Knowledge that Transforms

Recent evidence suggests that employers acquire more precise information about a worker’s productivity the more time he or she spends in the labor market. The following question arises: Is learning symmetric, that is, do all employers have the same information about workers’ productivity, or is learning asymmetric, that is, does the current employer have superior information about workers’ productivity? This article develops a learning model with endogenous mobility that nests both learning hypotheses. It then proposes new tests for asymmetric employer learning. Overall, learning appears to be mostly symmetric, except possibly when the employees involved are college graduates.

We study worker behavior in an efficiency‐wage environment in which coworkers’ wages can influence a worker’s effort. Theoretically, we show that an increase in workers’ responsiveness to coworkers’ wages should lead profit‐maximizing firms to compress wages. Our laboratory experiments, by contrast, show that while workers’ effort choices are highly sensitive to their own wages, effort is not affected by coworkers’ wages. This casts doubt on the notion that workers’ concerns with equity might explain pay policies such as wage compression or wage secrecy.

This article considers how divorce law alters the incentives for couples to invest in their marriage, focusing on the impact of unilateral divorce laws on investments in new marriages. Differences across states between 1970 and 1980 provide useful quasi‐experimental variation with which to consider incentives to invest in several types of marriage‐specific capital: spouse’s education, children, household specialization, and home ownership. I find that adoption of unilateral divorce—regardless of the prevailing property‐division laws—reduces investment in all types of marriage‐specific capital considered except home ownership. In contrast, results for home ownership depend on the underlying property division laws.

Using unique panel data on production lines in U.S. minimills, we analyze the adoption of problem‐solving teams and group incentive pay and their effects on productivity. Almost every line ultimately adopts group incentives. However, problem‐solving teams are found almost exclusively in lines with more complex production processes. Consistent with these patterns, fixed‐effects models reveal increased productivity under group incentives in all lines, while teams raise productivity in lines with more complex production processes. This evidence indicates that teams give workers a valuable opportunity to solve problems in more complex production processes, while standard operating procedures appear to suffice elsewhere.

The employer‐learning literature finds support for statistical discrimination on the basis of schooling. How economically relevant statistical discrimination is depends on how fast employers learn about workers’ productive types. This article is the first to estimate the speed of employer learning. Employers learn quickly. Initial expectation errors decline by 50% within 3 years. This estimate places an upper bound on the contribution of signaling. This bound varies with the speed of employer learning and with discount rate. For a wide range of parameter values, the contribution of signaling to the gains from schooling is less than 25%.

Using confidential microdata from the Characteristics of Business Owners survey, we examine why African American–owned businesses lag substantially behind white‐owned businesses in sales, profits, employment, and survival. Black business owners are much less likely than white owners to have had a self‐employed family member owner prior to starting their business and less likely to have worked in that family member’s business. Using a nonlinear decomposition technique, we find that the lack of prior work experience in a family business among black business owners, perhaps by limiting their acquisition of general and specific business human capital, negatively affects black business outcomes.

Using March Current Population Survey data, we investigate married women’s labor supply from 1980 to 2000. We find a large rightward shift in their labor supply function for annual hours in the 1980s, with little shift in the 1990s. These shifts account for most of the slowdown in the growth of labor supply during this period. A major development was the dramatic decrease in the responsiveness of married women’s labor supply to their own and husbands’ wages: their own wage elasticity fell by 50%–56%, while their cross wage elasticity fell by 38%–47% in absolute value.

We estimate the importance of teachers in Chicago public high schools using matched student-teacher administrative data. A one standard deviation, one semester improvement in math teacher quality raises student math scores by 0.13 grade equivalents or, over 1 year, roughly one-fifth of average yearly gains. Estimates are relatively stable over time, reasonably impervious to a variety of conditioning variables, and do not appear to be driven by classroom sorting or selective score reporting. Also, teacher quality is particularly important for lower-ability students. Finally, traditional human capital measures—including those determining compensation—explain little of the variation in estimated quality.

The categories listed below are used to classify books, book reviews, journal articles, and dissertations indexed in JEL, JEL on CD, EconLit, and www.e-JEL.org . New changes to the classification system appear as soon as possible on www.econlit.org . The JEL classification system may be used freely for scholarly purposes. We suggest the following format: “JEL: A10, B10, etc.”

The categories listed below are used to classify books, book reviews, journal articles, and dissertations indexed in JEL, JEL on CD, EconLit, and www.e-JEL.org . New changes to the classification system appear as soon as possible on www.econlit.org . The JEL classification system may be used freely for scholarly purposes. We suggest the following format: “JEL: A10, B10, etc.”