spillover effects in wage determination an econometric analysis 1991 spillover effects in wage determination an econometric analysis applied economics vol 23 no 9 pp 1473 1482

public pension reform in europe policies prospects and evaluation this paper describes the demographic and economic factors underlying the reform of public pension programmes in europe it examines the policy response both at the europe wide level and within individual european countries several programme reform strategies that have been implemented are evaluated these strategies are the greater pre funding of public pensions and expanded second tier private pension components parametric reforms to existing programmes and the development of formula driven actuarially fair public programmes efforts to provide greater incentives for individuals to postpone retirement are also discussed

do contracts matter in canada this paper empirically examines the view that wage rigidity in long term labor contracts matters for the behavior of employment in particular i follow bils s 1991 approach which looks for systematic employment patterns in the first year of long term contracts using a new panel data set which includes annual firm level employment observations from the canadian manufacturing sector i find evidence in many industries that employment over adjusts to shocks that occur during the contract my examination of wage dynamics however indicates that for those industries in which contracts appear to matter for the behavior of employment there is little indication that contractual wage rigidity is the source of the over adjustment of employment

downward wage rigidity in a model of equal treatment contracting following insights by bewley 1999a this paper analyses a model with downward rigidities in which firms cannot pay discriminately based on year of entry to the firm and develops an equilibrium model of wages and unemployment we solve for the dynamics of wages and unemployment under conditions of downward wage rigidity where forward looking firms take into account these constraints we show that there is a frontloading incentive that leads to a simple solution in the case of certainty using productivity data from the postwar us economy we analyse the ability of the model to match certain stylised labour market facts

cyclical fluctuations in strike activity using a set of data on contracts and strikes for the period 1970 81 the author distinguishes among the roles of aggregate business conditions labor market conditions and product market conditions in the determination of strike incidence and duration strike incidence is found to be highest in industries that are depressed relative to the rest of the economy but in regions with low unemployment this finding is consistent with the theory that the cost of a strike to a firm increases with the demand for its product and the cost of a strike to the union increases with unemployment another finding however is that strikes are longest in industries that are booming relative to the rest of the economy

wage changes and intrafirm job mobility over the business cycle two case studies despite the many reasons to expect sluggish wage adjustment recent evidence suggests that real wages are quite procyclical growing more rapidly during economic expansions than during recessions and that this wage procyclicality pertains even to workers who stay with the same employer one possible explanation for these findings is the old hypothesis that a portion of firms cyclical adjustment of labor costs is achieved not by changing the wages paid in particular jobs but by changing the quality of labor assigned to those jobs the authors analysis of interwar personnel data from the ford motor company and the a m byers company supports that hypothesis the authors recognize that case studies of only two firms cannot be definitive but they conclude that cyclicality in workers job assignments deserves further attention

the effect of unions on the structure of wages a longitudinal analysis this paper studies the effects of unions on the structure of wages using an estimation technique that explicitly accounts for misclassification errors in reported union status and potential correlations between union status and unobserved productivity the econometric model is estimated separately for five skill groups using a large panel data set formed from the u s current population survey the results suggest that unions raise wages more for workers with lower levels of observed skills in addition the patterns of selection bias differ by skill group among workers with lower levels of observed skill unionized workers are positively selected whereas union workers are negatively selected from among those with higher levels of observed skill despite a large and sophisticated literature there is still substantial disagreement over the extent to which differences in the structure of wages between union and nonunion workers represent an effect of trade unions rather than a consequence of the nonrandom selection of unionized workers over the past decade several alternative approaches have been developed to control for unobserved heterogeneity between union and nonunion workers 2 one method that has been successfully applied in other areas of applied microeconometrics is the use of longitudinal data to measure the wage gains or losses of workers who change union status unfortunately longitudinal estimators are highly sensitive to measurement error even a small fraction of misclassified union status changes can lead to significant biases if the true rate of mobility between union and nonunion jobs is low this sensitivity led lewis 1986 to essentially dismiss the longitudinal evidence in his landmark survey of union wage effects in this paper i present some new evidence on the union wage effect based on a longitudinal estimator that explicitly accounts for misclassification errors in reported union status the estimator uses external information on union status misclassification rates along with the reduced form coefficients from a multi variate regression of wages on the observed sequence of union status indicators to isolate the causal effect of unions from any selection biases introduced by a correlation between union status and the permanent component of unobserved wage heterogeneity recognizing that unions may raise wages more or less for

the determination of escalator clauses in collective agreements u ntil very recently the literature on the wider usage of escalator clauses has dealt mainly with their impact on inflation unemployment the trade balance and the exchange rate it is equally important however to understand why and in what circumstances employers and labor unions agree to incorporate such clauses in work contracts in the past few years shavell 1976 azariadis 1978 and blinder 1978 have outlined a theoretical framework for explaining the emergence of indexation to the best of our knowledge however none of the assumptions deriving from these models have been subjected to empirical testing the purpose of this paper is first to develop and test a number of these assumptions and second to consider the problem of simultaneity between two types of adjustments to inflation indexation versus shorter contract duration in the first section we summarize the contributions of the three aforementioned authors to the theory of wage indexation and extract from them a number of verifiable assumptions the second section provides an empirical framework since adjustments to uncertainty about inflation can take the form of shorter contract duration or indexation those two variables are simultaneously determined to overcome the problem of dummy endogenous variables in a simultaneous equation system we have applied the method suggested by heckman 1978 based on the use of maximum likelihood estimators in the third section we analyse the results and in the conclusion we draw their implications for economic policy

wage rigidity in canadian collective bargaining agreements the authors search information on the provisions of 10 947 wage contracts signed in the canadian unionized sector between 1976 and 1999 for evidence of downward nominal wage rigidity the disinclination of wages to fall in nominal dollars below their established level over the sample period real wage reductions were common but nominal wage reductions were rare the probability of downward nominal wage rigidity increased substantially during low inflation periods during such periods apparently there was no reduction in the incidence of real wage cuts but the magnitude of those cuts was modest suggesting a lesser ability of wages to adjust to labor market conditions than at other times

can the scala mobile explain the fall and rise of earnings inequality in italy a semiparametric analysis 1977 1993 this article uses survey of households income and wealth microdata to investigate the role the scala mobile played in the initial fall and subsequent rise in earnings inequality in italy between 1977 and 1993 the scala mobile was a wage indexation mechanism granting the same absolute wage increase to all employees as prices rose thereby potentially compressing wage differentials over time the potential equalizing effect of this mechanism fell this article argues that the rise in inequality from the mid 1980s was a response to the compression of differentials operated over the previous years by the scala mobile

panel attrition from the panel study of income dynamics household income marital status and mortality this analysis is concerned with the determinants of panel attrition from the panel study of income dynamics and with its consequences for estimation of dynamic behavioral models which exploit the panel or longitudinal information household income dynamics marriage formation and dissolution and adult mortality risk we develop and estimate joint models of attrition and one or more of these substantive processes and allow for correlation across the equations through random effects although we find evidence of significant selectivity in attrition behavior the biases that are introduced by ignoring selective attrition are very mild

fertilizer adoption by smallholders in the brazilian amazon farm level evidence multiple constraints prevent smallholders from adopting fertilizers even with regional supply of agricultural inputs expanding and soils being weared out using comprehensive farm level data from the eastern brazilian amazon we found that market proximity had a significant positive correlation with fertilizer adoption even after controlling for liquidity land tenure education experience and access to rural extension services nevertheless few smallholders completely replaced nutrients from vegetation with fertilizers instead we found that a hybrid system that combines nutrients from vegetation and fertilizers was approximately twice as common as exclusive fertilizer use we suggest that the option for this diversified nutrient portfolio may result not only from a lack of capital or knowledge regarding return on fertilizer use but also from the need to adapt to the economic constraints facing smallholders and minimize risk results indicate that a rural extension program aimed at supporting a rapid and complete replacement of ashes from vegetation by fertilizers could prove unsuccessful for amazonian smallholders

wage compression within the firm evidence from an indexation scheme we revisit the role of labour market institutions by showing how they affect the sharing of firm specific rents between employers and employees we look at an italian wage indexation mechanism scala mobile that compressed the distribution of wages imposing real wage increases at the bottom of the distribution after developing a simplified version of a search model with intra firm bargaining and on the job search we document that skilled workers received lower wage adjustments when employed at firms with many unskilled workers and they tended to move towards more skill intensive firms moreover the system drove the least skill intensive firms out of the market

on the absence of positive wage indexation this paper rationalizes the absence of positive wage indexation in labour contracts that is of indexing provisions that link wage increases to inflation we investigate the equilibrium of a policy game in a stochastic economy in which wage setters and a policy maker interact strategically in order to determine the preferred degree of wage indexation and an optimal stabilization rule respectively our conclusion is that nominal wage rigidity and counterinflationary economic policy represent the best courses of action when price stability is valued and negative responses of contractual wages to price shocks are ruled out under these assumptions moreover the stochastic structure of the economy has no bearing on the optimality of maximal real wage flexibility this paper presents an argument for explaining nominal wage rigidity in labour contracts we investigate the equilibrium of a policy game in a stochastic economy in which wage setters and a policy maker interact strategically in order to determine the preferred degree of wage indexation and an optimal intervention rule respectively our conclusion is that indexing provisions that maximize the flexibility of real wages and counter inflationary economic policy represent the best courses of action for the players in the absence of schemes that create a negative correlation between wage and price movements maximal real wage flexibility is attainable through zero indexation or rigid nominal wages the crucial assumption that drives this result is that some price stability is desirable for the policy maker the introduction of price stability as a goal seems eminently justified from a practical standpoint the federal reserve system s legislative mandate from the federal reserve reform act of 1977 the ongoing debate about the house joint resolution 409 and the delors report which speaks of an unequivocal commitment to maintain price stability as the primary objective of the european system of central banks

the determinants of wage changes in indexed and nonindexed contracts a switching model wage changes in a sample 1979 86 of canadian wage contracts are analyzed the sample is split into cost of living allowance cola and non cola contracts econometric estimation corrects for sample selectivity bias in non cola contracts the unemployment rate and a proxy for expected inflation are significant expected industry price changes and productivity changes exert smaller but significant effects in cola contracts ex ante inflation coverage ranges between 60 and 100 of expected inflation catch up for previous uncompensated inflation the unemployment rate and expected inflation are also significant a common wage structure across cola and non cola contracts is rejected by the data

hyperbolic discounting and the phillips curve using a standard dynamic general equilibrium model we show that the interaction of staggered nominal contracts with hyperbolic discounting leads to inflation having significant long run effects on real variables

inflation and productivity shocks abstract we examine whether sectoral productivity shock distributions are conditioned by inflation regimes we conclude that this is not the case our results have implications for the literature on downward nominal wage rigidity and on inflation as a labor market lubricant

controlling for endogeneity of strike variables in the estimation of wage settlement equations this article analyzes wage changes with an unbalanced panel from the spanish collective bargaining in large firms survey central to the analysis are the joint determination of strike and wage outcomes and in particular the estimation of the slope of the wage concession curve i control for the possible endogeneity of strike variables in the wage equation and suggest two sets of instruments lagged strike outcomes or reduced form predictions of the strike variables when controlling for endogeneity a negative relationship between strike duration and the size of the wage change arises however short strikes still produce higher wage changes

downward nominal wage rigidity evidence from canada 1901 1950 this paper tests for the presence of downward nominal wage rigidity in canadian wage data for 26 occupations in 38 cities from the first half of the 20th century the sample is of particular interest as it contains periods with average inflation rates that are close to zero as well as two sharp deflations results from a variety of different tests indicate that wage change distributions are consistent with the presence of downward nominal wage rigidity however for two subsamples containing sharp declines in output and prices estimates of the extent of downward nominal wage rigidity are much lower this suggests that downwards adjustments did occur during times of severe depression and deflation

pasture conversion and competitive cattle rents in the amazon the economic incentives for conversion to pasture in mato grosso brazil are investigated using pastureland rents pastureland rents are estimated from physical and geographic determinants and verified by predicting the location of conversion to pasture between 2001 and 2004 results indicate that a one hundred dollar increase in mean cattle rent increases the probability of conversion to pasture from 8 6 to 11 1 the use of economic rent allows the direct study of fiscal policy levers on land conversion behavior expanding policy discussions beyond the role of roads and road improvement towards the use of excise and conversion taxes or conservation subsidies

the interaction between indexation contract duration and non contingent wage adjustment a model of the elasticity of indexation contract duration and non contingent wage adjustment is estimated using canadian wage agreements results suggest that the degree of indexation and contract duration are interdependent and are affected by their past values labour market conditions and inflation uncertainty the correlation between the industry product prices and the cpi affects the degree of indexation non contingent wage adjustment depends on expected inflation uncompensated past inflation duration and indexation values past and present and labour market conditions this model explains total wage adjustment as well as more aggregative models designed solely for that purpose

inflation and unemployment the world economy today is vastly different from the 1930s when seymour harris the chairman of this meeting infected me with his boundless enthusiasm for economics and his steadfast confidence in its capacity for good works economics is very different too both the science and its subject have changed and for the better since world war ii but there are some notable constants unemployment and inflation still preoccupy and perplex economists statesmen journalists housewives and everyone else the connection between them is the principal domestic economic burden of presidents and prime ministers and the major area of controversy and ignorance in macroeconomics i have chosen to review economic thought on this topic on this occasion partly because of its inevitable timeliness partly because of a personal interest reaching back to my first published work in 1941

systematic risk and the theory of wage indexation in this article the author integrates the theory of optimal wage indexation with capital market theory the optimal indexation factor in his model depends on workers preferences firm specific variables and economywide capital market variables a major difference between the results of the model and those of the previous literature is that in his model nonsymmetric randomness does not affect the indexation decision in addition the effects of economywide capital market variables can provide an explanation for why the author does not observe wage contracts with more than perfect indexation contracts where real wages rise with unexpected inflation copyright 1990 by the university of chicago

downward nominal wage rigidity in canada evidence from micro level data we assess the importance of downward nominal wage rigidity dnwr in canada using both firm and worker level microdata in particular we analyze employer level administrative data from the major wage settlements mws and household based survey data from the survey of labour income dynamics slid

vulnerable seniors unions tenure and wages following permanent job loss in contrast to nonunion workers reemployment wages of workers displaced from unionized jobs decline with tenure on the lost job this finding cannot easily be explained by firm or industry specific human capital accumulation deferred pay policies standard matching models or a correlation between tenure and reentry rates into unionized jobs possible explanations include negative selection of senior union workers and a negative causal effect of unionism on workers alternative skills despite a much flatter predisplacement tenure wage profile displaced union workers wage losses increase with tenure at a rate comparable to or higher than those of nonunion workers

the labour supply effect of the abolition of the earnings rule for older workers in the united kingdom high effective tax rates on work at and around state pension age deter participation an example is the earnings test operating in several oecd countries the united states abolished its test for the 65 age group in 2000 the united kingdom offers a natural experiment of this reform as it abolished its test known as the earnings rule in 1989 we examine the effect of this change taking account of the opportunity to defer pension rights abolition of the rule raised working hours of older male workers by around 4 hours a week with a lesser impact on women s behaviour

an empirical model of wage indexation provisions in union contracts this paper describes the responses of index linked wage rates to concurrent price increases for a sample of canadian union contracts and then analyzes theseresponses in terms of a simple model of indexation to the aggregate price level the model highlights the importance of aggregate price movements in conveying information about industry specific prices the empirical analysis confirms that industry specific correlations between input and output prices and the consumer price index are important determinants of the flexibility of wages to prices across indexed contracts

the wage curve a review in the wage qurve david g blancflower and andrew j oswald argue that there is a fundamental negative relation between wages and the unemployment rate in a worker s local labor market blancflower and oswald use large scale micro data sets to estimate this relation for the united states britain and 10 other countries i review their empirical methods and findings and provide some further evidence on the nature of the wage curve relationship in the united states i conclude that there is a strong statistical correlation between rates of pay and local unemployment although the interpretation of this correlation remains unresolved this abstract was borrowed from another version of this item

wage contract settlements in u s manufacturing a bstruactusing a large scale longitudinal micro data base this paper tests for the determinants of union wage settlements in manufacturing alternative specifications of wage change relationships were tested in data covering the years 1957 to 1980 among the most important determinants of union wage changes were the expected inflation rate inflationary surprises in indexed agreements incomes policy dummy variables and spillovers from key national agreements catch up effects from lagged inflationary surprises were not important in determining the size of new settlements

ecosystem service value and agricultural conversion in the amazon implications for policy intervention we explore the welfare implications of agricultural expansion in the brazilian amazon by comparing spatially explicit estimates of soybean rents and the value of ecosystem services although these estimates are generated from different datasets models and estimation techniques the values are comparable such that the value of ecosystem services is greater than soybean rents for about 61 of the total area and 24 of the area where soybean rents are positive if protected areas are well enforced based on the balance between the benefits and costs of conversion failure to value ecosystem services reduces total social welfare by 7 13 billion dollars annually relative to an optimum policy instruments that internalize the value of ecosystem services via protected lands land conversion taxes conservation subsidies or excise taxes can avoid much of this loss regardless of intervention regime policy makers should be cognizant of the diminishing net benefits of converting natural ecosystems to agriculture realizing the final 3 8 requires the conversion of an additional 15 natural ecosystems to soybean production

wage indexation and compensating wage differentials a stractthe theory of wage indexation implies that if workers are more risk averse than firms then workers will pay a price in order to obtain wage indexation this prediction is tested on a sample of 3 115 u s manufacturing collective bargaining negotiations from 1967 to 1982 the dependent variable is the expected real wage level taking into account expected cost of living payments colas using instrumental variables or fixed effects techniques to account for the endogeneity of indexation ve find a 2 to 22 real wage premium paid to get a cola however the 2 figure is most consistent with existing estimates of worker risk aversion and union nonunion wage differentials

nominal and real wage rigidity in a friction model abstract nominal wage adjustment in contract data is examined for evidence of nominal and real rigidities a friction model encompassing many special cases is used to analyse data from a rich inflation period

dynamic bargaining with action dependent valuations abstract an infinite horizon dynamic bargaining model is presented in which actions affect the expected future value of the buyer seller match because actions directly affect the future surplus to be bargained over the model is unlike other models that tie the dynamic process to nature alone focusing on a subset of weak markov equilibria several results come about that are not found in static bargaining models using similar bargaining protocols in particular optimal price demands can be lower higher than the buyer s lowest highest possible valuation and several empirical features concerning wage settlements and strike incidence from labor union contract negotiations can be explained

cost of living escalators in major union contracts this paper analyzes the price indexation provisions of a sample of major canadian collective bargaining agreements concluded between 1968 and 1975 under these contracts escalated wage increases comprised about one third of total wage increases and represented a major source of erosion in the relative wages of skilled workers the author argues that indexation provisions are usefully characterized by the marginal elasticity of the contractual wage rate to increases in prices measures of this responsiveness indicate that on average contractual wage rates are only slightly less than unit elastic with respect to price increases there is considerable variation across industries however in the extent to which wages respond to price changes

a comparison of the cyclical behavior of union and nonunion wages in the united states this paper presents an extensive analysis of the behavior of union and nonunion wages over the business cycle using quasi panels developed from the current population survey in an attempt to resolve or reconcile competing claims about the cyclical behavior of union and nonunion wages union wages were roughly as procyclical as nonunion wages were prior to the early 1980s substantial reductions in union wage procyclicality since then are associated with reductions in the procyclical exercise of bargaining power

unions wages and skills studies uniformly conclude that union wage effects are largest for workers with low measured skills longitudinal analysis using 1989 90 1994 95 cps matched panels produces union premium estimates equivalent across skill groups following appropriate sample restrictions and control for worker specific skills nlsy evidence on aptitude scores confirms that union workers with high measured skills have relatively low unmeasured skills differential selection by skill class and skill homogeneity in union workplaces result from employer and employee sorting in response to wage standardization union organizing where skills are homogeneous and unionized employers reluctance to hire the most as well as least able workers

the economics of cropland conversion in amazonia the importance of agricultural rent abstract we use spatially efficient logit models to explore the role of economic incentives on the expansion of cropland in the mato grosso region between 2001 and 2004 an empirical measure for agricultural economic rent is used to quantify the desirability of a particular plot of land which previous research proxies with variables such as distance to roads or urban areas and simple climatic and edaphic variables results indicate that the measure for economic rent provides additional information and explanatory power to one of the most commonly used proxies distance to roads as predicted by economic theory it is not simply access or variation in transportation costs that drives the spatial determinants of agricultural expansion but the expected total returns from the venture this suggests that spatially explicit rent models can be used to simulate the location and quantity of land use change in an economically consistent framework such a framework lays the foundation for an enhanced methodology that can evaluate the ability of fiscal policy levers to influence the location of agricultural conversion with the ultimate aim of balancing economic and environmental goals

contracts job experience and cyclical labor market adjustments longitudinal estimates of the variability of individual wages hours and weeks worked over the course of changing demand states are provided for all workers generally and for workers of varied levels of job experience emphasis is placed on that part of job experience represented as years on current job a commonly used proxy for the magnitude of firm specific skills interpretation of resulting estimates in the context of the labor market contracting literature is attempted generally significant procyclical patterns are found for real weekly wages weekly hours and weeks worked the extent of weekly wage variability is much greater than is generally suggested in the literature furthermore workers with greater tenure exhibit greater cyclical wage and hours variability and less weeks variability finally empirical distinctions are drawn separately for white collar and blue collar as well as union and nonunion workers

the financial stability of notional account pensions a number of european countries are reforming their pension benefit formulas by adopting notional accounts these accounts are used to determine individual benefits but pay as you go financing is retained this paper addresses the belief that by choosing adjustment rules cleverly notional accounts can provide automatic financial equilibrium in the short run if this were true it would be a valuable advantage in terms of insulating the government budget from demographic pressures while insulating the pension budget from fiscal pressures it is shown that notional account benefit formulas cannot provide automatic financial equilibrium in the short run the paper also suggests that if indexing rules are chosen in a particular way and shocks revert rapidly to a mean the pension institution may achieve financial stability in the long run however long run stability is unlikely to be valuable because political interference occurs in the short run

task assignment over the business cycle in this article i evaluate the hypothesis that firms respond to negative demand shocks by assigning workers to tasks that require less skill than the tasks they normally carry out using changes in employment in state industry cells as a measure of demand conditions facing individual firms i provide evidence in favor of the hypothesis furthermore the skill requirements of the tasks carried out by workers are procyclical the results are consistent with a specific capital model where employers move workers between tasks so that layoffs are concentrated on workers with low levels of firm specific human capital

a comment on the great canadian slump in this comment on fortin 1996 the authors argue that the sluggishness in economic activity in canada in the 1990s is better explained by a combination of factors than by monetary policy alone they find that 1 it is difficult to explain the sluggishness on the basis of the historical relationship between monetary conditions and real activity 2 fortin s evidence of downward nominal wage rigidity is seriously overstated 3 there are several reasons why technological change may have had a larger impact on employment in canada in the 1990s than in the united states and 4 the build up of government debt in the 1980s and 1990s was much more than a cyclical problem associated with monetary policy

nominal wage rigidity in contract data a parametric approach using wage agreements reached in the canadian unionized sector during 1976 99 a period of high as well as exceptionally low inflation we consider how histograms of wage adjustment changed as inflation reached the low levels of the 1990s the histograms and parametric tests suggest that wage adjustment is characterized by downward nominal rigidity and significant spikes at zero there is some evidence of modest menu cost effects we examine whether the rigidity features of wage adjustment are sensitive to indexation provisions and investigate whether the distinction between short and long contracts is useful

strategic bargaining models and interpretation of strike data attrition screening and signalling models of strategic bargaining are characterized in terms of their predictions about the incidence mean duration and settlement rates of strikes and the terms of wage settlements these predictions are compared with the general features observed in empirical studies of strikes in canada and the united states conclusions are drawn about the types of models capable of generating these features and about the conformity of the models to the evidence methods are described for computing the numerical examples used to illustrate the models

the determinants of u s labor disputes we present a bargaining model of union contract negotiations in which the union decides between two threats the union can strike or it can continue to work under the expired contract the model makes predictions about the level of dispute activity and the form disputes take strike incidence increases as the strike threat becomes more attractive because of low unemployment or a real wage drop we test these predictions by estimating logistic models of dispute incidence and dispute composition for negotiations from 1970 to 1989 we find support for the model s key predictions but these associations are weaker after 1981

an analysis of sample attrition in panel data the michigan panel study of income dynamics by 1989 the michigan panel study on income dynamics psid had experienced approximately 50 percent sample loss from cumulative attrition from its initial 1968 membership we study the effect of this attrition on the unconditional distributions of several socioeconomic variables and on the estimates of several sets of regression coefficients we provide a statistical framework for conducting tests for attrition bias that draws a sharp distinction between selection on unobservables and on observables and that shows that weighted least squares can generate consistent parameter estimates when selection is based on observables even when they are endogenous our empirical analysis shows that attrition is highly selective and is concentrated among lower socioeconomic status individuals we also show that attrition is concentrated among those with more unstable earnings marriage and migration histories nevertheless we find that these variables explain very little of the attrition in the sample and that the selection that occurs is moderated by regression to the mean effects from selection on transitory components that fade over time consequently despite the large amount of attrition we find no strong evidence that attrition has seriously distorted the representativeness of the psid through 1989 and considerable evidence that its cross sectional representativeness has remained roughly intact

the degree of indexation in major u s union contracts the authors propose that the most appropriate measure of the degree of indexation in a union contract is the marginal elasticity of the average expected wage during the life of the contract with respect to unanticipated changes in the price level they present estimates of this elasticity for 68 u s contracts negotiated between 1971 and 1983 with cost of living escalators the average degree of indexation in the sample 48 is considerably smaller than previous estimates of similar marginal elasticities because the estimation method more accurately incorporates caps minimum colas and the exact specification of the cola clauses

a risk sharing view of real wages and contract length this paper models a union and firm choosing between long labor contracts in which wages are predetermined and short contracts in which wages are flexible it is shown that the union strictly prefers short contracts because it dislikes the greater employment volatility in long contracts in contrast the convexity of the firm s profit function leads the firm to prefer the greater uncertainty of long contracts the model predicts that workers are prepared to enter long contracts only if they are compensated with a higher real wage this prediction is tested using a large sample of canadian collective agreements with generally supportive results

declining public pensions in an era of demographic ageing will private provision fill the gap abstract demographic crisis and imprudent commitments have induced a crisis in public pension programmes in oecd countries will present and prospective cutbacks lead to greater private saving either in the form of private pension provision or in other forms of saving the paper surveys existing evidence and provides new results on three questions do individuals substitute private for public provision of savings when public pension programmes are cut back voluntarily do individuals respond to incentives to join sponsored or tax subsidised arrangements if encouraged by the government and if individuals are prepared to make such arrangements and where saving is voluntary do they save enough to replace previous prospective public pension flows

crises in public pension programmes in oecd what are the reform options the paper examines projections of the fiscal liabilities of public pension programmes in a number of oecd countries it investigates the reasons why many countries have built up such liabilities in the past and critically appraises the future projections of pension costs it examines the strengths and weaknesses of four reform options which are currently being discussed and implemented in various countries

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

the effect of implicit contracts on the movement of wages over the business cycle evidence from the national longitudinal surveys a 1991 study by paul beaudry and john dinardo found evidence of internal labor markets that augment incumbent workers wages when the external labor market is tight when unemployment is low and shield their wages when it is slack current wages they found depend on the tightest labor market conditions observed since a worker was hired not current labor market tightness or labor market tightness at the time of hiring this paper replicates and extends that research using data from six cohorts of the national longitudinal surveys that together span more than three decades as well as an estimation framework more robust than that in the original study the author finds strong support for beaudry and dinardo s key prediction supplementary regressions confirm other implications of the theory as well recently at least the effect of implicit contracting on wages has been similar for men and women

strikes and wages a test of an asymmetric information model this paper describes a simple model of labor disputes based on the hypothesis that unions use strikes to infer the profitability of the firm the model posits the existence of a negatively sloped resistance curve between wages and strike duration in addition it offer a series of predictions relating wage and strike outcomes to changes in the expected profitability of the firm and changes in the alternative opportunities of striking workers these implications are tested using data on wage outcomes strike probabilities and strike durations for a large sample of collective bargaining agreements

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

wage rigidity collective bargaining and the minimum wage evidence from french agreement data using several unique data sets on wage agreements at both industry and firm levels in france we document stylized facts on wage stickiness and the impact of wage setting institutions on wage rigidity first the average duration of wages is a little less than one year and around 10 percent of wages are modified each month by a wage agreement data patterns are consistent with predictions of a mixture of calvo and taylor models the frequency of wage change agreements is rather staggered over the year but the frequency of effective wage changes is seasonal the national minimum wage has a significant impact on the probability of a wage agreement and on the seasonality of wage changes negotiated wage increases are correlated with inflation the national minimum wage increases and the firm profitability

assessing the effectiveness of saving incentives concluding that iras and 401 k s do increase saving this text provides a fresh cost benefit approach for analyzing the success of savings incentives it compares the new savings to the government tax revenue lost through contributions to iras and 401 k s

union wage concessions in the 1980s the importance of firm specific factors this paper evaluates the effects of firm performance and firm characteristics on concession outcomes over the years 1980 87 across similar firms the author finds concessions were inversely related to stock price and employment growth concessions were also most likely in small firms in firms paying high wages and in firms with relatively low union coverage the effect of firm performance and firm characteristics on the likelihood of concessions was uniform across concessions of differing severity and was stable in magnitude over the eight year period

pension reform and saving in britain the paper examines the pension programme in britain focusing on reforms that have increased the fraction of the work force opting out of public provision and that have permitted individuals to choose their private pension provider it also examines the issue of pension provision and household saving the paper highlights the disparities in retirement saving behaviour across types of pension provision and different households the paper discusses the policy issues of the adequacy of household saving and the impact of pension reform on household saving and the public finances

nominal contracting theories of unemployment evidence from panel data this paper examines economywide and sector specific responses of real wages to nominal shocks using micro panel data from the national longitudinal survey of young men the observed response patterns provide no support for nominal contracting theories of unemployment which predict that nominal surprises should be negatively correlated with real wages in fact both inflation and money growth surprises are found to be essentially uncorrelated with real wages either a real business cycle model or a model with rigidities in commodity prices could be consistent with these results copyright 1993 by american economic association

the determinants and extent of uaw pattern bargaining the author using two new data sets covering uaw contract outcomes in a wide range of industries estimates the degree to which the union s target settlement with a big three automaker was followed in subsequent settlements in the same bargaining round over the years 1955 79 and 1987 90 using several different specifications and examining both wage levels and percent wage increases he finds that target settlements had large statistically significant spillover effects in all years although the effects were considerably smaller in 1987 90 than in 1955 79 bargaining unit size and industry had important influences on pattern following in all years firm specific financial health indicators had little influence on pattern following in the earlier period but an important influence in 1987 90

the incidence and intensity of wage indexation an empirical analysis variables suggested by theoretical studies of indexation are considered with a view to examining their utility in the context of the decision to index incidence and the desired degree of indexation when escalator clauses are put into effect intensity the tobit model which can address both of these issues suggests that most of the effects of explanatory variables on the regressand occur by modifying the incidence of indexation not its intensity however the tobit model is itself rejected in favour of separate probit and truncated regression investigations of incidence and intensity respectively the results obtained indicate that the standard list of explanatory variables which one thinks of in the context of the theoretical literature as dealing primarily with intensity perform well in explaining incidence but very poorly in accounting for the non limit observations the latter are influenced by bargaining power proxies such as the unemployment rate and union density a very clear trade off be

the union nonunion wage differential over the business cycle evidence from psid abstract there is some prior evidence lewis 1963 mellow 1981 freeman 1984 to support the notion that union wage premium is counter cyclical this phenomenon may be a product of union wage rigidity which results from a long term union contracts and b union reliance on layoffs due to seniority dominance rather than work share practices in response to worsening economic conditions and efficiency wage considerations this paper within a pooled cross section time series framework empirically tests for the presence of perceived counter cyclical nature of the union nonunion wage differential using the psid data from 1979 1984 results from this study do support the presence of counter cyclical union wage premium during the time period studied

union wage determination in canadian and u s manufacturing 1964 1990 a comparative analysis the author analyzes nominal and real wage changes in unionized manufacturing firms in canada and the united states over the years 1964 90 he finds more differences between the countries patterns of wage determination in the years 1964 79 than have commonly been recognized in the 1980s the nominal wage determination structure changed more sharply in the united states than in canada real wage determination changed little in the united states before 1986 while after 1986 observed real wage growth was significantly smaller than what would have been predicted based on patterns of bargaining in earlier years in canada real wages in the 1980s were significantly higher than they would have been if the previous patterns of wage determination had persisted both the nominal and real wage change results suggest that unions in u s manufacturing fared poorly in wage bargaining in the 1980s by comparison with their canadian counterparts