Knowledge that Transforms

Existing models of incentive compatibility in life-cycle employment contracts arrive at different predictions partly because of the different kinds of "contract-breaking" behavior allowed in them. This paper sets out and classifies the full range of such behaviors, argues that no model has yet incorporated all of them, and examines the consequences of doing so in the context of Lazear's well-known model. In the extended model, wages cannot rise faster than marginal products throughout the entire contract, and the set of feasible contracts can often be empty, even when both parties can commit to terminate the contract whenever it is broken by the other party.

This paper describes changes in hours of work and income between 1959 and 1979 of women and men ages 25-64. It includes attempts to measure and value nonmarket production and leisure as well as market work, to take account of possible income sharing within households, and to allow for economies of scale in household production. The most important empirical result is that, relative to men, women's access to goods and services and leisure was lower in 1979 than in 1959. Changes in hourly earnings, hours of work, and household structure contributed to this result. The sex differential in hourly earnings is explored in detail.

The traditional model of collective bargaining confines unions to settlements constrained by the employer's labor demand curve, but an alternative model places wage-employment outcomes on a contract curve that extends beyond the labor demand curve. This paper derives a multidimensional (hedonic) contract-curve model in which employment-security provisions are used to maintain efficient bargains outside the employer's demand curve and distinguishes empirically between the contract-curve and demand-constraint models using data for public school teachers in New York State. Estimates clearly support the contract-curve model over the demand-constraint model by linking the gap between compensation and the value of the marginal product to the strength of employment-security provisions.

The objective of this paper is to demonstrate that the nonunion wage differential consists of two effects. The first represents the differential between the wage of a nonunion worker in a collective bargaining unit and the wage paid to a comparable worker not covered by a bargaining agreement. This effect arises from the monopoly power of organized labor. The second is the wage differential between union and nonunion workers in collective bargaining units. This latter effect is attributed to economic benefits that unionism brings to its members. Empirical evidence is presented in support of both effects.

The 1970 and 1979 Current Population Surveys are used to compute the personal distribution of income. The major innovation in this paper is that all individuals in the household are not treated identically. In particular, children receive a different proportion of income than do adults. That proportion is estimated. Its variations with respect to household characteristics are discussed, and a final distribution of personal income is computed. That distribution has considerably fatter tails than does the one normally used.

This paper examines the provision of industrial safety in a competitive labor market under the assumption that it takes time for workers to learn about changes in safety levels at a firm. It is shown that safety will in general be underprovided and that in some cases government-enforced workmen's compensation can bring improvements. The results hold even though in equilibrium all workers are perfectly informed about the level of safety prevailing at each firm and each is free to move to any firm he likes.

Previous static analyses of the work disincentive effects of welfare programs are extended to a dynamic context. Using a sample of continuous longitudinal labor market histories, estimates are derived for welfare-nonwelfare differences in labor market flows among the states of employment, unemployment, and nonparticipation. The estimates are used to identify the main sources of the lower employment and labor force participation rates and higher unemployment rate of welfare recipients. The findings indicate that welfare programs have substantial effects on virtually every labor market transition examined but that the primary source of the static work disincentive effect is slower entry into employment.

This paper uses industry price-cost margin data to estimate the extent to which unions reduce profits. Estimates allowing for the endogeneity of union status are contrasted with estimates that assume union status is exogenous and not determined in part by either profitability or industry structure. Endogeneity is found to be an important consideration in estimating the union impact on profits: two-stage estimates are considerably larger than OLS estimates. The final section explores the total estimated redistribution from capital to labor in the manufacturing sector. An important conclusion is that unions raise prices less than was previously believed.