wall street occupations many finance jobs entail the risk of large losses and hard to monitor effort we analyze the equilibrium consequences of these features in a model with optimal dynamic contracting we show that finance jobs feature high compensation up or out promotion and long work hours and are more attractive than other jobs moral hazard problems are exacerbated in booms even though pay increases employees whose talent would be more valuable elsewhere can be lured into finance jobs while the most talented employees might be unable to land these jobs because they are too hard to manage

testing the morale theory of nominal wage rigidity this paper tests the morale theory of nominal wage rigidity according to which firms resist making nominal cuts to workers pay even in adverse economic conditions because such cuts hurt worker morale and productivity the authors analyze data from an employer employee survey they conducted in japan in 2000 that year coincided with a rare spell of deflationary recession which the authors argue is a good setting in which to study how nominal pay cuts affect morale they find that a nominal annual pay freeze experienced by 21 of the sampled workers demoralized workers by reducing their trust in the firm and that even greater demoralization not wholly attributable to reduced trust was associated with a nominal pay cut which affected 17 of the workers the observed negative relationship between nominal pay cuts and morale persists even when the estimation includes controls and firm fixed effects

convention industry and destination clusters evidence from italy abstract the study investigates aspects of the convention industry not well explored in the literature using a framework of cluster theory a quantitative method is used to assess the italian convention industry and its relationships with local infrastructure and tourism product supply the development of the different phases of the life cycle of convention destinations in italy is outlined and locational factors which influence them are investigated managerial and political strategies which would enhance the competitiveness of the italian convention industry in the global market are proposed furthermore the study evaluates the use of the cluster theory in investigating the hospitality industry contributing to the debate on local tourism development

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

measuring positive externalities from unobservable victim precaution an empirical analysis of lojack lojack is a hidden radio transmitter device used for retrieving stolen vehicles because there is no external indication that lojack has been installed it does not directly affect the likelihood that a protected car will be stolen there may however be positive externalities due to general deterrence we find that the availability of lojack is associated with a sharp fall in auto theft rates of other crime do not change appreciably at least historically the marginal social benefit of an additional unit of lojack has been fifteen times greater than the marginal social cost in high crime areas those who install lojack however obtain less than 10 percent of the total social benefits leading to underprovision by the market

gender differences in training capital and wages this paper constructs an equilibrium job matching model where workers differ in their attachment to the labor force the model predicts that workers with weaker attachment to the labor market will receive lower starting wages and lower post training wages and will be placed in jobs that offer less training and use less capital the implications of the model for gender differences in pay and job assignment are tested with the eopp data set ourfindings suggest that while training intensity during the first three months of employment is similar in positions filled by males and females females are employed in positions that have a shorter duration of on the job training and that use less capital these differences in on the job training and capital in positions filled by men and women as well as a lower market value for women s prior labor market experience account for a substantial part of the gap in wages between males and females

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

dynamic contracts with worker mobility via directed on the job search this article proposes a model with dynamic incentive contracts and on the job search in a frictional labor market the optimal long term contract exhibits an increasing wage tenure profile with increasing wages worker effort also increases with tenure these two features imply that the probabilities of both voluntary and involuntary job separation decrease with both job tenure and the duration of employment given these results workers experience differing labor market transitions between employment unemployment and across different employers and the equilibrium generates endogenous heterogeneity among ex ante homogeneous workers abstract from author

wages mobility and firm performance advantages and insights from using matched worker firm data to illustrate the wide applicability of longitudinal matched employer employee data we study the simultaneous determination of worker mobility and wage rates using an econometric model that allows for both individual and firm level heterogeneity the model is estimated using longitudinally linked employer employee data from france structural results for mobility show remarkable heterogeneity with both positive and negative duration dependence present in a significant proportion of firms the average structural returns to seniority are essentially zero but this result masks enormous heterogeneity with positive seniority returns found in low starting wage firms

job turnover and the returns to seniority in this article we match firm data to individual work history files to simultaneously estimate the wage and employment duration processes of a longitudinal sample of 2 million french workers employed in roughly 1 million firms and followed over 20 years the particular structure of the dataset allows us to distinguish between the impact of job search and labor demand indicators on wages and employment at the job level the model allows for correlated individual and job unobserved heterogeneity controlling for job matching we find that returns to seniority are close to zero

the british low wage sector and the employment prospects of the unemployed abstractare low wages a way for the unemployed to switch to higher paying jobs using data from the british household panel survey the labour market dynamics of unemployed low paid and higher paid employed men are analysed moreover the respective un employment duration and occupational skill level are accounted for results show that in general low wages significantly reduce the risk of future unemployment and increase the chances of ascending the salary ladder especially in the case of long term unemployment 360 days furthermore the occupational skill level has a substantial influence on the upward mobility of low paid jobs individuals working in the initial period in a low paid and higher skilled occupation have on average an 11 percentage points higher probability of entering higher pay compared to when working in a low paid and low skilled occupation

firm wage premia industrial relations and rent sharing in germany the authors use three distinct methods to investigate the influence of industrial relations on firm wage premia in germany first ordinary least squares ols regressions for the firm effects from

the uk association conference attendance decision making process this paper reports on research carried out into the consumer behaviour displayed by uk association conference delegates when deciding to attend a conference examination of the available literature suggested that there has been little investigation of the delegate s perspective on attending a conference as most research into business events has traditionally been centred on the supply side particularly convention destination image and association site selection the paper found six underlying dimensions of the uk association conference delegate decision making process personal professional development networking opportunities cost location time and convenience and health and wellbeing additionally regression analysis showed that two of the dimensions networking opportunities and cost were significant predictors of intention to attend the conference again in the future

is there monopsonistic discrimination against immigrants the authors investigate immigrants and natives labor supply to the firm within an estimation approach based on a dynamic monopsony framework applying duration models that account for unobserved worker heterogeneity to a large administrative employer employee data set for germany they find that immigrants supply labor less elastically to firms than do natives under monopsonistic wage setting the estimated elasticity differential predicts a 7 7 log points wage penalty for immigrants thereby accounting for the entire unexplained native immigrant wage differential of 5 8 to 8 2 log points when further distinguishing immigrant groups differing in their time spent in the german labor market their immigration cohort and their age at entry the authors find that the observed unexplained wage differential is larger for those groups that show a larger elasticity differential relative to natives these findings not only suggest that search frictions are a likely cause of employers more pronounced monopsony

are rising earnings profiles a forced saving mechanism this paper tests the hypothesis that rising earnings profiles are a mechanism by which individuals engage in forced saving it does this by examining the cross sectional relationship between overwithholding on income tax payments behavior that is consistent with a preference for forced saving and the slopes of age earnings profiles the forced saving hypothesis receives support from earnings regression estimates individuals who receive tax refunds are on earnings profiles that are significantly steeper and have significantly lower intercepts copyright 1995 by royal economic society

demand elasticities of tourism in singapore abstract in 1983 the un economic and social commission for asia and the pacific set up a study to investigate the relationship between prices of tourist goods and tourist inflow in singapore the analysis was carried out on a world level using amalgamated data for 15 nations also individually for each of the five major tourist generating countries determinants of demand considered were income exchange rates shopping and hotel prices and local disturbances tourism demand is found to be highly income elastic whereas effects of prices and exchange rate movements vary between countries two out of three disturbance factors significantly reduced demand

works councils and establishment productivity declining union density in many industrialized countries increases interest in alternative forms of employee representation such as works councils the german works council is one of the most powerful forms of worker representation in developed countries but little is known of its causal effect on productivity the author used a large linked employer employee panel data set to examine this issue comparing firms with and without a works council the author finds that establishments with a works council are on average 6 4 more productive but he also presents evidence that this figure underestimates the true productivity effect of works councils

firm level contracting and the structure of wages in spain in many european countries sectoral bargaining agreements are automatically extended to cover all firms in an industry employers and employees can also negotiate firm specific contracts the authors of this paper use a large matched employer employee data set from a 1995 survey in spain to study the effects of firm level contracting on the structure of wages they estimate a series of wage determination models including specifications that control for individual characteristics coworker characteristics the bargaining status of the workplace and the probability that the workplace was covered by a firm level contract they find that firm level contracting was associated with a 5 10 wage premium with larger premiums for more highly paid workers although they cannot decisively test between alternative explanations for the firm level contracting premium they find that workers with firm specific contracts had substantially longer job tenure than other workers suggesting that the premium was at least

the firm as a dedicated hierarchy a theory of the origins and growth of firms in the formative stages of their businesses entrepreneurs have to provide incentives for employees to protect rather than steal the source of organizational rents we study how the entrepreneur s response to this problem determines the organization s internal structure growth and its eventual size large steep hierarchies will predominate in physical capital intensive industries and will have seniority based promotion policies by contrast e at hierarchies will prevail in human capital intensive industries and will have up or out promotion systems furthermore e at hierarchies will have more distinctive technologies or cultures than steep hierarchies the model points to some essential differences between organized hierarchies and markets at the root of most enterprises generating economic surplus is an entrepreneur with a unique critical resource such as an idea good customer relationships a new tool or superior management technique a fundamental problem of entrepreneurship is how to enlist the cooperation of the many agents necessary for production without ceding to them too much of the surplus generated by the enterprise the risk of being expropriated however is always inherent in production in particular the entrepreneur has to give her employees whom we call managers close proximity or access to the critical resource for them to learn to produce effectively for example a manager has to understand the idea be in contact with the key customers and suppliers or even learn the entrepreneur s unique managerial techniques in order to work effectively but access also gives the manager the opportunity to expropriate this critical resource and compete against the entrepreneur managers may steal the idea walk away with clients or mimic the entrepreneur s management style and start up a rival concern the greater the access a manager has the more he can appropriate and the more effectively he can compete this paper explores the role of organizational design in

should i stay or should i go career choices for young workers in latin america labor market institutions shape the return to workers skills they define the incentives of firms and workers to invest in general and specific skills affecting the returns to experience and tenure this paper presents an empirical assessment of this hypothesis we take advantage of rich administrative data from brazil and chile two countries with different regulatory frameworks we focus on young workers as they face to a greater extent the trade off between accumulating general or specific skills the analysis is motivated by a simple conceptual framework from which we derive empirical predictions it takes into account the potential endogeneity of occupational choices while allowing for heterogenous returns to tenure and experience we find positive average returns to both dimensions in both countries with larger returns to tenure in brazil and larger returns to experience in chile this is consistent with the original conjecture as the more rigid labor market legislation in brazil encourages firms to carry out additional investments in young workers s specific skills chile s institutions on the contrary promote the acquisition of general skills we further examine how these returns differ by educational attainment an important policy consideration in the region and find that more educated workers in both countries face larger returns to experience and tenure relative to their less educated counterparts

seniority wages and the role of firms in retirement in general retirement is seen as a pure labor supply phenomenon but firms can have strong incentives to send expensive older workers into retirement based on considerations about wage costs and replacement costs we discuss steep seniority wage profiles as incentives for firms to dismiss older workers before retirement conditional on individual retirement incentives e g social security wealth accrual rates or health status the steepness of the wage profile will have different incentives for workers as compared to firms to maintain the employment relationship using an instrumental variable approach to account for selection of workers in our firms and for reverse causality we find that firms with higher labor costs for older workers have on average a lower job exit age and a higher incidence of golden handshakes author s abstract

moral hazard in high office and the dynamics of aristocracy both aristocratic privileges and constitutional constraints in traditional monarchies can be derived from a ruler s incentive to minimize expected costs of moral hazard rents for high officials we consider a dynamic moral hazard model of governors serving a sovereign prince who must deter them from rebellion and hidden corruption which could cause costly crises to minimize costs a governor s rewards for good performance should be deferred up to the maximal credit that the prince can be trusted to pay in the long run we find that high officials can become an entrenched aristocracy with low turnover and large claims on the ruler dismissals for bad performance should be randomized to avoid inciting rebellions but the prince can profit from reselling vacant offices and so his decisions to dismiss high officials require institutionalized monitoring a soft budget constraint that forgives losses for low credit governors can become efficient when costs of corruption are low

wage growth due to human capital accumulation and job search a comparison between the united states and germany this paper compares the sources of wage growth of young male workers in two countries with very different labor market institutions the united states and germany the author first develops a simple method for decomposing wage growth into components due to general human capital accumulation firm specific human capital accumulation and job search the empirical analysis uses data from administrative records germany and the national longitudinal survey of youth united states for cohorts entering the labor market in the late 1970s and early 1980s although the two countries differed substantially in mobility rates they were similar in the sources of wage growth with general human capital accumulation being the most important single source and job search accounting for an additional 25 or more of total wage growth there is no evidence that returns to firm specific human capital accumulation were higher for german apprentices than for u s high school dropouts or graduates

crime and social interactions the high variance of crime rates across time and space is one of the oldest puzzles in the social sciences this variance appears too high to be explained by changes in the exogenous costs and benefits of crime we present a model where social interactions create enough covariance across individuals to explain the high cross city variance of crime rates this model provides an index of social interactions which suggests that the amount of social interactions is highest in petty crimes moderate in more serious crimes and almost negligible in murder and rape

the effect of firm level contracts on the structure of wages evidence from matched employer employee data in spain as in several other european countries sectoral bargaining agreements are automatically extended to cover all firms in an industry employers and employees can also negotiate firm specific contracts we use a large matched employer employee data set to study the effects of firm level contracting on the structure of wages employees covered by firm specific contracts earn about 10 percent more than those covered by sectoral contracts the estimated premium is about the same for men in different skill groups but higher for more highly skilled women suggesting that firm level contracts raise wage inequality for women at the establishment level we compare average wages under firm level and sectoral bargaining controlling for the propensity to negotiate a firm specific contract consistent with the worker level models we find that firm specific contracting raises average wages with a pattern of effects that tends to increase inequality relative to sectoral bargaining for women although we cannot decisively test between alternative explanations for the firm level contracting premium workers with firm specific contracts have significantly longer job tenure suggesting that the premium is at least partially a non competitive phenomenon

rent sharing and collective wage contracts evidence from german establishment level data using german establishment level data this article analyses whether wages respond to firm specific profitability conditions particular emphasis is given to the question of whether the extent of rent sharing varies with collective bargaining coverage in this context two conflicting hypotheses are tested the first one asserts that unions exploit their bargaining power at the firm level and appropriate a larger share of rents than the bargaining parties in uncovered firms the second one states that unions favour a compressed intra industry wage structure and suppress the responsiveness of wages to firm specific profitability conditions the empirical analysis provides strong support for the second hypothesis while pooled ordinary least squares pols estimates yield positive estimates of the rent sharing coefficient in covered establishments dynamic panel data estimates accounting for unobserved heterogeneity and the endogeneity of rents point to a rent sharing coefficient of zero

a tourism demand function for the okanagan bc abstract this study examines the relative importance of the existing determinants of tourism demand in the okanagan because national coefficients cannot be used intercnageable with regional coefficients it is hypothesized that the values of the okanagan demand elasticities are likely to be lower than that of the province and the nation five major markets for okanagan tourism with identified and separate regressions run to determine the relative importance of the determinants of demand for okanagan tourism with respect to these markets empirical results indicate that national coefficient will tend to overestimate the regional coefficient values contrary to the results of other studies for the nation as a whole the exchange rate and travel cost did not seem to be significant determinants of okanagan tourism receipts

do works councils inhibit investment theoretische uberlegungen deuten darauf hin dass firmen durch arbeitnehmervertretungen auf betriebsebene wie gewerkschaften mit einem hold up problem konfrontiert werden da letztere sich einen teil der quasi renten aus langlebigen kapitalinvestitionen aneignen konnen deshalb mogen die firmen ihre anfalligkeit fur derartiges rent seeking dadurch verringern dass sie ihre investitionen zuruckfahren wahrend es fur diese hypothese empirische bestatigungen durch firmenstudien aus den usa gibt untersuchen wir ob dies auch in dem unterschiedlichen institutionellen umfeld in deutschland der fall ist wo statt betriebsgewerkschaften betriebsrate eine ahnliche rolle spielen konnen unter verwendung von parametrischen und nichtparametrischen methoden sowie von betriebspaneldaten finden wir keine empirischen hinweise darauf dass die errichtung bzw abschaffung eines betriebsrates einen negativen bzw positiven einfluss auf das betriebliche investitionsverhalten hat

why the gender gap in wages narrowed in the 1980s since 1976 the gender gap in wages on average declined by about 1 per year this article focuses on identifying the factors underlying this trend three data sets are analyzed the current population survey the panel study of income dynamics and the national longitudinal survey we find that convergence in measurable work related characteristics schooling and work experience explains one third to one half the narrowing the remainder is attributable to a relative increase in women s returns to experience as well as to declining wages in blue collar work and other factors

wages seniority and the demand for rising consumption profiles abstract in many occupations wages rise faster than productivity over the life cycle other authors have suggested a variety of explanations for this pattern we argue that these explanations fail for at least two occupations commercial airline pilots and intercity bus drivers we then explore an alternative explanation based on the assumption that satisfaction depends on not only the level of consumption but also its rate of change we argue that upward sloping wage profiles are an expedient substitute for personal savings as a means for achieving upward sloping consumpion profiles

job assignments signalling and efficiency this article analyzes a model in which information about a worker s ability is only directly revealed to the firm employing the worker other firms however use the worker s job assignment as a signal of ability three results recur throughout the analysis first wage rates tend to be more closely associated with jobs than with ability levels second there is frequently an inefficient assignment of workers to jobs i e even when a firm has complete information about a worker s output third the severity of this inefficiency tends to be negatively correlated with the level of firm specific human capital in the economy

anarchy and its breakdown anarchy defined as a system in which participants can seize and defend resources without regulation from above is not chaos but rather a spontaneous order however anarchy is fragile and may dissolve either into formless amorphy or into a more organized system such as hierarchy under anarchy each contestant balances between productive exploitation of the current resource base and fighting to acquire or defend resources anarchy is sustainable only when there are strongly diminishing returns to fighting effort the decisiveness parameter is sufficiently low and incomes exceed the viability minimum these considerations explain many features of animal and human conflict

german works councils and the anatomy of wages using matched employer employee data from the german liab for 2001 the authors found that german works councils are in general associated with higher earnings even after accounting for establishm

are wages habit forming evidence from micro data although utility functions play a central role in economics the axiom that utility depends only on the absolute levels of its arguments is rarely tested this paper uses panel data on 2000 british employees who remain with the same employer and who are not promoted from one wave to the next it is shown that one important measure of well being overall job satisfaction is strongly positively correlated with the change in the worker s pay between waves but is unrelated to the current level of pay empirical tests suggest that a reference dependent satisfaction function where individual well being depends on current pay relative to past pay is more consistent with these regression results than are productivity or agency explanations of increasing wage profiles some evidence is presented of greater job satisfaction effects of pay rises for lower paid less well educated and younger workers these results provide some micro evidence consistent with the theory widespread in social science of habituation individuals may become used to any given level of consumption or income as such they tie in with the finding that a country s well being as measured by the average happiness of its citizens is only weakly correlated with its per capita gnp

individual protection against property crime decomposing the effects of protection observability we re examine the efficiency of observable and unobservable crime protection decisions with new results and insights observable protection is unambiguously associated with a negative externality at the individual level it reduces the crime effort but its unit payoff remains unchanged conversely unobservable protection reduces the unit payoff and has no effect on the crime effort exerted though it deters crime globally a decrease in the global crime payoff is detrimental to a victim if protection is observable while it is beneficial when unobservable while observable protection has a positive diversion effect it has the opposite effect when unobservable on reexamine l efficacite des decisions observables et non observables de protection par rapport au crime et on en tire de nouveaux resultats et de nouvelles perspectives la protection observable est associee a une externalite negative sans aucune ambiguite au niveau individuel elle reduit l effort de crime mais laisse les resultats financiers inchanges d autre part la protection non observable reduit les resultats financiers de l unite mais n a aucun effet sur l effort de crime dans ce cas particulier meme si cela se traduit par un effet dissuasif sur le crime globalement un declin dans le rendement global de l activite criminelle nuit a une victime si la protection est observable alors qu il est benefique quand la protection n est pas observable alors que la protection observable a un effet positif de diversion elle a l effet oppose quand elle n est pas observable

rent sharing and collective bargaining coverage evidence from linked employer employee data using a linked employer employee data set this paper analyses the relationship between firm profitability and wages particular emphasis is given to the question of whether the sensitivity of wages to firm specific rents varies with collective bargaining coverage to address this issue we distinguish sector specific wage agreements firm specific wage agreements and wage determination without any bargaining coverage our findings indicate that individual wages are positively related to firm specific rents in the non union sector and under firm specific contracts industry wide wage contracts however seem to suppress firm level rent sharing while pooled ols estimates yield a positive correlation between wages and quasi rents under centralised contracts estimates accounting for unobserved individual and establishment heterogeneity point to a coefficient of zero differenced gmm estimates accounting for the endogeneity of our profitability measure even point to a negative relationship under centralised contracts

personnel economics past lessons and future directions presidential address to the society of labor economists san francisco may 1 1998 in 1987 the journal of labor economics published an issue on the economics of personnel since then personnel economics defined as the application of labor economics principles to business issues has become a major part of labor economics now accounting for a substantial proportion of papers in this and other journals much of the work in personnel economics has been theoretical in large part because the data needed to test these theories have not been available in recent years a number of firm based data sets have surfaced that allow personnel economics to be tested using two such data sets i give support to the implications of theories that relate to life cycle incentives tournaments piecework incentives pay compression and peer pressure i conclude that personnel economics is real it is far more than a set of clever theories it has relevance to the real world additionally firm based data make asking and answering new kinds of questions feasible the value of research in this area is h

gated communities and the economic geography of crime abstract this paper analyzes gated communities in a geographic model of crime there are four major results first gating always diverts crime to other communities but has an overall deterrent effect on crime as long as it does not impact legitimate employment opportunities second gating expenditures may be strategic substitutes or strategic complements the latter possibility may help explain why gated communities appear to spread like a contagion third the nash equilibrium level of gating expenditures is inefficiently large fourth gating may actually increase the overall level of crime if it either affects employment opportunities or it influences the selection among multiple equilibrium crime rates

tourism forecasting and the policymaker criteria of usefulness abstract this article is a sequel to one by the author in the september 1982 issue of tourism management in which the question of what futures research could contribute to tourism policy was raised here the subject is explored further and a comparison of various forecasting techniques is used to investigate how far forecasting is and could be useful in supporting tourism policies

determinants of demand for international tourist flows to turkey abstract this article describes the development and findings of a set of models used to identify the most important of the following selected variables influencing international tourist flows to turkey per capita income relative prices relative exchange rate promotional expenditure the turkish government has invested a substantial amount in promoting foreign tourism and special events eg political unrest the demand for travel was measured both by the number of tourists and by the total tourist expenditure data were obtained from secondary sources and analysis was by least squares multiple regression income price and exchange rate were found to be important factors but the impact of promotional expenditure was minimal

works councils wages and job satisfaction we investigate the effects of works councils on employees wages and job satisfaction in general and for subgroups with respect to sex and occupational status making use of a german representative sample of employees we find that employees who move to a firm with a works council report increases in job satisfaction but do not receive particular wage increases especially the job satisfaction of female employees is affected by a change in works council status however we do not find support for the hypothesis that the introduction of a works council itself increases wages or job satisfaction for the employees staying at the firm

salaries and piece rates compensation can take many forms remuneration can come as pecuniary payments as fringes such as health and pension benefits or as a nonpecuniary reward such as plush office furniture that costs the firm less than it benefits the worker a significant literature has examined the trade offs between pecuniary and nonpecuniary compensation the modern work having been pioneered by rosen 1974 more recently another body of literature has examined the selection of method of total compensation ignoring the distinction between pecuniary and nonpecuniary payment this work has focused on risk and incentive factors it has resulted in comparisons of compensation based on absolute output levels to that based on relative performance it has also led to explorations of the relation of compensation to experience over the work life 2 little attention has been paid to what may be among the most important and obvious distinction in methods of compensation namely the choice between a fixed salary for some period of time that is paying on the basis of input and some workers receive compensation that is specified in advance and not directly contingent on performance instead it depends on an input measure such as hours worked for others compensation is directly related to output this essay is an attempt to predict a firm s choice of compensation method piece rates are defined more rigorously among the more important factors discussed are worker heterogeneity incentives sorting considerations monitoring costs and asymmetric information one result is that salary workers tend to be of lower quality and more homogeneous than are their piece rate counterparts numerous additional results are provided helpful comments by victoria lazear and yoram weiss are gratefully acknowledged support was provided by the department of labor and the national science foundation 1 see lazear and rosen 1981 stiglitz 1981 holmstrom 1982 green and stokey 1983 2 see lazear 1979 1981 and harris and holmstrom in press

implicit contracts explicit contracts and wages over the past decade the search for an explanation of aggregate money wage stickiness in the face of substantial shifts in the marginal revenue product of labor of the kind that was associated with an increase in real wages in the depression of the 1930 shas led to an extensive examination of explicit union and implicit nonunion employment contracting arrangements this distinction can be exaggerated long term union contracts have an implicit element in the sense that they specify only a limited number of contingencies to which wages will be adjusted moreover the implicit contracting branch of the literature has pushed in the direction of implying that the explicit contracts observed in the union sector may be formalizations of common informal arrangements in the nonunion sector so that differences between the sectors in the behavior of wages and employment may be more apparent than real the purpose of this paper is to examine the empirical basis for some of the key propositions of implicit contract theories and to note some important differences in the outcome of implicit and explicit contracting

trade unions and optimal labour contracts the recently revived literature on wage and employment determination under trade unionism has in our opinion contributed important insights into the functioning of especially european labour markets it suffers however from a potentially serious deficiency with a few exceptions it neglects completely the issue of risk shifting between workers and employers 3 in particular it disregards entirely the possibility of such risk shifting in economies characterized by more or less encompassing trade unions and centralized wage setting as e g the scandinavian countries the netherlands and austria a typical feature of trade unions in these countries is that they are not only concerned with wage setting but strive in various ways to increase their member s welfare at the expense of the employers by reducing their members exposure to risk for instance unions demand limits to the employers right to require overtime or co lay off workers or they demand occupational safety rules work injury insurance health insurance etc an actual employment contract hence not only entitles the worker to a certain wage and the employer to a certain number of working ho urs in return but is really a package of rights and responsibilities for both parties increases in the amount of insurance such a package provides are sometimes explicitly declared to be obtained through foregone wage increases while risk shifting hence is of prime importance to real world unions the formal trade union literature is almost entirely concerned with wage and employment setting under certainty

wage growth and job mobility in the united kingdom and germany using data from the british household panel survey for 1991 99 and the german socio economic panel for 1984 99 the authors investigate job mobility and estimate the returns to tenure and experience job mobility was higher in the united kingdom than in germany returns to experience also seem to have been substantially higher in the united kingdom where the wage gain associated with ten years of labor market experience was around 80 compared to 35 in germany the low returns to labor market experience in germany appear to have been accountable to one group of workers those with apprenticeship training who tended to receive fairly high starting wages but to experience relatively low wage growth thereafter wage growth due to labor market experience was similar between the two countries for the other skill groups returns to tenure were close to zero in both countries

an empirical study of labor market equilibrium under working hours constraints predictions of economic theory for the equilibrium condition of workers in three labor markets with differing working hours constraints are tested original data allow the marginal rate of substitution of income for leisure to be estimated directly in two markets working hours constraints resulting from high fixed employment costs and the overtime premium respectively cause workers to desire fewer and more hours in the third market agricultural labor constraint factors are absent the predicted relationship between the wage and the marginal rate of substitution of income for leisure holds in each case implications for agency and human capital models are investigated additionally in the agricultural case preferences and equilibria are indistinguishable for legal and illegal workers copyright 1990 by mit press

dynamic labor market competition and wage seniority abstract we design an overlapping generations model of the labor market experienced workers bear costs of switching employers whereas the segment for junior workers is horizontally differentiated the literature typically explains wage seniority premia with reference to productivity gains generated by the accumulation of worker experience or mechanisms associated with incomplete information in contrast this paper characterizes how the wage seniority premium depends on the relative intensities of competition in the markets for junior and senior workers in particular we show that a wage seniority premium may prevail even under circumstances where senior workers are less productive than junior workers

the economics of organized crime and optimal law enforcement this article extends the optimal law enforcement literature to organized crime i model the criminal organization as a vertical structure where the principal extracts some rents from the agents through extortion as long as extortion is a costless transfer from individuals to the criminal organization not only the existence of extortion is social welfare improving because it makes engaging in a criminal offense less attractive but it also allows the government to reduce expenditures on law enforcement when extortion is costly because the criminal organization resorts to threats and violence the existence of extortion is social welfare diminishing and may lead to higher expenditures on law enforcement

unionization and plant closure in canada this paper examines for the first time the role of unionization as a determinant of plant closings in canada using the 1999 to 2001 canadian workplace and employee survey the paper contributes to the north american evidence by showing that the share of a plant s workers covered by collective bargaining has a robust positive partial correlation with the probability of larger plants closing for smaller plants the extent of unionization tends to be much lower and its variation plays no role in plant closure the study highlights the theoretical and statistical importance of examining closure separately for large and small plants ce memoire examine pour la premiere fois le role de la syndicalisation en tant que determinant de la fermeture d usines au canada a l aide des resultats de l enquete sur le milieu de travail et les employes de 1999 et de 2001 emte le texte contribue a enrichir le dossier qui montre qu il y a correlation positive partielle robuste entre la portion des travailleurs d usines couverts par une convention collective et la probabilite de fermeture des grandes usines pour les plus petites usines le degre de syndicalisation tend aetre plus faible et sa variation ne joue pas de role dans le processus de fermeture d usines cette etude montre l importance theorique et pratique qu il y a aetudier separement les fermetures des grandes et des petites usines

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

an empirical look at franchising as an organizational form franchise contracts are identified as a hybrid form of economic organization motives for the dominance of franchise arrangements are identified by examining the theoretical literature on franchising and related literatures on the theory of the firm firm growth managerial and employee selection a nd brand name capital empirical tests are performed on the incidence of franchise contracts across states for three industries in which f ranchising is prominent and data are readily available the results s uggest that both principal agent incentives and informational incenti ves favor the use of franchise arrangements copyright 1988 by the university of chicago

competition in crime deterrence this paper studies competition between jurisdictions in the eradication of crime in one story criminals choose the jurisdiction in which they will commit their crimes while jurisdictions choose the amount of resources devoted to deterrence to protect local production in another story the criminals cannot change jurisdictions but they can not rob the owners of mobile capital jurisdictions choose the amount of resources devoted to the deterrence of local crime so as to secure property rights and to attract capital in both stories competition between jurisdictions leads to overdeterrence relative to the pareto optimal level

employer seniority discrimination evidence from enterpreneurial occupational choice abstract this research examines the theories presented in the human capital literature by becker 1975 lazear 1979 1981 and others that the relative paths of earnings and value of marginal product henceforth vmp diverge over the worklife the findings support lazear s work incentive theory for professionals but reject its application to non professionals as predicted by orthodox human capital theory documentation is also developed that earnings for non professionals equal their vmp over the job life cycle on the other hand the analysis provides no support to becker s specific training model

seniority rules and productivity an empirical test the primary purpose of this paper is to test empirically the effect of labor quality on short run manufacturing productivity in doing so the study makes major advances in two areas for the first time a job tenure function is estimated and a time series of job tenure in manufacturing is developed this estimated tenure series empirically verifies the use of seniority rules in the firm worker employment relationship having generated a tenure series the authors then test whether tenure enhances productivity in manufacturing the results clearly indicate that seniority rules have a statistically significant positive impact on productivity and the pattern of the seniority rules is reminiscent of a model where human capital has a specific component copyright 1989 by the london school of economics and political science

does rising productivity explain seniority rules for layoffs seniority rules for layoffs are a widespread feature of the union and nonunion workplace many explanations have been offered for their existence some emphasize the role of unions but others argue that seniority rules can promote economic efficiency in this context the rules are simple easy to implement and widely regarded as fair they may help control turnover and conserve valuable investments in specific capital they may also be a response to the higher reliability of more experienced workers or they may reflect the higher value young workers place on their time at home or at search in this company a new explanation is hardly needed and this note will not provide one rather i will show that one of the most commonly accepted explanations is based on an assumption that is quite unrealistic one of the most plausible explanations for seniority rules seems to follow directly from human capital theory 2 senior workers having had more time to invest in on the job training are likely to be more productive the seniority rule may therefore be a convenient rule of thumb which ensures that on average it is the less productive workers who are let go while the more productive ones are hoarded until business picks up this argument has been given added weight by some results from implicit contract theory when workers differ in skill levels but share the same value of time at home efficient contracts will always lay off the unskilled workers before the skilled ones the natural corollary again seems to be that where senior workers are more skilled they should be last to go 3 i show in this paper however that when skill grows with experience as human capital models predict this corollary is false in fact human capital growth by itself predicts that it is the most senior workers who should be laid off first previous writers have missed this result because they have implicitly and unrealistically assumed that workers continue to gain productive skills while sitting at home on layoff my analysis will also shed light on some aspects of collective bargaining contracts and on the phenomenon of early retirement the results are first derived in the context of an implicit contract model which is stripped of all but the barest essentials subsequently the robustness of the conclusions is examined in a series of extensions finally some implications of the analysis are discussed

convention tourism modelling abstract this paper introduces an approach for identifying the determinants of convention attendance at alternative cities this approach permits planners to evaluate the relative importance of accessibility and attractiveness variables as determinants of convention attendance for each site four major convention sites in the usa are analysed to illustrate the procedure in this example accessibility was found to be far more important than attractiveness

consequences of seniority wages on the employment structure the author examines seniority wage profiles in german establishments to discern hiring patterns with respect to age and sex using the country s linked employer employee dataset liab over the per

forecasting international conference attendance abstract there are many tourism modelling forecasting studies but most of these are concerned with holiday tourism or total tourism ie not disaggregated by visit purpose conference tourism is virtually ignored in this paper an econometric model which explains tourism demand for an international conference is developed the model is specified in logistic form and is estimated using maximum likelihood techniques various alternative forms of the model are considered for the forecasting model selected good empirical results are obtained in terms of model fit and in contrast with previous non conference tourism forecasting findings the forecasts generated by the econometric model are more accurate than random walk forecasts

delayed payment contracts and a firm s propensity to hire older workers there are jobs for which firms employ older workers but tend not to hire new older workers this may be attributable in part to implicit contracts that discourage worker shirking and malfeasance by shifting compensation to the end of the contract such delayed payment contracts can introduce a form of fixed costs into the employment relationship much as with hiring and training costs these fixed costs lead firms to hire primarily young long term workers while firms employ older workers workers who are serving out the last years of their contract they tend not to hire them this paper presents empirical evidence that is consistent with this argument

performance responses to competition across skill levels in rank order tournaments field evidence and implications for tournament design tournaments are widely used in the economy to organize production and innovation we study individual data on 2775 contestants in 755 software algorithm development contests with random assignment the performance response to added contestants varies nonmonotonically across contestants of different abilities precisely conforming to theoretical predictions most participants respond negatively whereas the highest skilled contestants respond positively in counterfactual simulations we interpret a number of tournament design policies number of competitors prize allocation and structure number of divisions open entry and assess their effectiveness in shaping optimal tournament outcomes for a designer

do workers prefer increasing wage profiles we present survey data challenging the assumption implicit in analyses of labor supply that all else being equal workers prefer declining over increasing wage profiles we test several explanations for our results including that a there is something special about wages e g their association with productivity as opposed to other types of payments that induces the preference for increasing wages b utility depends not only on absolute levels of consumption but also on changes in consumption over time and c respondents who prefer increasing wage profiles are irrational and would change their behavior if the rationale for preferring declining wages were explained

male female wage differentials in job ladders much of the male female wage differential exists because men and women are assigned to different jobs within narrow job categories there is no male female differential only a tortured taste theory of discrimination can reconcile these facts we argue that differential movement along job ladders entails comparative advantage so the ability standard for promotion is higher for women this implies that more able women will be passed over in favor of less able men women assumed to have the same ability distribution as men earn less the differential reflects females lower promotion probability not within job discrimination

human capital vs signalling explanations of wages increases wages by directly increasing the worker s productivity this learning explanation is usually associated with human capital theory however it seems unlikely that learning explains all the wage differences associated with schooling and work history better educated workers are not a random sample of workers they have lower propensities to quit or to be absent are less likely to smoke drink or use illicit drugs and are generally healthier it is unlikely that employers make full use of differences in propensities to quit or to be absent or sick when hiring workers these characteristics are often not directly observed and the americans with disabilities act precludes firms from using either poor health or the likelihood of future sickness as a hiring criterion unless it is directly related to job performance however if low levels of education are associated with these unfavorable employee characteristics and employers are allowed to take education into account when hiring workers we would expect employers to favor better educated workers as a means of reducing their costs of sickness and job turnover in turn students will take these hiring criteria into account when deciding how long to stay in school students will choose a length of schooling to signal their ability to employers and employers will demand a minimum level of schooling

tenure unions and the relationship between employer size and wages the unionization rate in a worker s industry and the worker s tenure are interacted with employer size in wage regressions using current population survey data the results provide insight into the relatively small size wage relationship in the union sector nonunion tenure profiles steepen sharply with establishment size while union profiles flatten also the effect of industry unionization increases with firm size in the nonunion sector a pattern indicative of threat effects a separate analysis of nonunion wages indicates that size wage relationships are stronger in occupations associated with high monitoring costs

internal labour markets causes and consequences the paper analyzes the causes and consequences of internal labor market rules that yield long tenure promotion from within seniority pensions and due process in dismissals about half the workforce are estimated to be in such markets competitive reasons for internal labor markets as a response to specific training and arms length relationships between workers and firms are surveyed these reasons are found to be consistent with the pattern of internal labor markets among non union firms however some internal labor markets e g among small unionized firms are probably a response to union pressure and government regulations in these circumstances low labor mobility could pose problems for policy copyright 1991 by oxford university press

minimum wage legislation in a dual labor market the paper studies the equilibrium effects of minimum wage legislation in an economy with coexisting primary and secondary labor markets owing to difficulties in monitoring relative wages and the threat of job loss play a functional role in eliciting effort from primary sector workers minimum wage laws hence affect the primary wage and employment level even if the law only binds in the secondary labor market furthermore interaction between the two sectors can also alter the secondary outcome relative to the standard analysis and has implications for participation decisions and for the level of unemployment

wage settlements and wage setting results from a multi level model which dimensions of wage setting differ across establishments applying collective contracts and uncovered establishments the empirical analysis reported here utilizes german linked employer employee data for the years 1990 1995 and 2001 and is restricted to workers without supervisory functions in larger manufacturing firms results show that the expected wage of an average worker is higher in firms applying collective contracts while returns to human capital and the gender wage gap are reduced moreover during the 1990s these effects became stronger

intergenerational conflicts of interest and seniority systems in organizations this paper studies the role of a proposed seniority system in an organization the organization consists of at least three overlapping generations of short lived members and chooses either a shortsighted or a farsighted action in each period this results in intergenerational conflicts of interest the old generation desires to obtain an immediate profit while the middle and young generations have incentives to invest for future profits we use a model of infinitely repeated games and demonstrate that the seniority system solves these conflicts in the sense that the farsighted action profile is sustainable in equilibrium

swimming upstream trends in the gender wage differential in the 1980s using michigan panel study of income dynamics data for 1979 and 1988 we analyze how a falling gender wage gap occurred despite changes in wage structure unfavorable to low wage workers the decrease is traced to gender specific factors which more than counterbalanced changes in measured and unmeasured prices working against women supply shifts net of demand were unfavorable for women generally and hurt high skilled more than middle and low skilled women by analyzing wages we find support for the notion of a gender twist in supply and demand having its largest negative effect on high skilled women

political economy of mechanisms we study the optimal mirrlees taxation problem in a dynamic economy in contrast to the standard approach where the taxation mechanism is operated by a benevolent planner with full commitment power we focus on economies in which policy decisions are made by self interested politicians who cannot commit to policies the society controls politicians using elections we show that the provision of incentives to politicians can be partly separated from redistribution across agents and that political economy constraints can be modeled as introducing additional aggregate distortions in the dynamic mirrlees problem we provide conditions under which the political economy distortions persist or disappear in the long run if the politicians are as patient as the agents the best sustainable mechanism leads to an asymptotic allocation where the aggregate distortions arising from political economy disappear in contrast when politicians are less patient than the citizens positive aggregate labor and capital taxes remain even asymptotically we conclude by providing a brief comparison of centralized

health insurance market reform and employee compensation the case of pure community rating in new york abstract pure community rating which was enacted to improve access to health insurance in new york s small group market in 1993 prevents carriers from charging different premiums based on the ages of a firm s workers if small firms were adjusting compensation packages prior to reform to offset higher health care costs of older workers then community rating could lead to greater relative wages for older workers post reform and not necessarily induce adverse selection that results in changes in who is insured i present evidence showing that relative wages of older workers in small firms increased in comparison with other states and with large firms within new york following reform

labour turnover in uk manufacturing a model of quits is constructed and combined with a labour demand function to produce a model of layoffs these are combined to provide an explanation of separations the main feature of this is the explicit incorporation of the interactions between quits and layoffs a linear approximation and a structural form are estimated on uk manufacturing data for 1965 82 it is shown that the most important determinant of separations is the state of demand in the labour market with some structural factors having a minor role to play

some evidence on the relationship between performance related pay and the shape of the experience earnings profile we investigate the relationship between performance related pay prp and the shape of workers experience earnings profiles in particular we argue that the slope of the profile depends critically upon the degree of equity held by workers in their enterprise as measured by the extent of prp the implication is that the slope of the profile for prp workers falls between those of their zero equity fixed wage and one hundred per cent equity self employed counterparts our empirical analysis of three british data sets namely the british social attitudes survey the british household panel survey and the british family expenditure survey supports this prior in this paper we explore the shape of the experience earnings profile for individuals employed under different types of contracts fixed wage performance related pay prp and self employment contracts we follow lazear 1979 1981 and lazear and moore 1984 in hypothesizing that the slope of the experience earnings profile reflects agency costs and the reduction thereof with increased agency costs inducing steeper profiles if monitoring costs are high firms may implement compensation schemes designed to encourage employees to self select behavior in the firms interests one such scheme defers a substantial amount of compensation until the later years of tenure the resulting experience earnings profile provides a penalty for shirking lazear and moore 1984 we therefore presume that the profiles of workers employed under fixed wage contracts are steeper than those of self employees for whom the issue of agency does not arise because of the duality of principal and owner lazear and moore 1984 the interesting case is that of workers employed under prp if such contracts represent a hybrid between fixed wage and self employment then one would expect their experience earnings profiles to lie somewhere between these two extreme