an approximation of the distribution of learning estimates in macroeconomic models abstract adaptive learning under constant gain allows persistent deviations of beliefs from equilibrium so as to more realistically reflect agents attempt of tracking the continuous evolution of the economy a characterization of these beliefs is therefore paramount to a proper understanding of the role of expectations in the determination of macroeconomic outcomes in this paper we propose a simple approximation of the first two moments mean and variance of the asymptotic distribution of learning estimates for a general class of dynamic macroeconomic models under constant gain learning our approximation provides renewed convergence conditions that depend on the learning gain and the model s structural parameters we validate the accuracy of our approximation with numerical simulations of a cobweb model a standard new keynesian model and a model including a lagged endogenous variable the relevance of our results is further evidenced by an analysis of learning stability and the effects of alternative specifications of interest rate policy rules on the distribution of agents beliefs

intertemporal labor supply and long term employment contracts the authors compare the implications of a symmetric information contracting model and a dynamic labor supply model for changes in earnings and hours a simple test is whether earnings changes are more variable than hours changes as predicted by the labor supply model or less variable as predicted by the contracting model the authors apply this test to two longitudinal surveys of adult men and find that earnings are somewhat more variable than hours for men who never change employers the estimates suggest that changes in earnings and hours not associated with survey measurement error occur at fixed wage rates copyright 1987 by american economic association

quantile selection models with an application to understanding changes in wage inequality we propose a method to correct for sample selection in quantile regression models selection is modeled via the cumulative distribution function or copula of the percentile error in the outcome equation and the error in the participation decision copula parameters are estimated by minimizing a method of moments criterion given these parameter estimates the percentile levels of the outcome are readjusted to correct for selection and quantile parameters are estimated by minimizing a rotated check function we apply the method to correct wage percentiles for selection into employment using data for the uk for the period 1978 2000 we also extend the method to account for the presence of equilibrium effects when performing counterfactual exercises

escape dynamics in learning models this article illustrates and characterizes how adaptive learning can lead to recurrent large fluctuations learning models have typically focused on the convergence of beliefs towards an equilibrium however in stochastic environments there may be rare but recurrent episodes where shocks cause beliefs to escape from the equilibrium generating large movements in observed outcomes i characterize the escape dynamics by drawing on the theory of large deviations developing new results which make this theory directly applicable in a class of learning models the likelihood frequency and most likely direction of escapes are all characterized by a deterministic control problem i illustrate my results with two simple examples

the life cycle and the business cycle of wage risk cross country comparisons abstract we provide evidence on life cycle and business cycle fluctuations in the dispersion of household level wage innovations comparing the us the uk and germany first we find that household characteristics explain about 25 of the dispersion in wages within an age group in all three countries second the cross sectional variance of wages is almost linearly increasing in household age in all three countries but with increments being smaller in the european data third wage risk is procyclical in germany while it is countercyclical in the us and acyclical in the uk

the cyclicality of the user cost of labor abstract the user cost of labor is the expected difference between the present discounted value of wages paid to a worker hired in the current period and that paid to a worker hired in the next period analogous to the price of any long term asset the user cost not wage is the relevant price for a firm that is considering adding a worker i construct its counterpart in the data and estimate that it is substantially more procyclical than average wages or wages of newly hired workers i demonstrate an application of the finding using the textbook search and matching model

caught in a trap wage mobility in great britain 1975 1994 in this paper i study wage mobility in great britain using the new earnings surveys of 1975 94 and the british household panel surveys of 1991 94 measuring mobility in terms of decile transition matrices i find a considerable degree of immobility within the wage distribution from one year to the next mobility is higher when measured over longer time periods those in lower deciles in the wage distribution are much more likely to exit into unemployment and non employment measuring mobility by studying changes in individuals actual percentile rankings in the wage distribution i find evidence that short run mobility rates have fallen since the late 1970s this has potentially important welfare implications given the rise in cross section earnings inequality observed over the last two decades copyright 2000 by the london school of economics and political science

what has 20 years of public private pay gap literature told us eastern european transitioning vs developed economies this paper surveys the literature on public private sector pay differentials based on 20 years of research in transitioning countries of eastern europe ee and compares the results with estimates obtained from developed market economies the majority of empirical studies from ee economies found evidence of public sector pay penalties during the period of economic transition from a communist to market based economy in developed economies however the average differential is usually around zero or positive the public sector pay inequality reducing effect relative to the private sector is greater in transitioning economies than in developed economies nevertheless there is evidence that the sign of the public sector pay gap as well as the relative public sector pay distribution change with the progress of economic transition towards those usually observed in developed economies different pay setting arrangements between private and public sectors and competition for workers seem to be major arguments for the existence of systematic pay differences between the two sectors

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

distributional changes in the gender wage gap using panel study of income dynamics psid data the authors analyze changes in wage differentials between white men and women over time and across the entire wage distribution the authors decompose distributional changes in the gender wage gap to assess the contribution of observed characteristics measuring individual productivity they find that the gender wage gap narrowed by 16 at the lowest decile and by less than 5 at the highest decile the decomposition results indicate that changes in the gender wage gap are mainly attributable to changes in educational attainment at the top of the wage distribution with a sizable part due to work history changes at the bottom the findings further reveal that the accuracy of the results depends on the direction in which the decompositions are performed

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

decomposing changes in wage distributions a unified approach over the last fifteen years many researchers have attempted to explain the determinants and changes of wage inequality i propose a simple procedure to decompose changes in the distribution of wages or in other distributions into three factors changes in regression coefficients the distribution of covariates and residuals the procedure requires only estimating standard ols regressions augmented by a logit or probit model it can be extended by modelling residuals as a function of unmeasured skills and skill prices two empirical examples showing how the procedure works in practice are considered in the first example sources of differences in the wage distribution in alberta and british columbia are considered in the second sources of change in overall wage inequality in the united states 1973 99 are re examined finally the proposed procedure is compared with existing procedures jel classification j3 la decomposition des changements dans les distributions de salaires une approche unifee au cours des quinze dernieres annees nombre d etudes se sont penchees sur les determinants et les changements de la distribution des salaires ce memoire propose une procedure pour decomposer les changements de la distribution des salaires en trois elements les changements dans les coefficients de regression la distribution des regresseurs et les changements residuels cette procedure ne necessite que l estimation de regressions par moindre carres ordinaires et d un modele probit ou logit l auteur montre aussi comment modeliser les residus en fonction de competences non mesurees la procedure proposee est mise en application dans le contexte de deux exemples la distribution des salaires en alberta et en colombie britannique et les changements dans la distribution des salaires de 1973 a 1999 aux etats unis le memoire examine aussi comment cette procedure se compare aux methodes proposees par d autres chercheurs

escaping nash inflation an ordinary differential equation ode gives the mean dynamics that govern the convergence to self confirming equilibria of self referential systems under discounted least squares learning another ode governs escape dynamics that recurrently propel away from a self confirming equilibrium in a model with a unique self confirming equilibrium the escape dynamics make the government discover too strong a version of the natural rate hypothesis the escape route dynamics cause recurrent outcomes close to the ramsey commitment inflation rate in a model with an adaptive government

choosing the right pond social approval and occupational choice we model the endogenous emergence of social perceptions about occupations and their impact on occupational choice in particular an individual s social approval increases with his community s perception of his skill in his chosen career these perceptions vary across communities because individuals better assess the skill of those in occupations similar to their own such imperfect assessment can distort choices away from comparative advantage when skill distributions differ across occupations and or correlate positively the community perceives one occupation more favorably this favored sector experiences overcrowding but misallocation occurs across both sectors furthermore a positive skill correlation can produce multiple steady states

school attendance and child labor a model of collective behavior this paper theoretically investigates how community approval or disap proval aects school attendance and child labor and how aggregate behavior of the community feeds back towards the formation and persistence of an anti or pro schooling norm the proposed community model continues to take aggregate and idiosyncratic poverty into account as an important driver of low school attendance and child labor but it provides also an explanation for why equally poor villages or regions can display dierent attitudes towards schooling distinguishing between three dierent modes of child time allocation school attendance work and leisure the paper shows how the time costs of schooling and child labor productivity con tribute to the existence of a locally stable anti schooling norm it proposes policies that eectively exploit the social dynamics and initiate a permanent escape from the anti schooling equilibrium an extension of the model explores how an education contingent subsidy paid to the poorest families of a community manages to initiate a bandwagon eect towards education for all the optimal mechanism design of

schooling and the distribution of wages in the european private and public sectors international research has shown that schooling enhances within groups wage dispersion this assessment is typically based on private sector data and up to date the inequality implications of schooling have not been documented for the public sector this article uses recent data from eight european countries to explicitly take into account differences between the private and public sectors using quantile regression the article describes the effects of schooling on the location and shape of the conditional wage distribution in each sector while the average impact of schooling on wages is similar across sectors the impact of schooling on within groups dispersion is found to be substantially larger in the private sector than in the public sector this finding warns that the effects of the european educational expansion on overall within groups dispersion may be lower than previously thought

economic change and rising income inequality in the oslo region the importance of knowledge intensive business services wessel t economic change and rising income inequality in the oslo region the importance of knowledge intensive business services regional studies the growth of market income inequality in the oslo region of norway between 1993 and 2004 is investigated using two measures it is shown that most of the change occurred within knowledge intensive business services and further within demographic subgroups changes in mean income between group inequality and shifts in the balance between segments of the economy are of minor importance the results support a combined focus on productive paths and institutions labour relations in particular appear as an important explanation however labour relations can hardly explain why men rather than women and western immigrants rather than non western immigrants converge towards employment in high profit businesses this particular pattern requires research beyond the economic and institutional landscape wessel t

outsourcing labor market pooling and labor contracts this paper considers the interaction between input sharing and labor market pooling in urban areas in particular it examines the impact of the size of a city and business risks on the organizational structures of firms located in urban agglomerations and it also discusses the impact of organizational structure on incentives to insure workers against income risks it is shown that manufacturing firms suffer from a coordination game in their decision to outsource production the existence of idiosyncratic risks causes manufacturers to refrain from outsourcing the incentives to offer wage and employment protection to workers are more pronounced when manufacturers outsource the production of their inputs to a local market which mitigates the impact of labor market pooling

we are what we eat obesity income and social comparisons abstract the empirical evidence of a non monotone relation between income and obesity is not well explained we build a theoretical model combining income inequality and social comparisons to explain the link between income and obesity and study tax policy implications for fighting obesity we assume that differences in food consumption patterns between poor and wealthy households partly reflect positionality which is the concern for social status our key assumption is that positionality for low calorie food consumption is positively related to a country s wealth in this framework body weight outcomes reflect competing income and positionality effects yielding the following results we explain the link between average obesity rates and standards of living and suggest the existence of a kuznets curve for obesity in accordance with empirical evidence for cross sections of the population we explain the observed correlation between income and obesity which is positive in poor countries and negative in rich countries we find that increasing the relative cost of high calorie food is less effective at decreasing the relative weight of poor individuals in rich countries than in poor countries

intergenerational mobility in britain in this paper we use longitudinal data on children and their parents to assess the extent of intergenerational mobility in britain based on data from the national child development survey a cohort of all individuals born in a week of march 1958 we find that the extent of intergenerational mobility is limited we report an intergenerational correlation of the order 40 to 60 for fathers and sons and 45 to 70 for fathers and daughters in terms of labour market earnings and years of schooling an examination of quartile transition matrices between parental and child earnings outcomes reveals a similar pattern finally it seems on the basis of these transition matrices that there is an important asymmetry in intergenerational earnings mobility with upward mobility from the bottom of the earnings distribution being more likely than downward mobility from the top

changes in the distribution of male and female wages accounting for employment composition using bounds this paper examines changes in the distribution of wages using bounds to allow for the impact of nonrandom selection into work we show that worst case bounds can be informative however because employment rates in the united kingdom are often low they are not informative about changes in educational or gender wage differentials thus we explore ways to tighten these bounds using restrictions motivated from economic theory with these assumptions we find convincing evidence of an increase in inequality within education groups changes in educational differentials and increases in the relative wages of women

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

micro economic determinants of tourist expenditure a quantile regression approach abstract we assess the effect of the main determinants of tourist expenditure by applying both linear and quantile regression models to individual micro data collected by a survey addressed to non resident tourists who spent their holidays in sardinia during the period april october 2012 we find that in addition to income and foreign nationality tourist expenditure is crucially driven by trip related party size stay length accommodation sea and sun typology and transport modality and psychographic characteristics repeated visits and holiday motivations moreover our results indicate that the effects vary with respect to the expenditure component and the level of spending thus confirming the high complexity of the tourism product higher positive effects were found for heavy spenders in the case of foreign nationality previous visits and notoriety motivated holidays while party size and the number of visited sites contribute to reducing the level of expenditure for light spending tourists

trends in time allocation a cross country analysis abstract using detailed time use data for seven industrialized countries from the 1970s until today we document general decreases in men s market work coupled with increases in men s unpaid work and child care and increases in women s paid work and child care coupled with decreases in unpaid work we also find almost universal increases in the time devoted to watching television over this period and uncover a widespread increase in leisure inequality in favor of lower educated adults trends in leisure inequality mirror the general increase in income and earnings inequality experienced in most countries over this period especially after the mid 1980s all these findings are consistent with previous results for the us however in contrast to the increases in leisure found for the us we fail to find common trends in leisure time across countries over the period analyzed

learning and wage dynamics we develop a dynamic model of learning about worker ability in a competitive labor market the model produces three testable implications regarding wage dynamics 1 although the role of schooling in the labor market s inference process declines as performance observations accumulate the estimated effect of schooling on the level of wages is independent of labor market experience 2 timeinvariant variables correlated with ability but unobserved by employers such as certain test scores are increasingly correlated with wages as experience increases and 3 wage residuals are a martingale we present evidence from the nlsy that is broadly consistent with the model s predictions

health expenditure growth looking beyond the average through decomposition of the full distribution explanations of growth in health expenditures have restricted attention to the mean we explain change throughout the distribution of expenditures providing insight into how expenditure growth and its explanation differ along the distribution we analyse dutch data on actual health expenditures linked to hospital discharge and mortality registers full distribution decomposition delivers findings that would be overlooked by examination of changes in the mean alone the growth rate of hospital expenditures is greatest at the middle of the distribution and is driven mainly by changes in the distributions of determinants pharmaceutical expenditures increase most rapidly at the top of the distribution and are mainly attributable to structural changes including technological progress making treatment of the highest cost cases even more expensive changes in hospital practice styles make the largest contribution of all determinants to increased spending not only on hospital care but also on pharmaceuticals suggesting important spill over effects

learning and time varying macroeconomic volatility abstract this paper presents a dsge model in which agents learning about the economy can endogenously generate time varying macroeconomic volatility economic agents use simple models to form expectations and need to learn the relevant parameters their gain coefficient is endogenous and is adjusted according to past forecast errors the model is estimated using likelihood based bayesian methods the endogenous gain is jointly estimated with the structural parameters of the system the estimation results show that private agents appear to have often switched to constant gain learning with a high constant gain during most of the 1970s and until the early 1980s while reverting to a decreasing gain later on as a result the model can generate a pattern of volatility which is increasing in the 1970s and falling in the second half of the sample with a decline that can roughly match the magnitude of the so called great moderation in the 1984 2007 period the paper also documents how a failure to incorporate learning into the estimation may lead econometricians to spuriously find time varying volatility in the exogenous shocks even when these have constant variance by construction

the school to work transition a cross national perspective school to work patterns and issues are discussed for seven economies france germany japan the netherlands sweden the united kingdom and the united states the emphasis is placed on differences across countries in the current labor market position of young people and recent trends therein along with the institutions that regulate youth education training and employment the power of public policies including labor market deregulation labor market programs vocationalization of education and apprenticeship to improve youth outcomes is discussed drawing on national evaluation literatures evidence of extensive policy failure points up the need to develop nationally appropriate institutions to improve school to work transitions

riding high success in sports and the rise of doping cultures in this paper i develop a socioeconomic model that can be used to investigate the decisions made by professional athletes concerning doping in their evaluation of whether to use performance enhancing drugs athletes consider not only costs and benefits through rank improvement but also the approval from fellow athletes toward pro doping decisions peer group approval is modeled as a lagged endogenous variable depending on the share of doping athletes in the history of a sport as such the model can explain an equilibrium of high incidence of doping as a doping culture in addition to presenting comparative statics of the equilibrium i e in order to answer the question of how a doping culture can be eliminated i also investigate how doping decisions are affected by the standards set by the leader in a sport e g olympic qualification marks and by the disproportionate public veneration of winners

reconciling the wage curve and the phillips curve the wage curve is the negative relationship that links wage levels to the unemployment rate it fits accurately with modern non competitive labour market models but goes against a phillips curve modelling because the latter ties wage growth to the unemployment rate in this article we present a comprehensive review of these non competitive models highlighting recent contributions that try to eliminate the possible gap that exists between the concepts of the wage curve on the one hand and the phillips curve on the other copyright blackwell publishers ltd 2005

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

income inequality and the labour market in britain and the us abstract we study household income inequality in both great britain and the united states and the interplay between labour market earnings and the tax system while both britain and the us have witnessed secular increases in 90 10 male earnings inequality over the last three decades this measure of inequality in net family income has declined in britain while it has risen in the us to better understand these comparisons we examine the interaction between labour market earnings in the family assortative mating the tax and welfare benefit system and household income inequality we find that both countries have witnessed sizeable changes in employment which have primarily occurred on the extensive margin in the us and on the intensive margin in britain increases in the generosity of the welfare system in britain played a key role in equalizing net income growth across the wage distribution whereas the relatively weak safety net available to non workers in the us mean this growing group has seen particularly adverse developments in their net incomes

private information wage bargaining and employment fluctuations shimer 2005 pointed out that although we have a satisfactory theory of why some workers are unemployed at any given time we don t know why the number of unemployed workers varies so much over time the basic mortensen pissarides 1994 model does not generate nearly enough volatility in unemployment for plausible parameter values this paper extends the mortensen pissarides model to allow for informational rents productivity is subject to publicly observed aggregate shocks and to idiosyncratic shocks that are seen only by the employer it is shown that there is a unique equilibrium provided that the idiosyncratic shocks are not too large the main result is that small fluctuations in productivity that are privately observed by employers can give rise to a kind of wage stickiness in equilibrium and the informational rents associated with this stickiness are sufficient to generate relatively large unemployment fluctuations

crime scars recessions and the making of career criminals recessions lead to short term job loss lower levels of happiness and decreasing income levels there is growing evidence that workers who first join the labour market during economic downturns suffer from poor job matches that have a sustained detrimental effect on their wages and career progression this paper uses a range of us and uk data to document a more disturbing long run effect of recessions young people who leave school in the midst of recessions are significantly more likely to lead a life of crime than those graduating into a buoyant labour market these effects are long lasting and substantial

the social multiplier aggregate data is often used to make inferences about individual level behavior if there are social interactions in which one person s actions influence his neighbor s incentives or information then these inferences are inappropriate the presence of positive social interactions or strategic complementarities implies the existence of a social multiplier where aggregate relationships will overstate individual elasticities we present a brief model and then estimate the size of the social multiplier in three areas the impact of education on wages the impact of demographics on crime and group membership among dartmouth roommates in these contexts there is a significant social multiplier jel ho jo co

changes in compulsory schooling education and the distribution of wages in europe using data from 12 european countries and the variation across countries and over time in the changes of minimum school leaving age we study the effects of the quantity of education on the distribution of earnings we find that compulsory school reforms significantly affect educational attainment especially among individuals belonging to the lowest quantiles of the distribution of ability there is also evidence that additional education reduces conditional wage inequality and that education and ability are substitutes in the earnings function

non separable time preferences novelty consumption and body weight theory and evidence from the east german transition to capitalism abstract this paper develops a dynamic model to illustrate how diet and body weight change when novel food products become available to consumers we propose a microfounded test to empirically discriminate between habit and taste formation in intertemporal preferences moreover we show that novelty consumption and endogenous preferences can explain the persistent correlation between economic development and obesity by empirically studying the german reunification we find that east germans consumed more novel western food and gained more weight than west germans when a larger variety of food products became readily accessible after the fall of the wall the observed consumption patterns suggest that food consumption features habit formation

changes in the distribution of house prices over time structural characteristics neighborhood or coefficients quantile hedonic house price function estimates imply that appreciation rates were higher between 1995 and 2005 for high priced homes in chicago decompositions of temporal changes in the house price distribution suggest that the types of homes sold and their location do not account for the change in the price distribution rather higher appreciation rates for high priced homes are explained by differences in the quantile regression coefficients over time

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

the college wage premium and the expansion of higher education in the uk this paper reports estimates of the uk college premium for young graduates across successive cohorts from large cross section datasets for the uk pooled from 1994 to 2006 a period when the higher education participation rate increased dramatically the growth in relative labour demand suggests that graduate supply considerably outstripped demand which ought to imply a fall in the premium we find no significant fall for men and even a large but insignificant rise for women quantile regression results reveal a fall in the premium only for men in the bottom quartile of the distribution of unobserved skills

misclassified treatment status and treatment effects an application to returns to education in the united kingdom abstract we study the impact of misreported treatment status on the estimation of causal treatment effects focusing on applications where no additional information or repeated measurements are available we first characterize the bias introduced by misclassification on the average treatment effect on the treated att under a conditional independence assumption in both a binary and a multiple treatment setting we find that the bias of matching type estimators computed from misclassified data cannot in general be signed we subsequently provide easily implementable methods to bound the att of interest semiparametrically in particular allowing for very general forms of impact heterogeneity and of the no treatment outcome equations as well as for some dependence of the misreporting probabilities on individual characteristics the empirical problem that motivates our paper is the estimation of the wage returns to a number of educational qualifications in the united kingdom allowing for misreporting in a

social approval values and afdc a re examination of the illegitimacy debate this paper models the fertility decision of individuals who differ in their wage rate and their intensity of preferences for rearing children and whose utility of having a child out of wedlock depends on the level of social approval associated with doing so this social approval in turn is a function of the fraction of individuals in previous generations that chose to have children out of wedlock the model is a straightforward extension of the typical rational choice model that motivates much of the empirical literature a literature that has cast doubt on a strong link between afdc and illegitimacy however the model introduces elements from epidemic models that many have in mind when arguing for such a link as a result the predictions of this extended model are consistent with empirical findings while at the same time linking the rise in illegitimacy solely to government welfare programs specifically a program similar to afdc is introduced into an economy with low illegitimacy rates and a trans

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

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

collective labor supply heterogeneity and nonparticipation in this paper we extend the collective model of labour supply developed by chiappori 1988 to allow for discrete choices censoring and nonparticipation in employment we derive the collective restrictions on labour supply functions that we contrast with restrictions implied by the usual unitary framework we apply our results to the estimation of a collective labor supply model for married couples without children using uk data from 1979 to 1993 taking into account unobserved heterogeneity we use the log linear labor supply framework the implications of the unitary framework are rejected while those of the collective approach are not the estimates of the sharing rule show that wages have a strong influence on bargaining power within couples

collective labour supply heterogeneity and non participation we present identification and estimation results for the collective model of labour supply in which there are discrete choices censoring of hours and non participation in employment we derive the collective restrictions on labour supply functions and contrast them with restrictions implied by the usual unitary framework using the large changes in the wage structure between men and women in the u k over the last two decades we estimate a collective labour supply model for married couples without children the estimates of the sharing rule show that male wages and employment have a strong influence on bargaining power within couples

estimating labour supply responses using tax reforms the 1980 s tax reforms and the changing dispersion of wages offer one of the best opportunities yet to estimate labor supply effects nevertheless changing sample composition aggregate shocks the changing composition of the tax paying population and discontinuities in the tax system create serious identification and estimation problems we develop grouping estimators that address these issues our results reveal positive and moderately sized wage elasticities we also find negative income effects for women with children

learning about monetary policy rules abstract we study macroeconomic systems with forward looking private sector agents and a monetary authority that is trying to control the economy through the use of a linear policy feedback rule we use stability under recursive learning a la evans and honkapohja learning and expectations in macroeconomics princeton university press princeton new jersey 2001 as a criterion for evaluating monetary policy rules in this context we find that considering learning can alter the evaluation of alternative policy rules

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

trends in quality adjusted skill premia in the united states 1960 2000 this paper presents new evidence that increases in college enrollment lead to a decline in the average quality of college graduates between 1960 and 2000 resulting in a decrease of 8 percentage points in the college premium the standard demand and supply framework katz and murphy 1992 card and lemieux 2001 can qualitatively account for the trend in the college and age premia over this period but the quantitative adjustments that need to be made to account for changes in quality are substantial furthermore the standard interpretation of the supply effect can be misleading if the quality of college workers is not controlled for to illustrate the importance of these adjustments we reanalyze the problem studied in card and lemieux 2001 who observe that the rise in the college premium in the 1980s occurred mainly for young workers and attribute this to the differential behavior of the supply of skill between the young and the old our results show that changes in quality are as important as changes in prices to explain the phenomenon they document

the evolution of individual male earnings in great britain 1975 95 i study the dynamic structure of male wages in great britain using the new earnings survey panel from 1975 95 computing auto covariances of individual wages by cohort i find evidence of a permanent component of earnings that increases over the life cycle and a highly persistent serially correlated transitory component in addition the estimated variances of both these components have risen over this period each explaining about half the rise in inequality using individual s occupation at age 22 i split the sample into four skill groups i find some differences across these groups with the rise in the permanent variance most important for the manual groups

does education raise productivity or just reflect it education has an important effect on wages but it not clear whether this is because education raises productivity or because education is simply a signal of ability we implement a number of existing tests for discriminating between these two explanations and find that they do not support the signalling hypothesis however we have severe reservations about these results and we propose an alternative test based on changes in education incentives caused by changes in the minimum school leaving age in the 1970s using this idea we find that uk data appear to strongly support the human capital explanation an important issue in the economics of education is that an individual s education has an effect on wages paid in the labour market for example blundell et al 2003 uses detailed education and subsequent earnings information for a cohort of male individuals born in 1958 to estimate that the returns to a uk degree typically of 3 year duration relative to graduating from high school at 18 with 2 a level qualifications a necessary but not sufficient condition for admission to university is a 24 wage premium human capital explanations pioneered by becker 1962 and schultz 1963 suggest that the correlation between education and wages is due to education enhancing productivity however earnings may rise in response to education not because of any effect on productivity but simply because education may act as a signal of productivity employers believing that education is correlated with productivity will screen workers for their education and pay higher wages to the more educated the employers beliefs will be confirmed by their experience if it is the case that high productivity individuals signal this by choosing high levels of education it will be optimal for individuals to behave in this way if the cost of acquiring education is less for high productivity individuals than it is for low productivity individuals thus under reasonable conditions the market will be characterised by a separating equilibrium where higher productivity individuals choose higher levels of education than lower productivity workers and earn correspondingly higher wages the theory is largely due to spence 1973 1979 and the subsequent empirical literature was reviewed by groot and oosterbeek 1994 riley 2001 provides an excellent modern survey chevalier harmon and walker are fellows of iza in bonn and are affiliated with the institute for the study of social change issc in dublin this paper is part of the issc policy evaluation programme chevalier and walker are also affiliated with the centre for the economics of education at the london school of economics lse the support of all of these bodies for facilitating our collaboration is acknowledged harmon is grateful to university college london for their hospitality during his nuffield foundation new career development fellowship in the social sciences comments from steve machin and three anonymous referees greatly improved the exposition of this paper we are also grateful to richard blundell and to seminar participants at the lse and the tinbergen institute in amsterdam for their comments and to vincent o sullivan for excellent research assistance the usual disclaimer applies

social norms fertility and economic development abstract this paper presents an overlapping generations model with endogenous fertility and human capital accumulation within such a framework it shows how the presence of family size norms can lead to multiple equilibria it can thus potentially explain different development patterns without recourse to increasing returns and differences in initial conditions furthermore it derives sufficient conditions under which different equilibria can be pareto ranked finally it shows that the main results hold also in the case where there exists parental altruism

reversal of fortunes the rise and fall of lifetime earnings of iranian men abstractthe islamic revolution of 1979 the 8 year war with iraq 1980 88 and the collapse of oil prices in 1986 dealt huge blows to iran s economy in this article we use a pseudopanel constructed from annual multiple surveys during 1984 2004 to analyze changes in cohort earnings and consumption through these tumultuous times using well known techniques we decompose the changes in median cohort earnings of men into cohort age and year effects our results show that cohorts born before 1950 who were well into their careers at the time of the revolution enjoyed a steady increase in lifetime earnings however those born after the mid 1960s who started their careers during the revolution and the war with iraq experienced losses relative to previous cohorts in contrast to earnings per capita expenditures do not indicate a declining cohort trend for younger cohorts when we restrict the year effects to cyclical variation only the cohort effects show a rising trend we interpret the difference in

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

which workers get insurance within the firm abstract industry level time series data suggest that low skilled workers get less insurance within the firm than high skilled workers in particular wages respond relatively more to productivity shocks in low skilled industries than high skilled industries our theory is that low skilled workers get relatively less insurance from their firms because they have relatively lower displacement costs under limited commitment lower displacement costs make the workers outside options more attractive and hence decrease the amount of risk sharing sustainable within the firm evidence on average displacement costs by industry support the theory s predictions

income variance dynamics and heterogeneity recent theoretical work has shown the importance of measuring microeconomic uncertainty for models of both general and partial equilibrium under imperfect insurance in this paper the assumption of i i d income innovations used in previous empirical studies is removed and the focus of the analysis is placed on models for the conditional variance of income shocks which is related to the measure of risk emphasized by the theory we first discriminate amongst various models of earnings determination that separate income shocks into idiosyncratic transitory and permanent components we allow for education and time specific differences in the stochastic process for earnings and for measurement error the conditional variance of the income shocks is modelled as a parsimonious arch process with both observable and unobserved heterogeneity the empirical analysis is conducted on data drawn from the 1967 1992 panel study of income dynamics we find strong evidence of sizeable arch effects as well as evidence of unobserved heterogeneity in the variances

empirical calibration of adaptive learning abstract adaptive learning introduces persistence in the evolution of agents beliefs over time helping explain why economies present sluggish adjustments towards equilibrium the pace of this learning process is directly determined by the gain parameter we document and evaluate gain calibrations for a broad range of model specifications with macroeconomic data also developing alternative approaches to the endogenous determination of time varying gains in real time our key findings are that learning gains are higher for inflation than for output growth and interest rates and that calibrations to match survey forecasts are lower than those derived according to forecasting performance suggesting some degree of bounded rationality in the speed with which agents update their beliefs

raising children to work hard altruism work norms and social insurance children who can count on support from altruistic parents may not try hard to succeed in the labor market moreover parental altruism makes withdrawal of such support non credible to promote work

inference in models with adaptive learning abstract identification of structural parameters in models with adaptive learning can be weak causing standard inference procedures to become unreliable learning also induces persistent dynamics and this makes the distribution of estimators and test statistics non standard valid inference can be conducted using the anderson rubin statistic with appropriate choice of instruments application of this method to a typical new keynesian sticky price model with perpetual learning demonstrates its usefulness in practice

macroeconomic conditions at entry and injury risk in the workplace financial support from mineco feder eco2015 70540 p and the compagnia di san paolo to call3 20120119 the popart network is gratefully acknowledged

conditional cash transfers and school dropout rates this paper evaluates a united kingdom pilot study designed to test whether a means tested conditional cash transfer paid to 16 to 18 year olds for staying in full time education is an effective way of reducing the proportion of school dropouts the transfer s impact is substantial in the first year full time education participation rates increase by around 4 5 percentage points while the proportion receiving two years of education increases by around 6 7 percentage points those receiving the full payment have the largest initial increase in participation and some evidence is found suggesting that part of the effect can be explained by liquidity constraints

strikes wages and private information private information models of strikes suggest that the strike is used as an information revealing device by the union in the presence of asymmetrical information a testable prediction of these models is that there is a negative relationship between strikes and the unpredicted component of the wage this paper finds evidence of such a relationship in a large sample of u s labor contracts the real wage falls by about 3 percent after a strike lasting one hundred days copyright 1989 by american economic association

expectations and the stability problem for optimal monetary policies eine auf den fundamentaldaten beruhende regelbindung der geldpolitik ohne selbstverpflichtung die bei vollkommen rationalen erwartungen der privaten akteure optimal ware ist instabil wenn diese akteure de facto den ublichen regeln des adaptiven lernens folgen dieses problem lasst sich dadurch beheben dass die erwartungen privater akteure berucksichtigt und in geeigneter weise in die optimale geldpolitik einbezogen werden diese eindeutige schlusfolgerung gilt auch dann wenn sich der geldpolitische entscheidungstrager und die privaten akteure in einem simultanen lernprozess befinden unsere ergebnisse zeigen wie wichtig es ist die geldpolitik angemessen zu gestalten und dabei nicht nur die fundamentaldaten sondern auch direkt die beobachteten erwartungen privater haushalte und unternehmen zu berucksichtigen

recruitment restrictions and labor markets evidence from the postbellum u s south this article studies the effect of recruitment restrictions on mobility and wages in the postbellum u s south i estimate the effects of criminal fines charged for enticement recruiting workers already under contract on sharecropper mobility tenancy choice and agricultural wages i find that a 13 10 increase in the enticement fine lowered the probability of a move by black sharecroppers by 12 daily wages by 1 cent 1 and the returns to experience for blacks by 0 6 per year these results are consistent with an on the job search model where the enticement fine raises the cost of recruiting an employed worker

interpreting aggregate wage growth the role of labor market participation a new and easily implementable framework for the empirical analysis of the relationship between aggregate and individual wages is developed aggregate real wages are shown to contain three important bias terms one associated with the dispersion of individual wages a second deriving from compositional changes in the selected sample of workers and a third reflecting the distribution of working hours their importance for interpreting the path of aggregate wages and of the returns to education for recent experience in britain is highlighted a close correspondence between the estimated biases and the patterns of differences shown by aggregate wages is established

effect of large scale social interactions on body weight i estimate models of endogenous social interactions in body weight at the county and state levels the results show that dispersion in body weight across time and space in the u s is not clearly excessive and that much of this variation can be attributed to observable individual and regional characteristics models exploiting variants of methods proposed by glaeser et al 2003 fixed effects instrumental variable and split sample instrumental variable methods to address endogeneity suggest that there are not large social multipliers on body weight outcomes the evidence suggests there may be small multipliers on bmi obesity and morbid obesity there is no evidence that underweight is subject to a social multiplier the results are sensitive to specification

the effect of implicit contracts on the movement of wages over the business cycle evidence from micro data in this paper we address the question of whether wages are affected by labor market conditions in a manner more consistent with a contract approach than with a standard spot market model from a simple implicit contract model we derive implications about the links between wages and past labor market conditions using individual data from the current population survey and the panel study of income dynamics we find that an implicit contract model with costless mobility describes these links better than either a simple spot market model or an implicit contract model with costly mobility

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

the impact of income shocks on health evidence from cohort data we study the eect of permanent income innovations on health for a prime aged population using information on more than half a million individuals sampled over a twenty five year period in three dierent cross sectional surveys we aggregate data by date of birth cohort to construct a synthetic cohort dataset with details of income expenditure socio demographic factors health outcomes and selected risk factors we then exploit structural and arguably exogenous changes in cohort incomes over the eighties and nineties to uncover causal eects of permanent income shocks on health we find that such income innovations have little eects on health but do aect health behaviour and mortality

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

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

the cycle of earnings inequality evidence from spanish social security data we use detailed information on labor earnings and employment from social security records to document the evolution of male daily earnings inequality in spain from 1988 to 2010 we find that inequality was strongly countercyclical it increased around the 1993 recession experienced a substantial decrease during the 1997 2007 expansion and then a sharp increase during the recent recession this evolution went in parallel with the cyclicality of employment in the lower middle part of the wage distribution our findings highlight the importance of the housing boom and bust in this evolution suggesting that demand shocks in the construction sector had large effects on aggregate labor market outcomes

a mass phenomenon the social evolution of obesity this paper proposes a theory for the social evolution of obesity it considers a society in which individuals experience utility from consumption of food and non food the state of their health and the evaluation of their appearance by others the theory explains under which conditions poor persons are more prone to be overweight although eating is expensive and it shows how obesity occurs as a social phenomenon such that body mass continues to rise long after the initial cause e g a lower price of food is gone the paper investigates the determinants of a steady state at which the median person is overweight and how an originally lean society arrives at such a steady state extensions of the theory towards dietary choice and the possibility to exercise in order to lose weight demonstrate robustness of the basic mechanism and provide further interesting results

economic shocks and labor market flexibility we test how labor markets adjust to large but temporary economic shocks in a context in which such shocks are common using an individual level panel from 1 140 philippine municipalities over 26 quarters we find that workers in areas affected by strong typhoons experience reductions in hours worked and hourly wages without evidence of layoffs the results are strongest for formal wage paying jobs we argue that those results are best explained by implicit contracts where workers and firms share risks we provide extensive qualitative data suggesting that employment contracts in the philippines allow for such flexibility abstract from author

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

long term wage fluctuations with industry specific human capital exploiting long term interindustry demand shifts this article provides evidence that 1 industry level wages do not respond to industry demand conditions 2 at the industry level the employment of young workers responds more to demand shifts than does the employment of experienced workers and 3 the postdisplacement wages of displaced workers are strongly affected by demand in their predisplacement industries these findings are consistent with a model in which worker s investments in industry specific skills pose a barrier to interindustry labor mobility and wages do not respond to spot labor market conditions

the decline of labour market institutions and the rise in wage inequality in britain abstract at the same time as the role of labour market institutions declined very dramatically in britain there was a very sharp rise in wage inequality that since 1980 has increased at a faster pace than in most advanced countries britain in the 1980s and early 1990s therefore provides a very good testing ground for evaluating the importance of labour market institutions in explaining the evolution of the wage structure i look at this in terms of two institutions that have traditionally propped up wage levels at the bottom end of the wage distribution unions and minimum wages i find that their weakening has played an important part in the rise in wage inequality in britain

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances