Knowledge that Transforms

Using union contract and industry wage survey data, this article examines the effect of discounting on cooperative bargaining behavior by unions and firms. Game theory predicts that higher discount rates raise the temptation to defect from cooperation. Measures of cooperative behavior included the presence of merit pay, incentive pay, wage-employment guarantees, or labor-management study committees. Discount rates were proxied by the relevant industry's failure rate. Failure rates generally had negative effects on cooperation. Industry Wage Survey results showed larger effects for union than non-union establishments, providing support for the union bargaining framework.

This article argues that the negative relationship between weekly hours worked and the gross hourly wage rate is due to the provision of fringe benefits. As the total weekly wage increases, employers and employees avoid taxation by substituting wages with nontaxable, nonwage benefits. I produce a wage that incorporates the benefit effects and estimate the corresponding labor-supply elasticities. An estimator is presented for the wage/hours market locus and the structural labor-supply function. An empirical application indicates that an estimated negative labor-supply elasticity associated with the observed gross wage is reversed when the adjusted wage is employed.

Using a sample of workers' compensation claims from New York, this article investigates (1) the probability that the claimant and insurer will negotiate a settlement rather than adjudicate the claim; (2) the size of the settlement, if settlement occurs; (3) the size of the award if the claim is adjudicated; and (4) factors determining the extent of the insurers claim adjustment efforts. The findings show that insurer adjustment activities increase settlement probability and that a 24%-25% discount rate is required to equate lump sum settlements with the benefit stream paid by an adjudicated award.

This article discusses some aspects of labor market adjustments in Japan that may be relevant to the low unemployment rate there. Japanese statistics treat kyugyosha (persons not at work) as being employed, but some of these workers would be counted as unemployed in the United States. The kyugyosha group appears to increase in size during downturns and decreases during upturns, suggesting that temporarily laid-off persons are an important part of this group. Japanese employers evidently rely less on employment adjustments, and more on adjustments in hours of work and inventory, while employers in the United States rely more on employment adjustments, to deal with cyclical changes in product demand. Japanese manufacturing employment became less sensitive, and hours of work more sensitive, to demand shocks after the introduction of the Employment Insurance Law in 1975.

The article empirically estimates the effects of disability pensions provided under the Canada / Quebec Pension Plans on the labor-force participation rates of males aged 45-64 years. Two data sets are used. One consists of pooled cross section / annual time-series data by province for the years 1975-83. The other consists of observations as of 1985 on 651 males in the specified age group. Naive estimation results from both sets of data suggest a large negative effect of pension income. In the case of the micro data, this effect becomes small and statistically nonsignificant when more sophisticated estimation methods are used.

Canada has a universal social assistance program that is almost completely administered through the federal Canada Assistance Program. However, provinces determine the levels of assistance for various groups eligible for welfare. This article exploits the variation in payments and uses microdata to estimate the effect of changes in welfare benefits on welfare participation, single parenthood, births out of wedlock, divorce, and labor force participation among low-income women. In Canada, it would appear that welfare benefits influence these decisions.

We develop a model in which it is predicted that more resources will be devoted to safety in a workers' compensation system with experience-rated premiums than in one with flat-rated premiums. We test this model by observing the effect on fatality rates of the move from flat rating to experience rating in the forestry and construction industries of Ontario, Canada. The evidence provides strong confirmation of the theory.

This article examines municipal union employment and wage effects in a sample of police, fire, sanitation, streets and highways, and finance and control departments from approximately 900 U.S. cities during 1977-80. Cross-section results for 1980 suggest positive union contract effects on fire fighter and sanitation employment and wages, consistent with demand shifts due to union political influence in municipal bargaining. I then model potential omitted variables as nonstationary fixed effects and apply longitudinal models to estimation of employment and wage changes between 1977 and 1980. The longitudinal results provide little support for the demand shift hypothesis.

If, as is usually assumed, older individuals face a continuous choice of work hours without fixed costs or take account of the actuarial adjustment of Social Security benefits postponed as a result of the earnings test, the earnings limit should not affect their labor supply before age 65. We test, and reject, these assumptions by estimating the hazard function for labor market reentry after retirement, using white men in the Retirement History Survey. We find that the earnings limit does affect reentry and that older men behave myopically, responding to current benefits rather than to Social Security wealth. Several policy implications follow.