysis of the influence of managerial ability on the choice of self employment leads to a theory that can explain the observed pattern of earnings of the urban self employed compared to wage employees implications of the model for estimation of production function

racial discrimination and professional basketball salaries in the 1990s racial differences in professional basketball player salaries are examined to determine whether the 20 premium paid to whites in the mid 1980s has persisted into the 1990s ols and tobit regressions indicate no difference between white and black salaries controlling for player and team characteristics for the 1994 95 season however censored quantile regressions show substantial racial differences at certain points in the salary distribution whites earn less than blacks at the lower end of the distribution although the difference is not statistically significant and varies with minutes played in contrast whites receive a significant premium 18 at the upper end of the salary distribution these findings are consistent with a form of consumer discrimination in which sports fans prefer to see white star players all else equal

labor market effects of september 11th on arab and muslim residents of the united states we investigated whether the september 11 2001 terrorists attacks had any effect on employment earnings and residential mobility of first and second generation arab and muslim men in the united states we find that september 11th did not significantly affect employment and hours of work of arab and muslim men but was associated with a 9 11 percent decline in their real wage and weekly earnings with some evidence that this decline was temporary the adverse earnings effects were strongly linked to hate crime incidence estimates also suggest that the terrorists attacks reduced intrastate migration of arab and muslim men

the best and the brightest or the least successful self employment entry among male wage earners in sweden this paper analyzes self employment entry among swedish born male wage earners is it the best and the brightest or the least successful that become self employed the residual from an income regression is used as an indicator of who belongs to which group we find that both wage earners who receive a lower income than predicted i e have a negative residual and those who receive a higher income than predicted i e have a positive residual are more likely to become self employed than those who receive an income close to the predicted one however splitting self employment into different types depending on corporate form and number of employees we find that the self employed are drawn from both tails of the residual distribution only if it is a matter of unincorporated firms wage earners who become self employed and start an incorporated firm are only drawn from the top of the residual distribution using self employment income and turnover as measures of self employment performance we find a positive linear relationship between the income residual and performance

an equilibrium search matching model of discrimination abstract a model in which firms have incomplete information about workers at the hiring stage is shown to entail discrimination as the unique stable equilibrium outcome even if no agents have a taste for discrimination and groups are ex ante identical groups which are discriminated against e g blacks women earn lower wages and endure longer unemployment spells

real wages over the business cycle evidence from panel data one topic on which keynes did not disagree with classical economists was the cyclical behavior of real wages keynes 1936 as well as various classical writers predicted that real wages should move countercyclically quoting the general theory p 17 in general an increase in employment can only occur through the accompaniment of a decline in real wages thus i am not disputing this vital fact which the classical economists have rightly asserted as indefeasible this prediction is based on the premise of competition and a given short run capital stock increases in employment then correspond to more intensive use of capital and through diminishing product lower real wages for this reason evidence by dunlop 1938 and tarshis 1939 that real wages move procyclically was viewed as paradoxical both dunlop and tarshis based their findings on an observed positive correlation between real and money wages which given the procyclical movement of money wages implies a positive correlation between

ethnic fractionalization in an african labour market abstract we find evidence of ethnic fractionalization and its consequences in an african labour market we consider earnings differentials between members of different ethnic groups and between employers relatives unrelated co ethnics and other workers in the ghanaian manufacturing sector variations in a standard set of observed workers characteristics explain a large proportion of the earnings differentials between ethnic groups however the greatest proportion is explained by the ethnic fractionalization of the labour market combined with variations in employers characteristics workers who are related to their employers earn a premium and there is statistical discrimination in favour of inexperienced co ethnic workers

customer discrimination and employment outcomes for minority workers this paper investigates the effects of customer discrimination on the employment and earnings of minorities particularly blacks data are used from a new survey of employers in four large metropolitan areas in the united states our results show that the racial composition of an establishment s customers has sizable effects on the race of who gets hired particularly in jobs that involve direct contact with customers and in sales or service occupations race of customers also affects wages with employees in establishments that have mostly black customers earning less than those in establishments with mostly white customers

strategic gains from discrimination abstract according to a classical argument an employer handicaps herself if basing hiring decisions on factors unrelated to productivity therefore discrimination is undermined by competition this paper in contrast argues that being discriminatory can be a commitment device that helps an employer and its rivals to partially segment the labor market which leads to lower wages and higher profits discrimination can thus be an endogenous response to competition indeed the relationship between discrimination and competition can be non monotone moreover the logic suggests that a ban on wage discrimination may instead lead to discrimination in hiring

managerial incentive problems a dynamic perspective the paper studies how a person s concern for a future career may influence his or her incentives to put in effort or make decisions on the job in the model the person s productive abilities are revealed over time through observations of performance there are no explicit output contingent contracts but since the wage in each period is based on expected output and expected output depends on assessed ability an implicit contract links today s performance to future wages an incentive problem arises from the person s ability and desire to influence the learning process and therefore the wage process by taking unobserved actions that affect today s performance the fundamental incongruity in preferences is between the individual s concern for human capital returns and the firm s concern for financial returns the two need be only weakly related it is shown that career motives can be beneficial as well as detrimental depending on how well the two kinds of capital returns are aligned it is well understood by now that informational externalities may place special demands on the organization of economic exchange simple price mediated markets will frequently fail in the presence of asymmetric information in that case more elaborate contractual arrangements have to be used as substitutes for the price system lately considerable effort has been devoted to the analysis of contracting under incomplete information with the objective to understand the range of economic institutions that emerge in response to the failure of the price system the analysis of moral hazard has played a prominent role in this development moral hazard problems arise when for some reason or another transacting parties cannot contract contingent on the delivery of the good for instance in buying labour services it may be that the amount of labour supplied is not directly observable precluding a simple exchange of wage for labour as a partial remedy to this problem an imperfect mutually observed signal about the supply of labour can be used as a proxy in the contract frequently output is taken as such a proxy the drawback is that output is often influenced by other factors than labour input which induce undesirable risk into the contract one is therefore faced with a tradeoff between allocating risk associated with incomplete observability and providing incentives for a proper supply of labour gaining insight into this tradeoff is important not only for understanding contracting in the small e g managerial incentive schemes but also because it is closely related to the fundamental tension between equity and efficiency in the society as a whole while our understanding of moral hazard has advanced a lot in past years it is clear that much work remains an important question that has received little attention until

a theory of wage dynamics a dynamic equilibrium model of long term implicit labour contracts under incomplete but symmetric information is developed workers are assumed to be risk averse and of unknown ability or productivity risk neutral firms learn as do workers about each worker s productivity by observing the worker s output over time it is shown that equilibrium contracts provide for wages which never decline with age and increase only when the worker s market value increases above his current wage in addition to characterizing the equilibrium wage contract we also derive some of its implications for the behaviour of aggregate wages across various groups of workers these implications explain some findings in the recent empirical literature on ageearnings profiles in particular our model can explain why earnings may be positively related to experience even after controlling for productivity as some empirical studies have indicated

does racial prejudice affect black entrepreneurship evidence exploiting spatial differences in prejudicial attitudes abstractthis article explores the relationship between racial prejudice towards blacks and the black white self employment rate gap and provides the first direct empirical evidence that racial prejudice negatively impacts black self employment particularly in high start up cost industries to perform this analysis i construct a measure of prejudicial attitudes using responses from the general social survey and estimate the relationship between self employment and this index using the american community survey i find that an amount of prejudice equal to the difference in least and most prejudiced census divisions increases the black white self employment rate gap in high start up cost industries by 10 4 16 8 depending upon whether parental self employment is controlled for and represents the entire impact of racial prejudice on the black white self employment rate gap additionally racial prejudice widens the black white self employment income gap by between 6 4 and 8 2 in my full specification d

optimal incentive contracts in the presence of career concerns theory and evidence this paper studies optimal incentive contracts when workers have career concerns concerns about the effects of current performance on future compensation we show that the optimal compensation contract optimizes total incentives the combination of the implicit incentives from career concerns and the explicit incentives from the compensation contract thus the explicit incentives from the optimal compensation contract should be strongest for workers close to retirement because career concerns are weakest for these workers we find empirical support for this prediction in the relation between chief executive compensation and stock market performance

nepotism discrimination and the persistence of utility maximizing owner operated firms reply much debate in the discrimination literature surrounds whether employers with biased preferences can persist in the market 7 10 this issue is a natural extension of the broader literature on owner operated firms which focuses on the consistency of utility and profit maximization 12 13 14 18 26 27 theories of owner operated firms which have a long history in economics model the entrepreneur as both a producer and consumer of goods that determines the level of production and consumption jointly through utility maximization 2 9 16 22 31 this approach is applied in this paper to examine employer discrimination and nepotism our analysis provides necessary conditions for utility maximizing firms to persist in the market and shows how biased preferences can yield seemingly uneconomic input and output choices that are in fact rationally inefficient empirical results using data on family farms support the prediction that utility maximizing entrepreneurs trade profit for nonmarket goods and do not hire inputs to maximize profits competitive neoclassical theories of the labor market do not provide a clear theoretical resolution to the issue of persistence of employer nepotism and discrimination the employer discrimination model proposed by becker 4 5 and extended by arrow 1 postulates that entrepreneurs maximize utility that increases with profit but decreases with a nonmarket attribute of some workers e g race ethnicity or gender these models predict that white male workers may initially have better market opportunities than comparable minority or female workers however entrepreneurs who hire based on nonproductive attributes are also predicted to earn less than a normal rate of return and because they derive disutility from an aspect of owning and operating a firm can improve their welfare by leaving the industry and converting firm assets to those that do not require employment decisions e g stocks and bonds this result has the important policy implication that market intervention may not be necessary to improve the relative pay and employment of disadvantaged groups when employers are the source of the discrimination alternatively goldberg 15 uses the arrow 1 framework but postulates that employers

bridging the gender gap identifying what is holding self employed women back in ghana rwanda tanzania and the republic of congo quantile decomposition methods are used to study the determinants of the gender gap in self employment earnings across the earnings distribution of four sub saharan countries the republic of congo

up or out rules in the market for lawyers we examine how up or out rules operate as a screening device in the market for lawyers using data on large new york law firms we show that firm growth is a slow and uncertain process because performance as an associate is not an especially informative signal about whether a lawyer will make a good partner and because the costs of mistaken promotion are relatively high a newly hired associate is unlikely to be a suitable partner and the screening process is relatively imprecise firm growth therefore contributes between 5 7 of the present value of profits of a law firm

adverse selection in dynamic moral hazard this paper studies a multiperiod moral hazard problem under two assumptions i contracts are subject to renegotiations ii the agent s action has long term effects the action is also interpreted as a choice of characteristic or type renegotiation proof contracts that implement various actions including random ones are characterized under appropriate conditions the equilibrium involves the principal implementing a random action therefore the equilibrium has standard properties of adverse selection models

beauty productivity and discrimination lawyers looks and lucre we propose models with an ascriptive characteristic generating earnings differentials and causing sectoral sorting allowing us to distinguish among sources producing such differentials we use longitudinal data on a large sample of graduates from one law school and measure beauty by rating matriculation photographs 1 betterlooking attorneys who graduated in the 1970s earned more than others after 5 years of practice an effect that grew with experience 2 attorneys in the private sector are better looking than those in the public sector differences that rise with age these results support theories of dynamic sorting and customer behavior

the role of the agent s outside options in principal agent relationships abstract we consider a principal agent model of adverse selection where in order to trade with the principal the agent must undertake a relationship specific investment which affects his outside option to trade i e the payoff that he can obtain by trading with an alternative principal this creates a distinction between the agent s ex ante before investment and ex post after investment outside options to trade we investigate the consequences of this distinction and show that whenever an agent s ex ante and ex post outside options differ this may equip the principal with an additional tool for screening among different agent types by randomizing over the probability with which trade occurs once the agent has undertaken the investment in turn this may enhance the efficiency of the optimal second best contract

wind energy in brazil from the power sector s expansion crisis model to the favorable environment since the 1970s demands arising from the impacts of the power sector on the natural environment were added to studies regarding the strategic power sector and its impact on the economic and financial crises thus the development of alternative technologies reflected the new institutional guidelines and overcame the technological paradigms that were based on increasing installed capacities consequently multiple debates that consider the energy use potential of each region and its contributions to sustainable development occurred this paper presents the information that is necessary for understanding the relationships of the development model that was founded based on waste and the expanding technologies that exploit natural resources actions that are aimed at developing renewable energy resources are structured based on the instability of the technological maintenance paradigm and are guaranteed by expanding technologies that were used prior to 1970 in addition we evaluated the current institutional arrangements that are used to promote wind energy in this case greater attention was given to the european experience because europe provides multiple examples of successful legal frameworks that promote wind energy in addition europe is a benchmark for emerging market countries such as brazil

failure or voluntary exit reassessing the female underperformance hypothesis abstract we reevaluate the female underperformance hypothesis by challenging the assumption that female owned ventures are more likely to fail instead of equating exit with failure we draw on exit literature and feminist theories to argue that female entrepreneurs are actually more likely than males to exit voluntarily we argue for further gender differences by using an even more fine grained conceptualization of entrepreneurial exit failure exit for personal reasons and exit for other professional financial opportunities post hoc analyses also point to within gender heterogeneity depending on family status a sample probe of 219 spanish entrepreneurs who had exited their business supports our overall reasoning

the role of employer employee interactions in labor market cycles evidence from the self employed self employed workers are less likely to be affected by implicit contracts efficiency wages and other forces that mute wage cyclicality and exacerbate employment cyclicality this observation motivates our comparison of the cyclical experience of the self employed with wage and salary workers who clearly have an employer we find negligible or small differences in annual hours cyclicality between the two groups but hourly wages and annual earnings are much more cyclical for the self employed these results are consistent with efficient contracting models where employers smooth workers income without causing inefficiencies in hours of work

limited liability contracts between principal and agent abstract the optimal strategy of the principal is examined in an environment where there are ex post limitations on the maximum penalty that can be imposed on a riskneutral agent contrary to the case in which such limitations are not imposed it is in the principal s interest to deliberately forego the opportunity to induce socially efficient behavior and to instead design a contract that induces the agent to realize an efficient outcome only in the most productive state of nature and perhaps in certain very unproductive states the properties of the contract are examined in detail

intertemporal substitution in labor supply evidence from micro data the sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics the analysis of social security and pensions and the study of life cycle patterns of work this paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature the first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation the second approach is to estimate a first difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations the results indicate that intertemporal substitution elasticity for married men is positive but small

directed search coordination failure and seller profits an experimental comparison of posted pricing with single and multiple prices we experimentally examine posted pricing and directed search in one treatment capacity constrained sellers post fixed prices which buyers observe before choosing whom to visit in the other firms post both single buyer applied when one buyer visits and multibuyer when multiple buyers visit prices we find based on a 2 2 two buyers and two sellers market and a follow up experiment with 3 and 2 3 markets that multibuyer prices can be lower than single buyer prices or prices in the one price treatment also allowing the multibuyer price does not affect seller profits and increases market frictions

fear and lathing in the michigan furniture industry employee based discrimination a century ago i introduction despite progress made in the conceptualization of labor market discrimination the sources of discrimination continue to elude economists in their empirical investigations d amico 1987 the primary reason for this failure is inadequate data since studying the sources of discrimination demands information on workers institutional settings in particular the examination of employee based discrimination requires information on coworkers attributes in addition to the characteristics of the worker himself because of this direct tests of employee based discrimination in the modern economy are nearly impossible to make most tests must be rather indirect 1 here we attempt to examine the sources of discrimination by focusing on discrimination by fellow employees in an era in which intergroup tensions were important as they are now we link two themes in labor economics by analyzing employee based discrimination as a special example of a compensating wage differential the data from the 1889 michigan bureau of labor annual report on the furniture industry are uniquely suited to the analysis of employee based discrimination because they include information on the individual worker his firm and his coworkers for over 5000 workers and because the workers surveyed come from several ethnic groups using the data we measure the magnitude and character of employee based discrimination as we examine specific aspects of ethnic interaction in the labor market in the late 1800s empirically we find that employee based discrimination was important in this labor market workers of one ethnic group received a higher wage when working with members of other groups wages rose by about 0 1 percent when the proportion of coworkers in the worker s own ethnic group fell by one percentage point this response was greater in small cities small firms and among certain ethnic groups including the american born dutch and poles protestants were generally paid more when working with catholics thus the wage of the furniture worker was determined not only by his ability to lathe but also by fear and other feelings toward his coworkers we close by attempting to measure the additional labor costs generated by employee based discrimination within a multi ethnic work force concluding that they were probably offset by several benefits which rendered complete segregation unnecessary ii model and data our model of the labor market unites becker s 1971 model of employee based discrimination with rosen s 1974 hedonic wage model we assume that employers sell goods in a competitive output market and hire mobile workers in a competitive input market following the hedonic wage model firms make job offers to workers that include both wage and nonwage benefits a worker chooses the wage nonwage benefit bundle to maximize utility the nonwage benefits bundle to which we restrict our attention is the ethnic composition of the firm 2 as the work force of his firm includes more workers whom he likes dislikes the worker s wage should fall rise the data from the seventh annual report of the michigan bureau of labor 1890 include the worker s wage birth place father s birth place and several human capital measures age occupation years of experience in occupation years with present employer a literacy proxy place of residence and marital status for each individual 3 table i shows the characteristics of the american born foreign born and sons of immigrants in the sample the report is organized by firm with the name and location of the firm followed by a list of the employees in the firm containing thirty three pieces of information about each individual 4 therefore it is possible to measure the ethnic characteristics of each worker s fellow employees and the effect of work force composition on the worker s wage iii expectations about employee and employer discrimination 1889 nativism reached a peak in the united states around 1890 and michigan was a center of nativist feeling

do young firms owned by recent immigrants outperform other young firms this study compares the performance of new businesses owned by recent immigrants with that of other new firms it addresses an on going unresolved discussion in the academic and professional literatures by drawing on a large sample of canadian business owners whose firms began trading between 2000 and 2004 and using taxation data to track 2004 to 2008 performance the results provide empirical evidence that young immigrant owned exporter firms outperformed young domestically founded firms whether or not they exported however immigrant owned young enterprises that did not export underperformed other young firms owner level factors such as gender growth intentions and experience also influenced growth performance among young smes the results provide evidence that suggests that immigrants have resources such as access to international networks that provide competitive advantage over non immigrant owners that export or aspire to export not all immigrant business owners however are able to lever such advantages the implications of the findings for research and policy are discussed

entrepreneurial women and men two different species the ability of the self employed to create additional job opportunities is a fundamental concern given the huge increases in public resources targeted at new venture creation in the u k and other countries since 1979 this study initially concentrates on identifying differences in the personal and demographic characteristics of women and men in four potential labour market states namely unemployment waged employment single self employment and job creating self employment it then goes on to consider labour market transitions over a four year period between 1991 and 1995 the key findings are firstly that women entrepreneurs are better educated than their male counterparts and secondly that flows into self employment were considerably higher for men than women furthermore proportionately three times as many male self employed in 1991 had gone on to become job creating self employed by 1995

why are wages cyclical in the 1970 s this article investigates cyclicality in real wages between 1969 and 1982 using panel study of income dynamics data there is little evidence that movements in and out of the labor market induced aggregate wage cyclicality during these years however cyclicality in the movement of workers between heterogeneous labor market sectors affected aggregate wage cyclicality while sector location is important sector selectivity is not correlated with wages yet even within sectors cyclicality is present in real wages over this time period and is the result of cyclicality in overall wage levels as well as in the coefficients associated with particular worker characteristics

comparative advantage in self employment and paid work the author reports a study of self employment paid work choice based on a representative sample of white canadian men the main findings are as follows relative potential earnings is the main choice determinant potential earnings differences between groups is primarily due to unobserved factors market values of observed characteristics are similar between groups and relative potential earnings based only on observed characteristics are not an explainer of choice and paid workers have higher potential earnings in both sectors with a greater advantage in paid work but the apparent comparative advantage is not significant

consumer discrimination and self employment self employment rates and incomes differ significantly by race we show that these differentials arise in markets with consumer discrimination and incomplete information about the price of the good and the race of the seller equilibrium income distributions have two properties mean black incomes are lower than mean white incomes and the returns to ability are lower for black than for white sellers able blacks therefore are less likely to self select into the self employment sector than able whites using the 1980 census data we find that observed racial differences in the self employment income distributions are consistent with the theoretical predictions

the mechanisms of spatial mismatch the spatial mismatch hypothesis smh argues that low skilled minorities residing in us inner cities experience poor labour market outcomes because they are disconnected from suburban job opportunities this assumption gave rise to an abundant empirical literature which is rather supportive of the smh surprisingly it is only recently that theoretical models have emerged which probably explains why the mechanisms of spatial mismatch have long remained unclear and not properly tested this article presents relevant facts reviews the theoretical models of spatial mismatch confronts their predictions with available empirical results and indicates which mechanisms deserve further empirical tests

ownership agency and wages an examination of franchising in the fast food industry this paper estimates the difference in compensation between company owned and franchisee owned fast food restaurants the contrast is of interest because contractual arrangements give managers of company owned outlets less of an incentive to monitor and supervise employees estimates based on two data sets suggest that employee compensation is slightly greater at company owned outlets than at franchisee owned outlets the earnings gap is 9 percent for assistant and shift managers and 2 percent for full time crew workers furthermore the tenure earnings profile is steeper at company owned restaurants these findings suggest that monitoring difficulties influence the timing and generosity of compensation

some recent developments in labor economics and their implications for macroeconomics this paper reviews three recent directions of research on labor markets and the macroeconomy models of sectoral shifts and unemployment efficiency wage theories and insider outsider models of wage and employment determination sectoral shifts models show how permanent intersectoral shifts in labor demand and the slow process of labor reallocation across sectors may play an important role in explaining aggregate fluctuations efficiency wage and insider outsider models have in common the property that in equilibrium firms may pay wages in excess of market clearing these models provide potential explanations for persistent involuntary unemployment and segmented labor markets copyright 1988 by ohio state university press

repeated moral hazard and one sided commitment abstract this paper considers a repeated unobserved endowment economy with a restriction that agents can walk away from insurance contracts at the beginning of any period and contract with another insurer one sided commitment an equilibrium is derived characterized by a unique market determined insurance contract with the property that agents never want to walk away from it the paper shows that trade or insurance still occurs and that a non degenerate long run distribution of consumption exists a numerical example shows that this distribution is nearly log normal journal of economic literature classification numbers d30 d31 d80 d82

implicit contracts a survey 7mplicit contracts resolve the distribution of uncertainty and utilization of specific human capital between risk averse workers and less risk averse firms incomplete contracts are required to yield involuntary layoffs in contract markets otherwise contracts are efficient and pareto optimal by construction there is a close relation between contract theory and neoclassical labor market theory contracts smooth consumption but increase the volatility of labor supply and labor utilization to demand disturbances because contractural insurance eliminates the income effects of socially diversifiable risks this result is similar to the intertemporal substitution hypothesis however the price mechanism in a contract is substantially different contracts embody a nonlinear two part pricing scheme the lump sum part allocates the income consumption consequences of risks and the marginal pricing part allocates production and labor utilization this implicit pricing mechanism is in all respects flexible though the observed average hourly wage combines both parts and may give the outward appearanceof rigidity furthermore the observed average wage rate in a contract does not reflect marginal conditions necessary for structural econometric estimation indivisibilities appear necessary to account for the split between work sharing and layoffs contracts with private information are also considered in the nonlinear pricing context this abstract was borrowed from another version of this item

turnover and promotion of lawyers an inquiry into gender differences this paper analyzes the turnover and promotion of male and female lawyers using data on two cohorts of lawyers one which entered law firms between 1969 and 1973 and the other entering between 1980 and 1983 this study considers whether law firm promotion decisions have differed for women and if so whether these differences have declined over time a competing risks duration model is employed to capture the link between the lawyer s decision to stay or leave and the firm s decision to grant or deny promotion we find that over the entire sample period women are considerably less likely to be promoted and slightly more likely to leave the firm without being promoted however we also find that the parametric differential between men and women in partnership hazards has been reduced substantially and in the most general of our specifications eliminated across the two cohorts in contrast the gap between male and female job turnover rates does not appear to change over time we find that the gap between males and females in the cumulative partnership rate at seven years of experience falls from 32 to 14 percent the turnover gap increases about 0 2 percent with females slightly more likely to exit from the firm in the later period

small menu costs and large business cycles a macroeconomic model of monopoly i introduction the conflict between modern neoclassical and traditional keynesian theories of the business cycle centers upon the pricing mechanism in neoclassical models prices are fully flexible they represent the continuous optimization of economic agents and the continuous intersection of supply and demand in keynesian models prices are often assumed to be sticky they do not necessarily equilibrate all markets at all times one of the reasons for the resurgence of the equilibrium approach to macroeconomics has been the absence of a theoretical underpinning for this keynesian price stickiness this note shows that sticky prices can be both privately efficient and socially inefficient the business cycle results from the suboptimal adjustment of prices in response to a demand shock to the extent that policy can stabilize aggregate demand it can mitigate the social loss due to this suboptimal adjustment in some keynesian models prices are simply exogenously fixed 2 in others agents must set their prices in advance of the transaction date the act of altering a posted price is certainly costly these costs include such items as printing new catalogs and informing salesmen of the new price yet these menu costs are small and therefore generally perceived as providing only a weak foundation for these fixed price models however this inference is flawed small menu costs can cause large welfare losses the claim that price adjustment costs are small does not rebut the claim that they are central to understanding economic fluctuations

competitive markets without commitment in the presence of a time inconsistency problem with agency contracts we show that competitive markets can implement allocations that pareto dominate those achieved by a benevolent government and they induce more effort we analyze a model with moral hazard and a two sided lack of commitment after agents have chosen their work firms can modify contracts and agents can switch firms if the ex post market outcome satisfies a weak notion of competitiveness and sufficiently separates individuals it is pareto superior to a government s allocation with a complete breakdown of incentives moreover competitive markets without commitment implement more effort in equilibrium under general conditions

competitive risk sharing contracts with one sided commitment this paper analyzes dynamic equilibrium risk sharing contracts between profit maximizing intermediaries and a large pool of ex ante identical agents that face idiosyncratic income uncertainty that makes them heterogeneous ex post in any given period after having observed her income the agent can walk away from the contract while the intermediary cannot i e there is one sided commitment we consider the extreme scenario that the agents face no costs to walking away and can sign up with any competing intermediary without any reputational losses we demonstrate that not only autarky but also partial and full insurance can obtain depending on the relative patience of agents and financial intermediaries insurance can be provided because in an equilibrium contract an up front payment effectively locks in the agent with an intermediary we then show that our contract economy is equivalent to a consumption savings economy with one period arrow securities and a short sale constraint similar to bulow and rogoff 1989 from this equivalence and our characterization of dynamic contracts it immediately follows that without cost of switching financial intermediaries debt contracts are not sustainable even though a risk allocation superior to autarky can be achieved

equilibrium long term labor contracts the paper presents a labor market equilibrium analysis of implicit contract theory a two period single good model is used to propose consistent notions of labor market equilibrium for long term employment contracts both when labor is specialized and cannot move in the second period and when there is free mobility without costs the result that long term contracts emerge in equilibrium even without mobility costs is novel and contrary to common beliefs the main features of equilibrium are that risk neutral firms will insure risk averse workers against downside risk yielding downward rigid wages wages are not fully rigid as in earlier work on contract theory because workers may quit and wages have to be bid up to retain them the firm gets its return of the insurance deal by paying less than marginal product in the first period the resulting equilibrium is second best and lies between productive efficiency and full insurance workers gain from long term contracts in comparison to spot markets whereas owners may not in the model with specialized skills there exist transfer payments such that both parties are better off within an equilibrium with long term contracts

labor contracts under asymmetric information when workers are free to quit this paper examines the impact of workers ability to quit on the performance of labor contracts between workers and privately informed firms while the need to induce workers to remain with the firm necessarily lowers total welfare the effect on employment levels is to reduce the magnitude of the inefficiency due to asymmetric information whether this inefficiency is under or overemployment the model predicts that employment distortions increase with the strength of lock in effects on workers a prediction which contrasts with the results of efficiency wage models and which may help in empirical testing of labor contract theory

inflation stabilization and the vanishing size wage effect the author examines wage patterns under an incomes policy in mexico in 1987 94 the policy specified increases in the minimum wage rate but also guided salary negotiations more generally the author finds indications of a substantial but largely temporary effect on wage rates and evidence consistent with more intensive monitoring of compliance in large firms than in smaller ones for example three years after policy implementation public sector wages had fallen approximately 10 relative to private sector wages and wages in the largest private firms had fallen 15 relative to those in the smallest private firms these relative wage effects are consistent with the centralized administration of the policy

revolving doors and the optimal tolerance for agency collusion in this article i study how the presence of a revolving door and potential collusion between a regulator and a regulated firm affect the regulator s performance incentives contrary to the conventional wisdom these seemingly undesirable features of the regulatory system may serve the interests of the government because i the regulator s efforts to enhance her industry qualifications may have a complementary effect on her regulatory performance and ii the regulator may become more aggressive in regulation so as to signal her industry qualifications to the firm collusion between a regulator and a firm also can be beneficial because a regulator may increase her monitoring effort in order to increase the chance of achieving a profitable side contract with the firm and side contracting may not always succeed

employer discrimination evidence from self employed workers during the last two decades the issue of equality according to sex and race has become one of increasing importance to economists an extant literature on the economics of discrimination began with the pioneering work of becker 1957 this paper is an attempt to shed further light on the extent of employer discrimination by sex and race by comparing the earnings of self employed workers to their wage and salary counterparts in short if employer discrimination is a principal source of discrimination against blacks and women then we would expect the black white and female male earnings ratios to be higher for the self employed compared to their wage and salary counterparts no discrimination of this type is applicable to self employed workers in addition blacks and women should be relatively overrepresented among the self employed compared to wage and salary workers in the economy section ii of this paper further elaborates on this indirect method to estimate the extent of employer discrimination in the labor market for blacks and women in section iii the results of this method are presented using the 1978 current population survey as the data source results indicate the black white and female male earnings ratios are no larger for the self employed compared to their wage and salary counterparts even after making various attempts to adjust for differences in other variables that affect earnings and to limit the influence of consumer discrimination on the results

home based work and women s labor force decisions home based work differs from other employment because the work site is the home itself this difference means that the fixed costs of working at home are less than the fixed costs of working on site and that home based workers may engage in joint market and household production using data from the 1990 census we find that home based work is an attractive option for women for whom the fixed costs of work are high women who have small children are disabled or live in rural areas and that home based workers are more likely to choose self employment than are on site workers

an equilibrium search model with coworker discrimination this article analyzes the effect of coworker discrimination on wage and unemployment differentials between males and females using a search model an increase in female participation drives up the wage offer to female workers and raises female employment moreover an increase in the degree of discrimination by males results in gains to them in terms of higher wages and lower unemployment but results in losses to females in terms of lower wages and higher unemployment the benefit to males provides an explanation for the persistence of discrimination