Knowledge that Transforms

In this article we investigate the disincentive effects of shortening the potential duration of unemployment insurance (UI) benefits. We identify these disincentive effects by exploiting changes in Slovenia’s unemployment insurance system—a “natural experiment” that involved substantial reductions in the potential duration of benefits for four groups of workers plus no change in benefits for another group (which served as a natural control). We find that the change had a positive effect on the exit rate from unemployment—to new jobs and other options—for unemployment spells of various lengths and for several categories of unemployed workers.

We analyze data from the National Longitudinal Survey of Youth 1979 on high school completion, smoking, and obesity. First, we investigate whether GED recipients differ from other high school graduates in their smoking and obesity behaviors. Second, we explore whether the relationships between schooling and these health‐related behaviors are sensitive to controlling for background and ability measures. Third, we estimate instrumental variables models. Our results suggest that the returns to high school completion may include less smoking but the health returns to GED receipt are much smaller. We find little evidence that high school completion is associated with less obesity.

We estimate the effect of rising health insurance premiums on wages, employment, and the distribution of part-time and full-time work using variation in medical malpractice payments driven by the recent "medical malpractice crisis." We estimate that a 10% increase in health insurance premiums reduces the aggregate probability of being employed by 1.2 percentage points, reduces hours worked by 2.4%, and increases the likelihood that a worker is employed only part time by 1.9 percentage points. For workers covered by employer provided health insurance, this increase in premiums results in an offsetting decrease in wages of 2.3%.

In some OECD countries the male and female unemployment rates are very similar but in others (notably the Mediterranean countries) the female unemployment rate is much higher than the male. Explaining these cross‐country differences is the subject of this article. We show that, in countries where there is a large gender gap in unemployment rates, there is a gender gap in both flows from employment into unemployment and from unemployment into employment. We conclude that differences in human capital accumulation between men and women interacted with labor market institutions is an important part of the explanation.

The explanation typically given for longer tenure among workers who use informal contacts to find jobs is that relatives and friends reduce uncertainty about the quality of the match between worker and employer. An alternative explanation is that workers rely on informal information sources as a last resort. Such workers remain at their current jobs mainly because they have few alternative choices rather than because of better match quality. This article shows that the two different explanations are simultaneously valid for different types of contacts and can account for differences in the wage effects of job contacts.

Recently improved Swedish register data have made it possible to remedy many weaknesses of previous research on displaced workers. Using linked employer‐employee data, we identify all workers displaced in 1987, due to an establishment closure, and follow them over both a predisplacement period of 4 years and a postdisplacement period stretching until 1999. We find that the displaced workers suffer both earnings losses and worsened labor‐market position not only during a transitory period of adjustment but also in the longer run. These longer‐run effects seem to be driven by an increased sensitivity to subsequent macroeconomic shocks.

We apply Haider and Solon’s generalized errors‐in‐variables model to Swedish income tax data to produce estimates of the association between current and lifetime income. Our estimates demonstrate strong life‐cycle patterns. This implies that the widespread use of current income as a proxy for lifetime income leads to inconsistent parameter estimates (i.e., life‐cycle bias) even when the proxy is used as the dependent variable. Estimates for comparable cohorts of Swedish and American men demonstrate surprising similarities. There are, however, significant gender and cohort differences in this association that lead to statistically significant and quantitatively meaningful differences in life‐cycle biases.

In previous work, we showed that a model that integrates job assignment, human capital acquisition, and learning can explain several empirical findings concerning wage and promotion dynamics inside firms. In this article, we extend that model in two ways. First, we incorporate schooling and derive further testable implications that we then compare with the available empirical evidence. Second, and more important, we show that introducing “task‐specific” human capital allows us to produce cohort effects. We further argue that task‐specific human capital is a realistic concept and may have many important implications. We also discuss limitations of our (extended) approach.

Introduced in 1993, Georgia’s HOPE Program sponsors a merit‐based scholarship for students attending in‐state colleges and a grant for those entering technical schools. There are no income restrictions. Comparing Georgia with other southeastern states over the 1988–97 period, HOPE increased freshmen enrollment by 5.9%, or 2,889 students per year, which amounts to only 15% of freshmen scholarship recipients. Four‐year colleges account for most of the gain; a reduction in students leaving the state explains two‐thirds of the 4‐year‐school effect attributable to freshmen who have recently graduated from high school. White and black enrollments increased because of HOPE.

Existing studies of the effects of college quality on wages typically rely on a single proxy variable for college quality. This study questions the wisdom of using a single proxy given that it likely contains substantial measurement error. We consider four econometric approaches to the problem that involve the use of multiple proxies for college quality: factor analysis, instruments variables, a method recently proposed by Lubotsky and Wittenberg, and a GMM estimator. Our estimates suggest that the existing literature understates the wage effects of college quality and illustrate the value of using multiple proxies in this and other similar contexts.