Knowledge that Transforms

A general selection model is estimated in which workers select across four labor markets-private/nonunion, privat e/union, public/nonunion, and public/union. Evidence is found of posi tive selection bias in the private/nonunion sector and of negative se lection bias in the public/union sector. Union wage differentials in the public and private sectors as well as public/private wage differe ntials are contrasted. The authors discuss when it is appropriate to use each type of differential.

A general stochastic model of optimal job separation behavior is developed in the paper. The model nests both the job training and the job-matching hypotheses of the wage-tenure relationship as special cases. The purpose of the paper is to compare the implications of the two hypotheses for job turnover. That expected wealth-maximizing separation strategies are qualitatively identical under the two hypotheses is the principal theoretical result. Although the empirical implications of the two hypotheses for observations on the distribution of completed job-spell lengths are similar as a consequence, they are not quite identical.

This article evaluates the quality of workers' information regarding pension offerings using both administrative records and worker reports of pension provisions. Missing and incorrect information is wide-spread. Unionized employees, higher income workers, better educated workers, and those with seniority are better informed about their pensions. There are also demographic differences: minorities have less pension knowledge than whites, but women are better informed than men along several pension dimensions. Myopia about pension incentive structures is troubling since workers may save or consume suboptimally, change jobs, or retire earlier than they would have if equipped with better pension information.

This article investigates racial differences in 1985-86 salaries of individual professional basketball players. White and black players earn similar mean compensation; however, controlling for a variety of productivity and market-related variables and for the endogeneity of player draft position, we find a significant ceteris paribus black compensation shortfall of about 20%. Further, we find that all else equal, including team performance and market factors, replacing one black player with an identical white player raises home attendance by 8,000 to 13,000 fans per season. The compensation and attendance results together are consistent with the idea of customer discrimination.

In a labor market with tied hours-wage packages and wage dispersion for a particular type of job, constrained workers may be willing to sacrifice wage gains for better hours when changing jobs. Likewise, workers may accept jobs offering undesirable hours only if the associated wage gains are large. We investigate this issue empirically by examining whether overemployment and underemployment on the initial and new job affects the relation between hours changes and wage changes for quitters. Our results generally support the view that an individual requires compensation to work in a job that, given the individual's particular preferences, offers unattractive hours.

A model of wage determination in unionized oligopolistic industries is developed and used to compare the outcome of collective bargaining under two different bargaining structures-one in which the workers of each firm are represented by separate and independent unions (local bargaining) and one in which a national union represents all workers in the industry. In both cases, the bargaining problem has a unique outcome with industrywide bargaining resulting in higher wages. In addition, industrywide unions are inherently stable in that there are no incentives for independent unions to attempt to cheat on the collusive agreement.

A bilateral moral-hazard problem provides a rationale for "up-or-out" employment contracts. The employer sets a wage higher than opportunity cost to induce the worker to invest in firm-specific capital. If the individual does not make the grade, it is in the firm's interest ex post to fire him. Had the initial arrangement not included provisions for firing individuals, the firm would underreport the value of the employee, wrecking the incentive scheme. The basic model permits both firm and worker to be risk neutral. Therefore, it admits a straightforward multiperiod extension, which we also investigate.

Immigrant workers will be evaluated by their ability to speak English as well as by their other skills. The empirical work in this article add resses the hypothesis that there is an economic cost to English langu age deficiency both in occupation-specific earnings and in (cross-sec tional) occupational mobility. This analysis suggests that it is cost ly to be deficient in English, but the cost is ethnically and occupat ionally specific. Hispanics have a higher cost for English language d eficiency than Asians at every skill level.

This article considers the representativeness of the Panel Study of Income Dynamics (PSID) over its 14-year history from 1968 to 1981 given the dynamics of entry and exit from the panel. By 1981, 40% of the original members had left the sample and were replaced by new entrants who joined either existing households or new households being formed by members of the original sample. We consider the distribution of demographic characteristics and earnings equations over time, and we compare the PSID with the Current Population Survey (CPS). By either approach we find little evidence that the PSID has become unrepresentative.

This article presents a search model which shows that search method choices should be related to their costs and expected productivities as well as to nonwage income and wage offer distributions. The empirical evidence then shows that the most frequently used search methods (i.e., friends and relatives and direct applications without referral) are also the most productive in generating offers and acceptances. The number of methods used is affected by factors that presumably reflect opportunities as well as income sources and needs. Specific methods are chosen in a manner that generates positive average effects on outcomes for those using them.