the excess demand for subsidized child care in germany the extension of publicly provided or subsidized child care is currently one of the priorities of the political agenda in many european countries in this article the excess demand for subsidized child care slots in germany is estimated using a partial observability model the results show that there is considerable excess demand for child care for children aged less than 3 years in east and west germany even among children with working mothers

a dynamic multinomial probit model for brand choice with different long run and short run effects of marketing mix variables in this paper we propose a dynamic multinomial probit model in order to estimate the long run and short run effects of marketing mix variables on brand choice the latent variables which contain the unobserved perceived utilities follow a first order vector error correction autoregressive process of order 1 with current and lagged explanatory variables the unrestricted autoregressive parameter matrix concerns the intertemporal correlation in perceived utilities of households over purchase occasions and indicates the persistence in brand choice as explanatory variables we consider relative prices and promotional activities like feature and display an important and novel feature of our model is that it allows for different long run and short run effects of promotional activities thereby extending the models that are currently available in the literature additionally to account for different base preferences for brands across households we allow for consumer heterogeneity our application concerns a panel of households choosing among several brands of a fmcg our estimated model turns out to be an improvement over a static model and over a model with only short run effects in terms of in sample fit and out of sample forecasts copyright 2000 john wiley sons ltd

the rising skill premium and deunionization abstract during the past 50 years the us economy has seen a rapid decline in labor union membership and a substantial rise in wage inequality since labor unions compress wages between skilled and unskilled workers a rising skill premium encourages skilled workers to withdraw from the union if this withdrawal is accompanied by a fall in the productivity of unskilled workers firms become reluctant to hire the relatively expensive union workers reinforcing the decline in the unionization rate evaluating this hypothesis we find that the rise in the skill premium explains about 40 of the decline in the unionization rate

price setting supergames with capacity constraints this paper examines the role of industry capacity in enforcing collusion in the context of repeated games for a fixed capacity per firm it is shown that changes in the number of firms have a non monotone effect on the best enforceable cartel price this is due to the fact that while an additional firm lowers the share that each of the other firms enjoys at the collusive price it also increases the losses to each firm should the cartel fail

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

union effects on wage dispersion in canadian industry abstract this paper analyzes the effects that unions have on the dispersion of wages in canada the empirical results indicate that unions have a significant effect in reducing wage dispersion the standard deviation in hourly wages is smaller for unionized workers than it is for non unionized workers this result holds not only for the more general case but also for narrowly defined demographic industrial and occupational categories finally regression estimates indicate that the coefficients on the wage determining variables are smaller in the unionized sector

a probabilistic choice model for market segmentation and elasticity structure marketing scholars commonly characterize market structure by studying the patterns of substitution implied by brand switching though the approach is useful it typically ignores the destabilizing

a study of cartel stability the joint executive committee 1880 1886 this article employs weekly time series data on the joint executive committee railroad cartel from 1880 to 1886 to test empirically the proposition that observed prices reflected switches from collusive to noncooperative behavior an equilibrium model of dynamic oligopoly with asymmetric firms together with explicit functional form assumptions about costs and demand determines the estimating equations and stochastic structure of the econometric model the hypothesis that no switch took place so that price and quantity movements were solely attributable to exogenous shifts in the demand and cost functions is then tested against this alternative and rejected

cross sectional versus panel estimates of union wage effects abstract the main objective of this paper is to compare and reconcile the cross sectional and the panel estimates of union wage effects it uses panel survey of income dynamics psid data for a period of 6 years 1979 1984 unlike what freeman 1984 predicted i e panel union wage estimates would be smaller than pure cross sectional estimates due to the cumulative nature of the errors in reporting union status in the former both the cross sectional and panel estimates of union wage effects are very similar ranging from 11 to 13 unions seem to have flattering effect on the age earnings profiles not surprisingly the rate of return to schooling of non union members is larger than that of the union members

price competition under mixed multinomial logit demand functions in this paper we postulate a general class of price competition models with mixed multinomial logit demand functions under affine cost functions in these models the market is partitioned into a finite set of market segments we characterize the equilibrium behavior of this class of models in the case where each product in the market is sold by a separate independent firm we identify a simple and very broadly satisfied condition under which a pure nash equilibrium exists and the set of nash equilibria coincides with the solutions of the system of first order condition equations a property of essential importance to empirical studies this condition specifies that in every market segment each firm captures less than 50 of the potential customer population when pricing at a specific level that under the condition is an upper bound for a rational price choice for the firm irrespective of the competitors prices we show that under a somewhat stronger but still broadly satisfied version of the abov

job satisfaction trade unions and exit voice revisited many studies have found that unionized workers express less job satisfaction than nonunion workers the exit voice explanation of this phenomenon is that dissatisfied nonunion workers tend to qui

unionization and the pattern of nonunion wage supplements negotiated standard wage policies reduce dispersion in the log earnings of union members when compared to those of otherwise equal nonunion members 5 6 as large as these dispersion differences are they may underestimate the true influence of union wage policy kahn and curme 14 have suggested that high degrees of unionization actually result in reduced nonunion wage dispersion this follows from a particular model of the union threat effect in which nonunion employers tilt induced wage increases toward low wage workers such tilting makes sense because lower paid workers are assumed to be more likely to support unions ceteris paribus this assumption fails to emphasize that low wage workers may be the least likely to be retained by a newly unionized employer and that this also influences their ultimate decision to support unionization in the face of union avoidance strategies that routinely imply the possibility of job loss low wage employees may recognize that the employer faces greater costs of bringing them up to a standard union wage and thus their chances for retention are lower including this realization results in ambiguous predictions about the influence of unionization on nonunion dispersion not only should the ambiguity of the proper theoretical prediction be highlighted but it should be recognized that the relevant prediction from theoretical models has not yet been tested previous tests are inappropriate because the threat induced wage increases could be tilted toward low wage workers without a necessary reduction in the typical measures of wage dispersion similarly those measures of wage dispersion may actually decline without a general tilt of wages toward low wage workers this possibility exists because of the sensitivity of the usual variance measures to outliers and because of aggregation and endogeneity problems affecting previous methodologies this paper uses 1983 and 1988 current population survey cps data to directly estimate the impact of unionization on the earnings of lowand high wage nonunion workers after controlling for traditional human capital locational and occupational variables unionization increases the log earnings of low wage nonunion workers significantly more than those of high wage nonunion workers this result is found with the very data belman and heywood 2 used to demonstrate that

employment impact of inner city development projects the case of underground atlanta this paper makes use of a unique data set to explore the issue of whether inner city residents are more likely to be hired by a new inner city development than non residents a selection model with partial observability is specified and estimated this partial observability estimates at the hiring stage we determine holding individual and neighbourhood characteristics constant that while inner city residents are less likely to be considered hireable their greater propensity to apply for jobs at this development means that they were at least as likely as non residents to both apply and be hired we also tentatively conclude that distances between an applicant s residence and the location of the development does not appear to have been an issue in the application decision

job queues and the union status of workers this paper develops a model of the determination of the union status of workers that allows for the possibility of queuing for union jobs the empirical results derived using a sample from the university of michigan panel study of income dynamics are supportive of the queuing hypothesis the no queue model can be rejected using a likelihood ratio test this suggests that a simple probit or logit model for union status is misspecified because it is not based on any consistent behavioral theory an important implication of the model is that because most new entrants to the labor market prefer union jobs but cannot get them and because accrual of nonunion seniority makes workers progressively less likely to desire union jobs the union status of workers is largely determined by their success in being selected from the queue early in their working life

nonunion wage rates and the threat of unionization i investigate how the threat of union organization affects the wage paid to nonunion workers i start by outlining the standard model of wage determination by a nonunion employer when faced with the threat of union organization the model suggests that the nonunion wage will be directly related and the union wage gap will be inversely related to the threat i use repeated cross section data from the cps from 1977 2002 to develop a measure of the threat as the predicted probability of union membership i use this measure to estimate earnings functions that use several sources of variation in the likelihood of union membership to identify the threat effect in a manner that reduces the likelihood of omitted variable bias finally i investigate two cases where there has arguably been a change in the likelihood of union organization that is not correlated with changes in the demand for labor these include the wage changes surrounding the introduction of rightto work rtw laws in two states during the period studied and wage changes surrounding deregulation of key industries in the late 1970s and early 1980s the results are mixed the preferred estimates from the analysis using predicted probability of unionization as the threat measure imply very little relationship between either nonunion wages or the union wage gap and the threat the estimates that rely on the introduction of rtw laws show a significant relationship between nonunion wages and the introduction of rtw laws in one of the two states stronger evidence of threat effects is found in the experience of deregulated industries where regulation was a central factor in union strength

the determinants of workers union status evidence from the national longitudinal surveys using data from the 1980 wave of the young men nls sample this paper provides estimates of the queue model developed by farber to explain the process of union status determination the use of nls data largely avoids the censoring problem encountered by farber in estimating his model and permits direct estimation of crucial probabilities associated with the model despite important differences between econometric methodologies and the data sets analyzed the nls results support farber s conclusion that queueing for vacancies in existing union jobs is an important labor market phenomenon in particular supply constraints on the availability of union jobs are found to dominate worker preferences in explaining differences in extent of unionization by occupation and region but not race

unions and wage inequality in mexico this paper offers empirical evidence on the impact of trade unions on wage inequality in mexico the results indicate that unions were a strongly equalizing force affecting the dispersion of wages in 1984 but were only half as effective at reducing wage inequality in 1996 not only did the unionized percentage of the labor force fall considerably over the period unions also lost some of their ability to reduce wage dispersion among the workers they continued to represent had unions maintained in 1996 the same structural power they possessed in 1984 the rise in wage inequality in the formal sector of the labor market between those years would have been reduced by roughly 11

a random coefficients logit brand choice model applied to panel data a random coefficients logit model that allows for unobserved heterogeneity in brand preferences and in the responses to marketing variables is empirically investigated using household level panel data the unknown underlying distribution of unobserved heterogeneity is approximated by a discrete distribution the results reveal that there is significant unobserved heterogeneity across households and that ignoring its effects results in a downward bias in the parameter estimates of the marketing variables it is therefore important to account for heterogeneity in both preferences and responses in the absence of any a priori knowledge about the nature of heterogeneity across households

investigating heterogeneity in brand preferences in logit models for panel data in analyzing panel data the issue of heterogeneity across households is an important consideration if heterogeneity is present but is ignored in the analysis it will result in biased and inconsi

returns to seniority in union and nonunion jobs a new look at the evidence in cross sectional data the positive association between seniority and earnings is typically much stronger for nonunion workers than for union workers a finding that seems inconsistent with the generalization that seniority is more important in the union sector than in the nonunion sector the authors of this paper show that standard estimates of the return to seniority are likely to be biased upward due to unmeasured worker heterogeneity job heterogeneity or both and they argue that this bias is likely to be larger in the nonunion sector than in the union sector when they correct for this problem in analyzing data on male blue collar workers for the years 1968 80 they find a larger return to seniority in the union sector than in the nonunion sector

models of health plan choice this paper considers alternative approaches to accounting for consumer heterogeneity in econometric models of health plan choice in particular we compare and contrast approaches used by health economists and marketing researchers to explicitly allow for consumer heterogeneity in assessment of plan provider quality and characteristics as a result we are able to identify conditions under which approaches utilized by health economists are preferred over those utilized by marketing researchers and vice versa for example we find that in the absence of data on prior year choice which is often the case of models estimated in the health economics literature it would be valuable to estimate random coefficient models which have not been estimated in such works and in the presence of data on prior year choice which is often the case of models estimated in the marketing literature a model wherein consumer characteristics simply interact with plan specific constants and premium and which has not been estimated in that literature offers better fits than random coefficient semi parametric random coefficient and latent class models which have been previously estimated in that literature the model offers important managerial insights useful for targeting benefits of various plans to different customer segments

on the incidence and duration of price wars the purpose of this paper is to test some theoretical predictions about the incidence and duration of price wars when these price wars are viewed as an enforcement device to maintain a cooperative or tacitly collusive agreement in an uncertain environment the theoretical model of green and porter i984 and porter i983a predicts that price wars should be triggered by unanticipated demand fluctuations and that they will be more frequent the greater the number of firms in the industry or the greater the degree of market concentration correspondingly the optimal duration of price wars is also affected by the number of firms the tests employ weekly time series data on the joint executive committee railroad cartel henceforth referred to as the jec from i88o to i886 porter i 983b and lee and porter i 984 previously used this data in order to identify periods in which price wars occurred and to test whether pricing behavior in cooperative periods was consistent with predictions of the theoretical model the present paper will look more closely at the price wars themselves in order to test another set of predictions about their incidence and duration section 2 summarizes the theoretical model in more detail with emphasis on markets with price setting firms the models in green and porter i984 and porter i 983a consider quantity setting firms but the railroads in the jec chose prices not quantities the distinction has some bearing on the econometric work but the basic ideas from the theory still apply there is a brief description of thejec and the data set in section 3 empirical results are covered in section 4 and section 5 contains some concluding comments

new estimates of union wage effects in the u s abstract we present new estimates for union wage effects using a unique dataset with information on job skill requirements we find the union wage premium to be smaller at higher skill levels consistent with the view that unions work to decrease skill differentials

unions and nonunion wage dispersion previous research has found that union standard rate policies lower the dispersion of union wages and that unions indirectly raise nonunion wage levels as firms weigh the probability of unionizing and wage costs these two findings imply that unions lower the dispersion of nonunion wages since for a given payroll a nonunion firm can achieve the greatest reduction in the probability of unionism by giving raises to those who would benefit most from a union this hypothesis is confirmed on current population survey data taking into account the endogeneity of unionism ceteris paribus nonunion wage dispersion is lower in more highly unionized industries copyright 1987 by mit press

pricing strategies in a dynamic duopoly a differential game model we formulate a differential game model for dynamic pricing in a duopolistic market firms demand functions are derived from utility maximizing behavior of consumers with the demand for a brand given by the logit model preferences for brands are assumed to evolve over time in the market in a manner akin to learning models postulated in the marketing literature we derive the differential equations governing the equilibrium open loop price paths over time and show that in steady state the brand with the higher preference level charges the higher price the formulation is extended to include the effects of consumer heterogeneity and equilibrium steady state prices are compared with those obtained when heterogeneity is ignored a comparison of steady state dynamic prices with myopic prices is provided an empirical example is discussed to show how steady state model predictions may be obtained from actual longitudinal purchase data

unemployment insurance job queues and systematic job search an equilibrium approach the labor market effects of unemployment insurance ui have been viewed in several contexts by economists on the one hand the ui system of jobless benefits and experiencerated taxation of firms is seen as influencing firms decisions to lay off workers 9 10 24 2 key in such analyses is the degree to which firms layoffs are subsidized by an imperfect experience rating a tax system in which employers ui taxes increase by less than their workers benefits increase on the other hand many other studies of ui place primary focus on the worker although employer concern for worker well being plays a role even in the work on the impact of ui on firm layoff decisions each of these worker based studies is concerned with one of two issues 1 ui and compensating wage differentials 14 24 or 2 u i and the job search process first hutchens assumes that workers face a choice in the labor market between high wage high layoff probability firms and low wage low layoff probability firms 14 by reducing the cost of being laid off ui increases one s likelihood of choosing the former kind of job along these lines topel finds evidence that ui generosity substitutes for wages and therefore lowers the compensating differential associated with a high layoff job 23 second several authors have studied the effect of ui on job search this work recognizes that ui lowers the cost of searching and therefore raises the reservation wage expected unemployment duration and expected post unemployment wages 2 previous work on the impact of ui on firm layoff decisions has assumed either a layoff subsidy 9 or demand uncertainty 2 in order to generate layoffs and therefore a u i impact on layoffs in contrast to such work this paper views layoffs in an equilibrium context they occur in our model even with no layoff subsidy and or with no demand uncertainty layoffs are of value to the firm in our model since they correspond to workers rejected from a queue of potential trainees from the firm s point of view a queue of applicants may be desirable in order to lower

internet start ups access to the bank loan market evidence from italy the analysis of the bank sector s ability to efficiently fuel the birth of new italian business ventures in internet related services is studied in particular through the specification and the estimate of a series of econometric models this paper aims at investigating which characteristics of a large sample of internet start ups and their relative founders facilitate access to the loan market more precisely the role played by founders human capital as a possible significant signal used by banks to evaluate investment projects is addressed estimation results suggest that highly qualified human resources possessed by internet founders do not represent an important driver for gaining access to bank credit and they do not affect the amount of the incurred debt

the demand for labor market structure an economic approach this paper formulates and estimates a model for the determination of employer and union demand for multiemployer vs single employer bargaining units utility maximizing risk averse firms and unions are both assumed to weigh the impact of each type of bargaining unit on the expected level and variability of profits and wages respectively the model is tested on a 1975 sample of 3 486 individual collective bargaining agreements because either party can generally leave a multiemployer unit without the other party s consent a partially observed bivariate probit model is used to estimate demand for structure it is found that the forgone profits due to a multiemployer unit relative to a single firm unit lower firm demands for this type of unit while forgone wages in a multiemployer unit relative to a single firm unit lower union demand for this type of unit

what determines cartel success following george stigler 1964 many economists assume that incentive problems undermine attempts by firms to collude to raise prices and restrict output but the potential profits from collusion can create a powerful incentive as well theory cannot tell us a priori which effect will dominate whether or when cartels succeed is thus an empirical question we examine a wide variety of empirical studies of cartels to answer the following questions 1 can cartels succeed 2 if so for how long 3 what impact do cartels have 4 what causes cartels to break up we conclude that many cartels do survive and that the distribution of duration is bimodal while the average duration of cartels across a range of studies is about five years many cartels break up very quickly i e in less than a year but there are many others that last between five and ten years and some that last decades limited evidence suggests that cartels are able to increase prices and profits to varying degrees cartels can also affect other non price variables including advertising innovation investment barriers to entry and concentration cartels break up occasionally because of cheating or lack of effective monitoring but the biggest challenges cartels face are entry and adjustment of the collusive agreement in response to changing economic conditions cartels that develop organizational structures that allow them the flexibility to respond to these changing conditions are more likely to survive price wars that erupt are often the result of bargaining issues that arise in such circumstances sophisticated cartel organizations are also able to develop multipronged strategies to monitor one another to deter cheating and a variety of interventions to increase barriers to entry

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

taste variation in discrete choice models this paper develops an extension of the classical multinomial logit model which approximates a class of models obtained when there is uncontrolled taste variation across agents and choices in addition to the stochastic noise inherent in the logit model unlike semiparametric and parametric alternatives the extended logit model is easy to estimate even when there are many potential choices unlike parametric alternatives it does not require the specification of a distribution of varying tastes the extended logit model can give a quick indication of the impact of taste variation on estimates and it generates estimates of the covariances of the taste shifters it can be used as an exploratory device en route to the construction of a model incorporating a particular form of random taste variation and it can be used to determine whether such effort is required at all when the amount of taste variation is not excessive the approximate model can be adequate itself the model nests the conventional logit model which leads to a misspecification diagnostic a method for estimating the model using conventional logit model software is proposed asymptotic properties of estimators are derived and an application is presented

minimum wages and labor market prospects of women in recent years the field of labor economics has witnessed growth of interest in causes and consequences of female labor force participation principal areas of research include determinants of female wages and labor supply many empirical issues remain unresolved and research continues to focus on the likely ranges of such parameters as the own wage elasticity of hours supplied the cross elasticity with respect to spouse s income the rate of return to female schooling and the issue of self selection in observed earnings of working women one area which remains relatively unexplored is the impact of minimum wage legislation on employment prospects of females the issue of minimum wages is of special interest in the case of women first the proportion of labor force nonparticipation by females exceeds that of males consequently institution of an effective minimum wage plays to a larger audience of nonparticipating females than males it is likely that a significant portion of the positive labor supply response to minimum wages is in the form of previously nonparticipating females second as is well known female wages tend to be lower than those of males owing in part to 1 lower levels of female schooling and experience 2 intermittent life cycle patterns of labor supply and human capital accumulation 3 sorting of females into occupations that are conducive to intermittent behavior and 4 as several researchers suggest gender discrimination consequently women are more likely than men to experience wages that fall short of the legal minimum this study examines the consequences of minimum wages on female employment prospects of special interest is the likelihood of successful job search for women whose wages in the absence of legislation would be below the minimum it is commonly argued that minimum wages in competitive labor markets have the effect of hindering employment prospects of low wage workers this study based on a sample of microdata from the public use sample of the 1980 census proposes a simple framework in which this issue can be addressed in the context of a conventional model of labor supply

deriving target selection rules from endogenously selected samples one of the aims of direct marketing in practice is to target the most profitable customers in the database at hand this selection is often done based on observed behavior in the past as a consequence databases arising from the responses to direct mailings are not a random sample from all potential respondents when not all heterogeneity is observed part of the target selection rule will be based on the unobserved heterogeneity so selection is endogenous treating an endogenously selected sample as a random sample results in inconsistent parameter estimates which in general also harms the predictive performance of the model we develop an adjustment to the likelihood of the model that corrects for the endogenous sample selection we apply this technique to the selection of mail targets for a charitable organization in the application we also show that based on a model for the response rate and the amount donated simultaneously we can create a target selection rule that maximizes expected revenues such a selection rule outperforms selection rules based on response rates or donated amount only the traditional approach of maximizing response is therefore not the optimal approach to target selection

new empirical generalizations on the determinants of price elasticity abstract the importance of pricing decisions for firms has fueled an extensive stream of research on price elasticities in an influential meta analytical study tellis 1988 summarized price elasticity research findings until 1986 however empirical generalizations on price elasticity require modifications because of 1 changes in market characteristics i e characteristics of brands product categories and economic conditions and 2 changes in the research methodology used to assess price elasticities therefore the authors present a meta analysis of price elasticity with new empirical generalizations on its determinants across a set of 1851 price elasticities based on 81 studies the average price elasticity is 2 62 a salient finding is that over the past four decades sales elasticities have significantly increased in magnitude whereas share and choice elasticities have remained fairly constant the authors find that accommodating price endogeneity has a strong magnitude increasing impa

the importance of lifetime jobs differences between union and nonunion workers the authors use cps micro data to derive estimates of retention rates and eventual lifetime tenure probabilities for union and nonunion workers although both groups enjoy a considerable degree of

working part time by choice or by constraint the selection of workers into part time jobs and the wages they earn are analysed using the 1989 labour market activity survey we focus on the distinction between voluntary and involuntary part time workers since involuntary part time workers earn substantially lower wages than other workers we find that the selection of individuals into involuntary part time work is more closely tied to job characteristics than personal or human capital characteristics the lower wage earned by involuntary part time workers is largely due to differences in returns and selection effects rather than differences in endowments

parameter bias from unobserved effects in the multinomial logit model of consumer choice abstract over the past two decades validation of choice models has focused on predictive validity rather than parameter bias in real world validation of choice models true parameter values are unknown so examination of parameter bias is not possible in contrast the main focus of this study is parameter bias in simulated scanner panel choice data with known parameter values study of parameter bias enables the assessment of a fundamental issue not addressed in the choice modeling literature the extent to which the logit choice model is capable of distinguishing unobserved effects that give rise to persistence in observed choices e g heterogeneity and state dependence although econometric theory provides some information about the causes of bias the extent of such bias in typical scanner data applications remains unclear the authors present an extensive simulation study that provides information on the extent of bias resulting from the misspecification of four unobserved effects that receive fr

impact of the worker s employment probability on wage rates the employment probability is a significant determinant of the worker s wage rate expecially in the presence of employers hiring discrimination several tests suggest that the omission of this variable in the wage regression may lead to misspecification

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

the interindustry structure of unionism earnings and earnings dispersion this study examines the relationship between unionism and earnings dispersion within u s manufacturing and nonmanufacturing industries the author hypothesizes not only that unionism narrows earnings dispersion as others have shown but also that the dispersion in earnings reflecting the degree of worker homogeneity influences the level of unionism estimation of a three equation model using 1970 three digit industry data provides evidence regarding the simultaneous determination of unionism earnings and earnings dispersion within u s industries the estimated equalizing effects of unionism on within industry earnings distributions are found to be significant both in the manufacturing and nonmanufacturing sectors the size of these estimates increasing after accounting for simultaneity in addition the dispersion in earnings does appear to affect the level of unionism although the evidence on this point is ambiguous

the emergence of cooperation among egoists this article investigates the conditions under which cooperation will emerge in a world of egoists without central authority this problem plays an important role in such diverse fields as political philosophy international politics and economic and social exchange the problem is formalized as an iterated prisoner s dilemma with pairwise interaction among a population of individuals results from three approaches are reported the tournament approach the ecological approach and the evolutionary approach the evolutionary approach is the most general since all possible strategies can be taken into account a series of theorems is presented which show 1 the conditions under which no strategy can do any better than the population average if the others are using the reciprocal cooperation strategy of tit for tat 2 the necessary and sufficient conditions for a strategy to be collectively stable and 3 how cooperation can emerge from a small cluster of discriminating individuals even when everyone else is using a strategy of unconditional defection

unions in a frictional labor market abstract a labor market with search and matching frictions where wage setting is controlled by a monopoly union that follows a norm of wage solidarity is found vulnerable to substantial distortions associated with holdup with full commitment to future wages the union achieves efficient hiring in the long run but hikes up wages in the short run to appropriate rents from firms without commitment in a markov perfect equilibrium hiring is too low both in the short and the long run the quantitative impact is demonstrated in an extended model with partial union coverage and multiperiod union contracting

whose wages do unions raise a dynamic model of unionism and wage rate determination for young men we estimate the union premium for young men over a period of declining unionization 1980 87 through a procedure which identifies the alternative sources of the endogeneity of union status while we estimate the average increase in wages resulting from union employment to be in excess of 20 we find that the return to unobserved heterogeneity operating through union status is substantial and that the union premium is highly variable we also find that the premium is sensitive to the form of sorting allowed in estimation moreover the data are consistent with comparative advantage sorting our results suggest that the unobserved heterogeneity which positively contributes to the likelihood of union membership is associated with higher wages we are unable however to determine whether this is due to the ability of these workers to extract monopoly rents or whether it reflects the more demanding hiring standards of employers faced by union wages 1998 john wiley sons ltd

the effect of unions on wage inequality in the u s labor market this study uses current population survey micro data for 1973 74 and 1993 to evaluate the effect of changing union membership on trends in male and female wage inequality unionization rates of men fell between the two sample periods with bigger declines among lower skill groups these trends account for 15 20 of the rise in male wage inequality union membership rates of low wage women also declined while unionization increased among higher wage women on balance shifting unionization accounts for very little of the rise in female wage inequality economy wide trends in unionization mask a sharp divergence between the private sector where unionism was declining and the public sector where it was rising comparisons across sectors suggest that unionization substantially slowed the growth in wage inequality in the public sector

expanding the behavioral foundations of labor economics the author examines critiques and suggests modifications to the psychological assumptions of the rational choice model of the human agent that underlies much of the theoretical work in modern neoclassical labor economics he analyzes the rational choice model in terms of three psychological constructs motivation cognition and emotion in the context of a five step model of the human behavioral process examples from the empirical and theoretical labor economics literature illustrate both problems with the current theory and new or improved insights and predictions that can be gained by incorporating additional psychological theories and concepts in economic analysis the author concludes that although the rational choice model is a powerful and productive conceptual device in many cases it cannot adequately explain behavior in the world of work and labor economic theory would be improved by a more interdisciplinary approach that integrates conceptual and empirical research from the behavioral sciences abstract courtesy jstor

union membership union organization and the dispersion of wages a variance components model explains wage dispersion with a specific version of generalized least squares the estimation preserves individual data while examining the influence of union penetration on dispersion in both the union and nonunion sectors controlling for both individual and industry characteristics and for the endogeneity of wages union penetration correlates strongly with reduced dispersion in the union sector but not in the nonunion sector a decomposition reveals the relative importance of the influences of union penetration and of union membership copyright 1990 by mit press

a selectivity model of employer size wage differentials this article investigates wage differentials for employees of different size firms utilizing an econometric methodology that allows the size of employer to be treated as endogenous in the context of discrete ordered employer size data as a result we are able to estimate i employer size wage gaps which are corrected for selectivity bias and ii the magnitude and direction of the selection bias decompositions of the resulting wage differentials are computed with comparisons of the conditional on sorting across employer size and unconditional wage gaps

labor union objectives and collective bargaining we consider a model oflabor union behavior in which workers make decisions about wages and employment by simple majority rule we show that under general conditions such a union has a well behaved objective function different from those previously postulated in the literature we then show that the union s majority preferences generally lack a von neumann morgenstern utility representation and thus cannot be inserted into traditional bargaining models we then develop and characterize the solutions to a new bargaining model that is consistent with the structure of union preferences several comparative statics results are presented

modeling multiple sources of heterogeneity in multinomial logit models methodological and managerial issues we offer a framework to specify and estimate various sources of heterogeneity in multinomial logit brand choice models we let each brand specific intercept and each parameter of the explanatory variable vector vary randomly across households in addition we distinguish loyal households from the rest our results suggest that incorporating multiple sources of heterogeneity improves the model fit and suggests higher impact of marketing mix elements on brand choice we highlight the importance of incorporating multiple sources of heterogeneity the model we implement yields valuable managerial insights

what occupational safety tells us about political power in union firms this article tests hypotheses on the distribution ofpower within unionized firms by measuring which workers preferences determine the level offirm supplied occupational safety an egalitarian model in which all workers have equal impact can be easily rejected as can a medianworker model the dominant groups appear to be the most senior workers with more than ten years of seniority and recently hired workers with three or fewer years of seniority this suggests that unions pursue the objectives of the most senior workers while management tries to set a safety level that is attractive to the more mobile workers

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

optimal cartel equilibria with imperfect monitoring abstract there exist optimal symmetric equilibria in the green porter model 4 8 having an elementary intertemporal structure such an equilibrium is described entirely by two subsets of price space and two quantities the only production levels used by firms in any contingency the central technique employed in the analysis is the reduction of the repeated game to a family of static games

cooperation in prices and capacities trade associations in brewing after repeal this study s main contribution is examination of the excess capacity held by brewers during a period in which they tacitly cooperated on price the analysis covers the industry in the united states between repeal of prohibition in 1933 and wartime rationing of raw materials in 1942 from april 1933 to may 1935 destructive price cutting among brewers was illegal under the national industrial recovery act subsequent rivalry among trade associations facilitated the development of tacitly cooperative pricing arrangements the trade associations appear to have adopted a different agenda as cooperation spread among all brewers instead of just facilitating cooperation on price the associations may have facilitated cooperation in the distribution of responsibility for enforcement members apparently distributed responsibility by coordinating the allocation of excess capacity these and other results are interpreted to suggest additional avenues for research on the distribution of responsibility for punishme

a framework for investigating habits the hand of the past and heterogeneity in dynamic brand choice in this paper we develop a general class of dynamic brand choice models called lightning bolt lb models which are consistent with the theory of random utility maximization of consumer choice behavior the underlying random utility process is markov and the inter temporal evolution of the utility maximizing brand choice process is also markov the models permit parsimonious parameterizations of the random utility process in brand choices with the resulting switching probabilities being functionally related to explanatory variables the model allows for structural state dependence feedback habit persistence inertia and unobserved heterogeneity the theoretical development shows that several well known stochastic brand choice models can be deduced from random utility maximization theory from a managerial perspective the usefulness of the proposed model stems from its ability to separate out the effects of habits state dependence and heterogeneity strong state dependence effects imply incentives for inducing trial of a brand e g product sampling in contrast with state dependence a strong habit persistence effect may be indicative of buyer behavior where inducement of trial of a different brand may not be sufficient to maintain a sustained defection of the consumer from the habitually purchased brand to the trial brand failure to distinguish between these two effects has important implications for example a model that only accounts for state dependence effects would in the presence of only habit persistence incorrectly attribute it to state dependence based on this the manager could decide to embark on an expensive sampling program that might prove ineffective due to the absence of state dependence it is also important to distinguish between the effects of unobserved heterogeneity and state dependence in the absence of true state dependence failing to account for unobservable variations across households such as differences in price sensitivities results in the temporally persistent unobservable elements showing up as state dependence in the model hence a manager may incorrectly opt for sampling as the appropriate marketing action whereas a couponing or price promotion strategy should have been preferred we estimate the model parameters using the ac nielsen household scanner panel data set on catsup purchases further we investigate empirical techniques for overcoming the initial conditions problem that affects many dynamic models of brand choice through simulation analysis using the estimated parameters we show that the calculated profitability of a promotion must take into account the multi period impact due to state dependence further we demonstrate how ignoring heterogeneity can result in spurious state dependence thereby making marketing tactics such as product sampling appear far more attractive than they actually are specifically the model that accounts only for habit persistence and state dependence effects predicts a share increase of 2 4 points through sampling for one of the brands in the empirical analysis once the effects of unobserved heterogeneity are accounted for however this number drops precipitously to 0 3 while even this low number might fulfill the objectives of the brand manager it ensures that expectations are not eight times that number it is important to note that this paper is a first attempt at analyzing the three fundamental dimensions of dynamic brand choice behavior our formulation represents a reduced form approach as opposed to a structural approach other limitations of the model include our focus on time invariant choice sets extensions of the model to situations where choice sets vary over time are possible but are difficult another limitation is the dependence on multivariate extreme value distributions an alternative would be to use multivariate normal distributions i e a probit like structure which has certain useful properties a comparison of the two approaches would be useful empirical extensions of the model to allow for higher order processes and nested logit type model structures could also be fruitful explicitly incorporating variety seeking behavior in the model would further enrich the theoretical framework proposed in this paper

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

union wage practices and wage dispersion within establishments this study analyzes establishment level data primarily to examine the effect of unionism on the wage structure within establishments the major finding is that within establishment dispersion of wages is significantly narrower in unionized than in nonunionized establishments a pattern the author attributes in large part to unions wage practices such as single rate or automatic progression modes of wage payment as opposed to merit reviews and individual wage determination the data also show that dispersion in average wages is narrower among organized plants but by more modest amounts than the within establishment differential overall the evidence suggests a major role for explicit union wage policies in explaining the dispersion of wages within firms and in the economy as a whole

the effect of unions on the employment of blacks hispanics and women to investigate whether unions have helped or hindered the employment prospects of minorities and women the author analyzes data on 1 273 california manufacturing plants for the period 1974 80 the

sluggish institutions in a dynamic world can unions and industrial competition coexist during the 1930s and 1940s collective bargaining emerged as the workplace governance norm in much of the u s industrial sector following its peak in the 1950s union density in the u s private sector fell steadily to only 7 4 percent in 2006 governance shifted from a formalized union norm to one of constrained managerial discretion in competitive and dynamic economic environments a union tax on company earnings and slow response to economic shocks combine to produce poor performance by union companies two industries automotives and airlines are used to illustrate these points if worker based institutions are to flourish they must add value and permit companies to perform at levels similar to those obtained under evolving nonunion governance norms

wage dispersion within firms and collective bargaining in spain abstract this paper analyses the determinants of bargained wage dispersion by professional groups within firms in spain estimations show that insider factors union density sales per employee and the average bargained wage level are the main determinants of wage dispersion

revisiting union wage and job loss effects using the displaced worker surveys estimates of union wage effects have been challenged by concerns regarding unobserved worker heterogeneity and endogenous job changes many economists believe that union wage premiums lead to busin

longitudinal analyses of the effects of trade unions but union members are different from nonmembers in unobserved ways biasing your estimates y ou should make a selectivity bias correction simultaneously determine union status and economic outcomes develop an unobservables model use longitudinal data archetypical comment on virtually any study of the economic effects of umomsm or suitably modified on any other empirical subject

an empirical two stage choice model with varying decision rules applied to internet clickstream data abstract in this article the author proposes and applies an empirical two stage choice model to internet clickstream data that captures observed choices for two choice stages products viewed and products purchased the model allows for interdependences between choices within a stage as well as the use of varying decision rules in each stage the author accommodates heterogeneity in preferences and in decision rules the proposed model uses observed choices to infer both attribute preference ratings and criterion attributes the results show empirically in a field setting that the product attributes evaluated in stage 1 differ from those evaluated in stage 2 consistent with existing theory consumers tend to use simpler decision rules based on a subset of attribute information in earlier stages the author also finds some preliminary evidence that attributes such as price and size tend to be considered in only one of the two stages whereas ingredient attributes tend to be considered in both stages f

the effects of union membership on wages and employee benefits the case of australia in australia pay awards by government tribunals cover nearly the entire work force and those awards set equal pay for comparable union and nonunion workers union members may however secure higher compensation through plant level bargaining this study uses 1984 88 panel data to estimate the magnitude of union effects on compensation by examining changes in the compensation of employees who enter and leave union jobs relative to changes in the compensation of workers who remain union or nonunion the results show that union workers in australia enjoy 7 18 higher wages than comparable nonunion workers and are also more likely to have access to a pension plan

wage effects of unionization and occupational licensing coverage in the united states recent estimates in standard models of wage determination for both unionization and occupational licensing have shown wage effects that are similar across the two institutions these cross sectional estimates use specialized data sets with small sample sizes for the period 2006 to 2008 the authors analysis examines the impact of unions and licensing coverage on wage determination using new data collected on licensing statutes that are then linked to longitudinal data from the national longitudinal survey of youth nlsy79 from 1979 to 2010 they develop several approaches using both cross sectional and longitudinal analyses to measure the impact of these two labor market institutions on wage determination the estimates of the economic returns to union coverage are greater than those for licensing statutes

collusion in dynamic oligopolies in the presence of entry threats this paper considers a generalized oligopoly supergame where an endogenous entry decision is included the author proves that strategies based on most severe symmetric punishments can sustain some degree of collusion even with arbitrarily small entry barriers provided that the discount rate is sufficiently small the model provides a justification for a view suggesting that neither substantial barriers to entry nor strategic or informational asymmetries are necessary for an oligopoly with some degree of cooperation to prevail copyright 1990 by blackwell publishing ltd

aggregation and imperfect competition on the existence of equilibrium we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result provides general conditions under which there exists a pure strategy price equilibrium for any number of firms producing any set of products this includes products with multi dimen sional attributes in addition to the proof of existence we provide conditions for uniqueness our analysis covers location models the characteristics approach and probabilistic choice together in a unified framework to prove existence we employ aggregation theorems due to prekopa 1971 and borell 1975 our companion paper caplin and nalebuff 1991 introduces these theorems and develops the application to super majority voting rules we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result is that there exists a pure strategy price equilibrium for any number of firms producing any set of products in addition to the proof of existence we provide conditions for uniqueness our model both unites diverse strands of the earlier literature and opens up uncharted areas for future analysis in particular we expand the traditional one dimensional framework to allow for multi dimen sional product differentiation our approach involves twin restrictions on consumer preferences one on individuals preferences the other on the distribution of preferences across society these are generalizations of the restrictions supporting 64 majority rule presented in caplin and nalebuff 1988 to prove existence we apply a new technique of aggregation this technique is valuable in a variety of other problems in the companion paper we use the aggregation result to generalize our earlier work on 64 majority rule and to characterize the relationship between the distribution of human capital and the distribution of income caplin and nalebuff 1991 there are additional applications in statistics and in search theory we begin with a brief review of the early literature on imperfect competition describing in more detail the existence problem and previous solutions section 3 presents our twin assumptions and shows that they cover many standard cases in section 4 we introduce the aggregation theorem and use it in the analysis of demand functions the proof of existence of equilibrium is in section

public sector unions and municipal employment using 1980 data for a large sample of u s cities the author reexamines recent empirical findings of a positive association between public sector unionization and municipal employment several researchers have interpreted this correlation as evidence that public employee unions successfully exert political pressure to raise the demand for municipal services structural estimates of labor demand and the determinants of police and fire unionization reveal however that economies of scale in union formation are at least partly responsible for any positive association between public sector unionization and municipal employment the author concludes that previous studies overstate the amount of political clout wielded by municipal labor unions

endogeneity and heterogeneity in a probit demand model estimation using aggregate data two issues that have become increasingly important while estimating the parameters of aggregate demand functions to study firm behavior are theendogeneity of marketing activities typically price andheterogeneity across consumers in the market under consideration ignoring these issues in the estimation of the demand function parameters can lead to biased and inconsistent estimates for the effects of marketing activities endogeneity and heterogeneity have achieved prominence in large measure because of the increasing popularity of logit models to characterize demand functions usingaggregate data the logit model accounts for purchase incidence and brand choice by including a no purchase alternative in the consumer s choice set this allows for category sales to change as a function of the marketing activities of brands in the category there are three issues with using the logit model with the no purchase option to characterize demand when studying competitive interactions among firms 1 the marketing literature dealing with brand choice behavior at the consumer level has found that the iia restriction is not appropriate as each brand in the choice set is more similar to some brands than it is to others 2 studies have found that the purchase incidence decision is distinct from the brand choice decision hence it may not be appropriate to model the no purchase decision as just another alternative in the choice set with the iia restriction holding across all brands and the no purchase option 3 even if the distinction between the purchase incidence and brand choice decisions is accounted for via for example a nested logit specification accounting for the purchase incidence decision with aggregate data requires assumptions for computing the share of the no purchase alternative which is otherwise unobserved in this paper we propose a probit model as an alternative to the logit model to specify the aggregate demand functions of firms competing in oligopoly markets the probit model avoids the iia property that affects the logit model at the individual consumer level furthermore the probit model can naturally account for the distinction between the purchase incidence and brand choice decisions due to the general covariance structure assumed for the utilities of the alternatives we demonstrate how the parameters of the proposed model can be estimated using aggregate time series data from a product market in the estimation we account for the endogeneity of marketing variables as well as for heterogeneity across consumers our results indicate that both endogeneity as well as heterogeneity need to be accounted for even after allowing for a non iia specification at the individual consumer level specific to our data we also find that ignoring endogeneity has a bigger impact on the estimated price elasticities than ignoring the effects of heterogeneity a comparison of the elasticities obtained from the probit model with those from the corresponding logit specification indicates that therange of elasticities obtained from the probit model across brands is larger than that obtained from the logit the results have implications for issues such as firm level pricing in addition to specifying a probit model and providing comparisons with the logit model the paper also addresses the third issue raised above we propose a simple alternative to the purchase incidence brand choice specification by decomposing the demand for a brand into a category demand equation and a conditional brand choice share equation we provide a comparison of results from this specification to those from the specification that includes the no purchase alternative and find that estimated elasticities are sensitive to the specification used we also estimate the demand function parameters using a traditional specification such as the double logarithmic model here we find that the estimated elasticities could be signed in such a manner as to be not useful for firm level pricing decisions one of the key limitations of the proposed model is that while it accounts for the purchase incidence and brand choice decisions of households it does not account for differences across consumers in their purchase quantities the model and analysis are best suited for product categories in which consumers typically make single unit purchases another limitation is more practical in nature while recent advances have been made in computing probit probabilities it could nevertheless be a challenge to do so when the number of alternatives is large

firm specific seniority and wages this article studies the relationship between seniority and wages micro data with more than one observation from each firm are utilized to single out the seniority effect on wages arising within firms from the total seniority wage effect the results show that the seniority effect arises within firms but do not support the human capital explanation of the seniority wage profile employees with high levels of firm specific on the job training requirements have less steep wage profiles the results give some support to the theory of delayed compensation as piece rate workers have negligible returns to seniority