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In 1997, the French government put into effect a law that permanently exempted young French male citizens born after Jan 1, 1979 from mandatory military service while still requiring those born before that cutoff date to serve. This paper uses a regression discontinuity design to identify the effect of peacetime conscription on education and labor market outcomes. Results indicate that conscription eligibility induces a significant increase in years of education, which is consistent with conscription avoidance behavior. However, this increased education does not result in either an increase in graduation rates, or in employment and wages. Additional evidence shows conscription has no direct effect on earnings, suggesting that the returns to education induced by this policy was zero.

This paper analyses and quantifies the effects of trade liberalisation and skill-biased technical change, both exogenous and trade-induced, on the skill premium and real wages of unskilled and skilled workers in the Mexican manufacturing sector, using industry- and firm-level data for 1984-1990 from the Encuesta Industrial Anual. The novelty of the paper lies in its strategy for identifying causality, which uses differences across industries over time in the relative price of machinery and equipment in the US as an instrument for skill-biased technical change. The effect of trade-induced SBTC on wages, and especially on wage inequality, appears substantial. The regressions show that trade liberalisation and changes in the relative price of equipment in the US, which induce exogenous SBTC in Mexico, explain one quarter of the increase in relative skilled wages between 1984 and 1990. This rise in the skill premium due to SBTC and trade liberalisation mainly reflect a rise in real skilled wages, although with some specifications it was amplified by a fall in the real wages of unskilled workers.

We examine changes in inequality and instability of the combined earnings of married couples over the 1980-2009 period using two U.S. panel data sets: Social Security earnings data matched to Survey of Income and Program Participation panels (SIPP-SSA) and the Panel Study of Income Dynamics. Relative to male earnings inequality, the inequality of couples' earnings is both lower in levels and rises by a smaller amount. We also find that couples' earnings instability is lower in levels compared to male earnings instability and actually declines in the SIPP-SSA data. While wives' earnings played an important role in dampening the rise in inequality and year-to-year variation in resources at the family level, we find that marital sorting and coordination of labor supply decisions at the family level played a minor role. Comparing actual couples to randomly paired simulated couples, we find very similar trends in earnings inequality and instability.

Tax credits are a popular way to alleviate in‐work poverty. A common empirical assumption is that the benefit of the tax credit is borne solely by the claimant workers. However, economic theory suggests no particular reason why this should be the case. This paper investigates the impact of the Working Families' Tax Credit, introduced in the UK in 1999, on wages. Unlike similar tax credit policies, this tax credit was paid through employers rather than directly to workers, making it more salient to the employer. Using a novel identification strategy, we can separately identify the effect on wages associated with an increase in the amount of tax credit and that associated with the change in salience. We find evidence that: (1) through the salience mechanism the firm cuts the wage of claimant workers relative to similarly skilled nonclaimants by 30 percent of the tax credit, which is approximately 7 percent of the wage, and (2) there is a negative spillover effect onto the wages of claimant and nonclaimant workers of 1.7 percent, which is approximately 8 percent of the tax credit for claimant workers. Wages tax credits incidence salience I38 J30 H22 H23

This paper adds to the empirical literature on health as an important determinant of employment at older ages by exploring the role in the health-employment nexus of the wage rates of 50 to 64-year-old workers. To do so, we use individual-level panel data from the Survey of Health, Ageing and Retirement in Europe to estimate a system of equations for health, wages and employment. Our model also takes into account both the potential for measurement error in the health variable and selectivity issues related to the wage equation. We find that for men (women) a one-unit (one standard deviation) increase in health yields, on average, a 7 (8) percentage higher hourly wage rate, resulting in a 2 (4) percentage point higher employment probability. We also show a direct impact of health on employment: a similar increase in health raises the employment probability of men (women) by 16 (13) percentage points. As regards differences between European countries, our findings suggest that for all country groups, the mediating role of wages in the health-employment nexus is relatively small while the direct impact of health on employment is relatively large and rather similar. Overall, our findings indicate only a minor role for disability income policies likes wage subsidies to encourage the employment of (older) workers with health limitations, but an instrumental role for policy aimed at helping employers accommodate these workers on the job and keep them employed at older ages.

__Abstract__ We find that investor sentiment should affect a firm's employment policy in a world with moral hazard and noise traders. Consistent with the model's predictions, we show that higher sentiment among US investors leads to: (1) higher employment growth worldwide; (2) lower labor productivity, as the growth in employment is not matched by real value added growth; and (3) positive wage growth in countries with a greater proportion of high-skill labor, but negative wage growth otherwise. We also find evidence that sentiment induces greater labor instability during financial crises, which sheds new light on the view that financial development has a "dark side". Overall, the results suggest that sentiment has real effects, especially in countries that attract more foreign direct investments from the US and that are perceived as more popular among US investors.

Distinguishing carefully between mobility across firms and across oc- cupations, this study provides causal estimates of the wage effects of mobility among graduates from apprenticeship in Germany. Our instrumental variables approach exploits variation in regional labor market characteristics. Pure firm changes and occupation-and-job changes after graduation from apprenticeship result in average wage losses, whereas an occupation change within the train- ing firm results in persistent wage gains. For the majority of cases a change of occupation involves a career progression. In contrast, for job switches the wage loss dominates.

When an agent is offered performance related pay, the incentive effect is not only determined by the shape of the incentive contract, but also by the probability of contract enforcement. We show that weaker enforcement may reduce the agent's effort, but lead to higher-powered incentive contracts. This creates a seemingly negative relationship between effort and performance pay.

Although the sectors and fraction of workers covered are small given the low rates of formality and urbanization in Sub-Saharan Africa (SSA), as the number of covered workers grows wage regulation will become increasingly significant. We find that higher minimum wage values are associated with higher GDP per capita. Importantly, however, we find that the minimum wage relative to the mean wage is higher in low income countries than in lower- and upper-middle income countries. Indeed, SSA as a whole reflects a bias towards a more aggressive minimum wage policy compared to the rest of the world. There is limited research on the employment effect of minimum wages in SSA, but the few findings are consistent with the broad summary of global research. By and large, introducing and raising the minimum wage has a small negative impact or no measurable negative impact. However, there is significant variation around this average finding – the employment elasticities are not constant nor linear. Where increases in a minimum wage are large and immediate, this can result in employment losses, but more modest increases usually have very little observably adverse effects and may have positive impacts on wages. The great variability in findings on employment could be due partly to the great variation in the detail of the minimum wage regimes and schedules country by country, but also by the variations in compliance. We find that higher Kaitz indices are associated with higher levels of non-compliance. The release of country-level earnings and employment data at regular intervals lies at the heart of a future country-focused minimum wage research agenda for Africa.

Based on the reduced form New Keynesian Wage Phillips Curve, we estimate wage rigidity and indexation at the aggregate level in several advanced countries for the 1985–2014 period. We document that the wage setting process is heterogenous among our sample of countries: nominal wage rigidities are more important in the United States, while wage indexation is dominant in European Countries. We also present evidence that indexation to past inflation has decrease as inflation stabilizes at lower levels. In addition, our results suggest that wage rigidity is not linked to the institutional environment at the macroeconomic level. Finally, we show that there is significant time variation in the estimated coefficients on the implied equation that is usually not taken into account in the theoretical literature.

This paper presents a New Keynesian (NK) model that is extended to differentiate between straight time and overtime work. The model proposes that the New Keynesian Phillips curve (NKPC) should be estimated with marginal cost measured in terms of overtime labor; the resulting coefficient estimates are in accordance with theory and statistically significant for the hybrid NKPC (which allows for backward-looking price setters) but not for the purely forward-looking NKPC. In the hybrid model, backward-looking behavior is found to be predominant. The paper also shows that the incorporation of employment frictions (predetermined employment and convex adjustment costs) in NK models helps reconcile the frequent price changes found in the microdata with the degree of sluggishness in inflation adjustment to output changes at the macro level. © 2014 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

The converging roles of men and women are among the grandest advances in society and the economy in the last century. These aspects of the grand gender convergence are figurative chapters in a history of gender roles. But what must the “last” chapter contain for there to be equality in the labor market? The answer may come as a surprise. The solution does not (necessarily) have to involve government intervention and it need not make men more responsible in the home (although that wouldn't hurt). But it must involve changes in the labor market, especially how jobs are structured and remunerated to enhance temporal flexibility. The gender gap in pay would be considerably reduced and might vanish altogether if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours. Such change has taken off in various sectors, such as technology, science, and health, but is less apparent in the corporate, financial, and legal worlds. (JEL J3, J16, J22, J24, J31, J33, N3)

There is a large literature showing that the self-employed underreport their income to tax authorities. In this paper, we quantify the extent to which the self-employed also systematically underreport their income in U.S. household surveys. To do so, we use the Engel curve describing the relationship between income and expenditures of wage and salary workers to infer the actual income, and thus the reporting gap, of the self-employed based on their reported expenditures. We find that the self-employed underreport their income by about 30 percent. This result is remarkably robust across data sources and alternative model specifications. Failing to account for such income underreporting leads to biased conclusions. We document this bias in existing measures of earnings differentials, wealth differentials, precautionary savings, lifecycle earnings profiles, and earnings variation across MSAs. Our results show that it is naive for researchers to take it for granted that individuals will provide unbiased information to household surveys given their demonstrated tendency of providing distorted reports of the same information to other administrative sources.

The article presents the micro data on intangibles for Slovenia during the period 1994–2005 using an augmented method by Corrado et al. and analyses the role of intangibles in the Slovenian economy during the transition. By examining the organisational, information and communication technologies (ICT) and research and development (R&D) component of intangibles, we observe a decrease in the value of R&D capital that was to some extent offset by an increase in the value of ICT capital. We find that organisational workers had higher productivity than the average worker. The dynamic of change was gradual during the transition. The capitalisation of intangibles implied an average 4.5% increase of gross domestic product (GDP) for the new member states. Nonetheless, a worrying convergence can be observed between the tangible and the intangible capital. One can thus expect the intangibles have an important role in the future growth in Slovenia and across the European countries, but only if proper attention is devoted to them in terms of policy measures and regulation.

Two literatures exist concerning cross-border merger activity's impact on domestic wages: one focusing on positive spillover-effects; the other focusing on negative bargaining-effects. Motivated by scarce theoretical scholarship spanning these literatures, we nest both mechanisms in a single conceptual framework. Considering the separate phenomena of inward and outward cross-border merger activity, our theoretical model generates three formal propositions: cross-border mergers can lead to wage increases via positive spillover-effects; and negative bargaining-effects are relatively more dominant when union market power is high, and when merging firms exhibit relatedness. Employing US firm-level panel data on wages combined with industry-level data on unionization and merger activity (covering 1989-2001), we find support for our propositions as inward and outward cross-border merger activity generate positive spillovers to wages, but are more likely to generate firm-level wage decreases when unionization rates are high and when cross-border merger activity is characterized as horizontal. Accordingly, future research on how cross-border mergers affect domestic wages should be mindful that both spillover and bargaining effects are at play, and that the degree of union market-power and the relatedness of cross-border merger activity are critical in determining which effect dominates. (authors' abstract)

In an experiment with professionals from the financial services sector, we investigate the impact of a team incentive scheme on the recommendation quality of investment products when advisors benefit from advising lower quality products. Experimental results reveal that, when group affiliation is strong, inferior products are recommended significantly more often under team incentives than under individual incentives.

We propose a novel experimental design to study counterproductive behaviour in a principal agent setting. The design allows us to study and derive clean measures of different forms of counterproductive behaviour in a controlled but non obtrusive manner. We ask participants to complete a specific task (identify euro coins) and report their output. Participants can engage in various forms of counterproductive behaviour, none of them being offered to them explicitly. They can make mistakes in the identification task, lie in their report or even steal coins. We present an application of the design to study the effects of different pay schemes (competition, fixed pay and piece rate) on counterproductive behaviour. On average counterproductive behaviour amounts to 10 percent of the average productivity, almost all arising through mistakes and overreporting of output. We find essentially no evidence of theft. Moreover, we find that both productive and counterproductive behaviour are significantly higher under competition than under the two other pay schemes., Working papers series, ISSN 2628-1724, 2012, Heft 18

The paper estimates the household labor earning process using the March Current Population Survey 1968–2011. GMM estimates confirm that the results in Storesletten et al. (2004) still hold in a much larger data set over a longer period. The persistent idiosyncratic risk is strongly countercyclical, with an annual auto-correlation equal to .973 and an standard deviation that increases by 72.5% (from .090 to .156) as the macroeconomy moves from peak to trough.

We consider a model with on-the-job search where current wages depend only on current aggregate labor market conditions and idiosyncratic match-specific productivities. We show theoretically that the model replicates the findings in Bils (1985) and Beaudry and DiNardo (1991) on the history dependence in wages. We develop a method to measure match qualities in the data and show empirically that various variables summarizing past aggregate labor market conditions have explanatory power for current wages only because they are correlated with match qualities. They lose any predictive power once match qualities are accounted for. (JEL E3, E24, J3)

Real wage rates in Ghana have fallen substantially over the last twenty years. In this paper survey data for the years 1991–1996 is used to assess whether this fall has continued in the 1990s. It is shown that the fall in average real wage rates has continued, the relative wage of skilled labour has risen, the share of skilled wages in total wages has remained constant and the share of wages in value-added has risen. Factor share equations for skilled and unskilled labour are estimated which are consistent with the rise in skilled wages leading to substitution to unskilled labour and with technical regress raising the demand for unskilled labour. Real wage income in the sample has risen over the period.

The potential sources of rent to labor in a developing country urban labor market are considered in this paper. The data set used enables the relative importance of unions, firm size, profitability, ownership, and firm age to be assessed on the basis of cross-section evidence. It is shown that all these factors affect earnings. A panel-data-based estimation of the importance of the profitability term provides strong support for a rent-sharing theory of wage determination in a developing country similar to much recent evidence for developed country labor markets. Copyright 1996 by Royal Economic Society.

Wage Adjustment Practices and the Link between Price and Wages: Survey Evidence from Colombian Firms Abstract: This paper explores firms’ wage adjustment practices in the Colombian formal labor market; specifically, the timing and frequency of wage increases, as well as the link between wage and price changes. We use a survey of 1,305 firms belonging to all economic sectors. The results show that most firms adjust base wages annually, increases were concentrated around observed inflation and none of the firms cut wages. Moreover, factors associated with the performance of firms and workers alike are the main determinants of wage adjustments. The link between wages and price changes is stronger in sectors where labor costs represent a higher share of total costs and in firms operating in sectors with higher labor productivity. Keywords: wage increases, labor market, survey evidence, logit models, Colombia. JEL Classification: D22, J30, C25 Prácticas de ajuste salarial y la relación entre precios y salarios: Evidencia a partir de encuestas a empresas colombianas Resumen: Este artículo utiliza una encuesta a 1.305 firmas para evaluar las prácticas de ajustes salariales de las empresas en el mercado laboral colombiano. Específicamente, se analiza la frecuencia de los incrementos salariales y el vínculo entre los cambios de precios y salarios. Los resultados muestran que los salarios se ajustan anualmente, que los aumentos se concentran alrededor de la inflación observada y que ninguna empresa recortó los salarios. Además, los principales determinantes de dichos ajustes son factores asociados con el desempeño tanto de empresas como de trabajadores. La relación entre los cambios en salarios y precios es más fuerte en sectores donde los costos laborales representan una mayor proporción de los costos totales y en sectores con alta productividad laboral. Palabras clave: incrementos salariales, mercado laboral, encuestas, modelos logit, Colombia. Clasificación JEL: D22, J30, C25 Pratiques d’ajustement des salaires et le lien entre les prix et les salaires: résultats d’un sondage auprès des entreprises colombiennes Résumé: Cet article utilise un sondage auprès de 1305 entreprises pour évaluer les pratiques d’ajustement des salaires des entreprises sur le marché du travail en Colombie. Plus précisément, nous analysons la fréquence des augmentations de salaires et le lien entre les changements de prix et les salaires. Les résultats montrent, d’une part, que les salaires sont ajustés chaque année, d’autre part que les augmentations sont concentrées autour de l’inflation observée et, finalement, qu’aucune entreprise a réduit des salaires. Nous montrons également que les principaux déterminants de ces ajustements sont associés à la performance des entreprises ainsi qu’à celle des travailleurs. La relation entre l’évolution des salaires et des prix est plus forte dans les secteurs où les coûts salariaux représentent une proportion plus élevée des coûts totaux et dans les secteurs à forte productivité du travail. Mots-clés: Hausse des salaires, études du marché du travail, modèles logit, Colombie. Classification JEL: D22, J30, C25

Based on a rich personnel data set of a large university we find strong evidence for the existence of an internal labor market. First, the lowest academic rank is a strong port of entry and the highest rank is a port of exit. Second, wages do not follow external wage developments, since they follow administrative rules that have not been modified for a long time. We subsequently look at internal promotion dynamics to assess the relevance of alternative internal labor market theories. A unique feature of our data is that we have good measures of performance. Consistent with incentive theories of internal labor markets, research and teaching performance turn out to be crucial determinants of promotion dynamics. Learning theories of internal labor markets appear to have support when we do not account for observed performance, but the evidence becomes much weaker once we control for performance. Finally, we find that administrative rigidities play an important role in explaining promotion dynamics.

Although both economists and psychologists seek to identify determinants of heterogeneity in behavior, they use different concepts to capture them. In this review, we first analyze the extent to which economic preferences and psychological concepts of personality, such as the Big Five and locus of control, are related. We analyze data from incentivized laboratory experiments and representative samples and find only low degrees of association between economic preferences and personality. We then regress life outcomes (such as labor market success, health status, and life satisfaction) simultaneously on preference and personality measures. The analysis reveals that the two concepts are rather complementary when it comes to explaining heterogeneity in important life outcomes and behavior.

International audience; We investigate the effects of works councils on employees' wages and job satisfaction in general and for subgroups with respect to sex and occupational status. Making use of a German representative sample of employees, we find that employees, who move to a firm with a works council, report increases in job satisfaction, but do not receive particular wage increases. Especially the job satisfaction of female employees is affected by a change in works council status. However, we do not find support for the hypothesis that the introduction of a works council itself increases wages or job satisfaction for the employees staying at the firm.

Under less restrictive assumptions than in previous contributions, this paper highlights various patterns of profit rate dynamics that are common to the countries under scrutiny. Without a substantial re-distribution of income in favour of profits, the profit rate declines. When labour productivity is weak the profits/wages ratio declines leading to a decline in the profit rate, also due to capital deepening. Developments in the capital–labour ratio tend to increase the organic composition of capital while those in the ratio between the capital price deflator and the average wage tend to decrease it. Falls in the profit rate took place in countries with a weak technological change with episodes of Marxian bias. Employment shifted from low to high capital intensity sectors, from low to high organic composition industries and from low to high productivity sectors. Rising strength of labour and realization failures tend to have a greater role than rising organic composition in cyclical profit rate dynamics. Over the cycle, the first mechanism is also the first one to show up, while the others tend to follow it. Theoretical and policy implications are offered.

This note analyses the interaction between nominal wage stickiness and costly employment adjustment in a small closed-economy New Keynesian model with simple rule-based or optimal monetary policy. The results show (1) the costs of nominal and real rigidity to depend on the policy regime, (2) optimal policy to substantially contain the welfare loss, and (3) the absence of quantitatively important second-best interaction, suggesting that reducing rigidity along one dimension alone does not risk reducing overall welfare.

While most studies find evidence of a wage-firm size premium, we find that larger firms in China actually pay lower wages. We also find that the most plausible explanation for this result is that larger firms in China employ a higher ratio of blue-collar workers.

In this article we want to shed light on two aspects of income mobility: relative total income mobility using the estimator by Fields and Ok (1999) and equalization of long-run incomes measured by the index of Fields (2009). The cross country comparison shows a negative relationship between total relative mobility and long-run income equalization, this result is contrary to the intuition given by Shorrocks (1978a) who stated that higher relative mobility will cause higher equalization of incomes when the accounting period is extended.

This paper proposes a labour market model with job search frictions where workers have private information on match quality and effort. Firms use wage contracts to motivate workers. In addition, wages are also used to attract employees. We define and characterize competitive search equilibrium in this context, and show that it satisfies a simple modified Hosios rule. We also analyse the interplay between macroeconomic variables and optimal wage contracts. Finally, we show that private information may increase the responsiveness of the unemployment rate to changes in the aggregate productivity level and, in particular, to changes in the information structure. Copyright 2011, Oxford University Press.

Entwicklungen des dualen Berufsausbildungssystems in Deutschland werden spatestens seit Mitte der 1990er-Jahre unter dem Aspekt einer zuruckgehenden Ausbildungsbeteiligung der Wirtschaft diskutiert. Zur Beurteilung dieser Entwicklungen wird in der Regel auf querschnittsbezogene Durchschnittsgrosen wie die Ausbildungsquote der Betriebe zuruckgegriffen. Diese gibt allerdings nur Aufschluss uber den stichtagsbezogenen Anteil der ausbildenden Betriebe und sagt nichts uber die Gesamtdynamik der betrieblichen Ausbildungsbeteiligung aus. Selbst bei einer konstant bleibenden Ausbildungsquote konnen sich betrachtliche Veranderungen in der Zusammensetzung der Ausbildungsbetriebe wie auch der nicht ausbildenden Betriebe ergeben. Aufgrund der wirtschaftlichen Dynamik durfte es hier im Zeitablauf auch in der Ausbildung zwangslaufig Verschiebungen geben. Vor diesem Hintergrund soll im Folgenden fur die vergangenen Jahre die Dynamik im betrieblichen Ausbildungsangebot analysiert werden. Hierbei geht es insbesondere um die Frage, inwieweit sich das Angebot an Ausbildungsstellen auf Betriebsebene verandert und welche Bedeutung humankapitalbezogenen Faktoren zur Erklarung dieser Dynamik zukommt. Gegenstand der Analysen ist dabei auch die Frage, welcher Stellenwert wichtigen bildungspolitischen Masnahmen und anderen, nicht direkt beobachteten Einflussfaktoren zukommt.

"The protean and boundaryless career attitudes have gained special attention during the past years. A protean career attitude implies that a person strives towards a developmental progression and self-fulfillment; a boundaryless career attitude is characterized by a high physical and/or psychological mobility. The aim of the present paper is twofold: First, we want to empirically investigate the relationship between protean and boundaryless career attitudes and subjective (i.e., career satisfaction and success in comparison with colleagues) and objective (i.e., promotions and salary) career success. Second, we want to integrate research on protean and boundaryless career attitudes with research on predictors of career success. We analyze the career attitudes-career success relationship with a sample of 116 professionals. Our findings suggest that components of the protean career attitude are rather more related with subjective career success and that components of the boundaryless career attitude are more related with objective career success. Conclusions regarding the relevance of career attitudes for career success are drawn." (Author's abstract, IAB-Doku) ((en))

A matching model with labor/leisure choice and bargaining frictions is used to explain (i) differences in GDP per hour and GDP per capita, (ii) differences in employment and hours worked (per capita and per worker), (iii) differences in the proportion of part-time work across countries. The model predicts that the higher the level of rigidity in wages and hours the lower are GDP per capital, employment, part-time work and hours worked, but the higher is GDP per hour. In addition, it predicts that a country with a high level of rigidity in wages and hours and a high level of income taxation has higher GDP per hour and lower GDP per capita, employment and part-time work than a country with less rigidity and a lower level of taxation. This is due mostly to a lower level of employment. In contrast, a country with low levels of rigidity in hours and in wage setting but with a higher level of income taxation has a lower GDP per capita and a higher GDP per hour than the economy with low rigidity and low taxation. In this configuration, the level of employment is similar in both economies but the share of part-time work is larger. The model accounts well qualitatively for the facts, and a plausible calibration accounts well qualitatively for the differences between the US, French and Dutch economies.

According to the 2001 UK Census ethnic minority groups account for 4.6 million or 7.9 percent of the total UK population. The 2001 British Labour Force Survey indicates that the descendants of Britain’s ethnic minority immigrants form an important part of the British population (2.8 percent) and of the labour force (2.1 percent). In this paper, we use data from the British Labour Force Survey over the period 1979-2005 to investigate educational attainment and economic behaviour of ethnic minority immigrants and their children in Britain. We compare different ethnic minority groups born in Britain to their parent’s generation and to equivalent groups of white native born individuals. Intergenerational comparisons suggest that British born ethnic minorities are on average more educated than their parents as well more educated than their white native born peers. Despite their strong educational achievements, we find that ethnic minority immigrants and their British born children exhibit lower employment probabilities than their white native born peers. However, significant differences exist across immigrant/ethnic groups and genders. British born ethnic minorities appear to have slightly higher wages than their white native born peers. But if British born ethnic minorities were to face the white native regional distribution and were attributed white native characteristics, their wages would be considerably lower. The substantial employment gap between British born ethnic minorities and white natives cannot be explained by observable differences. We suggest some possible explanations for these gaps.

This paper analyzes the interaction between firms’ investment in general skills training and workers’ incentives. It shows that when a firm has an informational advantage over its workers, its provision of free general skills training can serve as a signal that there will be a long-term relationship between the firm and its workers. This signal induces the workers to exert more effort in learning firm-specific skills, which enhances the firm's profits. In contrast with most of the existing literature, the model implies that firms may provide free general skills training even if there is no labour market friction. Ce memoire analyse l'interaction entre l'investissement des entreprises dans l'acquisition d'habiletes generales de leurs employes et les incitations des travailleurs a fournir un effort. On montre que quand une firme a un avantage informationnel sur ses travailleurs, le fait de fournir gratuitement de la formation qui permette aux employes d'acquerir des habiletes generales peut servir de signal qu'il va y avoir une relation a long terme entre la firme et ses travailleurs. Ce signal incite les travailleurs a investir plus d'effort dans l'acquisition d'habiletes specifiques a la firme, ce qui augmente les profits de l'entreprise. Ce modele, en porte-a-faux par rapport au gros de la litterature existante, suggere que les entreprises peuvent fournir gratuitement de la formation permettant aux employes d'acquerir des habiletes generales meme s'il n'y a pas de friction dans le marche du travail.

Summary This paper addresses possible consequences of a minimum wage in a spatial context. An empirical analysis utilizing German data shows that a significant spatial wage structure exists and that, as a consequence, the share of workers earning wages below a minimum wage will be particularly high in rural counties even if we control for educational and occupational differences. A theoretical analysis discusses the implications for the spatial structure of the economy and shows that while the wages in the countryside will be affected positively, wages will decline in the city, where employment and population rise.Workers in the city will further suffer from an increase in housing costs. This supports concerns that urban poverty might increase as a result of the introduction of a minimum wage.

Students in majors with higher average quantitative graduate records exam (GRE) scores are less likely to attend graduate school whereas students in majors with higher average verbal GRE scores are more likely to attend graduate school. This sorting effect means that students whose cognitive skills are associated with lower earnings at the bachelor's level are the most likely to attend graduate school. As a result, there is a substantial downward bias in estimated returns to graduate education. Correcting for the sorting effect raises estimated annualized returns to a Master's or doctoral degree from about 5% to 7.3% and 12.8%, respectively. Estimated returns to professional degrees rise from 13.9% to 16.6%. These findings correspond to a large increase in relative earnings received by postgraduate degree holders in the United States over the past 20 years.

Public wages are a large share of the public budget in Portugal and, therefore, hiring freezes are a central feature of the efforts to control the public deficit. The system of public career advancement, however, may lead to increases in the wage bill even in the presence of hiring freezes. We estimate this wage drift effect in the case of university professors. We use a logit analysis with 1999 census data to identify the determinants of career advancement, to estimate the employment distribution in previous years and to obtain the corresponding wage bill. We estimate that the annual wage drift is 2.6%, a figure well above the gross domestic product growth rate and, therefore, we conclude that hiring freezes may be far from enough to stop the expansion of the public wage bill.

This paper examines the consequences of creating a fully competitive market in a sector previously dominated by a cost-minimising public firm. Workers in the economy are heterogeneous in their motivation to work in the sector. In line with empirical findings, our model implies that firms in the competitive market provide stronger monetary incentives to workers, reach higher productivity, and employ less workers than the public firm. Allocative efficiency therefore increases. Nevertheless, prices of the sector’s output rise as competition between private firms for the best motivated workers leads to higher wage cost than under the public monopsony. Political support for liberalisation may therefore be limited.

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004: We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that the subjects achieve the most efficient ownership allocation starting from different initial conditions. However, in contrast to the property rights approach, the most efficient ownership structure is joint ownership. These results are neither consistent with the self-interest model nor with models that assume that all people behave fairly, but they can be explained by the theory of inequity aversion that focuses on the interaction between selfish and fair players.

Earlier studies on income inequality and crime have typically used total income or total earnings. However, it is quite likely that it is changes in permanent rather than in transitory income that affects crime rates. The purpose of this paper is therefore to disentangle the two effects by, first, estimating region-specific inequality in permanent and transitory income and, second, estimating crime equations with the two separate income components as explanatory variables. The results indicate that it is important to separate the two effects; while an increase in the inequality in permanent income yields a positive and significant effect on total crimes and three different property crimes, an increase in the inequality in transitory income has no significant effect on any type of crime. Using a traditional, aggregate, measure of income yields mainly insignificant effects on crime.

The article examines the firm's choice of incentives when workers face additional incentives (“external incentives”) to those provided by the firm, such as building reputation that improves the workers’ prospects with other employers, or satisfaction from working well. Surprisingly, the firm might find it optimal to increase the incentives it provides following an increase in external incentives. Even if the firm reduces its incentives, however, total incentives unambiguously increase, leading to higher effort and profits. This implies that firms should try to increase the external incentives that their workers face; I suggest several ways firms can do so.

Journal of Law, Economics and Organization, 24 (2), ISSN:8756-6222, ISSN:1465-7341

Die Auswertung von Personaldaten eines deutschen Unternehmens identifiziert einige Merkmale eines internen Arbeitsmarktes fur die Stammbelegschaft von dauerhaft beschaftigten Mitarbeitern. Dazu zahlen eine uberdurchschnittlich lange und hierarchisch zunehmende Betriebszugehorigkeit sowie eine mit der Hierarchieebene steigende Entlohnung. Im Gegensatz zu einem idealtypischen internen Arbeitsmarkt nehmen jedoch die Lohndifferenziale nicht mit der Hierarchie uberproportional zu, und Humankapitalvariablen spielen eine wichtigere Rolle bei der Entlohnung als reine Hierarchievariablen. Neben seiner Stammbelegschaft setzt das Unternehmen in starkem Mase auf eine Randbelegschaft von befristet Beschaftigten und Leiharbeitnehmern. Eine okonometrische Analyse zeigt, dass die Kosten pro geleisteter Arbeitsstunde bei befristet Beschaftigten um 14 Prozent und bei Leiharbeitnehmern sogar um 29 Prozent unter denen vergleichbarer Stammmitarbeiter liegen. Zusammen mit den Flexibilitatsvorteilen von temporarer Beschaftigung deutet dies darauf hin, dass Unternehmen durch eine gelungene Mischung von Stamm- und Randbelegschaft Kosten- und Wettbewerbsvorteile haben konnen.

Labour market reforms increasing flexibility ‘at the margin’ have been recently paying out in terms of employment growth. This article argues that two-tier labour market reforms have a transitional ‘honeymoon’, job creating effect. In a dynamic model of labour demand under uncertainty, the article predicts that in the aftermath of reforms, beyond an increase in employment, there should be a reduction in ‘employment inaction’ and in the mean and cross-sectional variance of labour productivity. Based on a variety of firm-level data on Italy in the period 1995–2000, we find evidence of our empirical implications.

In this paper, quantile regressions is used to estimate wage equations of different ownerships. Quantile regressions give us distributions rather than a single estimate of the returns both to education and experience in each ownership sector. For state-owned enterprises (SOE), the returns to education tended to be larger at the bottom of the conditional distribution of wages in 1991 and 1993, and there was no such trend in 1997. For the private sector, however, the returns to education tended to be larger at the top positions in 1993 and 1997. It is also found that the growth rates of the wages at the bottom of the conditional distribution of wages are higher than those at the top in SOEs. No such patterns for the private sector is found. It is suggested the wage mechanism in the private sector is more market-oriented.

This study analyzes the trade-off relationship between layoffs and wage cuts. If the introduction of a performance-based payment system stimulates workers’ pecuniary-motivated minds, their morale can be damaged more severely by wage cuts than prior to the introduction thereof. Utilizing this idea, we demonstrate theoretically that the more heavily wages are based on performance, the more firms, fearing that workers’ morale will be damaged by wage cuts, try to avoid wage cuts and instead prefer layoffs. Next, we show empirically the trend whereby firms with performance-based payment systems are unlikely to implement wage cuts. Given this first-stage regression, the status of a performance-based payment system, based on the firm’s past decision and assured to be exogenous, is employed as an instrumental variable (IV) for wage cuts in a layoff regression model to overcome simultaneous bias. In the second-stage regression, the IV estimates for the impact of wage cuts on layoffs are significantly negative: if a firm implements wage cuts, it will reduce the probability of layoffs by 0.172. This supports the theoretical implication that implementing wage cuts can be a potential device for reducing layoffs. These results may imply an unexpected side effect of the increasing use of performance-based payment systems: as such systems become more widespread, layoffs will increase because firms will become less likely to impose wage cuts, thus potentially resulting in high unemployment.

This paper estimates the importance of workers’ outside options in wage determination. In models of search and bargaining, a worker’s wage is determined by the marginal product of labour and by a weighted average of wages in alternate jobs. Thus, the nature of the wage equation makes it difficult to isolate changes in workers’ outside options that are independent from changes in the marginal product of labour. This paper builds on the predictions of a search and bargaining model with multiple cities, industries and occupations to propose novel identification strategies. Using a unique administrative panel database for Germany, the study exploits differences in both the employment composition across cities and in job-specific skill transferability as sources of variation for identification. The main finding of the paper is that a 10% increase in the outside options of a worker generates a 7% wage increase.

How do cities' average wages adjust to a shock, e.g. trade-induced or technology-induced, shifting the industrial and/or occupational composition of employment? This question is commonly answered using a shift-share analysis, which imputes the effects of composition changes on cities' average wages in a purely mechanical way. This paper argues that a shift-share approach can be misleading if compositional shifts spill over into industrial and occupational wages. Using data on Germany, this paper finds that the spillover effects from a shift in industrial and occupational composition are large and imply a total effect on cities' average wages of 2.8 times the effect that is predicted by a shift-share exercise. In addition, results indicate that in the case of Germany, accounting for adjustments along the occupational mix is crucial to identify these spillovers, even if one is only interested in the effect of an industry-specific shock.

The paper revisits the problem of wage bargaining between a firm and multiple workers. We show that the Subgame Perfect Equilibrium of the extensive-form game proposed by Stole and Zwiebel (1996a) does not imply a profile of wages and profits that coincides with the Shapley values as claimed in their classic paper. We propose an alternative extensive-form bargaining game, the Rolodex Game, that follows a simple and realistic protocol and that, under some mild restrictions, admits a unique Subgame Perfect Equilibrium generating a profile of wages and profits that are equal to the Shapley values. The vast applied literature that refers to the Stole and Zwiebel game to give a game-theoretic foundation to the use of the Shapley values as the outcome of the bargain between a firm and multiple workers should instead refer to the Rolodex game.