statistical discrimination and the early career evolution of the black white wage gap this article develops and tests a simple dynamic model of statistical discrimination the model improves on earlier static models both by allowing ex ante uncertainty about worker productivity to be resolved as on the job performance is observed and by generating several testable empirical implications these predictions are tested using a sample of young men from the national longitudinal survey of youth producing mixed evidence for the model the main empirical result is that no black white wage gap exists at labor force entry but that one develops as experience accumulates mainly because blacks reap smaller gains from job mobility

evaluating welfare reform in the united states this paper reviews the economic literature on welfare reform over the 1990s a brief summary of the policy changes is followed by a discussion of the methodological techniques that analyze the effects of these changes on outcomes the paper then critically reviews the econometric and experimental literature on caseload changes labor force changes poverty and income changes and family formation changes a growing body of evidence suggests that recent policy changes have influenced economic behavior and well being one particular set of new style welfare programs seems to show especially promising results with significantly increased work and earnings and reduced poverty

payment changes and default risk the impact of refinancing on expected credit losses abstract this paper analyzes how access to credit and the path of mortgage rates can affect borrower credit risk this is a crucial issue for evaluating refinance programs as a form of loss mitigation and it became prominent in the debates around the treasury department s home affordable refinance program harp these debates exposed gaps in the literature on the relationship between credit performance and changes in borrowers monthly mortgage payments since then several new studies have attempted to fill these holes each pursing a different methodology in this paper we review the relevant debates and look at what downward adjustments in prime adjustable rate mortgages can tell us about modifications of prime fixed rate mortgages we argue that this method better addresses the various sampling biases that plague all attempts to predict harp s impact our analysis indicates that typical monthly payment reductions under harp would reduce credit losses by 56 basis points

collateral damage refinancing constraints and regional recessions in the current structure of the u s residential mortgage market a decrease in property values may make it very difficult for homeowners to refinance their mortgages to take advantage of declining interest rates in this papr we show that this form of collateral constraint has greatly reduced refinancing in statds with depressed property markets we outline the interaction between regional recessions and refinancing constraints when adverse economic shocks cause property values in a region to decrease the damage to the collateral makes it difficult or impossible for some homeowners to obtain new mortgages in the recent period this has meant that homeowners in economically depressed regions have been unable to refinance their mortgages to take advantage of declining interest rates this inability to refinance has further economic impacts on the region through lowering the wealth and the discretionary income of local homeowners thereby deepening the regional recession while the possible link between regional declines in property values and refinancing activity has been understood for some time for example monsen 1992 the subject has received very little empirical attention we provide the first quantitative assessment of the impact of constraints arising from regional property market dynamics on refinancing activity to accomplish this we use a new data set on more than thirty five thousand individual mortgages the sample consists of all mortgages serviced by chemical bank with originations between june 1989 and may 1992

anticipated discrimination choices and performance experimental evidence abstract this paper studies experimentally whether potential perceived discrimination affects decisions in a labor market setting with different stereotypes participants are assigned to a seven person group and randomly allocated a role as a firm or worker in each group there are five workers and two firms the only information firms have about each worker is a self selected avatar male female or neutral representing a worker s gender each firm then decides which worker to hire female workers react to potential discrimination when they know the task is math related but not otherwise men choose similar avatar patterns regardless of the task men do perform at much higher levels in the math related task but there is no difference in performance in the emotion recognition task where there is a strong female stereotype

endogenous inequality in integrated labor markets with two sided search we consider a market with red and green workers where labels are payoff irrelevant workers may acquire skills skilled workers search for vacancies while firms search for workers a unique symmetric equilibrium exists in which color is irrelevant there are also asymmetric equilibria in which firms search only for green workers more green than red workers acquire skills skilled green workers receive higher wages and the unemployment rate is higher among skilled red workers discrimination between ex ante identical individuals arises in equilibrium and yet firms have perfect information about their workers and strictly prefer to hire minority workers

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

what went wrong the erosion of relative earnings and employment among young black men in the 1980s this paper shows a widening in black white earnings and employment gaps among young men from the mid 1970s through the 1980s earnings gaps increased most among college graduates and in the midwest while gaps in employment population rates grew most among dropouts we attribute the differential widening to shifts in demand for subgroups due to shifting industry and regional employment the falling real minimum wage and deunionization the growing supply of black to white workers that was marked among college graduates and to increased crime among dropouts the different factors affecting subgroups highlight the economic diversity of black americans

household labor supply and welfare participation in sweden using a sample of swedish households we estimate a household labor supply model assuming that preferences for consumption and leisure can be described by a direct translog utility function the labor supply and welfare participation decisions are treated as a discrete choice problem and we assume that these choices follow a simple conditional logit rule in addition we allow unobserved individual specific effects to be correlated across alternatives we assume that these unobserved effects are drawn from a discrete distribution and the correlation across alternatives is modeled using factor loading techniques classification error in hours is allowed for by using a multiplicative measurement error specification the estimates from the structural model yield inelastic labor supply among husbands and positive wage elasticity for wives further the cross elasticities are close to zero

racial disparities in job finding and offered wages abstractthe extent to which discrimination can explain racial wage gaps is one of the most divisive issues in the social sciences using a newly available data set this paper develops a simple empirical test that under plausible but not innocuous conditions provides a lower bound on the extent of discrimination in the labor market taken at face value our estimates imply that differential treatment accounts for at least one third of the black white wage gap we argue that the patterns in our data are most naturally rationalized through a search matching model in which employers statistically discriminate on the basis of race when hiring unemployed workers but learn about their marginal product over time

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

racial discrimination in the labor market theory and empirics we review theories of race discrimination in the labor market taste based models can generate wage and unemployment duration differentials when combined with either random or directed search even when strong prejudice is not widespread but no existing model explains the unemployment rate differential models of statistical discrimination based on differential observability of productivity across races can explain the pattern and magnitudes of wage differentials but do not address employment and unemployment at their current state of development models of statistical discrimination based on rational stereotypes have little empirical content it is plausible that models combining elements of the search models with statistical discrimination could fit the data we suggest possible avenues to be pursued and comment briefly on the implication of existing theory for public policy jel j15 j31 j64 j71

welfare transfers in two parent families labor supply and welfare participation under afdc up this paper examines the effect of cash transfers and food stamp benefits on family labor supply and welfare participation among two parent families the aid to families with dependent children unemployed parent program has provided cash benefits to two parent households since 1961 despite recent expansions little is known about the program s effect on labor supply and welfare participation i develop a model of family labor supply in which hours of work for the husband and wife are chosen to maximize family utility subject to a family budget constraint accounting for afdc up benefits and other tax and transfer programs the husband s and wife s labor supply decisions are restricted to no work part time work and full time work maximum likelihood techniques are used to estimate parameters of the underlying hours of work and welfare participation equations the estimates are used to determine the magnitude of the work disincentive effects of the afdc up program and to simulate the effects of changes in afdc up benefit and eligibility rules on family labor supply and welfare participation the results suggest that labor supply and welfare participation among two parent families are highly responsive to changes in the benefit structure under the afdc up program

some defaults are deeper than others understanding long term mortgage arrears abstract the 2007 2008 financial crisis yielded a significant number of delinquent mortgage loans which ordinarily would have faced foreclosure and repossession however given the negative externalities of repossession policy response has shifted towards forbearance and mortgage modification which has led to longer spells in default for delinquent mortgage holders it is therefore imperative to move beyond binary models of default towards an understanding of the factors that drive the depth of default spells exploiting a highly detailed dataset on financially distressed households in ireland in 2012 and 2013 we are able to identify the impact of a range of current household level factors generally not available in loan level studies of mortgage default on the probability of entering early and deep states of mortgage default our results suggest that high loan to value ratios consumer credit growth shocks to mortgage affordability and unemployment should all trigger serious concerns among policy makers regarding subsequent stability in the mortgage market with these measures all shown to have differentially large impacts on entry to deep relative to early stage arrears

incentive effects of the u s welfare system a review the author would like to acknowledge support for prior work on this topic from the u s department of health and human services and helpful comments from three anonymous referees rebecca blank howard chernick john fitzgerald irwin garfinkel peter gottschalk edward gramlich david greenberg judith gueron james heckman v joseph hotz robert hutchens michael keane frank levy larry mead michael murray robert plotnick anuradha rangarajan philip robins howard rolston jeffrey smith and daniel weinberg all opinions and errors are those of the author alone

counteroffers and efficiency in labor markets with asymmetric information this article considers the effect of offer matching on labor market outcomes when the current employer has better information about his worker s productivity than potential employers previous research found that when current employers have better information than potential employers the latter use job assignment to infer an employed worker s qualifications as a result assignment of workers to jobs is inefficient i find that when current employers can match outside offers the equilibrium outcome may be efficient i analyze the effect of the asymmetric information on investment in human capital made by employers and workers and find these investment levels to be first best

job market signalling stereotype threat and counter stereotypical behaviour i introduce stereotype threat in a multiple productivity signalling model existence of multiple self fulfilling stereotypes which can generate statistical discrimination is more likely if there is less variance in the ability distribution a low endogenously correct stereotype about a group forces higher ability group members to choose a higher productivity and a higher separating signal thereby engaging in counter stereotypical behaviour this counter stereotypical behaviour causes the remaining partially pooling group to have lower average productivity reinforcing the negative stereotype the co existence of stereotype threat and counter stereotypical behaviour can explain the simultaneity of lower wages and higher education attainment in a group facing labour market discrimination resume signaux sur le marche du travail menace de stereotype et comportement contre stereotype l auteur introduit une menace de stereotype dans un modele de signalisation des multiples productivites l existence de multiples stereotypes porteurs d autorealisation qui peuvent engendrer la discrimination statistique est davantage vraisemblable s il y a moins de variance dans la repartition des habiletes un stereotype depreciatif endogenement correct a propos d un groupe force les membres du groupe a hautes habiletes a choisir des signaux de haute productivite et qui les separent grandement et donc a s engager dans des comportements contre stereotypiques ce comportement contre stereotypique entraine une productivite moyenne plus faible pour le reste du groupe partiellement agrege ce qui renforce le stereotype negatif la coexistence de menace de stereotype et de comportement contre stereotypique peut expliquer la simultaneite de salaires plus bas et de statut educationnel plus eleve dans un groupe faisant face a la discrimination dans le marche du travail

paying to queue a theory of locational differences in nonunion wages abstract traditional theories of the effect unions have on nonunion wages are difficult to reconcile with firm and worker mobility we show how differences in nonunion wages can persist in a two city search model nonunion wage differences across cities are driven by transition rates into the union sector should union queues form in the nonunion sector union power decreases nonunion wages as workers are willing to take lower wages to line up for union jobs however if queues are formed in the unemployed sector union power increases nonunion wages as nonunion firms pay premiums to induce workers to leave the queue

default probabilities for mortgages abstract models now exist for valuing the default option embedded in a mortgage implicitly these models generate all the information necessary to determine the probability of default in any possible situation economists and policymakers may find such default probabilities considerably more interesting than the nonobservable dollar value of the default option this paper provides the analytical procedure necessary to calculate such probabilities and presents a wide range of results the decision to terminate a mortgage results in the loss of the options to default or prepay in the future because of this consideration the price of a house must fall below the point of zero equity before a rational borrower defaults we provide evidence that even in the absence of transaction costs this value of delay results in substantial levels of negative equity being observed without default occurring in fact by not accounting for the value of delay most of the current empirical literature cited in this article substantially overestimates the role of transaction costs in the decision to default

an empirical model of discrete and continuous choice in family labor supply because of the interdependent nature of family labor supply decisions the nonnegativity constrai nt on women s hours of work will spill over into other consumption an d labor supply decisions of the family here the author develops an e conometric model of family labor supply that captures this spillove r while addressing the usual censoring issues as well the model i s based on a flexible direct utility function and permits unobservabl e differences in tastes the model is estimated by the maximum likeli hood method on a sample of about 1 200 families from the panel study of income dynamics copyright 1987 by mit press

assessing empirical approaches for analyzing taxes and labor supply recent surveys on the labor supply responses of men document a divergence in the estimates of substitution and income effects obtained using various estimation approaches generally studies accounting for nonlinear tax schedules in a static setting via a piecewise linear approach produce estimates that typically imply higher substitution and lower income responses than are suggested by empirical work applying other approaches this paper demonstrates that maximum likelihood estimation of a consumer choice problem with nonlinear budget sets implicitly relies on the satisfaction of inequality constraints that translate into behaviorally meaningful restrictions these constraints arise not as a consequence of economic theory but instead as a requirement to create a properly defined statistical model in the analysis of piecewise linear budget sets the implicit constraints required by maximum likelihood in estimation amount to imposition of slutsky conditions at all wage income combinations associated with kink points in the analysis of differentiable budget sets the tacit constraints invoked by maximum likelihood also involve inequality restrictions on slutsky terms the empirical work presented in this study supports the contention that these implicit constraints play a major role in explaining the discrepancies in estimates found in the literature on men s labor supply

mommy tracks and public policy on self fulfilling prophecies and gender gaps in hiring and promotion abstract consider a model with two types of jobs the profitability of hiring a worker to a fast track job depends not only on his or her observable talent but also on incontractible effort we investigate whether self fulfilling expectations may lead to higher hiring or promotion standards for women if employers expect women to do more household work than men thereby exerting less effort in their paid job then women must be more talented to make it profitable to hire them specialization in the family will then result in women doing most of the household work such self fulfilling prophecies can be defeated by affirmative action or family policy however it is unlikely that temporary policy can move the economy to a symmetric equilibrium policy must be made permanent anti discrimination policy need not enhance efficiency and from a distribution viewpoint this is a policy with both winners and losers

the labor market impact of state level anti discrimination laws 1940 1960 by the time congress passed the 1964 civil rights act 98 of non southern blacks 40 of all blacks already resided in states with fair employment laws prohibiting labor market discrimination using census data from the integrated public use microdata series the author assesses the impact of fair employment legislation on black workers relative income unemployment labor force participation migration and occupational and industrial distributions in general the fair employment laws adopted in the 1940s appear to have had larger effects than those adopted in the 1950s and the laws had considerably smaller effects on the labor market outcomes of black men than on those of black women

a theory of collective reputations with applications to the persistence of corruption and to firm quality the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by his past behaviour and because his track record is observed only with noise by the group s past behaviour as well the paper thus studies the joint dynamics of individual and collective reputations and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality 1 collective reputations collective reputations play an important role in economics and the social sciences countries ethnic racial or religious groups are known to be hard working honest corrupt hospitable or belligerent some firms enjoy substantial rents from their reputations for producing high quality products some departments are reported to treat their faculty or students fairly the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by her past behaviour and because her track record is observed only with noise by the group s past behaviour as well the paper studies the joint dynamics of individual and collective reputations in a model in which current generations are progressively replaced by new ones and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature see section 2 for a detailed comparison with the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality let us spell out the building blocks of our theory in more detail a a group s reputation is only as good as that of its members each member is characterized by individual traits such as talent diligence or honesty past individual behaviour conveys information about these traits and generates individual reputations

an equilibrium search matching model of discrimination abstract a model in which firms have incomplete information about workers at the hiring stage is shown to entail discrimination as the unique stable equilibrium outcome even if no agents have a taste for discrimination and groups are ex ante identical groups which are discriminated against e g blacks women earn lower wages and endure longer unemployment spells

sex discrimination in labor markets the role of statistical evidence reply correlations between statistically measured wage discrimination and confidential survey reports of discrimination are used to estimate the relative importance of statistical evidence in determining womens self assessed discrimination levels statistical evidence is found to be considerably less important than other nonstatistical evidence assuming courts weigh statistical versus other evidence as individuals do the effects of making statistical evidence admissible are calculated young well educated women are predicted to be the main beneficiaries of this policy copyright 1987 by american economic association

cultural transmission and discrimination workers can have good or bad work habits these traits are transmitted from one generation to the next through a learning and imitation process which depends on parents investment in the trait and the social environment where children live if a sufficiently high proportion of employers have taste based prejudices against minority workers we show that their prejudices are always self fulfilled in steady state and minority workers end up having on average worse work habits than majority workers this leads to a ghetto culture affirmative action can improve the welfare of minorities whereas integration can be beneficial to minority workers but detrimental to workers from the majority group

discrimination and the effects of drug testing on black employment abstract a common assumption is that the rise of drug testing among u s employers must have had negative consequences for black employment i use variation in the timing and nature of drug testing regulation to identify the impacts of testing on black hiring i find that adoption of protesting legislation increases black employment in the testing sector by 7 to 30 and relative wages by 1 4 to 13 0 with the largest shifts among low skilled black men the results are consistent with ex ante discrimination and suggest that drug testing may benefit african americans by enabling nonusing blacks to prove their status to employers

a life cycle consistent empirical model of family labour supply using cross section data this paper estimates a utility maximising model of the joint determination of male and female labour supplies using a sample of married couples from the u k family expenditure survey the emphasis is on the estimation of within period preferences that are consistent with intertemporal two stage budgeting under uncertainty however the approach we adopt provides an alternative method of estimating certain aspects of life cycle behaviour to the fixed effects constant approach of heckman and macurdy 1980 macurdy 1981 and browning deaton and irish 1985 moreover it relaxes some of the underlying restrictions that are implicit in these constant models under uncertainty

mortgage default during the u s mortgage crisis this paper asks which theories of mortgage default are quantitatively consistent with observations in the united states during 2002 2010 theoretical models are simulated for the observed time series of aggregate house prices their predictions are then compared to actual default rates on prime fixed rate mortgages an out of sample test discriminates between estimated reduced forms of the two most prominent theories the test reveals that the doubletrigger hypothesis attributing mortgage default to the joint occurrence of negative equity and a life event like unemployment outperforms a frictionless option theoretic default model based on this finding a structural partialequilibrium model with liquidity constraints and idiosyncratic unemployment shocks is presented to provide micro foundations for the double trigger hypothesis in this model borrowers with negative equity are more likely to default when they are unemployed and have low liquid wealth the model explains most of the observed strong rise in mortgage default rates a policy implication of the model is that subsidizing homeowners can mitigate a mortgage crisis at a lower cost than bailing out lenders

does privatization improve job satisfaction the case of ghana this paper analyzes the impacts of privatization in ghana on the basis of a survey of 300 workers in privatized and state owned enterprises the findings indicate a significant positive relationship between privatization and job satisfaction whereas monthly wage is an important determinant of job satisfaction in state owned enterprises education and the availability of training opportunities are strong determinants in privatized enterprises the study also shows that there exists a variety of instruments to implement a privatization program smoothly

mortgage terminations heterogeneity and the exercise of mortgage options as applied to the behavior of homeowners with mortgages option theoiy predicts that mortgage prepayment or default will be exercised if the call or put option is in the money by some specific amount our analysis tests the extent to which the option approach can explain default and prepayment behavior evaluates the practical importance of modeling both options simultaneouisly and models the unobserved heterogeneity of borrowers in the home mortgage market the paper presents a uinified model of the competing risks of mortgage termination by prepayment and default considering the two hazards as dependent competing risks that are estimated jointly it also accounts for the unobserved heterogeneity among borrowers and estimates the unobserved heterogeneity simultaneously with the parameters and baseline hazards associated with prepayment and default functions our results show that the option model in its most straightfolward version does a good job of explaininig default and prepayment but it is not enouigh by itself the simultaneity of the options is very important empirically in explaining behavior the results also show that there exists significant heterogeneity among mortgage borrowers ignoring this heterogeneity results in serious errors in estimating the prepayment behavior of homeowners

a structural model of multiple welfare program participation and labor supply work on estimating the labor supply effects of high marginal tax rates in welfare programs has been hindered by the difficulty of estimating the effects of participation in multiple welfare programs simultaneously the authors solve this problem by applying methods of simulation estimation to a model of labor supply and multiple program participation the results show asymmetric wage and tax rate effects with fairly large wage elasticities of labor supply but very inelastic responses to moderate changes in cumulative marginal tax rates implying that high welfare tax rates do not necessarily induce major reductions in work effort copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

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

an economic model of welfare stigma perhaps the most basic assumption of the economic theory of consumer demand is that more is better than less virtually all of the major propositions of consumer theory can in a certain sense be derived from the assumption that goods are good interestingly however this tenet seems to be violated by the behavior of many individuals in the low income population for many turn out to be eligible for a positive welfare benefit but do not in fact join the welfare rolls for example it has been estimated that in 1970 only about 69 percent of the families eligible for afdc aid to families with dependent children participated in the program see richard michel 1980 the corresponding percentage for afdc u the program for which families with an unemployed male are eligible was only 43 percent and the participation rate in the food stamp program was only 38 percent see maurice mcdonald 1977 this phenomenon has puzzled many investigators because such individuals do not locate on the boundaries of their budget sets consequently most investigators ignore the problem when studying the effects of welfare programs on behavior in this paper this seemingly irrational rejection of an increase in income is modeled as resulting from welfare stigma that is from disutility arising from participation in a welfare program per se 1 the existence of stigma has been amply documented in the sociological literature patrick horan and patricia austin 1974 lee rainwater 1979 where interviews of recipients have often uncovered feelings of lack of self respect and negative self characterizations from participation in welfare nevertheless this phenomenon has not been modeled and many questions consequently remain when is the disutility of participation strong enough to prevent participation shouldn t we expect individuals to weigh the disutility of participation against the potential benefit in their decisions what is the elasticity of participation with respect to the potential benefit also in a slightly different vein how are the work disincentives of welfare affected by stigma these questions have been given scant attention by economists yet they are crucial for our ability to predict the impact of various welfare programs on the lowincome population here these questions are addressed by modeling nonparticipation as a utility maximizing decision the model is developed and estimated for the afdc program 2 the model posits an individual utility function containing not just disposable income but

are emily and greg more employable than lakisha and jamal a field experiment on labor market discrimination we study race in the labor market by sending fictitious resumes to help wanted ads in boston and chicago newspapers to manipulate perceived race resumes are randomly assigned african american or white sounding names white names receive 50 percent more callbacks for interviews callbacks are also more responsive to resume quality for white names than for african american ones the racial gap is uniform across occupation industry and employer size we also find little evidence that employers are inferring social class from the names differential treatment by race still appears to still be prominent in the u s labor market jel j71 j64

life cycle labor search with stochastic match quality in the united states unemployment job finding and separation rates decline as worker age increases to explain these facts we build a search and matching model of the labor market that incorporates a life cycle structure and features random match quality as well as human capital accumulation the calibrated model successfully reproduces the empirical patterns of unemployment and job transition rates over the life cycle and generates plausible wage implications we then explore the efficiency implications of the model and find that the differences between the market and planner allocations are more important for older workers

does affirmative action work caste gender college quality and academic success in india public policy in modern india features affirmative action programs intended to reduce inequality that stems from a centuries old caste structure and history of disparate treatment by gender we study the effects of one such affirmative action program an admissions policy that fixes percentage quotas common across more than 200 engineering colleges for disadvantaged castes and for women we show that the program increases college attendance of targeted students particularly at relatively higher quality institutions an important concern is that affirmative action might harm intended beneficiaries by placing them in academic programs for which they are ill prepared we find no evidence of such adverse impacts

will affirmative action policies eliminate negative stereotypes a key question concerning affirmative action is whether the labor market gains it brings to minorities can continue without it becoming a permanent fixture in the labor market the authors argue that this depends on how the policy affects employers beliefs about the productivity of minority workers they study the joint determination of employer beliefs and worker productivity in a model of statistical discrimination in job assignments the authors prove that even when identifiable groups are equally endowed ex ante affirmative action can bring about a situation in which employers correctly perceive the groups to be unequally productive ex post copyright 1993 by american economic association

family labor supply with taxes over the period 1960 1983 the proportion of federal tax revenue raised by taxation of labor supply has risen from 57 77 percent in this paper we specify and estimate a model of family labor supply which treats both federal and state taxation husbands and wives labor supply are treated jointly rather than in aseparate manner as in previous research a method to calculate the virtual wage for nonworking spouses is used within a utility maximizing framework to treat correctly the joint family labor supply decision joint family efforts are found to be important the efficiency cost deadweight loss of labor taxation is estimated to be 29 6 of tax revenue raised the effect of the new 10 deduction to ease the marriage tax for working spouses leads to a prediction of 3 8 increase in wives labor supply and a 9 decrease in husbands labor supply overall taxes paid are predicted to decrease by 3 4 this abstract was borrowed from another version of this item

the rise in student loan defaults abstract we examine the rise in student loan defaults in the great recession by linking administrative student loan data at the individual borrower level to student loan borrowers individual tax records a blinder oaxaca style decomposition shows that shifts in the composition of student loan borrowers and the massive collapse in home prices during the great recession can each account for approximately 30 of the rise in student loan defaults falling home prices affect student loan defaults by impairing individuals labor earnings especially for low income jobs by contrast when comparing the default sensitivities of homeowners and renters we find no evidence that falling home prices affect student loan defaults through a home equity based liquidity channel the income based repayment ibr program introduced by the federal government in the wake of the great recession reduced both student loan defaults and their sensitivity to home price fluctuations thus providing student loan borrowers with valuable insurance against negative shocks

reconciling theory and empirics on the role of unemployment in mortgage default abstract empirical models of mortgage default typically find that the influence of unemployment is negligible compared to other well known risk factors such as high borrower leverage or low borrower fico scores this is at odds with theory which assigns a critical role to unemployment in the decision to stop payment on a mortgage we help reconcile this divergence by employing a novel empirical strategy involving simulated unemployment histories to measure the severity of attenuation bias in loan level estimations of default risk due to a borrower becoming unemployed attenuation bias results because individual data on unemployment status is unobserved requiring that a market wide unemployment rate be used as a proxy attenuation is extreme with our results suggesting that the use of an aggregate unemployment rate in lieu of actual borrower unemployment status results in default risk from a borrower becoming unemployed being underestimated by a factor more than 100 in addition our analysis indicates that adding the unemployment rate as a proxy for the missing borrower specific unemployment indicator does not improve the accuracy of the estimated model over the specification without the proxy variable included hence aggregate portfolio level risk estimates for mortgage guarantors such as fha also are not improved these views represent those of the authors and not necessarily those of the federal reserve bank of new york or the federal reserve system this is a revised version of a paper that previously circulated under the title unemployment and unobserved credit risk in the fha single family mortgage insurance fund nber working paper no 18880 john grigsby provided excellent research assistance we appreciate the helpful comments of andrew haughwout wilbert van der klaauw the editor stuart rosenthal and referees but remain responsible for any errors

quantity rationing and concavity in a flexible household labor supply model in the first part of this paper the authors derive explicit expressions for the direct utility functions conditional demand equations and concavity conditions in both price income and quantity space for the demand system introduced by hausman and ruud 1984 these results are then used in an empirical static family labor supply model in which kinked budget constraints and unemployment benefits are taken into account for both spouses imposition of concavity is necessary for consistent estimation and the concavity constraint appears to be binding copyright 1990 by mit press

structural models of family labor supply a discrete choice approach a static neoclassical structural model is presented explaining labor supply of both spouses in two adult households in the netherlands family preferences are described with a direct translog utility function with the husbands leisure the wifes leisure and family income as its arguments we assume that the choice set of each family is finite account is taken of the dutch tax and benefits system we allow for hours restrictions and random preferences and account for unobserved wages of nonworkers the models are estimated using smooth simulated maximum likelihood results based upon dutch cross section data from 1987 are illustrated by confidence intervals for elasticities and by several policy simulations excerpt

can t pay or won t pay unemployment negative equity and strategic default this paper uses new data from the psid to quantify the relative importance of negative equity versus ability to pay in driving mortgage defaults between 2009 and 2013 these data allow us to construct household budgets sets that provide better measures of ability to pay changes in ability to pay have large estimated effects job loss has an equivalent effect on the propensity to default as a 35 decline in equity strategic motives are also found to be quantitatively important as we estimate more than 38 of households in default could make their mortgage payments without reducing consumption received september 29 2015 editorial decision june 2 2017 by editor philip strahan authors have furnished an internet appendix which is available on the oxford university pressweb site next to the link to the final published paper online

firms choice of method of pay using data from the bls industry wage survey the author tests the theory that firms choose their methods of pay by balancing the gains from more precise links between performance and pay against m

breaking free of a stereotype should a domestic brand pretend to be a foreign one consumers in many emerging markets exhibit a pronounced preference for western and global brands while domestic brands are often associated with a cheap but low quality image frustrated with the negative country of origin coo stereotype imposed on them many domestic brands from emerging markets follow a variety of approaches to disguise their coo and pretend to be foreign this paper studies the strategic aspects of this phenomenon we consider an experience good market where consumers learn about each brand s quality using its coo as a prior each firm can invest in product quality or coo dissociation the former generates better quality signals while the latter simply masks the firm s coo identity the analysis reveals a few main insights sharing a reputation leads to a common good problem where firms free ride on each other s quality investments as a high quality firm dissociates itself from the stereotype it ceases to contribute to the coo image but also prevents its low quality peers from free riding on it this incurs a negative direct effect but a positive strategic effect on the group image consequently a country s coo image may actually improve when more high quality brands shun their identities and pretend to be foreign in equilibrium coo image improves monotonically as firms become more efficient in providing quality however the prevalence of coo dissociation may first increase then decrease we discuss the implications of these results for emerging market brands as well as policy makers

the impact of the london bombings on the well being of adolescent muslims we exploit the timing of the london bombings coinciding with a large scale national survey of adolescents to identify the impact of extremist islamic terror attacks on the well being of adolescent muslims our analysis reveals interesting gender differences we find evidence of a decline in the happiness of muslim teenage girls after the bombings which is also accompanied by a rise in expectations of facing discrimination in the labour market these findings are robust to several falsification tests on the other hand we fail to uncover compelling evidence of any impact of the bombings on muslim teenage boys

statistical discrimination with employment criteria this paper develops the theory of statistical discrimination in the form of unequal employment criteria and interviews workers differ by imperfectly observed quit rate profit maximization leads firms to set stricter employment criteria or interview fewer workers from the group with a greater proportion of high quit rate workers the theory can explain unemployment differences between groups and the total exclusion of a group from a labor market although statistical discrimination constitutes economic discrimination according to a criterion of harm to a group it may or may not be efficient because of the presence of externalities copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

a theory of sex discrimination abstract in this paper we put forward a theory that explains the way in which social attitudes towards sex discrimination in the labour market have evolved we suggest that sex discrimination in the labour market can generate both costs and benefits and that a sizeable part of these costs can be ameliorated through marriage the fact that marriage is no longer a pervasive and stable institution has contributed to the awareness that sex discrimination in the labour market is a major social problem

the economics of rotating savings and credit associations supported by the center for energy policy studies m i t and the japanese corporate associates program at the kennedy school of government

the dynamic implications of search discrimination abstract blacks have both lower employment rates and lower earnings than whites further the earnings gap increases as workers age this paper focuses on explaining differences in black white earnings profiles and how government interventions work in a dynamic environment three contributions are made firstly multiple equilibria may exist solely because of a coordination failure by firms even without taste discrimination blacks may play no role in their poor labor market outcomes secondly search discrimination leads to economic discrimination against the non discriminated group reverse discrimination finally in response to a quota program whites may find it optimal to subsidize black investment

does job testing harm minority workers evidence from retail establishments because minorities typically fare poorly on standardized tests job testing is thought to pose an equality efficiency trade off testing improves selection but reduces minority hiring we develop a conceptual framework to assess when this trade off is likely to apply and evaluate the evidence for such a trade off using hiring and productivity data from a national retail firm whose 1 363 stores switched from informal to test based worker screening over the course of one year we document that testing yielded more productive hires at this firm raising mean and median tenure by 10 or more consistent with prior research minorities performed worse on the test yet testing had no measurable impact on minority hiring and productivity gains were uniformly large among minority and nonminority hires these results suggest that job testing raised the precision of screening without introducing additional negative information about minority applicants most plausibly because both the job test and the informal screen that preceded it were unbiased

displacement asymmetric information and heterogeneous human capital gibbons and katz s asymmetric information model of the labor market predicts that wage losses following displacement should be larger for layoffs than for plant closings this was borne out in their empirical work in this article we examine how the difference in wage losses across plant closing and layoff varies with race and gender we find that the basic prediction by gibbons and katz holds only for white males we augment their asymmetric information model with heterogeneous human capital and show that this augmented model can match the data

the econometrics of nonlinear budget sets traditional empirical analysis of consumer demand has usually made the assumption of linear budget sets that is the consumer is assumed to purchase any desired quantity at a constant price subject to a budget constraint the major exception to this framework is the analysis of demand when some goods are rationed 2 in the rationed case the price is constant up to a quantity limit in contrast to the rationed case here i consider the situation where the price varies with the amount of the good purchased empirical situations with nonconstant prices come readily to mind and of course they have received much recent attention from theorists since mirrlees 44 paper on optimal nonlinear taxation the following examples are meant to give a partial listing of cases when nonlinear budget sets occur i electricity prices many electric utilities engage in declining block pricing that is the marginal price of successive kwh s of electricity decrease at a given number of points determined by total demand thus the budget set is piecewise linear houthakker 36 was the first to propose an approach to this problem taylor 51 analyzes the problem at length and hausman kinnucin and mcfadden 31 use an instrumental variables estimator to provide consistent estimates of the demand function

housing price bubbles new supply and within city dynamics abstract although there is broad recognition that cities differ in their tendency to experience house price bubbles most studies assume away any possibility of within city heterogeneity in response to a bubble we develop a model that suggests that this assumption may be appropriate when markets are rising but can be far from reality on the bust side of a bubble during a housing boom new construction and related supply adjustments by developers ensure stable relative prices between low and high quality segments of the housing market on the bust side of a bubble however reduced housing starts allow demand side forces and mortgage default to create pressure for relative prices to diverge across market segments absent a change in technology as markets recover and new construction rebounds relative prices should revert back to pre crash levels evidence based on 2000 2013 single family home sales in phoenix arizona supports this modeling framework additional evidence also suggests that high rates of mortgage default contributed to divergence in relative prices when markets crashed

cross section estimation of the matching function evidence from england and wales this paper analyses how the levels of unemployment and vacancies affect the rate at which unemployed workers find employment the worker firm matching function in particular we test the robustness of previous empirical work by checking whether we obtain the same estimated function using cross section data rather than aggregate time series data we find strong evidence of constant returns to scale similar to previous work we also find larger cities have higher wages this provides indirect support for increasing returns but where those returns are taken in the form of better quality matches

how does home equity affect mobility abstract the impact of the housing crash on household mobility is theoretically ambiguous households that have little or negative equity are less likely to move because the proceeds from the sale of the home may not be large enough to pay off the original mortgage and provide a sufficient down payment on a new home on the other hand at sufficiently negative levels of home equity household mobility may actually increase through the foreclosure channel in this paper we develop and empirically test a model that incorporates both of these mechanisms our empirical results based on data for florida homeowners provide evidence of a non monotonic relationship between home equity and mobility although default induced mobility did increase following the financial crisis this increase did little to offset the substantial decline in voluntary moves due to home equity lock in we find that on net household mobility declined by roughly 25 in our sample because of reductions in equity

arbitraging a discriminatory labor market black workers at the ford motor company 1918 1947 the 1918 47 employee records of the ford motor company provide a rare opportunity to study a firm willing to hire black workers when similar firms would not the evidence suggests that ford did profit from discrimination elsewhere but not by paying blacks less than whites an apparent wage equity constraint prevailed resulting in virtually no racial variation in wages inside ford an implication was that blacks quit ford jobs less often than whites holding working conditions constant arbitrage profit came from exploiting this nonwage margin as ford placed blacks in hot dangerous foundry jobs where quit rates were generally high

information learning and wage rates in low income rural areas in this essay we present evidence that employers in rural areas of developing countries have imperfect information with regard to the productivity of heterogeneous workers in addition to obtaining direct measures of the completeness of employer information we consider the implications of information asymmetries for the structure of casual labor markets we then evaluate the extent to which casual labor markets do in fact exhibit these attributes we find that 1 there is adverse selection out of the time rate labor market 2 employers discriminate statistically given two workers with different observed characteristics but the same actual productivity the worker from the group with the higher average productivity will have a higher wage 3 employers exhibit learning over time the extent of employer ignorance is negatively related to labor market exposure on the part of the workers and 4 calorie consumption affects productivity but is not rewarded in the time rate labor market in concluding we argue that an analysis of wage and employment patterns and the implications of these patterns for human capital investment in rural areas of developing countries that ignored the role of information problems could yield misleading conclusions

statistical discrimination and efficiency this paper asks whether statistical discrimination is a market failure i consider the problem for a utilitarian social planner who operates in an environment that can generate statistical discrimination as an equilibriumphenomenon it is found that there are potential efficiency gains from discrimination in terms of reduced mismatch between workers and jobs whether the solution to the planning problem involves discrimination depends on the trade off between the informational gains of specialization and the losses in terms of increased investment costs

trade unions v statistical discrimination theory and application to post apartheid south africa a simple model of statistical discrimination is analyzed which captures some stylized facts of the south african labor market it shows that this type of discrimination disappears when the wage rates are determined by efficient bargaining between a representative firm and a union with endogenous membership this may explain why the wage gap between black and white workers in post apartheid south africa is smaller among unionized workers than among non unionized ones

a general equilibrium model of statistical discrimination we study a general equilibrium model with endogenous human capital formation in which ex ante identical groups may be treated asymmetrically in equilibrium the interaction between an informational externality and general equilibrium effects creates incentives for groups to specialize discrimination may arise even if the corresponding model with a single group has a unique equilibrium the dominant group gains from discrimination rationalizing why a majority may be reluctant to eliminate discrimination the model is also consistent with reverse discrimination as a remedy against discrimination since it may be necessary to decrease the welfare of the dominant group to achieve parity

intra family distribution of paid work time this article analyses the intra family distribution of paid work time in five european countries france germany italy spain and the uk to that end we formulate a collective model which allows us to characterize the efficient labour supply decisions of each spouse this two equation model is then simultaneously estimated by using national panel data drawn from the european community household panel echp 1994 2001 empirical results clearly show that in all sample countries the labour supply of wives is affected by own wages household and own nonlabour incomes and the number of children whereas evidence for husbands differs across countries

wages employment and statistical discrimination evidence from the laboratory i introduction while taste based discrimination becker 1957 is driven by prejudice research on statistical discrimination attempts to explain differential treatment of individuals unrelated to prejudice in essence statistical discrimination results when the actual or assumed statistical properties of a group are applied to anyone belonging to that group differential treatment based on lower average outcomes of one s group e g minorities females was considered a starting point for modeling of statistical discrimination see phelps 1972 however labor market researchers then considered that statistical discrimination could result from measures other than the average outcomes of one s group see aigner and cain 1977 lundberg and startz 1983 theoretical models have explored various reasons why statistical discrimination might arise in varied contexts most notable are the models based on differential screening or communication costs cornell and welch 1996 lang 1986 noisier productivity signals see discussion in aigner and cain 1977 or incomplete information lundberg and startz 1983 1 field studies some of which involve experimental manipulations have uncovered evidence of statistical discrimination in mortgage lending ladd 1998 auto sales ayers and siegelman 1995 goldberg 1996 harless and hoffer 2002 sports card price negotiations list 2004 law enforcement decisions applebaum 1996 exam grading hanna and linden 2012 taxi fare negotiations castillo et al 2013 and vehicle repair estimates gneezy and list 2006 in labor markets some discrimination may be due to factors other than productivity characteristics neumark 1999 but the evidence for statistical discrimination based on race has been elusive see altonji and pierret 2001 identifying statistical discrimination from field data is complicated by the fact that it may arise as first moment or second moment statistical discrimination and they are difficult to disentangle empirically more controlled laboratory studies have also examined statistical discrimination anderson and haupert 1999 castillo and petrie 2010 davis 1987 dickinson and oaxaca 2009 fershtman and gneezy 2001 masclet peterle and larribeau 2012 2 findings from these laboratory studies indicate that statistical discrimination may result from aversion to risk mistaken stereotypes biased probability assessments or incomplete information the benefit of the laboratory approach is our ability to control and cleanly identify the source of the discrimination if it exists whether taste based or statistical discrimination is most always measured along a single dimension such as vehicle pricing labor market wages group choice or job assignments 3 however in many instances multiple avenues for discrimination exist simultaneously and to focus on only one may produce a systematically biased view of the prevalence of statistically based discrimination 4 in this paper we examine statistical discrimination in a controlled experimental environment statistical discrimination in our study can only be based on productivity distribution risk attached to worker groups we not only cleanly separate taste based from statistical discrimination but we also cleanly isolate second moment statistical discrimination in a way not possible from field data building on dickinson and oaxaca 2009 our key contribution is to examine an environment in which discrimination may be exercised simultaneously along the dimensions of both wages and employment rates this more closely approximates the field environments we hope to study where discrimination may exist in terms of labor market wages and or hiring practices auto sales prices and or sales rates mortgage rates and or home sales as in dickinson and oaxaca 2009 subjects negotiate in a simulated labor market where worker subjects are given an induced common knowledge productivity distribution

statistical discrimination productivity and the height of immigrants building on the economic research that demonstrates a positive relationship between height and worker ability the author compares wage returns to height for immigrants and for natives to explore possible explanations for the positive wage height gradient using multiple data sets the article presents a robust empirical finding that the wage gains associated with height are almost twice as large for immigrants as for native born individuals this wage relationship occurs because the productivity gap between tall and short immigrants is greater than the productivity gap between tall and short native born workers the author next tests for the possibility that in the relative absence of other sources of information about immigrants employers place more importance on height for immigrants than for native born individuals the evidence does not support the hypothesis of statistical discrimination based on height

affirmative action in a competitive economy abstract we consider a model of endogenous human capital formation with competitively determined wages discrimination is sustainable in equilibrium in the presence of two distinguishable but ex ante identical groups of workers an affirmative action policy consisting of a quota may fail in the sense that there still may be equilibria where groups are treated differently however the incentives to invest for agents in the discriminated group are improved by affirmative action if the initial equilibrium is the most discriminatory equilibrium in the model without the policy the welfare effects are ambiguous it is possible that the policy makes the intended beneficiaries worse off even if the starting point is the most discriminatory equilibrium the expected payoff may decrease for all agents in the target group

risk sharing and efficiency implications of progressive pension arrangements the present paper aims to quantify the welfare effects of progressive pension arrangements in germany starting from a purely contribution related benefit system we introduce basic allowances for contributions and a flat benefit fraction since our overlapping generations model takes into account variable labor supply borrowing constraints as well as stochastic income risk we can compare the labor supply the liquidity and the insurance effects of the policy reform our simulations indicate that for a realistic parameter combination an increase in pension progressivity would yield an aggregate efficiency gain of more than 2 percent of resources however such a reform would not be implemented because it would not find political support of the currently living generations

work incentives in the afdc system an analysis of the 1981 reforms the road to welfare reform increasingly appears to be one of the rockier paths the united states has traversed indeed by all outward appearances it is not even clear whether the current path runs uphill or downhill as far as work incentives in the welfare system are concerned economists of all political persuasions from milton friedman to james tobin have agreed that the uphill direction is that which leads to lower tax rates i e lower benefit reduction rates however as with free trade the near unanimity of opinion among economists has strangely only occasionally persuaded a majority of the nation s representatives to vote to go uphill the legislative history so illustrates from 1935 when the aid to families with dependent children afdc program was enacted to the 1967 social security amendments the tax rate in the program was 100 percent that is benefits were reduced by one dollar for every extra dollar earned with the 1967 amendments congress lowered the tax rate to 67 percent and in the heady atmosphere of the 1960 s it was expected that further progress in this direction would be made and that the tax rate would be lowered further indeed the family assistance plan subsequently proposed by president nixon would have lowered tax rates however the legislation passed the house but not the senate the ford administration considered welfare reform proposals internally but never proposed legislation while the carter administration proposed a massive welfare reform plan that met with no legislative success welfare reform was finally achieved in 1981 when the omnibus budget reconciliation act obra was enacted but obra increased the tax rate back to 100 percent the level prevailing prior to 1967 in retrospect it appears that 1967 marked the end not the beginning of legislative progress on work incentives in the welfare system in this paper i shall report the results of recent research that complicates the issue considerably by questioning whether lower tax rates do in fact provide work incentives the findings themselves seesaw not unlike the path of welfare reform itself first on a theoretical basis it appears that lower tax rates in a welfare program do not necessarily increase labor supply in the low income population as a whole contrary to the conventional wisdom in fact it also appears that members of the reagan administration were aware of this all along well in advance of the economics profession this theoretical ambiguity has fairly fundamental implications for the work incentive issue in welfare reform second nevertheless the empirical resolution of the ambiguity provided by existing econometric estimates in the labor supply literature and by estimates of the effect of afdc on labor supply indicates that a lower tax rate would indeed increase labor supply in the low income population as a whole and that a higher tax rate would decrease it thus the conventional wisdom is correct even though based upon an incorrect tdiscussants henry aaron the brookings institution and university of maryland harold watts columbia university edward gramlich university of michigan

trends in the well being of american women 1970 1995 this paper examines the trends in the well being of american women over the last 25 years a time of significant changes in the relative economic status of women and in the labor market as a whole a broad range of indicators are considered to capture changes in women s well being in the family as well as in the labor market for virtually all age and education groups substantial evidence is obtained of rising gender equality in labor market outcomes notably labor force participation wages and occupational distributions broad evidence is also found of greater gender parity within married couple families as the housework time of husbands increased relative to wives and the relative wages of wives rose compared to their husbands however parallel to the recent evidence of the declining labor market position of lower skilled men there has been a similar deterioration in the economic status of less educated women especially high school dropouts their labor force participation rates and wages have risen at a much slower pace than those of more highly educated women while their incidence of single headship has increased much more rapidly these findings for less educated women serve to underscore the widening gap between more and less skilled americans of both sexes as well as to emphasize its broad dimensions

family structure and female labour supply in mexico city this paper investigates labour supply of the wives of the heads of households in mexico city with a focus on the impact of family structure a static neoclassical structural model is used we assume that each woman chooses her labour supply and corresponding income so that her utility is maximized conditional upon her husband s labour supply and earnings we use a direct translog specification and include family composition variables as taste shifters also taken into account are fixed costs of working nonlinear taxes unobserved preference variation prediction errors in wages of nonworkers and potential endogeneity of wages the models are estimated by smooth simulated maximum likelihood using data from mexico s urban employment survey drawn in 1992 we find income elasticities of labour supply of about 0 35 and wage elasticities of about 0 5 the latter is substantially overestimated if wage rate endogeneity is not taken into account the results are robust with respect to other specification choices we find that the impact of family structure variables on participation is different from that on hours worked so that their total effect is ambiguous

negative equity and foreclosure theory and evidence abstract recent declines in housing prices have focused attention on the relationship between negative housing equity and mortgage default theory implies that negative equity is a necessary condition for default but not a sufficient one this often misunderstood result is clearly illustrated in a dataset of massachusetts homeowners during the early 1990s fewer than 10 percent of borrowers likely to have had negative equity at the end of 1991 experienced a foreclosure during the following three years an econometric model of default estimated on two decades of massachusetts housing data also predicts low default rates for current negative equity borrowers we develop a simple theoretical model to interpret these empirical findings and to assess potential foreclosure reduction policies our results imply that lenders and policymakers face an information problem in trying to help borrowers with negative equity because it is hard to determine which owners really need help in order to stay in their homes

estimating labor supply responses and welfare participation using a natural experiment to validate a structural labor supply model in this paper we formulate and estimate an economic model of labor supply and welfare participation the model is estimated on data on single men from quebec drawn from the 1986 canadian census budget sets for each work welfare combination accounting for income taxes tax credits and welfare benefit rules are derived using a microsimulation model we validate our model by comparing reactions to a welfare reform that implied a dramatic increase in welfare benefits predicted by our model to those obtained by using a regression discontinuity approach the results show that our model is capable of recovering actual changes in labor supply and welfare participation we also show the advantage of having estimated a structural model by illustrating how labor supply and welfare participation change when benefit levels change

the distributional impacts of minimum wage increases when both labor supply and labor demand are endogenous we develop and estimate a one shot search model with endogenous firm entry and therefore zero expected profits and endogenous labor supply positive employment effects from a minimum wage increase can result as the employment level depends upon both the numbers of searching firms and workers welfare implications are similar to the classical analysis workers who most want the minimum wage jobs are hurt by the minimum wage hike with workers marginally interested in minimum wage jobs benefiting we estimate the model using cps data on teenagers and show that small changes in the employment level are masking large changes in labor supply and demand teenagers from well educated families see increases in their employment probabilities and push out their less privileged counterparts from the labor market this article has supplementary material online

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

what triggers mortgage default this paper assesses the relative importance of two key drivers of mortgage default negative equity and illiquidity to do so the authors combine loan level mortgage data with detailed credit bureau information about the borrower s broader balance sheet this gives them a direct way to measure illiquid borrowers those with high credit card utilization rates the authors find that both negative equity and illiquidity are significantly associated with mortgage default with comparably sized marginal effects moreover these two factors interact with each other the effect of illiquidity on default generally increases with high combined loan to value ratios cltv though it is significant even for low cltv county level unemployment shocks are also associated with higher default risk though less so than high utilization and strongly interact with cltv in addition having a second mortgage implies significantly higher default risk particularly for borrowers who have a first mortgage ltv approaching 100 percent this abstract was borrowed from another version of this item