Search

This paper investigates the extent to which state-level differences in business taxes influence the location decisions of multiestablishment firms. Each state in the United States administers their own unemployment insurance program, and cross-state variation leads to significant tax differences across state lines. This decentralized administration creates opposing employment incentives on the intensive and extensive margins depending on the economic conditions. Studying the locations of multistate manufacturing firms, I find that firms are more likely to exit from high-tax states during economic downturns, but high-tax plants experience more stable employment during nonrecession years.

We study the 2011 Austrian pay transparency law, which requires firms above a size threshold to publish internal reports on the gender pay gap. Using an event-study design, we show that the policy had no discernible effects on male and female wages, thus leaving the gender wage gap unchanged. The effects are precisely estimated, and we rule out that the policy narrowed the gender wage gap by more than 0.4 p.p.. Moreover, we do not find evidence for wage compression within establishments. We discuss several possible reasons why the reform did not reduce the gender wage gap. (JEL J16, J31, J71, K31)

How do rising temperatures affect long-term labor reallocation in developing economies? In this paper we examine how increases in temperature impact structural transformation and urbanization within Indian districts between 1951 and 2011. We find that rising temperatures are associated with lower shares of workers in nonagricultural sectors, with effects intensifying over a longer time frame. Supporting evidence suggests that local demand effects play an important role: declining agricultural productivity under higher temperatures reduces the demand for nonagricultural goods and services, which subsequently lowers nonagricultural labor demand. Our results illustrate that rising temperatures limit sectoral and rural-urban mobility for isolated households. (JEL J61, N35, O13, O15, O18, Q54, R23)

Abstract. The current labor market has produced manifold crises with high unemployment rates and increasing worklife dynamics. Adaptability and identity are metaskills that enable the learning process necessary to overcome obstacles on the career path. The contribution of this review lies in its focus on the question of whether the metaskills of career adaptability and identity can serve to bridge troubled times for everyone in the working population. This review provides a conceptual model of a “decent career” that acknowledges challenging circumstances based on demographic differences (e. g., age, ethnicity, sex) or structural conditions (e. g., economic crisis) and the antecedents necessary to foster individual skills that serve various beneficial outcomes.

Over eight million jobs were lost in the Great Recession, creating widespread economic hardship. This paper documents a novel and robust empirical regularity, that highly concentrated local labor markets experienced larger employment declines during the Great Recession. I argue that pre-crisis concentration level was instrumental in modulating the transmission of negative shocks using a model with heterogeneous firms where recessions arise as an aggregate consequence of idiosyncratic firm shocks. My model predicts a larger decline in expected employment when the market has a higher initial concentration level. Relatively small firms are unable to absorb the large number of workers that get displaced when relatively big firms are hit by idiosyncratic shocks, as the absorption is limited by decreasing returns to scale (at the firm) and an upward-sloping labor supply (in the local labor market). I undertake a series of empirical tests to rule out alternative explanations, and show that large employment losses in concentrated labor markets are not driven by highly concentrated industry-locations being hit harder during the Great Recession, having thinner labor markets, having more large firms, or having higher firm leverage ratios.

In popular thinking, debt evokes notions of vulnerability and bondage, while irregular migration for sex work conjures up the hazards of human trafficking and modern slavery 1 . These perceptions inform ‘safe migration’ policies aimed at ordering and regulating migration and combating informality to increase migrants’ safety and well-being; the assumption being that illegality puts migrants at risk of abuse. This article challenges these assumptions with an ethnographic study of brokerage practices in the quasi-family networks that facilitate the irregular and circular migration of Vietnamese sex workers to Singapore. In these networks, brokers sell a migration package on credit to their clients, the migrant sex workers, who repay it through sexual labour. This package includes all the services necessary for the women to migrate temporarily and work safely in Singapore. Most crucially, it serves as an entree into the broker’s business and social network, as a way of forming an enduring relationship. Without denying the power of debt to create inequality, obligation and exploitation, this article shows that debt can also be a profitable, non-coercive and reciprocal device for brokers and sex workers alike, a vector of ‘safety’ which limits some of the risks they encounter in a repressive and uncertain host environment. This finding stems from a novel framework in economic anthropology, the ‘socio-economy of debt’ (Guerin, 2018), which complicates moral views of debt through an empirical examination of the materiality, power dynamics and social and moral meanings of debt arrangements and relationships.

This paper studies the impact of foreign labour on the competitiveness of Italian dairy farms relying on the theory of foreign labour in profit functions. Application of an endogenous switching regression model identifies the drivers of adoption of the immigrant workforce. A counterfactual analysis performed on unit labour costs between farms employing and non-employing immigrants suggests the essential role of foreign farmworkers on dairy farms’ competitiveness, which provide a cheaper source of labour. The lower unit labour cost for immigrant workers resembles staunch support to the newly introduced ‘social conditionality’, for a CAP delivering also for farmworkers.

We study optimal promotion decisions of hierarchical firms, with one junior and one senior managerial position, which interact in a search and matching labor market. Workers acquire experience over time while being employed in a junior position and the firm has to determine the experience level at which the worker receives a promotion which allows her to fill a senior position. Promoted workers move to the senior position in their current firrm, if it is vacant, otherwise they search for senior positions on the market. The promotion cut-offs of the competing firms exhibit strategic complementarity, but we show that generically a unique stable symmetric general equilibrium exists. If workers have homogeneous skills, then an increase in the skill level induces faster promotion. In the presence of two skill levels in the work force an increase of the fraction of high skilled leads to slower promotion of both types of workers, where the promotion threshold for high skilled workers is substantially below that for low skilled workers. This implies earlier promotions of high skill workers compared to the low skilled consistent with available empirical evidence. Finally, we show that inserting pyramidal firms, which have twice as many junior than senior positions, into the market induces all firms to promote later. Pyramidal firms in equilibrium promote substantially later than vertical firms which is supported by the existing empirical findings. The paper also makes a methodological contribution by combining search and matching theory with simulations in order to characterize the general equilibrium promotion cut-offs in a market setting with heterogeneous hierarchical firms.

We show that business cycles reduce welfare through a decrease in the average level of employment in a labor market search model with learning on the job and skill loss during unemployment. Empirically, unemployment and the job-finding rate are negatively correlated. Since new jobs are the product of these two from the employment transition equation, business cycles imply fewer new jobs. Learning on the job implies that the resulting decrease in employment reduces aggregate human capital. This reduces incentives to post vacancies, further decreasing employment and human capital. We quantify this mechanism and find large output and welfare costs of business cycles. (JEL D83, E23, E24, E32, J24, J63)

Many developing countries are populated by multiple ethnic groups who use their own language in daily life and in local business, but have to use a common language in national business and in communications with other groups. In these countries, how much weights should be placed on teaching a local ethnic language and teaching a common language is a critical issue. A similar conflict arises in low-income countries in general between teaching skills that are "practical" and directly useful in local jobs, and teaching academic skills that are important in modern sector jobs. This paper develops a model to examine these questions theoretically. It is shown that balanced education of the two languages/skills is critical for skill development of those with limited wealth for education. It is also found that the balanced education brings higher earnings net of educational expenditure, only when a country has favorable conditions (TFP is reasonably high, and education, in particular, common language education [academic education] is reasonably effective) and only for those with adequate wealth. Common-language-only (academic-only) education maximizes net earnings of those with little wealth, and, when the country's conditions are not good, maximizes net earnings of all. This implies that there exists a trade-off between educational and economic outcomes for those with little wealth, and, when the conditions are not good, the trade-off exists for everyone without adequate wealth. Policy implications derived from the results too are discussed.

This paper studies lockdown policy in a dynamic economy without government commitment. Lockdown imposes a cap on labor supply, which improves health prospects at the cost of economic output and consumption. A government would like to commit to the extent of future lockdowns in order to guarantee an economic outlook that supports efficient levels of investment into intermediate inputs. However, such a commitment is not credible, since investments are sunk at the time when the government chooses a lockdown. As a result, lockdown under lack of commitment deviates from the optimal policy. Rules that limit a government's lockdown discretion can improve social welfare, even in the presence of noncontractible information. Quantitatively, lack of commitment causes lockdown to be significantly more severe than is socially optimal. The output and consumption loss due to lack of commitment is greater for higher intermediate input shares, higher discount rates, higher values of life, higher disease transmission rates at and outside of work, and longer vaccine arrival times.

In this paper, I develop and estimate a dynamic equilibrium model of household borrowing and savings decisions in formal and informal credit markets. The model features households with heterogeneities in productivity and wealth, and characterizes credit market access by interest rates, fixed costs, and borrowing constraints. Households have access to an exogenous formal credit market and to an informal credit market in which the interest rate is endogenously determined by the local demand and supply of credit. My application focuses on Thailand which implemented policies in 2001 that primarily encouraged borrowing. I estimate the model by simulated maximum likelihood using data from the Townsend Thai Monthly Survey. Based on the estimated model, I find that lower fixed costs increased the proportion of households borrowing formally, and that relaxed formal borrowing collateral constraints lowered informal interest rates. In terms of welfare, I find that low wealth but productive households benefited from Thai policies to expand credit access, but the gains were smaller than suggested by previous studies that ignored the informal market. Moreover, approximately 18% of households suffered welfare losses because of diminished opportunities for informal saving. Counterfactual policy simulations suggest that policies that combine borrowing and savings subsidies could yield higher average social welfare at a cost similar to the implemented policies.

This paper quantifies the effects of the increasing maximum unemployment insurance (UI) duration during recessions on the drop in the correlation between output and labour productivity in the U.S. since the early 1980’s - the so-called productivity puzzle. Using a general equilibrium search and matching model with stochastic UI duration, heterogeneous match quality, variable search intensity and on-the-job search, I demonstrate that the model can explain over 40 percent of the drop in this correlation (28 percent when the Great Moderation is taken into account). More generous UI extensions during recent recessions cause workers to be more selective with job offers and lower job search effort. The former channel raises the overall productivity in bad times. The latter prolongs UI extensions since in the U.S. they are triggered by high unemployment.

The Tax Cuts and Jobs Act (TCJA) significantly altered how business income is taxed in the US. This paper provides a quantitative assessment of the distributional and macroeconomic effects of the TCJA, both in the short run and in the long run, using a life-cycle model with occupational choice and accumulation of entrepreneurial human capital. When salient provisions of the TCJA are implemented, the economy experiences an increase of 0.20 and 0.5 percentage points in annual GDP and capital stock growth for the first decade 2018-2027, respectively. However, economic inequality increases across and within occupations under the TCJA. The provisions affect the incentives for individuals to save, making the occupational choice extensive margin critically important in analyzing the potential impacts of the new tax reform.

We study the aggregate consequences of the Social Security Disability Insurance (DI) program, focusing on the role of complementarity between heterogeneous human capital. First, we develop and estimate a wage process in which individuals' human capital comprises (pure) labor and experience, and their efficiencies are affected by disability. We find that older workers are more experience-abundant, and that disability causes a smaller loss in the efficiency of experience than it does in the efficiency of labor. Further, the estimated aggregate production technology shows that labor and experience are complementary inputs. Combining these empirical results with a structural general equilibrium model, we analyze the labor market implications of removing the DI program. Removal of the DI program induces an increase in the relative supply of experience, thus affecting the marginal productivities of inputs and wages of all workers in the economy. Despite the increased labor market entry of disabled workers, the aggregate productivity may increase in the counterfactual economy, thanks to the complementarity between labor and experience.

Strikes occur when activists temporarily and collectively withhold their participation from some crucial activity in order to convey a grievance or to enforce demands. These include food strikes, rent strikes, hunger strikes, culture strikes, prison strikes, student strikes, and labor strikes. By far the most prevalent of these, the focus here, are the latter, also known as walkouts or work stoppages, which occur when workers withhold their labor. The strike is potentially the most injurious action to firms, since production and therefore profits are reduced or stopped altogether (Rubin 1986). Keywords: employment relations; industrial relations; labor; labor movements; labor unions; United States of America; Europe

Debates about employers' collective action have remained inconclusive. Historians, sociologists, and political scientists have established that neither competition between employers, nor the secretive nature of their business practices, nor their supposed individualism, prevent them from acting together or from establishing permanent organizations of various natures. The very rich literature dealing with interest groups (including organizations representing economic interests) demonstrates this fact very convincingly. For instance, Michel Pincon and Monique Pincon-Charlot (2000) have shown that when it comes to its sociabilities and its reproduction, the French bourgeoisie behaves like a “collectivist” class. Keywords: employment relations; capitalism; labor; labor unions; wages

This paper argues that the canonical search-and-matching model cannot generate the observed cyclical asymmetry of the unemployment rate. In the United States, the unemployment rate raises quickly and abruptly at the onset of contractions and declines slowly and gradually during expansions. This pattern produces positive skewness in the distribution of unemployment rate changes, while the model produces a counterfactually negative skewness. The key feature of the model responsible for this counterfactual prediction is the convexity of hiring costs in aggregate employment, which leads to excessive responsiveness of job vacancies to positive shocks in periods of high unemployment. I argue that the inability of the model to replicate the cyclical asymmetry in the data stands regardless of its ability to generate realistic fluctuations in unemployment. Furthermore, high replacement rates and real wage rigidity (both fixed and downward rigid wages) - commonly used to enhance amplification of shocks - do not resolve the puzzle, rather they make it worse.

I contribute to the literature on institutions, gender, and entrepreneurship by showing that macrolevel institutional policies that do not explicitly target women nonetheless discourage them from leveraging prior professional experience—their own and that of others—in founding new ventures. Most ventures fail, but chances of success are greater if founders can bring to bear their professional expertise. However, employee non-compete agreements enjoin workers from leaving their employer to found a rival business in the same industry. Thus, non-competes add legal risk to business risk. To the extent that women exhibit greater risk aversion, the threat of litigation from their ex-employer may act as a sharper brake on startup activity than for men. Examining all workers who were employed exclusively within 25 states and the District of Columbia from 1990 to 2014, I find that women subject to tighter non-compete policies were less likely to leave their employers and start rival businesses. Non-competes increase the risk of entrepreneurship by making it harder to hire talent with relevant experience, shifting women away from higher potential ventures. A review of thousands of filed lawsuits suggests that firms do not target women in non-compete cases. Rather, it appears that non-competes disproportionately discourage women from leveraging their professional networks in hiring the sort of talent necessary for high-growth startups to succeed.

Numerous countries cut payroll taxes in response to economic downturns caused by COVID-19. This includes China, which completely exempted most firms from making social insurance (SI) contributions, resulting in an average tax cut of 21 percentage points on formal labor costs and approximately 20% of total tax remittances made by firms. We use novel data on 900,000 firms in one Chinese province to document new facts about the structure of SI in China and evaluate payroll tax cuts as a COVID-19 relief measure. We calculate that labor informality causes 54% of tax-registered firms---representing 24% of aggregate economic activity---to receive no benefits. Labor formality also increases with firm size, further skewing the benefit of payroll tax cuts towards large firms. But despite the mistargeting that results from these facts, the benefit of the tax cuts relative to firms' operating costs and liquidity is likely larger both for smaller firms and in industries most affected by the COVID-19 shock because these firms and industries are more labor-intensive.

Many economies exhibit downward wage rigidity. Surveys of managers indicate that employers hold wages rigid because they believe morale will suffer after a wage cut. Otherwise, there is little evidence for how employers' beliefs contribute to wage rigidity and whether those beliefs are accurate. Our design allows us to compare beliefs and effort rigorously. We demonstrate that effort falls after workers experience a wage cut and also that workers form reference points from wage contracts. Despite this partial confirmation of the morale theory as an explanation for wage rigidity, half of the employers in our experiment cut wages and lose money as a result. In a treatment where a recession is offset by nominal inflation, real wage cuts do not have a significant effect on effort.

We exploit a mortgage reform that differentially unlocked home equity across the Danish population and study how this impacted selection into entrepreneurship. We find that increased entry was concentrated among entrepreneurs whose firms were founded in industries where they had no prior work experience. Nevertheless, we find that marginal entrants benefiting from the reform had higher pre-entry earnings and a significant share of these entrants started longer-lasting firms. Our results are most consistent with a view that housing collateral enabled higher ability individuals with less-well-established track records to overcome credit rationing and start new firms, rather than only leading to ‘frivolous entry’ by those without prior industry experience.

In 2020, Berlin introduced a rigorous rent-control policy responding to soaring prices by capping rents: the Mietendeckel (rent freeze). The German Constitutional Court revoked the policy only one year later. Although successful in lowering rents during its duration, the consequences for Berlin’s rental market and close-by markets are per se not clear. This article evaluates the short-term causal supply-side effects in terms of prices, quantities, and landlords’ strategic behavior. We develop a theoretical framework capturing the key features of first-generation rent control policies and Berlin-specific aspects. Using a rich pool of detailed rent advertisements, predictions are tested, and further empirical causal inference techniques are applied for comparing price trajectories of dwellings inside and outside the policy’s scope. Mechanically, advertised rents drop significantly upon the policy’s enactment. A substantial rent gap along Berlin’s administrative border emerges, and rapidly growing rents in Berlin’s (unregulated) adjacent municipalities are observed. Landlords started adopting a hedging strategy insuring themselves against the risk of contractually long-term fixed low rents following a potentially unconstitutional law. Whereas this hedge was beneficial for landlords, the risk was completely borne by tenants. Moreover, the number of available properties for rent dropped significantly, a share of which appears to be permanently lost for the rental sector. This hampers a successful housing search for first-time renters and people moving within the city. Overall, negative consequences for renters appear to outweigh positive ones. This paper was accepted by Victoria Ivashina, finance. Funding: This research benefits from funding by the FNR Luxembourg National Research Fund [CORE Grant 3886] (ASSESS) and the OeNB Anniversary Fund [Grant 18767] (LocHouse). M. Fongoni further thanks the Department of Economics at the University of Strathclyde for support and acknowledges funding from the French government under the “France 2030” investment plan managed by the French National Research Agency [Reference ANR-17-EURE-0020] and from the Excellence Initiative of Aix-Marseille University - A*MIDEX. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4775 .

Workplace safety policies are designed to ensure that employers internalize the costs of injuries, but employers can undermine these policies with threats of dismissal. We show that states' adoption of the public policy exception to at-will employment—an exception forbidding employers from firing workers for filing workers' compensation claims or for whistleblowing—led to a substantial reduction in injuries. The widespread adoption of the public policy exception explains 14 percent of the decline in fatal injury rates between 1979 and 1994. Statutory protections from retaliatory firing also improved safety, but only when employers faced sufficiently strong penalties for violating them.

The Corona crisis and the lockdown in the spring of 2020 had various effects on working life in Europe. In this three-wave study, we assessed the trajectories of job demands and resources of 302 employees 2 weeks before the lockdown, over 1 week after lockdown start, and 6 weeks following the beginning of the lockdown. We applied a pre-post follow-up design with 129 employees who switched to telecommuting and a control group of 173 employees who remained in their on-site workplace. Results from the repeated-measures MANCOVA indicate that, despite various general changes to job characteristics because of the Corona crisis, telecommuting changes contributed to significant changes only in communication opportunities and – before Bonferroni correction – in physical job demands. These results may imply that the most visible massive switch to telecommuting of many employees during the first phase of the Corona crisis is only one explanatory factor for general changes to job characteristics.

I develop an endogenous growth model with skill acquisition, which can simultaneously account for labour market polarization and a slow down in labour productivity growth. When a new technology enters the economy, it requires implementation by high-skilled workers. Over time, process innovation makes the technology more user-friendly so that lower skilled workers can also operate it. Process innovation contributes to growth by increasing the range of technologies that a lower skilled worker can operate. It also reallocates labour demand for different skill-groups and thereby affects the income distribution. Skill can be acquired through a costly learning activity and workers face different learning costs. I calibrate the model to match the European labour market in 2000 and 2014 respectively. I show that when the rate of process innovation decreases, labour productivity growth slows down and wage and employment become polarized.

Can individuals’ aversion to drug markets curb the benefits of decriminalization? We investigate the effect of two policies on housing demand in the Netherlands: the distance-to-school criterion, which closed some cannabis shops in a few cities; and the zero-tolerance policy, which banned shops within municipal jurisdictions. While a small increase in the distance to retailers raised house prices by 1–5%, a substantial increase reduced them by 1–6%. Both policies reduced property crime, but the zero-tolerance was also related to fewer jobs. Our findings reveal that cities benefit from having cannabis shops, but households’ aversion to related nuisances depreciates surrounding areas.

This study provides novel evidence on the relative effectiveness of computer-assisted learning (CAL) software and traditional teaching. Based on a randomized controlled trial in Salvadoran primary schools, we evaluate three interventions that aim to improve learning outcomes in mathematics: (i) teacher-led classes, (ii) CAL classes monitored by a technical supervisor, and (iii) CAL classes instructed by a teacher. As all three interventions involve the same amount of additional mathematics lessons, we can directly compare the productivity of the three teaching methods. CAL lessons lead to larger improvements in students' mathematics skills than traditional teacher-centered classes. In addition, teachers add little to the effectiveness of learning software. Overall, our results highlight the value of CAL approaches in an environment with poorly qualified teachers.

This paper shows robust effects of trade shocks on within-firm wage inequality through changes in firm hierarchies. It uses two distinct research designs—one considering firm-level shocks to foreign demand and transportation costs, the other analyzing the Muslim boycott of Danish exports after the 2006 “cartoon crisis.” Consistent with knowledge-based and incentive-based hierarchy models, trade shocks affect organizational choices through production scale. Adding a hierarchy layer increases inequality throughout the organization, particularly widening the 90-50 wage gap and pay differences between top and bottom layers. Delayering after the boycott leads to wage compression through wage cuts, demotions, and employee turnover.

Exposure to a recession can have persistent, negative consequences, but does the severity of those consequences depend on when in the life cycle a person is exposed? I estimate the effects of exposure to the Great Recession on employment and earnings outcomes for groups defined by year of birth over the ten years following the beginning of the recession. With the exception of the oldest workers, all groups experience reductions in earnings and employment due to local unemployment rate shocks during the recession. Younger workers experience the largest earnings losses in percent terms (up to 13 percent), in part because recession exposure makes them persistently less likely to work for high-paying employers even as their overall employment recovers more quickly than older workers’. Younger workers also experience reductions in earnings and employment due to changes in local labor market structure associated with the recession. These effects are substantially smaller in magnitude but more persistent than the effects of unemployment rate increases.

We study the economic incentives for automation when labor and machines are perfect substitutes. Labor may still be employed in production, even when it is a costlier input than robots on a productivity-adjusted basis. This occurs if firms face idiosyncratic risk, adjusting the stock of machines is costly, and workers can be hired and fired quickly enough. Even though labor survives, jobs become less stable, as workers are hired in short-lived bursts to cope with shocks. We calibrate a general equilibrium, multi-industry version of our model to match data on robot adoption in US manufacturing sectors, and use it to compute the employment and labor share consequences of progress in automation technology. A fall in the relative price of robots leads to relatively few jobs losses, while reductions in adjustment costs, or improvements in relative robot productivity, can be far more disruptive. The model-implied semi-elasticity of aggregate employment to robot penetration (number of robots per thousand employees) ranges between 0.01% and 0.12%, depending on the underlying source of increased robot adoption, consistent with findings in the empirical literature. In an extension, we show that reduced-form hiring and firing costs unambiguously depress long-run employment.

We study the implications of automation for labor market fluctuations in a Diamond-Mortensen-Pissarides (DMP) framework that is generalized to incorporate automation decisions. If a job opening is not filled with a worker, a firm can choose to automate that position and use a robot instead of a worker to produce output. The threat of automation strengthens the firm's bargaining power against job seekers in wage negotiations, depressing equilibrium real wages in a business cycle boom. The option of automation also increases the value of a vacancy, raising the incentive for job creation, and thereby amplifying fluctuations in vacancies and unemployment relative to the standard DMP framework. Since automation improves labor productivity while muting wage increases, it implies a countercyclical labor income share, as observed in the data.

In any society or group, the behavior and manner of acting that are highly rated can be estimated based on the level of appreciation given by the group to that level of behavior. This reward system will be studied to show the kinds of behavior group members are expected to get by the group and the kinds of behavior that - through the reward system - will be strengthened and perpetuated in the group. The study of the wage and incentive systems of Japanese factories revealed very well the differences between Western industry and modern Japanese industry. The study also showed both the types and magnitude of the differences that underlie attitudes and behaviors that distinguish modern industry in Japan from that in the United States. In the following discussion, the wage system in one factory will be examined in detail to illustrate the particular central trend that appears in all studied factories. Since the monetary wage system for work performed is only a part of the entire wage system, it will also examine the general pattern of non-monetary benefits, welfare efforts, incentive programs for workers, using specific plans and costs of a particular factory.

Using district level data for urban areas in Java, we reassess the impacts of minimum wages on formal and informal sector employment, unemployment and labour participation. We employ the spatial Du...

Distinguishing between status spillovers and status ripples, we argue that sudden positive status shifts create status ripples when the social actors experiencing the status shifts are more constrained from exploiting their higher status than the social actors to whom they are affiliated. Specifically, we examine the status ripple paradox that the status effects experienced by the affiliated actors sometimes are as strong, or even stronger, as the direct status effects experienced by the ascending actors themselves. Focusing empirically on prestigious CEO awards from U.S. news magazines, we examine the consequences of positive status shifts for the awarded CEOs and the CEOs who are on the boards of directors of the awarded CEOs’ firms. We find evidence of status ripples in CEO compensation by showing that awarded CEOs have relatively greater immediate but smaller subsequent increases in compensation, which results in lower overall compensation effects for the awarded CEOs. Moreover, we provide empirical evidence of the theoretical mechanisms behind the status ripple paradox by showing that external constraints in the form of increased media and analyst attention and increased expectations affect the status ripple effect.

We study how frequent-flyer program members change their purchase behaviors as they progress towards achieving elite status. Using data from a leading U.S. airline, we empirically test the theoretical prediction that travelers' switching costs vary dynamically with their progress towards attaining status. We show evidence for increased switching costs as the consumer approaches the target pace of point accumulation required to attain status. These switching costs reflect changes in booking behavior with the airline: Travelers become more likely to choose the airline even when it is less appealing than its competitors, and to pay higher prices than they otherwise would. These responses are reduced when travelers accumulate points at a rate substantially ahead of the target pace. The increase in switching costs is more pronounced for consumers at a hub of the airline and for business travelers. Moreover, we document a stronger willingness-to-pay response when consumers are less likely to shoulder the ticket costs themselves because they are traveling for business. This response suggests that asymmetric incentives induced by business travel explains much of the heterogeneity between business and leisure travelers, and moral hazard may be responsible for a large part of the profi tability of frequent-flyer status incentives.

Lump-sum job displacement policies (e.g., severance pay) are often presented as a better alternative to contingent policies (e.g., unemployment insurance) in the context of developing countries, under the rationale that the former are less harmful to formal employment as they do not incentivize substitution from formal to informal jobs. First, this paper provides original evidence on the employment effects of lump-sum income in the context of a developing country with high labor informality. A regression discontinuity (RD) design, using Brazilian data, shows that a transfer equivalent to fifteen days of earnings (a) increases the duration out of a formal job by 1.9 weeks, (b) reduces monthly earnings in the next job by 1.6%, and (c) reduces total earnings in the formal labor market by 3.6% over a three-year period. Second, the paper studies the impact of a one-month extension in unemployment insurance (UI) on a comparable sample of displaced workers. UI is shown to have a stronger impact on the duration out of a formal job compared with a lump-sum transfer. In addition, a novel exercise matching administrative and survey data shows that 57% of the decrease in formal employment caused by UI is compensated by an increase in the incidence of informal employment. However, workers receiving the UI extension partially recover the initial employment loss over time in such a way that the adverse impact on employment over a three-year period is similar compared with the lump-sum transfer. Moreover, UI is found to be less harmful to reemployment wages, possibly because it improves workers' bargaining power as it offers insurance against the duration of joblessness. Overall, the UI extension is less detrimental to total earnings in the formal labor market over a three-year period. Hence, although these findings indicate that contingent job insurance policies have a stronger impact on the initial duration out of a formal job and indeed incentivize informal employment, they do not support the notion that lump-sum policies are less harmful to formal employment and earnings in the medium term.

The dependence of real income and inequality on changes in factor abundance, total factor productivity, factor bias, the relative cost of capital goods and the progressivity of the tax system are quantified using an elemental general equilibrium model with three households. Observed declines in low-skill labour shares are shown to have been generic in the OECD and to have been responsible for most of the increase in US inequality between 1990 and 2016. The widely anticipated future twist away from low-skill labour toward capital is then examined, in combination with expected changes in population and its skill composition. With downward rigidity of low-skill wages the potential is identified for unemployment to rise to extraordinarily high levels. Productivity growth at twice the pace since 1990 is shown to limit this, though it does not slow the concentration of income. The superior policy response is shown to be a generalization of the US “earned income tax credit” system, with financing from taxes on consumption, rather than capital income.

We examine worker effort as a potential margin of adjustment to a minimum wage hike using unique data on piece rate workers who perform a homogenous task and whose individual output is rigorously recorded. By employing a difference-in-differences strategy that exploits the increase in Florida’s minimum wage from $6.79 to $7.21 on January 1, 2009, and worker location on the pre-2009 productivity distribution, we provide evidence consistent with incumbent workers’ positive effort responses.

We analyze involuntary unemployment based on consumers’ utility maximization and firms’ profit maximization behavior with ongoing nominal wage rate decline. We consider a three-periods overlapping generations (OLG) model with a childhood period as well as younger and older periods under monopolistic competition with increasing, decreasing or constant returns to scale technology. When there exists involuntary unemploymnet, the nominal wage rate may decline. We examine the existenbce of involuntary unemployment in that model with ongoing mominal wage rate decline (or deflation). Even if the nominal wage rate declines, we have a steady state with involuntary unemployment and constant output and employment. We need budget deficit or budget surplus to maintain the steady state depending on whether real balance effect is positive or negative. Also we examine the possibility to achieve full-employment by fiscal policy.