heterogeneous wage effects of apprenticeship training the relatively small average wage effects of employer and occupation changes after apprenticeship training mask large differences between occupation groups and apprentices with different schooling backgrounds people who change employer and occupation within industrial occupations enjoy large wage advantages whereas apprentices in commerce and trading occupations as well as in construction and crafts occupations face wage losses from an occupation change the differences between the firms that provide the apprenticeship training are found to be small or insignificant in this paper we reconcile the differences between previous findings by comparing and replicating the empirical estimation strategies used this demonstrates that selectivity in occupations and changes unobserved heterogeneity between occupations and sample selection do matter

occupational mobility occupation distance and specific human capital abstract distance and direction measures are constructed and used to contrast occupational mobility following involuntary job displacement and total occupational mobility displacement involves specific capital loss some voluntary occupational mobility for example promotions reflects augmented skills rather than specific human capital loss wage losses following displacement are strongly related to distance and direction this is reflected in a downward shift in the skill portfolio by contrast the skill portfolio change in total occupational mobility shows a neutral or modest upward pattern suggesting limited or no specific human capital loss from voluntary occupational mobility the mean distance in occupational mobility following displacement declined significantly in the 1980s and 1990s suggesting the labor market was more efficiently reemploying workers following displacement lowering displacement costs in that period

estimation of an occupational choice model when occupations are misclassified this paper examines occupational choices using a discrete choice model that accounts for the fact that self reported occupation data is measured with error despite evidence from validation studies which suggests that there is a substantial amount of measurement error in self reported occupations existing research has not corrected for classi cation error when estimating models of occupational choice this paper develops a panel data model of occupational choices that corrects for misclassi cation in occupational choices and measurement error in occupation speci c work experience variables the model is used to estimate the extent of measurement error in self reported occupation data and quantify the bias that results from ignoring measurement error in occupation codes when

accuracy of response in labor market surveys evidence and implications this paper examines the extent of response errors in labor market survey data and explores the implications of such errors for economic analysis explicitly examined are responses to questions on industry occupation union status hours worked and wages analyses are based on two sources 1 a special supplement to the january 1977 current population survey that obtained data from workers and their employers and 2 an exact match of workers and their employers interviewed in the employment opportunity pilot project survey the dual nature of these surveys provides a basis for analyzing the effect of response error on a variety of economic analyses including the trade off between wages and risk the wage impact of unionism and the sensitivity of wage determination models to alternative responses to earnings questions

a test of lazear s theory of delayed payment contracts according to lazear workers and firms enter into long term implicit contracts that discourage shirking and malfeasance by shifting compensation to the end of the contract such delayed payment contracts are less likely to occur in jobs in which it is comparatively simple to monitor worker effort this paper uses data from the national longitudinal survey and the dictionary of occupational titles to test that hypothesis in particular it tests whether jobs that involve repetitive tasks tend to be characterized by an absence of pensions mandatory retirement long job tenures and high wages for older workers

the returns to general experience job and occupational tenure a study using australian panel data this article uses australian panel data for the years 2001 2009 to estimate returns to general experience job and occupational tenure we pay particular attention to issues of unobserved heterogeneity bias in our estimations we find that both general experience and occupational tenure have statistically and numerically significant effects on wage outcomes even after controlling for unobserved heterogeneity job tenure on the other hand only seems to matter in ols regressions that do not control for heterogeneity biases once these biases are controlled for only a modest effect from job tenure remains the inclusion of occupational tenure in the estimating equation tends to negate even this modest job tenure effect the only exception to this is for workers in large organizations for these workers a small but statistically significant effect from job tenure remains even once we have controlled for heterogeneity and included occupational tenure in the estimating equation the results reported in this

task specific human capital since gary becker s 1964 seminal work the theoretical and empirical literature on human capital has focused almost exclusively on general purpose and firm specific human capital in this paper we discuss the implications of a third type of human capital which we call task specific and which we believe is potentially as commonplace and as important as the two classic types by task specific human capital we mean that some of the human capital an individual acquires on the job is specific to the tasks being performed as opposed to being specific to the firm in other words task specific human capital is the simple but plausible idea that much of the human capital accumulated on the job is due to task specific learning by doing the idea of task specific human capital is closely related to occupationand industryspecific human capital in each case human capital is specific to the nature of the work not specific to the firm hence when capital is accumulated multiple firms value the capital so most or even all of the value of the capital will be reflected in the worker s wage the main difference between the idea of task specific human capital and occupationand industryspecific human capital is in how the idea is applied we argue that task specific human capital has much wider applicability than suggested so far by the occupationand industry specific human capital literatures the specific issues we address are cohort effects job design and promotions another argument in the literature closely related to ours is the classic argument of adam smith 1776 in the wealth of nations concerning returns to specialization smith s argument was that due to learning by doing at the level of the task productivity can be enhanced by having each job entail fewer tasks we believe that smith was correct in focusing on learningby doing at the level of the task as an important idea for thinking about organizations the goal of our paper is to describe some of the other implications of this idea for the design and operation of organizations

oligopoly and trade what how much and for whom abstract this paper integrates the cournot oligopoly model with the ricardian comparative advantage model the ricardian trade pattern is robust and only can be reversed in extreme conditions trade volume increases substantially with increases in competition in world export industries in a symmetrical world a threshold level of competition determines whether capitalists as a group usually gain or lose from trade under all circumstances workers never lose even if a country has a comparative disadvantage in a perfectly competitive world industry but workers gain less in that country than they do in the rest of the world

the distribution of talent and the pattern and consequences of international trade i study the interaction between imperfect labor contracts and international trade in a setting in which workers have private information about their own abilities when an individual s contribution to firm output can be measured accurately in some activities but not in others the most able workers select occupations in which their pay most closely reflects their own performance in a world economy with two otherwise similar countries that have different distributions of talent the country with the more heterogeneous labor force exports the good that is produced by the most talented individuals in this country trade exacerbates the polarization of the labor force and often worsens the distribution of income

wages and the composition of experience this paper provides evidence on the relation between alternative forms of experience and wages using data drawn from the national longitudinal survey of youth prior labor market experience is segmented into mutually exclusive categories based on industry and occupation to examine how subsequent employers value skills acquired on previous jobs we find that most forms of experience including tenure at the current job provide a comparable return however the wage return to prior experience in a different occupation and industry is significantly lower such career changes constitute over half of all prior work experience among workers in their mid 30s

occupational mobility and the returns to training the literature on the returns to training has pointed out that immediately following a training episode wages of participants in employer sponsored training increase substantially while wages of participants in government sponsored training hardly change we argue that there is a potential selection issue most of the government sponsored trainees are occupation switchers while most participants in employer sponsored training are occupation stayers an occupational switch involves a substantial destruction of human capital and once we account for the associated decline in wages we find a large positive impact of both employer and government sponsored training on workers human capital mobilite professionnelle et benefices des formations les etudes ayant trait aux benefices conferes par les formations professionnelles montrent que lorsque ces dernieres sont parrainees par l employeur le salaire des participants augmente significativement a l issue de leur formation en revanche lorsqu elles sont parrainees par le gouvernement le salaire des participants n evolue presque pas nous affirmons qu il s agit la d un probleme de selection potentiel dans le cadre des formations parrainees par le gouvernement la plupart des participants sont tres mobiles en emploi tandis que dans le cadre des formations parrainees par l employeur les participants sont tres stables en emploi une plus grande mobilite professionnelle genere une destruction importante du capital humain et des lors que l on tient compte de la baisse concomitante des salaires nous estimons que les formations parrainees a la fois par l etat et l employeur ont une incidence tres positive sur le capital humain des employes

an equilibrium analysis of wage productivity gaps we develop a model in which each firm chooses a hiring standard as well as a wage schedule and an application fee we then characterize the set of nash equilibria and establish necessary and sufficient conditions for the existence of equilibrium if the distribution of productivities within each ability type is gaussian workers who pass the test will be paid more than the value of their marginal product while workers who fail the test will receive a wage net of the application fee below the value of their marginal product

do wages rise with job seniority a reassessment the authors provide new estimates of the return to job seniority using a dataset similar to that employed in joseph altonji and robert shakotko do wages rise with job seniority review of economic studies 1987 and robert topel specific capital mobility and wages journal of political economy 1991 they consider the strengths and weaknesses of these studies treatment of economy wide trends their dating conventions for tenure and wages their handling of wage observations that might span multiple jobs and their estimation approaches re estimation points to an effect often years of tenure on the log wage equal to 11 which is above the preferred estimate of altonji and shakotko but far below that of topel changes in earnings distributions and in the employment relationship motivate the examination of more recent data perhaps surprisingly the return to tenure has probably increased over time

incentives in organizations n 1975 steven kerr published on the folly of rewarding a while hoping for b the argument was simple you get what you pay for kerr distilled this unifying theme from a disparate set of examples involving politicians soldiers doctors orphanage directors professors and students as well as manufacturing and clerical employees and even human resource managers from these examples kerr pp 77980 concluded that two main causes of distorted incentives are fascination with an objective criterion where individuals seek to establish simple quantifiable standards against which to measure and reward performance and overemphasis on highly visible behaviors when some parts of the task are highly visible while others are not it took agency theory 15 years to express kerr s title not to mention to evaluate or extend his conclusions during this period agency theory was obsessed with the tradeoff between incentives and insurance even though clear eyed observations like kerr s about the design and performance of real incentive contracts suggested that several other issues are at least as important fortunately recent work has brought agency theory not only to kerr s position but beyond in this paper i summarize four new strands in agency theory that help me think about incentives in real organizations as a point of departure i begin with a quick sketch of the classic agency model i then discuss static models of objective performance measurement that sharpen kerr s argument repeated game models of subjective performance assessments incentives for skill development rather than simply for effort and incentive contracts between versus within organizations i con

sorting it out international trade with heterogeneous workers each worker brings a bundle of skills to the workplace for example quantitative and communication skills since employers must take this bundle as a package deal they choose workers with just the right mix of skills we show that international differences in the distribution of worker skill bundles for example japan s abundance of workers with a modest mix of both quantitative and teamwork skills have important implications for international trade industrial structure and domestic income distribution formally we model two dimensional worker heterogeneity and show that the second moments of the distribution of skills are critical as in the roy model

firm specific human capital a skill weights approach the theory of human capital is agnostic on what constitutes firm specific skills the theory specifies that specific skills contribute to productivity only at the current firm a broader approach lets all skills be general but firms use them with different weights attached for example computer programming economics and accounting are general skills but there may be only one firm that wants workers trained in all three one implication is that wage profiles and the split of human capital costs depend on thickness of the market another is that firms pay for what appears to be general training

industry specific capital and the wage profile evidence from the national longitudinal survey of youth and the panel study of income dynamics using data from the national longitudinal survey of youth 1979 96 and the panel study of income dynamics 1981 91 i seek to determine whether there is any net positive return to tenure with the current employer once we control for industry specific capital including total experience in the industry as an additional explanatory variable i show that the return to seniority is markedly reduced using gls while it virtually disappears using iv gls at both the one digit and three digit levels therefore it seems that what matters most for the wage profile in terms of human capital is industry specificity not firm specificity

when misperception matters this essay is an analysis of the implications of misperception the inaccurate assessment by one actor of the other actor s preferences in international relations the author finds that misperception cannot affect the choice of an actor with a dominant strategy although it can affect that actor s expectations as long as both actors are self interested and seek to maximize their own payoffs misperception creates conflict only in a narrowly circumscribed range of situations and even then the misperceived actor has no incentive to mask its true preferences an actor who deceives does so in order to facilitate coordination through the other s misperception of its preferences and thus to avoid conflict not to create it three possible outcomes can occur when both actors misperceive and in only one of the three does misperception cause conflict that would otherwise be avoidable in a formal analysis of the limited set of situations that characterize international crises misperception is found neither to create conflict nor to lead to the escalation of crisis into war

the costs of worker displacement this study identifies part of the social loss attendant upon displacement as the remaining value of the assets specific to the severed employment relationship a bargaining model is used to link wage tenure profiles to the amount of information firms and workers possess about the duration of that relationship if information is good the profile will flatten as displacement approaches using psid data for workers separated between 1977 and 1981 wage tenure profiles are found not to change this suggests that either workers or both firms and workers are surprised by the displacement the present value of that part of the social loss attributable to the worker s share of firm specific capital is around 7 000 1980 dollars

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

a formulation of the earnings function using the concept of occupational investment standard models of income determination specify income to be a function of two variables that measure postschool investment the years of labor market experience and the years of employer tenure this investigation develops a better proxy for general human capital investments by hypothesizing that the intensity of investment varies by occupation and that a proportion of the occupational skills are transferable with occupational change after developing exogenous measures of these features the occupational investment variable is calculated for the young men of the national longitudinal survey empirical work demonstrates that occupational investment is a strong determinant of income far superior to the experience variable

a dynamic analysis of educational attainment occupational choices and job search this article examines career choices using a dynamic structural model that nests a job search model within a human capital model of occupational and educational choices wage growth occurs in the model because workers move between firms and occupations as they search for suitable job matches and because workers endogenously accumulate firm and occupation specific human capital simulations performed using the estimated model reveal that both self selection in occupational choices and mobility between firms account for a much larger share of total earnings and utility than the combined effects of firm and occupation specific human capital

factor intensities and factor substitution in general equilibrium abstract this article examines how factor intensity rankings between industries and the economy wide asymmetry in the degree of factor substitution combine to influence the manner in which changes in relative commodity prices affect the factoral distribution of income the reciprocal influence of factor endowment changes on the composition of outputs is also discussed the analysis is undertaken in a general three factor two commodity framework the minimal sized model that allows both influences to affect factor prices and admits of the possibility of complementarity between factors factors which are good substitutes find their returns behave somewhat similarly when commodity prices change while factors which are complements experience strongly asymmetrical fortunes a crucial role is played by a comparison of the share of the middle factor in each sector

the limitations of structural theories of commercial policy if a structural theory is one that purports to explain behavior in terms of environmental conditions and that largely eschews analysis of the internal processes of decision makers then it is difficult to identify a theory of commercial policy which is not structural most microeconomic theory is structural so are most balance of power theories in the realm of theories of commercial policy hegemonic stability theories as well as some recently developed theories of international tariff levels fit this description in the latter category judith goldstein s work which attempts to account for american commercial policy in terms of the ideology of american central decision makers and charles kindleberger s ambitious sketch of a general theory of 19th century tariff changes in terms of the diffusion of liberal ideology constitute lonely examples of nonstructural research strategies

job duration seniority and earnings an important stylized fact about labor markets is that workers with longer seniority with their current employer have higher earnings than other workers with the same total labor market experience this study shows that workers in longer jobs earn more throughout than workers in a series of shorter jobs and that the measured positive cross sectional return seniority is largely a statistical artifact due to the correlation of seniority with an omitted variable representing the quality of the worker the job or the worker employer match the implication is tha t earnings do not in fact rise very much with seniority copyright 1987 by american economic association

the missing link the ricardian approach to the factor endowments theory of trade this paper views all interpersonal trade as ricardian while all international trade reflects each country s factor endowment the model provides the logical link betwe en heckscher ohlin and ricardo the strength of the model is that it allows simpler and more robust theorems about trade welfare and fac tor payments factor price equalization holds universally and stolper samuelson is not tied to the number of goods or factors a key resul t is that the old mill theorem that the small country gains all from trade is incorrect trade patterns with three factors and two goods a re completely characterized copyright 1988 by american economic association

rational deterrence theory and evidence the causes and effects of the use of force raise crucial questions of substance and method issues are multiple and often are confused with each other thus while many case study findings contradict second wave deterrence theory they are consistent with some rational deterrence theories many findings however cannot be squared with the assumptions of rationality policies are suboptimal and behavior is often inconsistent furthermore the actor s values beliefs and calculations are exogenous to rational theories and can only be supplied by empirical analysis

occupational change employer change and the transferability of skills the individual propensity to change occupations has been little analyzed by economists despite its important implications for income growth and market adjustment individual income growth is commonly associated with one form of occupational change that of upward occupational mobility several examples of upward mobility sequences are technician to engineer to manager receptionist to secretary to administrative assistant laborer to operative to craft worker changes in these directions are likely to be accompanied by income growth and conversely downward occupational mobility would decrease income the implicit cause of the income growth associated with upward mobility is the increase in the individual s skills and the return to those skills in other words each of the sequences listed above appears to represent a discontinuous sequence of investments in occupational skills the resulting life cycle profile of investment and income growth is discontinuous and concave similar life cycle profiles would characterize an individual s change of employer or region yet these latter two types of mobility have received much more attention by economists than has occupational change this paper attempts to address this gap by developing a human capital investment model describing the direction and timing of occupational change to place the research described below in perspective one must first ask why there has been so little analysis of occupational change sociologists have long been interested in occupational mobility analyzing it as a means of upward income mobility yet economists have focused on models of occupational choice disregarding occupational change over the life cycle 4 15 these models of occupational choice rely most heavily on the effects of formal schooling thus disregarding the majority of the labor force for whom formal schooling is not a major determinant of either occupational choice or subsequent occupational change two factors may have contributed to the lack of interest in occupational change first the analysis of occupational change has relatively little direct policy relevance as compared to the analysis of labor institutions for example occupational change was last examined in

interpreting panel data on job tenure tenure responses in the panel study of income dynamics psid and the national longitudinal surveys are often inconsistent with calendar time these inconsistencies pose special problems in the psid because job changes cannot be identified directly so researchers must infer them from error ridden tenure data we use alternative rules for partitioning psid data into jobs and then estimate several wage and mobility models to assess the sensitivity of parameter estimates to the partitioning method we also assess the importance of replacing raw tenure data with imputed measures that are internally consistent

declining labor turnover and turbulence abstract the rate of job loss has been on a secular decline for the last four decades or longer changes in demographics or industry composition do not account for the trend this paper seeks to identify the possible sources of the decline using a simple search and matching model with two types of workers experienced and inexperienced where the former type faces a risk of skill loss during unemployment the calibrated model suggests that a higher risk of skill loss during unemployment results in a lower job separation rate because workers accept lower wages in exchange for job security various other potential hypotheses are also examined

the u shapes of occupational mobility using administrative panel data on the entire danish population we document a new set of facts characterizing occupational mobility for most occupations mobility is u shaped and directional not only low but also high wage earners within an occupation have a particularly large probability of leaving their occupation and the low high earners tend to switch to new occupations with lower higher average wages exceptions to this pattern of two sided selection are occupations with steeply rising declining productivity where mainly the lower higher paid workers within this occupation tend to leave the facts conflict with several existing theories that are used to account for endogeneity in occupational choice but it is shown analytically that the patterns are explained consistently within a theory of vertical sorting under absolute advantage that includes learning about workers abilities

risk and return trade offs in lifetime earnings this paper documents differences in lifetime earnings risk across occupations due to wage risk employment risk and midcareer occupation changes which can mitigate other shocks total lifetime ea

learning and life cycle patterns of occupational transitions individuals experience frequent occupational switches during their lifetime and initial worker characteristics are predictive of future patterns of occupational switching we construct a quantitative model of occupational choices with worker learning and occupation specific productivity shocks to match life cycle patterns of occupational transitions and quantify the value of occupational mobility and learning for the average 18 year old worker the value of being able to switch occupations is about 67 months of the maximum wage he or she could earn in the model and the value of a worker learning his or her type is about 32 months of this maximum wage

seniority wages and productivity a turbulent decade why does a worker s wage tend to grow with seniority in the firm and what does this have to do with productivity two decades ago neoclassical labor economists thought that the theory of human capital provided a good answer to this question the last decade has however been one of puzzles and doubt at this point few would give an unambiguous answer and much hinges on the answer an attractive feature of human capital theory is that it yields a consistent and coherent explanation for several aspects of the employer employee relationship for example seniority systems layoff policies that vary with skill and the relationship between tenure and turnover can be explained in terms of human capital the fact that these explanations are connected leads however to something like a domino effect doubts about one cast doubt on the others if the human capital explanation for the wage seniority relationship is flawed then human capital explanations for other phenomena may require reevaluation in addition an important body of empirical research is built around the assumption that at any point in time a person s wage indicates the person s productivity included here is the extensive literature on the human capital earnings function as well as work on labor demand market discrimination and compensating differentials that assumption has become controversial in recent years in part because implicit contract theories predict that compensation will be redistributed over the period of the contract if a person s spot wage has little to do with spot productivity but rather is an instrument of a complex insurance or deferred compensation scheme then a reassessment of the empirical research may be necessary

an examination of personality in occupational outcomes antagonistic managers careless workers and extraverted salespeople abstractthis article investigates the role of personality in the sorting of individuals between a number of occupations allowing for an extensive array of conditioning variables the focus is an examination of the relationship between occupational outcomes and personality using the five factor model we estimate a multinomial logit model using a panel data set from the household income and labour dynamics in australia hilda survey human capital variables are found to exhibit strong credentialism effects and there is evidence for some small dynasty hysteresis personality effects are found to be significant relatively large and persistent across all occupations the personality effects are strong enough to rival that of various education credentials these personality effects include but are not limited to managers being less agreeable and more antagonistic labourers being less conscientiousness and salespeople being more extraverted

do wages rise with job seniority many previous studies have found a strong positive effect of job seniority tenure on wages this paper re examines the evidence using a simple instrumental variables scheme to deal with the fact that tenure is likely to be related to unobserved individual and job characteristics that affect the wage we use the variation of tenure over a given job match as the principal instrumental variable for tenure the variation in tenure over the job is uncorrelated by construction with the fixed individual and job match specific components of the error term of the wage equation our main finding is that the partial effect of tenure on wages is small and that general labour market experience and job shopping account for most wage growth over a career the strong cross section relationship between tenure and wages is due primarily to heterogeneity bias prior researchers see mincer and jovanovic 1981 bartel and borjas 1981 borjas 1981 cline 1979 and mellow 1981 and many others have established that job seniority has a strong positive relationship with wage rates in a cross section or a cross section time series of individuals in this paper we re evaluate the evidence concerning the partial effects on wages of job seniority tenure and total labour market experience the extent to which wages rise with tenure is important for several reasons first and foremost the wage tenure profile is a fundamental question about the structure of earnings over careers second the wage tenure profile is a key determinant of the extent to which the earnings power of individuals is tied to specific jobs and it is important for assessment of the losses suffered by displaced workers hamermesh 1984 third evidence that wages rise with job tenure has been used to explain the decline in quits with tenure since the wage growth on the current job lowers the probability that the worker will locate a superior alternative a growing theoretical literature surveyed in parsons 1984 has taken the evidence of a strong wage tenure profile at face value and sought to provide an explanation for the relationship the most prominent explanation is the theory of specific human capital oi 1962 becker 1962 mincer 1974 parsons 1972 kuratani 1973 and hashimoto 1980 in which the growth of wages with tenure holding experience constant is attributed to the worker s share of investments in firm specific skills more recently lazear 1981 has presented a supervision model of wage growth in which firms defer compensation as a means of inducing workers not to shirk freeman 1977 and harris and holmstrom 1982 provide an explanation for wage growth based on an insurance motive salop and salop 1976 nickell 1976 and guasch and weiss 1982 present adverse selection models of wage growth in which firms use a wage tenure profile as a

wage tenure contracts in a frictional labour market firms strategies for recruitment and retention a common assumption in equilibrium search and matching models of the labour market is that each firm posts a wage to be paid to any worker hired this paper considers the implications of firms posting contracts in a random matching model with on the job search more complex contracts enable firms to address both recruitment and retention problems by for example increasing the wage with tenure the effect on the labour market is to reduce turnover below the level required for efficient matching of workers to firms copyright 2004 wiley blackwell

fiscal policy and occupational employment dynamics we document substantial heterogeneity in occupational employment dynamics in response to government spending shocks in the united states employment rises most strongly in service sales and office pink collar occupations by contrast employment in blue collar occupations is hardly affected by fiscal policy we provide evidence that occupation specific changes in labor demand are key for understanding these findings we develop a business cycle model that explains the heterogeneous occupational employment dynamics as a consequence of composition effects due to heterogeneous employment changes across industries and occupation specific within industry employment shifts due to differences in the short run substitutability between labor and capital services across occupations

the layoff rat race we investigate how discretionary investments in general and specific human capital are affected by the possibility of layoffs after investments are made firms may have to lay off workers and will do so in inverse order of the profit that each worker generates greater skill investments especially in specific human capital contribute more to a firm s bottom line so that workers who make those investments will be laid off last we show that as long as workers bargaining positions are not too weak workers invest in specific human capital in order to reduce layoff probabilities indeed workers over invest in skill acquisition from a social perspective whenever their bargaining power is strong enough even though they only receive a share of any investment more generally we characterize how equilibrium skill investments are affected by the distribution of worker abilities within firms the probability that a firm will downsize and the distribution of employment opportunities in the economy

thick market effects and churning in the labor market evidence from u s cities using u s census microdata we show that on average workers change occupation and industry less in more densely populated areas the result is robust to standard demographic controls as well as to including aggregate measures of human capital and sectoral mix analysis of the displaced worker surveys shows that this effect is present in cases of involuntary separation as well on the other hand we actually find the opposite result higher rates of occupational and industrial switching for the subsample of younger workers these results provide evidence in favor of increasing returns to scale matching in labor markets results from a back of the envelope calibration suggest that this mechanism has an important role in raising both wages and returns to experience in denser areas

the southern wage gap human capital and the quality of education this suggests that school quality can play an important role in explaining the racial wage gap welch 28 and smith 19 both provide anecdotal evidence that relates the narrowing of school quality to the falling racial gap in earnings the rising rate of return for black workers on years of school documented by weiss and williamson 27 welch 28 and smith and welch 20 also is consistent with the improving quality of their education nevertheless school quality has not been incorporated into systematic statistical analysis of the racial wage gap this is the main focus of this paper i examine 15 southern states which had data on the segregated white and black school systems i have attempted to link the demonstrated lower quality of education during segregation in the south to the persistent southern wage gap in addition i have tried to

human capital specificity evidence from the dictionary of occupational titles and displaced worker surveys 1984 2000 measures of four basic skills constructed from the dictionary of occupational titles are used to examine the source of human capital specificity the measures are used to characterize the skill portfolio of each job and to construct distance measures between jobs wage losses in the displaced worker surveys are shown to be more closely associated with switching skill portfolios than switching industry or occupation code per se these switches represent large decreases in the skill portfolio in the postdisplacement job the recent evidence for industry specific capital is reexamined the results suggest a difference between fluid and crystallized skills

a sorted tale of globalization white collar jobs and the rise of service offshoring abstract we study how the rise of unaffiliated trade in services with china and india has impacted u s labour markets the topic has two understudied aspects it deals with service trade most studies deal with manufacturing trade and it examines the historical first of u s workers competing with educated but low wage foreign workers our empirical agenda is made complicated by the endogeneity of service imports and the endogenous sorting of workers across occupations to develop an estimation framework that deals with these we imbed a partial equilibrium model of trade in tasks within a general equilibrium model of occupational choice the model highlights the need to estimate labour market outcomes using changes in the outcomes of individual workers and in particular to distinguish workers who switch up from those who switch down switching down means switching to an occupation that pays less on average than the current occupation we apply these insights to matched cps data for 1996 2007 the cumulative 10 year impact of rising service imports from china and india has been as follows 1 downward occupational switching increased by 7 percentage points from 21 to 28 and upward occupational switching increased by 6 percentage points from 17 to 23 2 transitions to unemployment were imprecisely measured to have increased by half a percentage point potentially raising the white collar unemployment rate from 3 0 to 3 5 3 the earnings average across all white collar workers fell by a small 1 however for the sub population of workers who switched down or became unemployed earnings fell by 15 and 47 respectively 4 service exports had partially offsetting effects on switching and unemployment

an empirical analysis of risk aversion and income growth risk aversion enters many theoretical models of human capital investment but attitudes toward risk have not been incorporated in empirical models of human capital investment this article develops a model of the joint investment in financial wealth and human wealth to show that human capital investment is an inverse function of the degree of relative risk aversion using data from the survey of consumer finances i find that wage growth is positively correlated with preferences for risk taking more educated individuals are also more likely to be risk takers thus risk taking explains a portion of the returns to education

choice under uncertainty problems solved and unsolved ffifteen years ago the theory of choice under uncertainty could be considered one of the success stories of economic analysis it rested on solid axiomatic foundations it had seen important breakthroughs in the analytics of risk risk aversion and their applications to economic issues and it stood ready to provide the theoretical underpinnings for the newly emerging information revolution in economics 1 today choice under uncertainty is a field in flux the standard theory is being challenged on several grounds from both within and outside economics the nature of these challenges and of our profession s responses to them is the topic of this paper

deterrence and foreign policy the article by christopher achen and duncan snidal in this issue however provocative some of its observations has the merit of raising an important question how should we think about the relationship between deductive theories of deterrence on the one hand and on the other research on deterrence that is at the same time empirical and oriented toward theory while forcefully defending the deductive form of theory achen and snidal also clearly dissociate themselves from the extreme position that it is a self contained enterprise that need not take empirical research seriously rather they recognize that empirical case studies are capable of contributing and indeed have to some extent already contributed to the development of theory perhaps even to the kind of deductive theory they favor

are workers willing to pay to join a better team using data from the major league baseball free agent market this study is the first to show that the productivity expected of the team a worker will join produces a significant negative compensating wage differential the younger workers in the sample drive this result trading 25 of their wages to join teams with an expected productivity one standard deviation higher this investment can be recouped if a reasonable increase in human capital occurs these results are robust to contract length wage simultaneity and indicate that investment in human capital motivates the observed tradeoff suggesting a new pathway through which human capital accumulation can affect wages reliable measures of workers own past productivity and the productivity expected of a worker s future team provide key advantages to identifying these effects jel j31 j24 m54

occupational mobility and wage inequality in this article we argue that wage inequality and occupational mobility are intimately related we are motivated by our empirical findings that human capital is occupation specific and that the fraction of workers switching occupations in the u s was as high as 16 a year in the early 1970 s and had increased to 21 by the mid 1990 s we develop a general equilibrium model with occupation specific human capital and heterogeneous experience levels within occupations we find that the model calibrated to match the level of occupational mobility in the 1970 s accounts quite well for the level of within group wage inequality in that period next we find that the model calibrated to match the increase in occupational mobility accounts for over 90 of the increase in wage inequality between the 1970 s and the 1990 s the theory is also quantitatively consistent with the level and increase in the short term variability of earnings copyright wiley blackwell

occupational specificity of human capital we find that returns to occupational tenure are substantial everything else being constant 5 years of occupational tenure are associated with an increase in wages of 12 20 moreover when occupational experience is taken into account tenure with an industry or employer has relatively little importance in accounting for the wage one receives this finding is consistent with human capital being occupation specific

the declining fortunes of the young since 2000 abstract we document that successive cohorts of college and post college degree graduates experienced an increase in the probability of obtaining cognitive jobs both at the start of their careers and with time in the labor market in the 1990s however this pattern reversed for cohorts entering after 2000 profiles of the proportion of a cohort in cognitive occupations since school completion fall and become flatter with successive cohorts since cohort wage profiles display a similar pattern these findings appear to fit with a strong increase in demand for cognitive tasks in the 1990s followed by a decline in the 2000s

the gains from specialization and population size abstract this note combines three ideas the association of more people with new goods the comparative advantages of individuals and economic happiness people may not be happier in a larger knowledge economy but the gains from specialization are necessarily larger

political solutions to market problems for some market failures serve as a rationale for public intervention however the fact that self interested market behavior does not always produce felicitous social consequences is not sufficient reason to draw this conclusion it is necessary to assess public performance under comparable conditions and hence to analyze self interested political behavior in the institutional structures of the public sector our approach emphasizes this institutional structure warts and all and thereby provides specific cautionary warnings about optimistic reliance on political institutions to improve upon market performance

skill accumulation in the market and at home abstract an evolving outside option is introduced into a stochastic directed search model with skill loss during non employment using multi spell data from the sipp i show that average reemployment wages are only mildly sensitive to unemployment duration while the job finding probability is highly sensitive to duration with evidence of true duration dependence in both variables though untargeted the model produces a quantitatively accurate decline in the job finding probability and starting wage improving over a model with a fixed outside option the addition of aggregate shocks leads to an nonlinear response of the unemployment and participation rates during and after recessions with more severe recessions resulting in stronger hysteresis

wage variability in the 1970s sectoral shifts or cyclical sensitivity the recent debate questioning whether unemployment in the 1970s represents sectoral adjustment or cyclical variation is expanded to examine comparable causes of real wage variability using panel study of income dynamics panel data real wages respond more to persistent sectoral shocks than cyclical shocks in the 1970s making recent estimates of procyclical wage variability appear weak in perspective employing a model of endogenous sector specific individual skills older workers earning economic rents are shown to have the greatest wage response to sectoral shocks these results are consistent with the hypothesis that short run cyclical shocks may be met with hours adjustment as specified in implicit or explicit contracts but that persistent shocks require wage adjustment copyright 1989 by mit press

equilibrium wage tenure contracts in this study we consider a labor market matching model where firms post wage tenure contracts and workers both employed and unemployed search for new job opportunities given workers are risk averse we establish there is a unique equilibrium in the environment considered although firms in the market make different offers in equilibrium all post a wage tenure contract that implies a worker s wage increases smoothly with tenure at the firm as firms make different offers there is job turnover as employed workers move jobs as the opportunity arises this implies the increase in a worker s wage can be due to job to job movements as well as wage tenure effects further there is a nondegenerate equilibrium distribution of initial wage offers that is differentiable on its support except for a mass point at the lowest initial wage we also show that relevant characteristics of the equilibrium can be written as explicit functions of preferences and the other market parameters

the costs of occupational mobility an aggregate analysis we estimate the costs of occupational mobility using a novel approach that relies on aggregate flows of workers across occupations rather than on wage data the theoretical underpinnings for this approach are derived from a model of occupation choice that delivers a gravity equation linking worker flows to occupation characteristics and to transition costs which we proxy using task data from the dictionary of occupational titles dot occupation flow data are constructed from the matched monthly current population survey cps between 1994 and 2012 we find that transition costs vary widely across occupations are increasing in task distance the dissimilarity in the mix of tasks performed in the two occupations and are higher for transitions across broad task categories however most of the transition costs are accounted for by general task independent entry costs specific to each destination occupation

internal labor markets firm specific human capital and heterogeneity antecedents of employee idiosyncratic deal requests a field study of 615 managers in 11 korean manufacturing firms extends theory regarding labor contracting to the study of idiosyncratic deals i deals despite i deals potential to benefit both employees and employers economic theory asserts that employers attempt to reduce individual contracting by use of internal labor markets ilms this study identifies limits to that assertion by identifying conditions under which i deals are sought despite employee participation in ilms furthermore we develop and test theory reconciling the roles of ilms and firm specific human capital in employee requests for i deals employee reports of ilm practices are negatively related to i deal requests whereas firm specific human capital is positively related to these requests in addition we find an interaction between the two such that the suppressive effects of ilm reports on i deal requests hold largely for workers with low firm specific human capital individuals with high firm specific human capital tend to seek i deals despite reported ilm practices i deal requests also increase with group level heterogeneity in firm specific human capital in all our findings suggest that ilms function as economic theory asserts for workers with limited firm specific human capital but they are less able to reduce i deal requests among workers with higher firm specific human capital

changing consequences of job separation in the united states using the panel study of income dynamics the author examines the consequences of job loss between the periods 1976 81 and 1986 91 he finds stability in the overall incidence of job separation but a statistically significant increase in the incidence of involuntary job loss relative to quits for older workers he also finds that the consequences of involuntary job loss worsened the reemployment rate of workers who experienced involuntary job loss dropped from 67 in 1976 81 to 62 in 1986 91 and among those who found new jobs the odds of receiving a large wage cut rose from 9 in 1976 81 to 17 in 1986 91

rational deterrence in an imperfect world this chapter applies recent economic research on games with incomplete information to the calculus of deterrence 1 we do not attempt to provide a complete theory of rational deterrence the focus is on the role of reputation and signaling in establishing deterrence we show how strategic players signal a reputation for strength from the perspective of an internally consistent equilibrium model

rising occupational and industry mobility in the united states 1968 97 we document and analyze the high level and the substantial increase in worker mobility in the united states over the 1968 97 period at various levels of occupational and industry aggregation this is important in light of the recent findings that human capital of workers is largely occupation or industry specific to control for measurement error in occupation and industry coding we develop a method that utilizes the psid retrospective occupation industry supplemental data files we emphasize the importance of our findings for understanding a number of issues such as the changes in wage inequality aggregate productivity job stability and life cycle earnings profiles

rational deterrence theory i think therefore i deter deterrence theories purport to supply the auxiliary assumptions rational choice theories need to predict rational strategic behavior they generally assume that would be initiators are i instrumentally rational 2 risk prone gain maximizers 3 free of domestic constraints and 4 able to identify themselves correctly as defenders or challengers these assumptions are contradicted by empirical studies that indicate that risk prone gain maximizing initiators are relatively uncommon that leaders at times calculate as deterrence theories expect but behave contrary to their predictions and that the calculus of initiators generally depends on factors other than those identified by deterrence theories deductive theories of deterrence are also inadequate because they do not define their scope conditions nor can they accommodate deviation by initiators from processes of rational calculation rational deterrence theories are poorly specified theories about nonexistent decision makers operating in nonexistent environments

the effect of individual uncertainty on the specificity of human capital empirical evidence from career developments in professional soccer this study looks at careers in professional soccer to investigate the determinants of human capital hc specificity inspired by labour market research we formulate three hypotheses on how uncertainty about the usefulness of individuals more productive specific skills affects their investment in more flexible general skills the empirical analysis is based on unique panel data on school grades soccer evaluations and sociodemographic characteristics of 90 elite players from the youth academy of a german bundesliga club we find that senior and long serving players who are comparably certain that their soccer specific capital will be sufficient to pursue a lucrative professional career invest less in general hc at school expected soccer performance in contrast has a counterintuitive positive effect our results expand knowledge on the factors influencing hc specificity from the macro to the subject level and highlight practical implications for institutions that train gifted individuals