tripartite income employment contracts and coalition incentive compatibility tripartite contracts between workers a firm and an insurance broker pareto dominate the usual bilateral arrangements if coalitions are not feasible they do this by allowing the broker to run surpluses over a reservation expected utility in some states and deficits in others we show that these contracts are manipulable by coalitions this motivates our main contribution the definition and characterization of coalition incentive compatible tripartite contracts we then ask whether broker intermediation can still be useful the answer is that not every coalition incentive compatibility requirement annuls the critical budget breaking property specifically if firm broker coalitions are feasible there is no three party contract that is coalition incentive compatible and pareto superior to bilateral firm worker contracts except in the extreme case where the workers demand for leisure is income inelastic but if only a firm worker coalition can form the addition of a broker to a bilateral arrangement does reduce the welfare losses caused by the existence of asymmetric information

involuntary unemployment and implicit contracts this paper provides an explanation of involuntary umemployment arising as a consequence of asymmetric information between firms and workers involuntary unemployment is defined as a situation where ex post gains to trade exist a model of labor contracts is developed where the allocations are not ex post optimal it is shown that inferiority of leisure is a necessary and sufficient condition for the existence of involuntary unemployment

underemployment and normal leisure abstract a combined worksharing layoff wage severance pay contract is shown to imply inter alia that normal leisure and underemployment do coexist provided the elasticity of substitution between employment and hours is sufficiently low as defined rigorously in the text

involuntary unemployment in economies with efficient risk sharing abstract we study economies where employment lotteries determine random layoffs and incomes for employed and unemployed agents allocate risk efficiently we ask for which specifications are unemployed agents worse off a situation we call involuntary unemployment we show unemployed agents are worse off iff an exogenous increase in wealth decreases aggregate unemployment in a monetary economy we show that in equilibrium the unemployed are worse off iff high inflation implies high unemployment our model also generates nominal wage stickiness as an equilibrium phenomenon but neither involuntary unemployment nor nominal stickiness implies these economies are operating inefficiently or are out of equilibrium

wage employment contracts this paper studies the efficient agreements about the dependence of workers earnings on employment when the employment level is controlled by firms the firms superior information about profitability conditions is responsible for this form of contract governance under plausible assumptions such agreements will cause employment to diverge from efficiency as a byproduct of their attempt to mitigate risk it is shown that if leisure is a normal good and firms are risk neutral employment is always above the efficient level such a one period implicit contracting model cannot therefore be used to explain unemployment as a rational byproduct of risk sharing between workers and a risk neutral firm under conditions of asymmetric information

unionization and input flexibility in u s manufacturing 1973 1996 input flexibility as measured by the ability of firms to vary input demand in the face of changes in input prices is an important dimension of labor market flexibility using a new dataset the authors analyze the impact of unionization on input flexibility in u s manufacturing from 1973 to 1996 a period in which production was arguably becoming more flexible due to deep changes in the u s industrial relations system and in the broad macroeconomic environment the authors quantify the effects of unionization on input flexibility by estimating elasticities of substitution between a broad range of labor and non labor inputs controlling for unionization the pattern that emerges is more complex than that suggested by other research in particular low unionization apparently is associated with greater flexibility in the use of labor inputs but less flexibility in the use of non labor inputs

union wage hours and earnings differentials in the construction industry full information maximum likelihood is used to estimate union wage hours and earnings markups construction union wage markups are positive 58 2 at the sample means since union hours markups are negative 4 0 for most demographic groups union earnings markups 51 1 are smaller than the wage markups all exogenous variables are allowed to interact with the endogenous union dummy variable which allows us to test whether markups vary across demographic groups whether increased local unionization has a positive spillover effect in the nonunion sector and whether increased local unemployment equally affects wages and hours in increased local unemployment equally affects wages and hours in the two sectors

wage profiles and imperfect capital markets a positive analysis this paper examines the structure of long term employment contracts when labor is mobile and risk averse employers are unable to monitor workers outside job offers workers cannot borrow against future income and workers productivity is increasing in the length of service with the long term employer workers are then liquidity constrained and the contract trades off consumption smoothing against efficiency in turnover in contrast to previous papers which have examined this problem this paper provides a continuous time formulation that permits a detailed characterization of the properties of the wage profile

experience tenure and wage growth of young black and white men this paper studies the source of differences in wage growth between young black and white workers focusing on terminal high school graduates from the national longitudinal survey of youth we estimate the returns to on the job tenure and general labor market experience using ordinary least squares altonji and shakotko and topel estimators results from all three estimators indicate that returns to general experience for black workers trail those for white workers but that black workers earn equal if not higher returns to tenure than do white workers

the theory of the labour managed firm revisited the voluntary interactive approach membership in the authors labor managed firm is determined in the long run by expected income maximization in the short run upon the realization of output price each member may leave the labor managed firm however a decision to leave when the entire membership quits is associated with fixed cost this arrangement ensures ex post egalitarianism and sense of job security the authors short run result is that employment does not exhibit a perverse response to price variations the long run result is that their labor managed firm is more populous than the illyrian firm and may even be more than its capitalistic twin copyright 1993 by royal economic society

are effort bargaining models consistent with the facts an assessment of the early 1980s recent research has attempted to explain the impact of changes in union bargaining of the uk productivity miracle of the 1980s a central part of these explaniations is the concept of effort or working conditions as an observable component of negotiations after reviewing the evidence this paper shiows that in models where effort and wages are jointly negotiated in an environmenit of weakenitig union power a positive effort wage association as observed in the early 1980s in the uk emerges only unider quite special assumptions we show that the stylized facts are better explained by a model where effort and wages are bargained over sequentially

do bank characteristics influence the effect of monetary policy on bank risk abstract we analyze whether bank characteristics affect the impact of monetary policy on bank risk we find that the insulation effects produced by capital and liquidity were lower for banks operating in countries with particularly low interest rates

bumping layoffs and worksharing this paper deals with an interesting but often neglected labor practice prevalent in large north american firms with well developed internal labor markets large north american firms typically respond to a decline in demand for their products by first reducing the number of hours worked or worksharing as the demand continues to fall however they begin to make skilled workers bump onto unskilled jobs displacing unskilled workers skilled workers are laid off only after a considerable number have bumped i develop an implicit contract model and explain the practice

pareto optimality and competition there is a general consensus that u s financial markets are very competitive and efficient with prices quickly reflecting the available information there is also a widespread belief that these competitive and efficient markets enable the efficient allocation of scarce capital among alternative investment opportunities this belief is not based on direct observation it is virtually impossible to obtain the data concerning the joint probability distribution of returns to all possible projects which would be required for a direct assessment of the efficiency of the resource allocations to which the market gives rise rather it is based on the well known result that perfectly competitive markets generate pareto efficient resource allocations the object of this paper is to question that conclusion to show that even with apparently competitive and efficient markets resource allocations may not be pareto efficient

an integration of trade union models in a sequential bargaining framework this paper aims to embed two popular models of trade union behavior the monopoly model and the efficient bargaining model in a more general framework it does this by analyzing sequential bargaining models where wages are determined before employment and the power of the union in the two stages of the bargain differs as well as finding that the monopoly and efficient bargain models are special cases of this model a new class of models is also discovered this framework is used to analyze the relationship between union pow er and efficiency the empirical analysis of trade unions and the effects of trade union legislation copyright 1987 by royal economic society

evaluating innovation and labour market relationships the case of italy in this paper the link between labour market flexibility and innovation is analysed paying particular attention to the different technological regimes of economic activities and the different geographical areas of the italian economy a dynamic panel data specification is used to assess the endogenous relationship between patents included as a proxy of the innovation and job turnover and wages which represent labour market indicators the results show that higher job turnover only has a significant and negative impact on patent activities in regional sectors of northern italy while a positive and significant impact of blue and white collar wages has been generally found

asymmetries in the bank lending channel of monetary policy in the united states abstract we study the presence of asymmetries in the transmission of monetary policy in the united states we find that the bank lending channel is stronger when the federal reserve tightens monetary policy particularly when the monetary policy stance is expansionary

hours of work and trade unionism this article is concerned with hours worked per employee in unionized labor markets first the determination of hours is examined in the context of various bargaining models and in the process these models are nested in a general framework then cross section and time series data are drawn on to quantify the effects of unionism on hours worked the time series data from 1920 to 1980 imply a negative impact of unionism on full time hours while cross section data for 1978 suggest some notable differences in both the direction and the magnitude of this impact across occupations and industries

implicit contracts labor mobility and unemployment firms inability to monitor their employees search effort forces a tradeoff between risk bearing and incentive considerations when designing employment related insurance since the provision of insurance against firm specific shocks adversely affects workers incentives to find better jobs the optimal contract provides only partial insurance it prescribes low high wages and under over employment to encourage workers to leave stay at low high productivity firms and it employs quits and layoffs as alternative means of inducing separations at low productivity firms with the mix depending upon the relative efficiency of the on and off the job search technologies our analysis of implicit contracts with asymmetric search information establishes that any consistent explanation for worksharing layoffs severance pay quits and unemployment must focus on questions of labor mobility this abstract was borrowed from another version of this item

wage bargaining in a macroeconomic model with rationing a model of a single commodity closed economy is constructed in which the commodity price is fixed and its market clears by quantity adjustment the distinctive feature is that the real wage and employment are determined by bargaining between unions representing workers and firms there are several possible regimes some with labor hoarding the effects of changes in autonomous spending and the reservation wage on the endogenous variables of the model including employment and the real wage are discussed some interesting possibilities emerge for the cyclical movement of productivity and the real wage

an experimental study of statistical discrimination by employers this article reports findings of an experiment motivated by a dynamic labor market model that considers the problem faced by employers in making hiring decisions between workers of different types the question examined here is how quickly employers learn about the ability of a group of workers through observing representatives of that group if prior opinions are weak the employer will use information from the workplace to quickly update any incorrect group based stereotypes it may have on the other hand if priors are heavily weighted incorrect initial perceptions will result in persistent wage differences our experimental findings are twofold first subjects employers behavior moves quickly toward optimal choices second strong priors are hard to establish these results suggest that it would take a long time for employers to form group based stereotypes and that such stereotypes should go away quickly in response to signals that contradict these stereotypes

overtime pay overtime hours and labor unions this article analyzes the effect of labor unions on overtime compensation and overtime hours estimates from may 1985 current population survey data indicate that unionization increases the prevalence of premium pay for overtime and reduces the incidence and extent of overtime hours along with the finding of previous research that unionized workers are more susceptible to temporary layoffs these results are consistent with a model in which unions use overtime pay to stabilize working hours and expand membership

did lower unionization in the united states result in more flexible industries do unions really impede manufacturers output flexibility if so in what ways the authors propose a methodology for quantifying george stigler s concept of output flexibility and for decomposing the effects of unionization on average cost differences between union and non union plants using a recently compiled data set on u s three digit manufacturing industries from 1973 to 1996 they adapt this methodology to simulate the effects of unionization on flexibility and average costs for average size plants simulation results indicate that higher unionization was associated with higher average costs and lower flexibility than low unionization higher average costs appear to have been primarily due to higher fixed costs such as higher benefits

reduction in the long term unemployment of the elderly a success story from finland in finland the elderly unemployed are allowed to collect unemployment benefits up to the age of 60 when they can retire via a particular unemployment pension in 1997 the eligibility age of persons benefiting from this scheme was raised from 53 to 55 we consider changes in the risk of unemployment unemployment durations and the exit states before and after the reform in the duration analysis a flexible treatment design is adopted by allowing for quantile treatment effects we apply three different non and semiparametric methods which all produce robust and coherent results since the reform the group aged 53 54 has had a lower risk of unemployment shorter unemployment durations and higher exit rates to employment and it is no longer distinguishable from the group aged 50 52 we estimate the amount of unemployment benefits saved due to the reform

does bank ownership affect lending behavior evidence from the euro area abstract we analyze the differences in lending policies across banks characterized by different types of ownership using micro level data on euro area banks during the period 1999 2011 to detect possible variations in bank lending supply responses to changes in monetary policy our results identify a general difference between stakeholder and shareholder banks following a monetary policy contraction stakeholder banks decrease their loan supply to a lesser extent than shareholder banks a detailed analysis of the effect among stakeholder banks reveals that cooperative banks continued to smooth the impact of tighter monetary policy on their lending during the crisis period 2008 2011 whereas savings banks did not stakeholder banks propensity to smooth their lending cycles suggests that their presence in the economy has the potential to reduce credit supply volatility

on optimal unemployment abstract some unemployment may be optimal in all states of nature for certain production and utility parameters and firm provided insurance for other specifications uniformly varying hours for all workers is optimal

unemployment insurance and short time compensation the effects on layoffs hours per worker and wages we analyze two unemployment insurance systems in one unemployed workers receive benefits while those on reduced hours do not as in north america at least until recently in the other short time compensation is paid to workers on reduced hours as in europe the first system causes inefficient temporary layoffs for some parameters the latter does not but implies inefficient hours per worker some evidence is presented regarding these effects despite policymakers recent enthusiasm for short time compensation the clear implication of this project is that changes should come on the tax not benefit side of the system

hours layoffs and unemployment insurance funding theory and practice in an international perspective the strikingly different behaviour of important economic aggregates in the united states and other industrial countries has received surprisingly little attention from economists among recent exceptions however gordon i 982 has shown that wages and hours of work are much more flexible in the united kingdom and japan than in the united states such relative hours variability is confirmed in a macro analysis by capdevielle and alvarez i98i and at micro level by sengenberger and kohler i982 the latter authors are concerned with labour market adjustment within the u s and west german automobile industries between i 97 i and i 980 estimates of the german workeroutput elasticity are found to be less than half that of the united states while the german hours elasticity is twice the united states figure at the national aggregate level capdevielle and alvarez also reveal much greater employment variability in the united states than in most other oecd countries in the years following the i973 74 opec supply shock much in line with these employment hours observations moy and sorrentino i98i argue that after

a theory of quits and layoffs with efficient turnover this paper answers the efficient turnover literature s long silence regarding the quit layoff distinction treating quits as worker initiated separations and layoffs as firm initiated separations i establish that the existence of layoffs is compatible with optimizing workers and firms forming and dissolving employment matches to exploit all the gains from trade the efficient turnover approach is shown to be consistent with many empirical regularities that distinguish quits from layoffs structural implications of the model are tested on data from the psid

optimal firm size taxes and unemployment abstract we analyze a model similar to the standard implicit contracting framework but assume that the size of the firm the number of workers under contract is endogenous some well known predictions from contract theory with firm size fixed exogenously are reversed in particular a result obtained by feldstein concerning unemployment insurance does not hold when firm size is chosen optimally he concludes an increase in experience rating the extent to which firms pay for unemployment benefits through their taxes reduces unemployment while we show that it increases unemployment under reasonable conditions

labor and credit contracts with asymmetric information and bankruptcy abstract this paper investigates the interaction between a firm s contracts for labor and its contracts for credit under asymmetric information and limited liability when workers are either always committed to their contract or they lack the power to commit ex post because arbitrage opportunities are available to them the analysis contains two main results first contrary to the perceptions of the limited liability literature where limited liability is thought of causing both underemployment and income underinsurance limited liability is in fact shown to only cause underemployment existence of outside sources of credit eliminates the underinsurance side of the inefficiency but can not eliminate underemployment second the factor that does cause underinsurance is the existence of ex post arbitrage opportunities for the worker worker mobility leads to underinsurance regardless of whether limited liability is binding or not and even if outside sources of credit exist thus underemployment stems from limited liability and underinsurance stems from worker mobility

experience tenure and the perceptions of employers this paper examines how group based assessments concerning employee ability impact employee compensation the employer learns about worker ability through bayesian updating creating an additional channel for wage growth that is not available to those workers with only general labor market experience consistent with the model s predictions results from national longitudinal survey of youth nlsy indicate that black workers fare much better relative to white workers in returns to tenure than in returns to experience finally parameter estimates in the structural model suggest that employers initially undervalue black males but that their wages rise with learning by employers over time on average black males earn lower wages than white males just as average wages differ across many groups this paper examines one explanation for this wage gap the possibility that employers underestimate the ability of workers in one or more groups in particular this paper proposes a model that provides explicit predictions about the affect of employer s perceptions on workers returns to general experience and tenure on the job we then examine the wage growth of young males to see whether patterns are consistent with the model economic theory provides many other explanations for differences in wages across groups

output work hours and employment in the short run of a labour managed firm in its pure form the organisation of a labour managed firm lmf differs radically from that of a profit maximising firm pmf lmfs are found not only in yugoslavia many forms of producers cooperatives and employee owned firms appear in capitalist economies e g jones and svejnar i982 the theory of the lmf is also relevant to the economics of trade unions profit sharing codetermination and internal labour markets this is because where worker participation exists elements of the economic forces prevalent in an lmf can influence management policies on wages employment and investment it follows that by studying the lmf in relation to the pmf we may be better able to grasp the workings of more realistic firm organisations in which both labour and management vie over the division of firm specific rents from this perspective on the theory of the firm we examine the short run behaviour of the competitive lmf and in particular the tendency for output supply employment demand and work hours to differ from the neoclassical norm traditionally the short run analysis of the lmf has focused on its employment response to output price changes the theorem due to ward i958 and vanek i970 holds that an increase in output price causes paradoxically a reduction in employment and output if the lmf maximises per capita remuneration more recent work in which the lmf maximises the member s expected utility over layoff probabilities and remuneration demonstrates that the lmf s response to a higher output price is essentially to increase both output and employment e g steinherr and thisse i979 bonin i98i and miyazaki and neary i983a the key to this result is that these authors distinguish actual workforce which is variable in the short run from lmf membership size which is variable in the long run but fixed in the short run the precise features of this lmf short run behaviour also depend on the nature of the lmf s bankruptcy constraint which is largely determined by the lmf s access to capital markets in this line of analysis however authors have effectively assumed that work hours are institutionally fixed but variability in work hours or effort intensity can also be an important factor in the lmf s response to output price changes because a change in the lmf s output price immediately affects the member worker s per capita some of the basic results of this paper were originally reported in sections 7 8 of our july 1979 mimeographed paper which was read at the second international conference on the economics of worker s self management istanbul june i980 and also in seminars at berkeley british columbia bell labs cornell hitotsubashi kyoto osaka tokyo and toronto in i979 i980 we thank j bonin and the participants of the above conference and seminars for comments on earlier versions in writing the present version we especially benefited from the comments of anonymous referees p evans and t macurdy we are responsible for any remaining errors omissions and ambiguities a detailed computational appendix for our theorems and examples is available on request

bargaining and shift length abstract we examine the determination of shift length employment and wages in a partial equilibrium bargaining framework using the nash bargaining solution a number of clearcut results are obtained perhaps the most interesting of which concern the effects of changes in demand on shift length in two of the cases examined hours worked are invariant with respect to an increase in demand whilst in a third shift length actually falls

management versus ownership ii two fields in economics have developed without much interaction in the past the theory of the firm and mathematical economics the former has accumulated a wealth of thoughts observations on the firm activities without analytical scrutiny the latter has raised the standard of analytical rigor only within simple frameworks which do not fit the nature of the firm activities in the preceding paper ichiishi 1982 a mathematical model of a capitalistic economy was constructed and a rigorous analysis was given to the model this paper presents the economic interpretations implications of the formal study in ichiishi 1982 and shows how the gap between the two fields is bridged it is also intended to serve as a survey article

job discrimination market forces and the invisibility hypothesis the invisibility hypothesis holds that the job skills of disadvantaged workers are not easily discovered by potential new employers but that promotion enhances visibility and alleviates this problem then at a competitive labor market equilibrium firms profit by hiding talented disadvantaged workers in low level jobs consequently those workers are paid less on average and promoted less often than others with the same education and ability as a result of the inefficient and discriminatory wage and promotion policies disadvantaged workers experience lower returns to investments in human capital than other workers

discrimination in the labor market the curse of competition between workers in an experiment we identify a crucial factor that determines whether employers engage in statistical discrimination of ex ante equal groups in the standard no competition setup of coate and loury 1993 we do not nd systematic evidence for statistical discrimination when we introduce competition between workers of dierent groups for the same job the non discrimination equilibrium ceases to be stable in line with this theoretical observation we nd systematic discrimination in the experimental treatment with competition nevertheless a substantial minority of the employers refuses to discriminate even when it is in their best interest to do so

endogenous adverse selection and unemployment insurance in this paper we consider how the presence of private information may explain the failure of the private sector to provide unemployment insurance in particular we show how the interaction of private information regarding employees preferences for work with the unobservable level of effort exerted on the job may explain the absence of private unemployment insurance we also reflect on the implications of our findings for the role of the public sector in providing unemployment insurance

layoff unemployment risk shifting and productivity this paper is concerned with the theory of implicit labor contracts the implications of introducing hours worked or effort as an argument both in workers utility functions in addition to the wage rate and in firms production functions in addition to the number of workers are considered it is shown that layoffs can occur at equilibrium in the absence of unemployment compensation and value of leisure but only because of the inclusion of this additional variable

crime versus justice is there a trade off abstract when society is divided into two groups with different actual or perceived crime rates maintaining a low crime rate minimizing the total number of innocent individuals convicted of a crime and keeping the probability of wrongly convicting an innocent individual equal across groups are incompatible social goals this paper fully develops these trade offs an empirical application of the model finds that these trade offs may be substantial specifically we estimate that innocent black americans would be roughly eight times more likely to be wrongly convicted of murder than innocent white americans if society placed no value on equality when it comes to convictions however we estimate that eliminating inequality entirely could cost up to 1 900 lives annually because of a rise in the murder rate estimates reveal similar findings for gender inequality in highlighting this serious dilemma this paper suggests a need for awareness of costs of crime reduction policies

discrimination bayesian updating of employer beliefs and human capital accumulation i introduction can labor market discrimination persist over time how do employer beliefs influence minority groups and their choices previous theoretical models of discrimination can be grouped into two distinct categories based upon the source of the discrimination the most common method of modelling discrimination follows the work of becker 1972 in which the employer manager or other employees receive disutility from associating with members of a particular group in a second class of models referred to as statistical discrimination initially proposed by phelps 1972 discrimination results from differences in the groups ability to signal output or capabilities this result can be reproduced as a special case of the model presented here this paper proposes an alternative model in which discrimination results initially from differences in the employer s prior opinion of average group ability using a bayesian updating model we analyze the dynamic effects of this prior belief on human capital acquisition and the potential for continued discrimination previous research provides an abundance of evidence that society s initial perceptions about numerous characteristics including those affecting productivity differ by group for example smith 1990 summarizes the results of the general social survey which asked individuals to rank ethnic groups on a scale of one to seven in various categories 1 the survey found a significant portion of those surveyed believed that african americans hispanics and white southerners lagged behind the rest of society in intelligence and work effort in fact 53 2 percent of those surveyed ranked african americans below whites in intelligence unless employers differ systematically from the rest of society this evidence implies that the initial or prior employer assessment of ability will be lower for members of these groups in addition to strong evidence that such general priors exist numerous studies find that prior beliefs influence the evaluation of employee ability the urban institute recently conducted a study comparing the evaluation of black and hispanic workers to that of equally qualified white workers 2 given equal resumes the black and hispanic job candidates trailed white candidates at every stage in the job seeking process from receiving fewer initial interviews to a lower number of job offers similar biases have been found in experiments in which identical resumes were evaluated differently simply due to the race or gender of the applicant 3 furthermore even if worker output is unambiguously observed and evaluated in an unbiased setting studies find that success of males is attributed to ability while that of females is more likely to be attributed to luck 4 this adherence to initial perceptions suggests that agents believe strongly in their initial beliefs and hence would require substantial evidence to alter their perceptions our model incorporates the strength of the prior beliefs through a variance parameter surrounding the initial belief of mean ability level a lower variance implies a decreased willingness to admit error in one s prior beliefs and update accordingly discrimination in our model results from the entrepreneur s sincere although perhaps incorrect beliefs concerning the distribution of ability levels of a particular group although empirical results provide strong evidence of labor market discrimination persisting over many years cain 1986 most existing theoretical models of discrimination are static designs used to explain only within period discrimination we propose a dynamic model in which a bayesian employer learns about an employee s ability over time based on output observed up to a stochastic error term thus updating prior beliefs concerning both the individual and the group in each period viewing output as a signal of ability it is clear that traditional statistical discrimination models are embedded within ours the special case in which one group s signal is less reliable than another s can produce the statistical discrimination results

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

adjustment costs firm responses and micro vs macro labor supply elasticities evidence from danish tax records we show that the effects of taxes on labor supply are shaped by interactions between adjustment costs for workers and hours constraints set by firms we develop a model in which firms post job offers characterized by an hours requirement and workers pay search costs to find jobs we present evidence supporting three predictions of this model by analyzing bunching at kinks using danish tax records first larger kinks generate larger taxable income elasticities second kinks that apply to a larger group of workers generate larger elasticities third the distribution of job offers is tailored to match workers aggregate tax preferences in equilibrium our results suggest that macro elasticities may be substantially larger than the estimates obtained using standard microeconometric methods

pension portability and labor market efficiency a survey of the literature this paper reviews the theoretical and empirical literature evaluating the labor market effects of policies to enhance pension portability one perspective is that reducing the cost of job change w

wage secrecy as a social convention there is a time to keep silent and a time to speak out ecclesiastes 3 7 ask anyone who works for a living how much money he or she makes and you are likely to encounter a range of responses from evasion to outright hostility such responses however should not be surprising according to organizational etiquette it is considered gauche to ask others their salaries in a study at e i du pont de nemours all employees were asked if the company should disclose more payroll information so that everyone would know everyone else s pay only 18 voted for an open pay system dolan and schuler 1987 315 m any organizations have strict policies and norms about the secrecy of pay it is seen as inappropriate in most companies for employees to talk about what they earn and data are rarely given out even internally on salaries some organizations even fire individuals who release salary data this is one way to make it very clear that the organization means it when it says it believes in pay secrecy lawler 1990 239 t he issue of openness or secrecy in the communication of compensation information is one of the most important issues facing senior management henderson 1985 379 i introduction despite the general belief that a free flow of information enhances efficiency social convention appears to call for secrecy regarding individuals wages this paper provides an explanation for this convention we suggest that the role of wage secrecy is to reduce effective labor mobility and thereby enhance the feasibility of risk shifting contracts wage secrecy may yield a mix of mobility and risk shifting that is superior both to a spot market for labor and to a social convention that binds workers to their employers in promising to pay a worker a pre agreed wage rate labor contracts shift uncertainty from workers to employers and provide workers with insurance in particular if workers are risk averse and firms are risk neutral such contracts may enhance the welfare of workers without imposing a cost on firms since a risk shifting contract shields workers from the vicissitudes of the market wage rates need not equal the marginal product of labor in good outcomes workers pay the firm an insurance premium by accepting a wage rate that is lower than their marginal product in bad outcomes workers collect on their insurance policy earning a wage rate that exceeds their marginal product 1 if workers can move freely from one firm to another however risk shifting labor contracts may not be feasible given such freedom of movement workers will stay with their firm if the wage rate exceeds that offered elsewhere and move if they can obtain a higher wage rate in another firm hence without restrictions on labor mobility risk shifting contracts will not be offered and wage rates will vary with the marginal product of labor in this case the market in labor is a spot market the risk shifting role of labor contracts may be salvaged by a social convention that binds workers to their firms this would require that a worker who leaves his employer earlier than the accepted norm would be viewed as breaking a social convention and develop a damaging reputation we shall refer to this type of convention as a binding convention 2 it appears that a binding convention is assumed in most of the implicit contract literature binding however comes at a cost while facilitating risk shifting it may lead to inefficient resource allocation with a binding convention the tradeoff between the loss in output and the extent of workers exposure to risk depends on the nature of risks faced by the firm when the only risk that firms face is an aggregate shock defined as a shock that affects all firms in a sector in the same way binding does not reduce production efficiency if the marginal product of labor is the same in all firms the worker s place of employment does not affect output

a note on overemployment underemployment in labor contracts under asymmetric information abstract models of labor contracts under asymmetric information may predict either overemployment or underemployment this paper shows that this result depends crucially on whether or not leisure is a normal good if firms are risk neutral

implicit contracts a survey 7mplicit contracts resolve the distribution of uncertainty and utilization of specific human capital between risk averse workers and less risk averse firms incomplete contracts are required to yield involuntary layoffs in contract markets otherwise contracts are efficient and pareto optimal by construction there is a close relation between contract theory and neoclassical labor market theory contracts smooth consumption but increase the volatility of labor supply and labor utilization to demand disturbances because contractural insurance eliminates the income effects of socially diversifiable risks this result is similar to the intertemporal substitution hypothesis however the price mechanism in a contract is substantially different contracts embody a nonlinear two part pricing scheme the lump sum part allocates the income consumption consequences of risks and the marginal pricing part allocates production and labor utilization this implicit pricing mechanism is in all respects flexible though the observed average hourly wage combines both parts and may give the outward appearanceof rigidity furthermore the observed average wage rate in a contract does not reflect marginal conditions necessary for structural econometric estimation indivisibilities appear necessary to account for the split between work sharing and layoffs contracts with private information are also considered in the nonlinear pricing context this abstract was borrowed from another version of this item

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

efficient unemployment insurance this paper constructs a tractable general equilibrium model of search with risk aversion an increase in risk aversion reduces wages unemployment and investment unemployment insurance has the opposite effect insured workers seek high wage jobs with high unemployment risk an economy with risk neutral workers achieves maximal output without any unemployment insurance but an economy with risk averse workers requires a positive level of unemployment insurance to maximize output therefore moderate unemployment insurance not only improves risk sharing but also increases output

a model of the natural rate of unemployment since the publication of edmund phelps volume the new macroeconomics has treated the labor market as a dynamic process of rational search by unemployed workers for available vacancies wages are viewed as at least potentially flexible though free contracting between workers and firms may lead to fixed wages in the short run imperfect information is a crucial element of the theory for it implies both a need for contracting and a need for rational search rather than simple market clearing in each period a positive rate of frictional unemployment may exist in equilibrium denoted as the natural rate this unemployment is due to the frictions in the search process and imperfections in information rather than to any deficiency in aggregate demand milton friedman defined the natural rate as the level that would be ground out by the walrasian system of general equilibrium equations provided there is embedded in them the actual structural characteristics of the labor and commodity markets including market imperfections stochastic variability in demands and supplies the cost of gathering information about job vacancies and labor availabilities the costs of mobility and so on p 8 this paper reexamines the micro foundations of the natural rate in a model of labor market equilibrium in which turnover flows and imperfect information are explicitly considered workers may quit their current jobs to enter the unemployment pool in order to search among available vacancies for a more preferred position firms economize on turnover by an appropriate wage policy

sheepskin effects in the returns to education an examination of women and minorities recent confirmation of sheepskin effects in the returns to education for prime age white males has been taken as evidence of screening or signaling in the labor market the authors report evidence of sheepskin effects among women and minority males and demonstrate that they are somewhat smaller for lower diploma years but larger for higher diploma years than those of white males these are among the first broad based results confirming the frequent contention derived from signaling models that minorities have smaller returns to low productivity signals but larger returns to high productivity signals copyright 1991 by mit press

labor contracts under asymmetric information when workers are free to quit this paper examines the impact of workers ability to quit on the performance of labor contracts between workers and privately informed firms while the need to induce workers to remain with the firm necessarily lowers total welfare the effect on employment levels is to reduce the magnitude of the inefficiency due to asymmetric information whether this inefficiency is under or overemployment the model predicts that employment distortions increase with the strength of lock in effects on workers a prediction which contrasts with the results of efficiency wage models and which may help in empirical testing of labor contract theory

social security benefits and employer behavior evaluating social security early retirement benefits as a form of unemployment insurance employers often shed older workers by encouraging them to take early retirement an implicit contract model suggests that this behavior will be influenced by the social security early retirement program when demand is weak and layoffs are necessary social security benefits can act like a form of unemployment insurance effectively subsidizing workforce reductions by lowering the cost to the firm of shedding older workers since social security benefits are not subject to experience rating the result is an inefficiently high level of early retirements this paper concludes with a discussion of policies for restoring early retirements to efficient levels

general productivity growth in a theory of quits and layoffs an efficient matching model of quits and layoffs is developed to account for several empirical regularities differences between quits and layoffs over the life and business cycles and across demographic groups are generated by differential rates of general productivity growth the standard approach to quits and layoffs based on wage rigidity is shown to be incapable of accounting for many of the empirical regularities although a formal test rejects a structural prediction of the efficient turnover model the specification does well in predicting both the level of and time series variation in the fraction of separations labeled quits

does a foot in the door matter white nonwhite differences in the wage return to tenure and prior workplace experience author affiliation arthur h goldsmith department of economics washington and lee university lexington va 24450 usa goldsmitha wlu edu corresponding authordarrick hamilton milano the new school of management and urban policy 72 fifth avenue new york ny 10011 usa hamiltod newschool eduwilliam darity jr department of economics university of north carolina at chapel hill chapel hill nc 27514 usa darity unc edu this work is supported by grant 0213838 from the national science foundation acknowledgment we are grateful for suggestions provided by barry hirsch and seminar participants at bond university gold coast australia in addition we are grateful for comments from julie hotchkiss co editor for this journal and two anonymous referees this paper was presented at the 2004 southern economic association meetings 1 overviewthere is an extensive literature documenting the lower wages of black and latino workers relative to white workers in the united states the explanations for these racial and ethnic wage disparities have ranged from differential accumulation of human capital to labor market discrimination 1 farmer and terrell 1996 and more recently lewis and terrell 2001 extend this literature by advancing a hypothesis which we summarize as the theory of ability misperception this hypothesis explains how group membership may differentially influence the gains associated with workplace experience and hence the relative wages of black and latino workers over the course of their working lifecycle their basic idea is twofold first employers believe nonwhite employees acquired fewer skills on prior jobs than white workers thus employers will reward additional experience with prior employers to a greater extent for white workers than for nonwhite workers we refer to this hypothesis as proposition 1 this first proposition falls under the umbrella of statistical discrimination which explains wage inequality as a result of employers offering nonwhite workers lower wages as a result of employer reliance on their perception that the distribution of skills for nonwhite workers is worse than that of white workers second as employers directly observe nonwhite workers on the job they come to realize that their perceptions concerning the distribution of skills for nonwhite workers were incorrect and consequently they have underrated the ability of nonwhite employees this learning leads employers to update their assessment of the relative productivity of nonwhite workers therefore racial ethnic differences in the return to additional tenure or seniority with the current employer will be smaller than the racial ethnic difference in the return to prior experience when proposition 1 holds this prediction constitutes proposition 2 of the theory of ability misperception in addition we introduce a third proposition or a strong form of proposition 2 which suggests that the returns to additional tenure for nonwhite employees will actually exceed that of white employees thus proposition 2 requires that the difference in returns to additional tenure with the current employer between nonwhite and white workers be smaller than the difference in returns to prior experience while proposition 3 requires that nonwhite workers actually receive a higher return for tenure the purpose of this paper is to advance the existing empirical literature aimed at evaluating the validity of the propositions central to the theory of ability misperception using data drawn from the multi city study of urban inequality mcsui if farmer and terrell 1996 and lewis and terrell 2001 are correct that employers underestimate the skills of nonwhite workers before directly observing them at the worksite then many capable nonwhite applicants will be denied work and if employed will suffer undue economic losses

labor turnover wage structures and moral hazard the inefficiency of competitive markets a multiperiod general equilibrium model of the labor market is developed in which risk averse workers are faced with job related uncertainty and labor turnover is costly if a worker is unlucky and suffers a bad job match he quits and joins another firm hoping that he will like its work environment more because the quality of a job match is unobservable workers cannot insure against the risk of a bad match the firm provides implicit insurance against job dissatisfaction typically by paying workers more than their net marginal products in their early years with the firm and less subsequently since the probabilities of the insured against events the quit rates over time are affected by the amount of such insurance provided this implicit insurance is characterized by moral hazard individuals quit when in the absence of insurance they would not the equilibrium contract balances out efficiency in risk bearing with efficiency in turnover incentives we show that the equilibrium contract is not con