occupational downgrading and upgrading in britain the willingness of workers to move down an occupational hierarchy is a potentially important source of flexibility in the labour market but relatively little is known about the scale or pattern of occupational up and downgrading this paper examines who downgrades and the cyclical structure of up and downgrading we find that occupational downgrading is surprisingly large relative to flows into unemployment individuals who have a high payoff to skilled work such as educated workers are less likely to downgrade contrary to expectations the rate of downgrading is found to be greater in the boom while upgrading follows the more conventional expectation of also being procyclical this finding is interpreted as evidence consistent with the rationing of jobs in the downgrading process contrary to the assumptions of simple dual labour market models

the persistent effects of initial labor market conditions for young adults and their sources unlucky young workers entering the labor market in recessions suffer a range of medium to long term consequences this paper summarizes the findings of the growing empirical literature on this subject and uses it to assess economic models of career development the literature finds large initial effects on earnings labor supply and wages that tend to fade after ten to fifteen years in the labor market and that are accompanied by changes in occupation job mobility and employer characteristics adverse initial labor market entry also has persistent effects on a range of social outcomes including timing and completed fertility marriage and divorce criminal activities attitudes and risky alcohol consumption there is also evidence that early exposure to depressed labor market lowers health and raises mortality in middle age patterns accompanied by a reopening of earnings gaps

the empirical content of the roy model this paper clarifies and extends the classical roy model of self selection and earnings inequality the original roy model based on the assumption that log skills are normally distributed is shown to imply that pursuit of comparative advantage in a free market reduces earnings inequality compared to the earnings distribution that would result if workers were randomly assigned to sectors aggregate log earnings are right skewed even if one sectoral distribution is left skewed most major implications of the log normal roy model survive if differences in skills are log concave however few implications of the model survive if skills are generated from more general distributions we consider the identifiability of the roy model from data on earnings distributions the normal theory version is identifiable without regressors or exclusion restrictions sectoral distributions can be identified knowing only the aggregate earnings distribution for general skill distributions the model is not identified and has no empirical content with sufficient price variation the model can be identified from multimarket data cross sectional variation in regressors can substitute for price variation in restoring empirical content to the roy model

social insurance and occupational mobility this paper studies how insurance from progressive taxation improves the matching of workers to occupations we propose an equilibrium dynamic assignment model to illustrate how social insurance encourages mobility workers experiment to find their best occupational fit in a process filled with uncertainty risk aversion and limited earnings insurance induce workers to remain in unfitting occupations we estimate the model using microdata from the united states and germany higher earnings uncertainty explains the u s higher mobility rate when workers in the united states enjoy germany s higher progressivity mobility rises output and welfare gains are large

structural transformation the mismeasurement of productivity growth and the cost disease of services if workers self select into industries based upon their relative productivity in different tasks and comparative advantage is aligned with absolute advantage then the average efficacy of a sector s workforce will be negatively correlated with its employment share this might explain the difference in the reported productivity growth of contracting goods and expanding services instrumenting with defense expenditures i find the elasticity of worker efficacy with respect to employment shares is substantially negative albeit estimated imprecisely the estimates suggest that the view that goods and services have similar productivity growth rates is a plausible alternative characterization of growth in developed economies jel e23 e24 h56 j24 o41 o47 one of the strongest and seemingly most accurate characterizations of the process and problems of growth in advanced economies is william baumol s cost disease of services baumol s argument begun in papers as early as 1965 and continuing to this very day e g baumol and bowen 1965 baumol 1967 baumol blackman and wolff 1985 and baumol 2012 starts from the premise that productivity growth is inherently more difficult to achieve in the production of services than in the pro

a growth model of inflation tax evasion and financial repression abstract this paper studies the relation between policies of financial repression inflation rates and long term growth we set up a model which shows that governments might want to express the financial sector because this sector is an easy source of resources for the public budget the inflation tax to the extent that the financial sector increases the efficiency of the allocation of savings to productive investment the choice of the degree of financial development will have real effects on the growth rate of the economy in countries where tax evasion is large the government will optimally choose to repress the financial sector in order to increase seigniorage taxation this policy will then reduce the efficiency of the financial sector increase the costs of intermediation reduce the amount of investment and reduce the growth rate of the economy financial repression will therefore be associated with high tax evasion low growth and high inflation

does inclusive financial development matter for firms tax evasion evidence from developing countries we find that firms in developing countries with more inclusive financial sector evade taxes to a lesser extent this effect is stronger for the countries with stronger legal rights and a smaller share of the informal economy the results suggest that the growing public policy emphasis on achieving inclusive financial development may also help reduce tax evasion in developing countries

effects of industry growth and decline on gender and education wage gaps in the 1980s the w e upjohn institute for employment research the uc institute for labor and employment

tax evasion financial development and inflation theory and empirical evidence abstract using a standard overlapping generations monetary production economy faced with endogenously determined tax evasion by heterogeneous agents in the economy we provide a theoretical model that indicates that both a lower higher level of financial development and a higher lower level of inflation leads to a bigger smaller shadow economy these findings are empirically tested within a panel econometric framework using data collected for 150 countries over the period 1980 2009 to enable a broad generalisation of the results the results support the developed theoretical model even after having accounted for the differences in the levels of economic development the level of institutional quality that includes different tax regimes and regulatory frameworks central bank participation in the economy as well as different macroeconomic policies

a theory of turnover and wage dynamics we develop a model of turnover and wage dynamics with insurance match specific productivity and long term contracting the model predicts that wages are downward rigid within firms but can decrease when workers are fired we apply the model to study the impact of business cycles on subsequent wages and job mobility workers hired during a boom have persistent higher future wages if staying with the same firm however these boom hires are more likely to be terminated and have shorter employment spells jel c73 d23 d82 j33

cyclical quality adjustment in the labor market 1 introductionthe u s unemployment rate fell to very low levels during the 1990s even more impressively the unemployment rate for minorities and less educated individuals fell disproportionately convergence of relative unemployment rates in expansions and divergence in recessions has been a feature of the u s economy over the last 30 years there are many possible reasons for this feature for example if the costs of hiring and firing less skilled labor are low one would expect these individuals to have very procyclical employment in this paper i explore an alternative model when there is an excess supply of labor high skilled people take jobs that would normally be occupied by less skilled people in expansions the process reverses with less skilled workers getting access to jobs that they would normally not attain i refer to this process as cyclical quality adjustment reder 1955 p 834 was one of the first to discuss how hiring standards adjust to business cycle conditions quality variations in labor markets arise through upgrading and downgrading of members of the labor force relative to the jobs they are to fill when applicants become scarce employers tend to lower the minimum standards upon which they insist as a condition for hiring a worker to fill a particular job and vice versa when applicants become plentiful since then many papers have developed this idea theoretically and many economic commentators appear to share this view of the labor market for example the economic report of the president states that a strong labor market is particularly important to less advantaged groups in the labor market such as workers with less education younger workers racial and ethnic minorities and immigrants when employers find it hard to fill vacancies they are more willing to hire and train workers whom they might pass over when they have fewer openings and an abundance of applicants council of economic advisors 1999 p 103 likewise the expansion during the 1990s spawned many newspaper articles about the improvement in the types of jobs available to less skilled applicants however there is little systematic empirical work about changes in job assignment in the united states over the business cycle the empirical work in this paper seeks to redress this situation cyclical assignment changes are important for many reasons as mentioned earlier job upgrading is a potential explanation for the greater cyclical variation of employment experienced by less skilled workers it is well known that the unemployment rates of less skilled individuals and minorities are more countercyclical relative to more skilled individuals clark and summers 1981 kydland 1984 keane and prasad 1993 hoynes 1999 the standard explanation for this effect is that low ability workers are more likely to be laid off in downturns because training and hiring costs are lower for these workers no commensurate attention has been paid to the issue of how the decision of who to hire changes over the business cycle however assignment models present a natural explanation for the greater procyclicality of employment of the less skilled both the adjustment cost hypothesis and the upgrading hypothesis imply that less skilled workers will have more procyclical employment empirically they are distinguishable because the upgrading explanation implies that jobs obtained by comparable workers should vary systematically over the cycle the adjustment cost hypothesis relates to the composition of those whose jobs are terminated second these mechanisms suggest a reason why wages are particularly procyclical for job changers recent studies using panel data have indicated that the wages of job starters are much more procyclical than the wages of workers who do not change jobs researchers have suggested various explanations for this result beaudry and dinardo 1991 and macleod and malcomson 1993 present contracting models in which the wages of job starters depend on the state of the labor market when they join the firm

comparative advantage learning and sectoral wage determination we develop a model in which a worker s skills determine the worker s current wage and sector the market and the worker are initially uncertain about some of the worker s skills endogenous wage changes and sector mobility occur as labor market participants learn about these unobserved skills we show how the model can be estimated using nonlinear instrumental variables techniques we apply our methodology to study wages and allocation of workers across occupations and industries using individual level panel data from the national longitudinal survey of youth we find that high wage sectors employ high skill workers and offer high returns to workers skills

why are the wages of job changers so procyclical evidence on wage cyclicality shows job changers have more procyclical wages than job stayers previous work argued this arises because workers gain greater access to jobs in sectors such as manufacturing that offer high wages this article argues that workers who switch jobs in booms enter temporary jobs with unemployment risk and are merely compensated for subsequent losses i demonstrate that the two explanations can be distinguished using the relationship between unemployment insurance and wage cyclicality among job changers the evidence supports the compensation hypothesis that is that job changers might not experience real gains from higher paying jobs in booms

educated guesses and income distribution abstract the matching of jobs and workers depends on the level of knowledge in the economy in this paper a natural threshold arises and hence there are two possible steady states asymptotically

financial development and reserve requirements abstract many countries have either eliminated or considerably reduced reserve requirements during the last decade this paper derives the optimal reserve requirements of a simple economy with production and financial intermediation subject to costly state verification and shows that one motivation for the widely observed reduction in the level of mandatory reserves is linked to the process of financial markets development

ability and power over production in the distribution of earnings t he aggregate distribution of earnings in all western countries is approximately lognormal over most of its range but the earnings of the top 10 or 20 of individuals follow the pareto form which generates a great excess of very high earnings compared with the tail of a lognormal distribution individuals at the top appear to be paid according to the job they perform rather than their ability this paper explains these features in terms of profit maximising behaviour from time to time a single new manager or management team improves a company s profit by millions of dollars per year this shows that a senior manager can influence the company s total output far more than a junior employee his greater influence over output derives from having much more control over the company s resources profit maximising companies offer high salaries for senior management jobs because even a small improvement in their performance leads to a worthwhile increase in output and competitive bidding for the best managers then drives their salaries up to high levels this in outline is the explanation for high earnings developed formally in the rest of this paper

how the market solves an assignment problem the matching of lawyers with legal claims in the market for lawyers observable data on promotion and turnover can be explained by reference to the idea that there is positive assortative mating of lawyers and legal claims there is a scale of resources effect under which it is optimal to assign larger claims to lawyers of higher quality in a law firm the institution of tenure performs a sorting function lawyers found to be of high quality are given tenured positions and the rest leave the value of legal claims handled by a firm determines its sorting problem which in turn determines its promotion ladder and turnover

a new measure of financial development theory leads measurement abstract this study presents a new measure of financial development that is directly derived from theory our measure the marginal utilization of debt hereafter mud comes from the seminal work of myers 1984 myers and majluf 1984 and shyam sunder and myers 1999 further it is directly related to the development facts of gurley and shaw 1955 mud is a global measure that reflects conditions in both debt and equity markets it varies enormously across nations from 0 23 in australia at one extreme to 0 96 in turkey at the other cross country variations in mud are not random they are related to special purpose measures of debt and equity market advancement from the financial development literature richer more advanced nations have smaller average muds we argue that the mud may be useful for a variety of purposes and provide three example applications

wages and employment in a segmented labor market this paper analyzes the impact of business cycle fluctuations on a labor market segmented into a unionized primary sector and a competitive secondary sector either permanent or temporary changes in real aggregate demand are shown to widen the intersectoral wage differential in recession and under reasonable specifications of key parameters to cause greater fluctuations of primary sector employment than secondary sector employment this pattern agrees with the stylized facts of the u s economy

stagflationary effect of government bond financing in the transforming chinese economy a general equilibrium analysis abstract this paper studies how the method of government debt financing affects the macroeconomic performance of the transforming chinese economy the investigation is conducted within the context of an endogenous growth model that incorporates the major institutional features of the chinese economy using this framework we evaluate the effects on the growth rate of output and inflation if the chinese government relies more on bonds and less on money creation for budget deficit and debt repayment financing it is shown that although this policy change can reduce the growth rate of the money supply it can generate a stagflationary effect reducing the rate of output growth while raising the rate of inflation if the initial fraction of government deficit and debt repayment financed by bonds is sufficiently small and the tax rate on labor income is sufficiently low

cyclical variation in the interindustry wage structure this paper presents an analysis of cyclical variation in the interindustry wage structure the study is therefore concerned with changes in relative wages among industries and not directly with the determination of the absolute wage level or changes in the absolute wage level the theory of the wage structure presented here is based on two hypotheses tihe first introduced initially as a maintained hypothesis is that differences among industries in the competitive structure of their product and labor markets result in wage inequalities for given skill levels the second hypothesis and the major finding of the paper is that the size of the wage differentials is a function not only of the extent and nature of the noncompetitive elements but also of the excess demand conditions in the labor market this result is derived from the proposition that under competitive supply conditions labor allocation is based on relative wages to support the theory a wage structure equation is estimated with the coefficient of variation of straight time average hourly earnings in the two digit manufacturing industries as the dependent variable the implications of the study for aggregate and industry wage equations are then discussed

ability matters effects of youth labor market opportunities on long term labor market outcomes utilizing registry data on cognitive ability tests for all norwegian males born between 1962 and 1973 i study whether labor market conditions at the age of graduation have differential effects on earnings and employment for different ability groups i find that low ability males are more vulnerable to local business cycles at the expected time of labor market entry in particular i demonstrate that low ability males suffer larger long term earnings losses than the rest of the population this article is protected by copyright all rights reserved

cashier or consultant entry labor market conditions field of study and career success we measure impacts of entry conditions on labor market outcomes for the us college graduating classes of 1974 2011 a large recession reduces initial earnings by 10 through full time work and wag

testing the monetary model of exchange rate determination a closer look at panels abstract in this paper we undertake an extensive evaluation of panel tests of the long run monetary model of exchange rate determination we first show how poorly the monetary model performs on a country by country basis for us dollar exchange rates over the post bretton woods period for a large number of industrialized countries in sharp contrast we find considerable support for the monetary model using panel procedures as in groen 2000 and mark and sul 2001 given the disparity in the country by country and panel approaches we carefully analyze the homogeneity restrictions inherent in the panel procedures the evidence on the appropriateness of the homogeneity restrictions is mixed in the end whether the monetary model conforms to post bretton woods data largely depends on one s prior beliefs

rent sharing in an equilibrium model of matching and turnover this article characterizes labor markets in which the heterogeneity of workers and firms results in thin markets and rents neoclassical marginal analysis and matching are blended into a computable general equilibrium model of trade in efficiency units of labor although workers bargaining problems are interrelated a simple wage contract generates wage flexibility and efficient matching in the model s equilibrium equilibrium wages are predicted to vary with the diversity of firms the scarcity of skills and the costliness of search the model is applied to superstar markets union bargaining in sports interindustry wage differentials and the relationship between pay and profit

the allocation of talent over the business cycle and its long term effect on sectoral productivity it is well documented that graduates enter different occupations in recessions than in booms in our paper we examine the impact of the resulting change in the allocation of talent for long term productivity and output in a sector in a setting where output can be quantitatively and qualitatively measured we find evidence that talent flows to stable sectors in recessions and to cyclical sectors in booms economists starting or graduating from their phd in a recession are significantly more productive in academia over the long term than economists starting or graduating in a boom

a quantitative analysis of inflation as a tax on the underground economy abstract inflation rates are more dispersed and are persistently higher in developing countries this paper quantifies the importance of the public finance motive for inflation in the presence of a tax evading sector the underground economy the approach is motivated by the observation that the underground economy is especially large in poor countries the analysis builds on a general equilibrium monetary model with two production sectors where income in one of the sectors cannot be taxed a benevolent government finances its budget using an optimal combination of the income tax rate and the inflation rate the model is first calibrated to the u s economy and is then used for a cross country simulation the resulting relationships between the size of an underground economy inflation rate income tax rate and the share of seigniorage in the government revenue rationalize the cross country data quantitatively well

worker allocation hierarchies and the wage distribution economists have traditionally viewed the allocation of workers among jobs through the concept of comparative advantage this paper investigates hierarchical production models which display an absence of comparative advantage in order to demonstrate that for hierarchical production there is a second allocating factor which plays an important role two results are found first the allocation of workers among jobs tends to match high ability workers with positions which value ability highly second despite the fact that the models display an absence of comparative advantage i e the standard theoretical explanation for why wage distributions might be skewed the models wage distributions are skewed to the right relative to the underlying ability distributions

unemployment fluctuations match quality and the wage cyclicality of new hires we revisit the issue of the high cyclicality of wages of new hires we show that after controlling for composition effects likely involving procyclical upgrading of job match quality the wages of new hires are no more cyclical than those of existing workers the key implication is that the sluggish behaviour of wages for existing workers is a better guide to the cyclicality of the marginal cost of labour than is the high measured cyclicality of new hires wages unadjusted for composition effects key to our identification is distinguishing between new hires from unemployment versus those who are job changers we argue that to a reasonable approximation the wages of the former provide a composition free estimate of the wage flexibility while the same is not true for the latter we then develop a quantitative general equilibrium model with sticky wages via staggered contracting on the job search and heterogeneous match quality and show that it can account for both the panel data evidence and aggregate evidence on labour market volatility

productivity growth increasing income inequality and social insurance the case of china abstract this paper builds a simple dynamic general equilibrium model to mimic two striking stylized facts observed in china s reform productivity growth contributes significantly to output growth and income inequality increases dramatically over time calibration exercises broadly matches the data the economic growth rate the aggregate productivity and income inequality increase as the coverage of the social insurance decreases perfect insurance is shown to be sub optimal with empirically plausible parameters the level of income inequality under different degrees of social insurance can be very similar even though their welfare implications are not social insurance cannot effectively reduce inequalities

the importance of bundling in a gorman lancaster model of earnings the idea that the labor market of individuals can be decomposed into payments to separate productive attributes has an enduring appeal in economics assuming that demographic groups differ only in their endowments of productive characteristics it is possible to rationalize observed demographic earnings differentials without invoking the arguments that characteristics specific to a particular demographic group are direct objects of employer demand by aggregating skills over all demographic groups it is possible to produce a theory of the market determination of the prices of skills held in different amounts by different demographic groups this paper considers conditions under which characteristics are uniformly priced across sectors of a multisector economy the paper presents empirical evidence that rejects uniform pricing of characteristics as a description of the us labor market bundling may account for this evudence but other hypotheses do as well authors

a near rational model of the business cycle with wage and price inertia this paper presents a model in which insignificantly suboptimal behavior causes aggregate demand shocks to have significant real effects the individual loss to agents with inertial price wage behavior is second order in terms of the parameter describing the shock while the effect on real economic variables is first order thus significant changes in business activity can be generated by anticipated money supply changes provided that some agents are willing to engage in nonmaximizing behavior which results in small losses

cointegration how short is the long run abstract when testing for cointegration and faced with short sample periods it is common for researchers to turn to more frequently sampled observations that is to move from annual to quarterly or monthly data in order to increase the number of observations we argue that such a gain in the degrees of freedom is more apparent than real essentially cointegration is a long run concept and hence requires long spans of data to give tests for cointegration much power rather than merely large numbers of observations using monte carlo simulations we demonstrate this for four popular tests for cointegration

inter industry mobility and the cyclical upgrading of labor we investigate whether a market clearing model is consistent with industry employment and wage patterns related to the cyclical upgrading of labor we demonstrate that roy s 1951 market clearing

conducting monetary policy at very low short term interest rates can monetary policy committees accustomed to describing their plans and actions in terms of the level of a short term nominal interest rate find effective means of conducting and communicating their policies when that rate is zero or close to zero the very low levels of interest rates in japan switzerland and the united states in recent years have stimulated much interesting research on this question and have led some central banks to make changes in their operating procedures and communications strategies in this paper we will give a brief overview of current thinking on the conduct of monetary policy when short term interest rates are very low or even zero monetary policy works for the most part by influencing the prices and yields of financial assets which in turn affect economic decisions and thus the evolution of the economy when the short term policy rate is at or near zero the conventional means of effecting monetary ease lowering the target for the policy rate is no longer feasible however it would be a mistake to think that monetary policy was impotent we discuss three strategies for stimulating the economy at an unchanged level of the policy rate these involve i providing assurance to investors that short rates will be kept lower in the future than they currently expect ii changing the relative supplies of securities in the marketplace by altering the composition of the central bank s balance sheet and iii increasing the size of the central bank s balance sheet beyond the level needed to set the short term policy rate at zero quantitative easing we also discuss the costs and benefits of very low interest rates an issue that bears on the question of whether the central bank should take the policy rate all the way to zero before undertaking alternative policies

sectoral shifts and interindustry wage differentials the observed differences in wages across industries may arise from a lack of worker mobility particularly among experienced workers allowing the effects of industry shocks to persist for some time although young workers arbitrage wage shocks they will have little effect on the dispersion of experienced workers wages if young and old workers are poor substitutes in production this explanation is investigated using the five censuses of population between 1940 and 1980 the evidence strongly suggests that differences in pay are not temporary phenomena the data provide some support for the role of human capital and ability

the cyclicality of real wages within employer employee matches using data from the panel study of income dynamics the author examines the cyclicality of wages within employer employee matches for the years 1970 91 recent research on wage cyclicality has suggested that wages are very procyclical tending to rise and fall with economic upturns and downturns even for workers who remain with the same employer the author finds however that the evidence for wage procyclicality within the matches he examines is rather weak except for the small group of workers who were paid by piece rate or commissions despite having acyclical wage rates men who were paid hourly had earnings movements that were very procyclical salaries exhibited little cyclicality but salaried workers who had income sources from bonuses commissions or overtime had procyclical earnings the results suggest that the increasing prevalence of incentive based pay will increase the procyclicality of wages within matches

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

an equilibrium theory of wage and employment cyclicality by gender and by industry this paper presents an equilibrium theory that accounts for how cyclical patterns of employment and real wages vary between genders and across industries workers self selection of industrial sectors gender differences in comparative advantage among sectors sector nonneutral shocks and resulting mobility of workers across sectors play the key roles in explaining wage and employment cyclicality by gender and by industry numerical simulations demonstrate that reasonable parameter values exist under which the current model accords with several stylized facts these parameter values are characterized most importantly by men s comparative advantage in the sector subject to larger cyclical demand shocks

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

thresholds in the process of international financial integration abstract the financial crisis has re ignited the fierce debate about the merits of financial globalization and its implications for growth especially for developing countries the empirical literature has not been able to conclusively establish the presumed growth benefits of financial integration indeed a new literature proposes that the indirect benefits of financial integration may be more important than the traditional financing channel emphasized in previous analyses a major complication however is that there seem to be certain threshold levels of financial and institutional development that an economy needs to attain before it can derive the indirect benefits and reduce the risks of financial openness in this paper we develop a unified empirical framework for characterizing such threshold conditions we find that there are clearly identifiable thresholds in variables such as financial depth and institutional quality the cost benefit trade off from financial openness improves significantly once these threshold conditions are satisfied we also find that the thresholds are lower for foreign direct investment and portfolio equity liabilities compared to those for debt liabilities

tax evasion inflation and stabilization abstract this paper focuses on the public resort to tax evasion in developing countries as an adjustment tactic during economic downturn we show using a theoretical model of intertemporal consumption that tax compliance declines when current income declines expectations about future income improve or inflation rises we then apply the model empirically to the cases of argentina brazil and chile three countries which have long experience with tax evasion and inflation over the last 40 years and find confirmation

does unmeasured ability explain inter industry wage differentials this paper provides empirical assessments of the two leading explanations of measured inter industry wage differentials 1 true wage differentials exist across industries and 2 the measured differentials simply reflect unmeasured differences in workers productive abilities first we summarize the existing evidence on the unmeasured ability explanation second we construct a simple model which shows that if matching is important then endogenous job change decisions can create important self selection biases even in first differenced estimates of industry wage differentials third we analyze a sample that approximates the experiment of exogenous job loss we find that i the wage change experienced by a typical industry switcher closely resembles the difference in the relevant industry differentials estimated in a cross section and ii pre displacement industry affiliation plays an important role in post displacement wage determination

where to go workers reasons to quit and intra vs interindustry job mobility we show that workers reasons for quitting their job affect their decision to stay in or leave their industry using survey data among public sector employees in the netherlands workers quitting for e g pay work pressure or job duties move relatively often to another industry in contrast to workers quitting for commuting time or the atmosphere at work this suggests that workers use their experience in the initial job to update their expectations on other jobs in the industry as the first set of job aspects is more likely to be related among jobs within an industry than the latter furthermore it is shown that workers reasons to quit fully explain the differences in wage growth between intra and interindustry job movers lastly we find that workers who quit for pay or management often leave the public sector altogether the data used in this article are proprietary

lost in transition the costs and consequences of sectoral labour adjustment this paper uses an equilibrium search and matching model to study canada s sectoral labour adjustment in 2002 2006 during an increase in global commodity prices and exchange rate appreciation i estimate economically significant adjustment costs for the aggregate economy in this episode and demonstrate that difficulty in transferring skills between jobs for individual workers can be an important contributor to these aggregate costs the analysis also demonstrates that the level of unemployment benefits impacts the economy s sectoral composition its aggregate productivity and the speed of its adjustment to shocks ce texte utilise un modele d equilibre de la recherche et de l arrimage pour etudier les ajustements sectoriels du travail au canada dans la periode 2002 2006 une periode d appreciation des prix globaux des produits de base et du taux de change j estime que les couts d ajustement sont economiquement significatifs pour l economie agregee au cours de cet episode et que la difficultea transferer les competences entre emplois pour les travailleurs individuels peut etre une source importante de ces couts agreges les analyses montrent aussi que le niveau des prestations d assurance emploi a un impact sur la composition sectorielle de l economie sur la productivite et sur la vitesse des ajustements aux chocs

excess worker reallocation workers face a trade off between macroeconomic and individual incentives to work in different occupations industries namely between search frictions and personal comparative advantages workers endowed with heterogeneous multi dimensional skills search for jobs that require different skill combinations in equilibrium specialized individuals contact few selected types of vacancies where they are likely to be hired those with weak comparative advantages are seldom chosen among competing applicants thus seek any job type in a tight labour market comparative advantages dominate waiting costs offsetting labour mobility across industries occupations excess worker reallocation is lower and matches are more successful consistently with direct and indirect evidence

self selection and the distribution of hourly wages this article formulates and estimates alternative equilibrium models of industrial wage determination and self selection in explaining industrial wage differentials we find that it is important to account for heterogeneous sector specific skills and self selection decisions by agents concerning their sector of employment the classical roy model is rejected so is an efficiency units model of the labor market a revised roy model that accounts for comparative advantage in the choice of industrial sectors and choice between market and nonmarket work is much more successful in explaining cross section wage distributions and their evolution over time

marriage markets and assortative mating with household public goods theoretical results and empirical implications this paper analyzes marriage market equilibria when the gains from marriage result from joint consumption of household public goods assuming transferable utility within marriage the paper proves that marriage markets will be characterized by positive assortative mating on wealth when spouses differ only in endowments and the gains to marriage result only from public goods when spouses differ in wages and household public goods are produced at home the results imply offsetting effects with public good economies creating an incentive for positive assortative mating on wages and gains from specialization creating an incentive for negative assortative mating on wages the results help explain the persistent lack of empirical support for becker s prediction of negative assortative mating on wages and have implications for empirical analysis of all joint living arrangement decisions

what determines corruption international evidence from microdata this paper uses a microlevel data set from 49 countries to create a direct measure of corruption which portrays the extent of bribery as revealed by individuals who live in those countries in addition it investigates the determinants of being asked for a bribe at the individual level the results show that both personal and country characteristics determine the risk of exposure to bribery examples are gender income education marital status the city size the country s unemployment rate average education and the strength of the institutions in the country jel k4 d73 p16

the contribution of large and small employers to job creation in times of high and low unemployment we document a negative correlation at business cycle frequencies between the net job creation rate of large employers and the level of aggregate unemployment that is much stronger than for small employers the differential growth rate of employment between initially large and small employers has an unconditional correlation of 0 5 with the unemployment rate and varies by about 5 percent over the business cycle we exploit several datasets from the united states denmark and france both repeated cross sections and job flows with employer longitudinal information spanning the last four decades and several business cycles we discuss implications for theories of factor demand jel d22 e23 e32 j23 l25

individual heterogeneity and interindustry wage differentials estimates of interindustry wage differentials are obtained using a fixed effects estimator on a long panel the national longitudinal survey of young men nls after controlling for observable worker characteristics 84 percent of the residual variance of log wages across industries is explained by individual fixedeffects only 16 percent of the residual variance is explained by industry dummies since no controls for specific job characteristics are used job characteristics that vary across industries could potentially explain this rather small residual across industry log wage variance that is not attributable to individual effects clearly then these data do not force us to resort to noncompetitive explanations of interindustry wage differentials such as efficiency wage theory furthermore efficiency wage theories predict that wages in efficiency wage paying or primary industries should be relatively rigid therefore industry wage differentials should widen in recessions however no such tendency is found in the data

a note on aggregation of skills and labor quality we use a unique new data set that combines data on individual workers and their employers to estimate marginal productivity differentials among different types of workers we then compare these to estimated relative wages leading to new evidence on

the sources of asian pacific economic growth the objective of this study is to analyze the sources of economic growth of ten asian pacific countries apcs china hong kong indonesia japan malaysia the philippines singapore south korea taiwan and thailand in conjunction with four industrialized western countries iwcs france west germany united kingdom and the united states in the postwar period in previous studies boskin and lau 1990 and kim and lau 1994c find for the group of five g 5 and the east asian newly industrialized countries nics respectively that 1 all countries share the same aggregate metaproduction function in terms of efficiency equivalent units and 2 technical progress can be represented in all countries as purely capitalaugmenting however kim and lau 1994c also find that there has been no measured technical progress in the east asian nics despite their much higher rates of economic growth the questions of interest in this study are 1 does the same aggregate meta production function that applies to the g5 countries and the east asian nics also apply to other apcs 2 does the finding of absence of technical progress hold for all the other apcs except japan and 3 what is the relative importance of the different sources of economic growth for the apcs

a definition of uncertainty aversion a definition of uncertainty or ambiguity aversion is proposed it is argued that the definition is well suited to modelling within the savage as opposed to anscombe and aumann domain of acts the defined property of uncertainty aversion has intuitive empirical content behaves well in specific models of preference multiple priors and choquet expected utility and is tractable tractability is established through use of a novel notion of differentiability for utility functions called eventwise differentiability

education mobility and the college wage premium abstract motivated by large educational differences in geographic mobility this paper considers a simple dynamic extension of roy s 1951 model and analyzes it using new evidence on net versus excess mobility and the individual level relationship between mobility and wages according to the model the dispersion of a labor income shock specific to a worker location match is greater for more educated workers and accounts for large educational differences in mobility in the model labor mobility raises both the average wage and the college wage premium a prediction consistent with differences between europe and the u s

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

do employers provide insurance against low frequency shocks industry employment and industry wages i use panel data to examine whether long term changes in industry wages are positively related to long term changes in industry employment previous research using repeated cross sectional data found no systematic relationship between these variables using standard fixed effects models to deal with individual heterogeneity i find a robust positive relationship between changes in composition constant industry wages and industry employment this suggests that growing industries attract less skilled individuals in a manner that biases down the estimated relationship between industry employment and wages in repeated cross sectional data the results imply that supply curves facing industries are elastic but upward sloping

labor market institutions and long term effects of youth unemployment graduating from a school during a time of adverse economic conditions has a persistent harmful effect on workers subsequent employment opportunities an analysis of panel data from oecd countries during the 1960 2010 periods reveals that a worker who experiences a 1 percentage point higher unemployment rate while the worker is 16 24 years old has a 0 14 percentage point higher unemployment rate at ages 25 29 years and 0 03 percentage points higher at ages 30 34 years the persistence of this negative effect is stronger in countries with stricter employment protection legislation a composite index for labor market rigidity is constructed and the index is shown to have positive correlation with the persistence moderating macroeconomic fluctuations is more important in countries that have more persistent labor market entry effects on subsequent outcomes

testing for cointegration power versus frequency of observation further monte carlo results abstract this paper studies the effects of increasing the frequency of observation and the data span on the johansen cointegration tests the ability of the tests to detect cointegration depends more on the total sample length than the number of observations

heterogeneous firms and the organization of production firms in the same industry exhibit systematic differences in the organization of production and the structure of employment entrepreneurial ability is the specific scarce input that limits the size of a firm this input must be allocated to two activities coordinating production and monitoring workers able entrepreneurs can convert calendar time into larger supplies of coordinating effort that enable them to assemble large firms greater ability implies a higher shadow price of time which increases the implicit costs of monitoring a dispersion of entrepreneurial abilities generates an equilibrium size distribution of firms differences in monitoring costs affect the choice of worker productivities the design of products and the organization of production the monitoring cost hypothesis advanced in this paper goes a long way in explaining the equilibrium of an industry containing heterogeneous firms that differ in size and behavior

the beveridge curve a survey important progress has been made in economists understanding of the beveridge curve from its measurement to its expression in canonical labor market models yet enduring puzzles remain chief among these are the empirical role of vacancies in the recruitment process the amplitude comovement and persistence of cyclical unemployment vacancy dynamics and the sources of lateral shifts in the beveridge curve the synthesis of these themes identifies several priorities for ongoing research including the role of entry costs into vacancy creation in shaping beveridge dynamics the cyclicality of search intensity both off and on the job and its relation to participation and job to job transitions the theory and measurement of mismatch and the sources of hysteresis in unemployment flows

financial development and openness evidence from panel data abstract this paper addresses the empirical question of whether trade and financial openness can help explain the recent pace in financial development as well as its variation across countries in recent years utilising annual data from developing and industrialised countries and dynamic panel estimation techniques we provide evidence which suggests that both types of openness are statistically significant determinants of banking sector development our findings reveal that the marginal effects of trade financial openness are negatively related to the degree of financial trade openness indicating that relatively closed economies stand to benefit most from opening up their trade and or capital accounts although these economies may be able to accomplish more by taking steps to open both their trade and capital accounts opening up one without the other could still generate gains in terms of banking sector development thus our findings provide only partial support to the well known rajan and zingales hypothesis which stipulates that both types of openness are necessary for financial development to take place