Knowledge that Transforms

A general equilibrium model of a dual economy is constructed with workers and managers and hierarchical production. Ability is continuous, and there is perfect competition in the product market. Higher quality of education is treated as a form of technical progress. An equilibrium wage profile is derived. Different kinds of technical and productivity changes yield different gainers and losers. Declines in the quality of education generally lead to an increase in inequality. Surprisingly, groups suffering from declines in quality of education often benefit at the cost of others. Parallels are drawn with recent experience.

Employment relationships are governed by short‐term incomplete contracts and typically involve on‐the-job screening and firm‐specific training. This article studies a dynamic employment relationship with these features and identifies a potential conflict between the employer's twin objectives to screen and train the worker: when the training technology is quite productive, the employer may have to sacrifice from worker performance during the screening process. The article thus offers an explanation for why firms may invest suboptimally on training, which complements the standard “inappropriable rents” explanation based on ex post mobility of young employees.

Compared to older women, young female job seekers are more than three times as likely to report that their ability to find a good new job is compromised by their gender. This phenomenon cannot be statistically attributed to observed personal or job characteristics, or to any “objective” measure of discrimination. Further, women's reports of gender‐induced advantage, and men's reports of gender‐induced harm, are also more prevalent among the young. A possible interpretation of all these patterns is that young people are more likely to interpret a given departure from gender‐neutral treatment as causally affected by their gender.

This article offers an explanation of the postinjury employment, wage, and accommodation patterns of permanently impaired workers. In particular, it argues that the observed tendency of time‐ofaccident employers to rehire at the preinjury wage, accommodate, and then, perhaps, quickly terminate the impaired worker, is a manifestation of the worker's preferred contract. That contract is characterized by wage inflexibility. By removing the opportunity for the postinjury employer to underreport productivity, this contract creates an incentive for the worker to attempt to functionally adapt to the impairment, thereby increasing expected lifetime utility.

Workers with limited English skills may suffer adverse effects when states declare English the official language. If employers believe official English laws allow or require them to adopt workplace English‐only rules that lower the demand for limited-English‐proficient workers, such laws may harm individuals who do not speak English well. Using data from the 1980 and 1990 censuses, I estimate whether the earnings of limited-English‐proficient workers who live in states that adopted official English laws declined relative to other workers. The results suggest a substantial decline in the annual earnings of men with limited English proficiency.

In this article, I evaluate the hypothesis that firms respond to negative demand shocks by assigning workers to tasks that require less skill than the tasks they normally carry out. Using changes in employment in state‐industry cells as a measure of demand conditions facing individual firms, I provide evidence in favor of the hypothesis. Furthermore, the skill requirements of the tasks carried out by workers are procyclical. The results are consistent with a specific capital model where employers move workers between tasks so that layoffs are concentrated on workers with low levels of firm‐specific human capital.

Theories of turnover and wage dynamics have studied the impact of wage levels on turnover, but they have failed explicitly to model the role of wage growth in predicting turnover. This article presents a theory of turnover that explains why within‐job wage growth reduces the likelihood of worker‐firm separations. The model determines the evolution of value among jobs that differ systematically in permanent rates of wage growth and shows that the value of high wage‐growth jobs increases faster. With additional assumptions about the search process, this proposition implies that high wage‐growth jobs are less likely to end.

Using Danish firm (workplace) data on employment reallocation merged with individual records, the effects of job creation/destruction and worker reallocation on wages are estimated using fixed effects techniques. After controlling for business cycle fluctuations, job creation is found to increase male wages. The effect of net job creation seems present at all phases of the business cycle. Entry wages as well as wages of low tenure workers appear much more sensitive to idiosyncratic job creation than wages of those who are already employed in a given firm. Except for entry wages, female wages are found insensitive to net job creation.

This paper develops a game‐theoretic model that endogenizes the items included in the bargaining agenda. The model's equilibria suggest two possible sources of inefficiency: (1) exclusion of items from the bargaining agenda and (2) delay to agreement due to negotiations over the bargaining agenda. Evidence from union contract negotiations is provided to demonstrate the relevance of these sources of inefficiency. The model also allows strategic delegation by the union. In certain equilibria, the surplus‐maximizing union selects wage‐maximizing delegates (such as senior union members) to negotiate the contract.

We analyze the link between workers' discretion and incentives in an organization that lasts for several periods. In a long‐lasting affiliation, it is possible for the principal to learn and update her beliefs about essential characteristics associated with either the job or the agent. This learning possibility has an important effect on the link between workers' discretion and incentives.