Knowledge that Transforms

This article reports direct evidence on how technological change is related to changes in wage gaps by schooling, experience, and gender. Wage gaps by schooling increased the most in industries with rising R&D intensity and accelerating growth in the capital‐labor ratio. Estimates of their relationship to high‐tech capital are inconclusive. Contrary to popular notions that technological change harms older workers, wage growth of experienced workers is much greater in R&D‐intensive industries than in industries with little R&D activity. The gender gap narrowed more in industries that most intensively used high‐tech capital in 1979.

Monetary union, such as the Economic and Monetary Union in Europe (EMU), may affect incentives for labor market reform, and thus equilibrium unemployment, through several mechanisms. If an inflation bias exists, there is usually a stronger incentive to reduce equilibrium unemployment through national reform outside rather than inside the EMU. Absent such a bias, EMU membership could lead to more reform. One reason is that reform may increase wage flexibility, which can substitute for monetary policy in the EMU. Another reason could be a precautionary motive for low equilibrium unemployment to reduce the utility cost of increased macroeconomic variability in the EMU.

Two quasi‐experiments are used to estimate the impact of parental divorce on the adult labor market and marital/fertility outcomes of adolescents. These involve individuals experiencing the death of a parent and legislative changes to the Canadian divorce law. Parental loss by death is assumed to be exogenous, the experiences of children with a bereaved background offering a benchmark to assess the endogeneity of parental loss through divorce. Adolescents whose parents divorced put off marriage and, once married, suffer a greater likelihood of marital instability, but their earnings and incomes are not on average much different from others.

This article provides new estimates of the nonprofit/for‐profit wage differential in the U.S. economy. Using observations on 4.1 million private‐sector employees from the 1990 census, I find either zero or slightly positive economy‐wide wage differences between nonprofit and for‐profit employees in a standard earnings equation format. Significant wage differentials are found at the disaggregated occupation and industry level and provide a basis for testing hypotheses explaining nonprofit/for‐profit wage differences.

Should unemployment benefits be paid indefinitely at a fixed rate or should the rate decline (or increase) over a worker’s unemployment spell? We examine these issues using an equilibrium model of search unemployment. The model features worker‐firm bargaining over wages, free entry of new jobs, and endogenous search effort among the unemployed. The main result is that an optimal insurance program implies a declining benefit sequence over the spell of unemployment. Numerical calibrations of the model suggest that there may be nontrivial welfare gains associated with switching from an optimal uniform benefit structure to an optimally differentiated system.

We investigate whether a market‐clearing model is consistent with industry employment and wage patterns related to the cyclical upgrading of labor. We demonstrate that Roy's (1951) market‐clearing model of self‐selection would account for cyclical upgrading if industries were characterized by positive selection. Wage comparisons of industry movers and stayers in panel data do reveal widespread positive selection. Also consistent with the Roy model, composition‐corrected industry wages are more cyclical in high‐wage cyclical industries. The Roy model does fail to explain predictable patterns in the wage changes of industry movers, so we consider several market‐clearing and queuing extensions.

We construct a search equilibrium model for a city with central and suburban labor markets that is consistent with the set of empirical regularities commonly associated with the spatial mismatch hypothesis: a higher rate of unemployment for central city residents than suburban residents, a higher job vacancy rate for suburban firms, and reverse commuting and higher suburban wages. The effectiveness and welfare implications of public policy programs that might be used to remedy the underlying mismatch are examined.

Students often accumulate substantial work experience before leaving school. Because conventional earnings functions do not control for in‐school work experience, their estimates of the return to schooling include the benefit of work experience gained along the way. Using data from the National Longitudinal Survey of Youth, I estimate wage models with and without controls for in‐school work experience. The estimated schooling coefficients are 25%–44% higher (depending on how I control for ability bias) when in‐school work experience is omitted than when it is included. These findings indicate that conventional models significantly overstate the wage effects of “school only.”

The labor supply decisions of certified elementary and high school teachers are examined using data from a general longitudinal survey. A significant decrease in the teaching participation rate takes place over time after teacher certification. Previously unavailable marital and fertility variables provide new insight into reasons for this decrease. Descriptive statistics indicate that high‐ability teachers choose to teach a smaller proportion of time than other teachers. A dynamic, discrete‐choice model, which accommodates Serial Correlation in the wage process for teachers, is used to analyze responsiveness of the overall sample and different types of teachers to two potential types of wage increases.

This study examines aspects of pay and promotion in corporate hierarchies in the context of tournament theory. Evidence supports the tournament perspective in that most positions are filled through promotion and pay rises strongly with hierarchical level. Furthermore, the winner's prize in the CEO tournament increases with the number of competitors for the CEO position. Not all evidence is supportive: the square of the number of competitors is negatively associated with the CEO prize. Additionally, firms do not appear to maintain short-term promotion incentives, as lengthier time in position prior to a promotion reduces the pay increase from the promotion. Copyright 2001 by University of Chicago Press.