Knowledge that Transforms

We report a gift exchange experiment. Firms make wage offers; workers respond by determining an effort level. Higher effort is more costly to workers, and firms have no mechanism for punishing or rewarding workers. Consistent with the gift exchange hypothesis, workers provide more effort at higher wages, but undergraduates provide substantially less effort than MBAs. Evidence suggests this results from differences in prior work experience. Firms' nonbinding effort requests are at least partially honored, resulting in increased overall effort for undergraduates. Although higher wages are relatively more costly for lower productivity firms, workers do not provide them with more effort.

This article estimates a dynamic model of fertility and labor supply of married women drawn from the National Longitudinal Survey of Young Women, 1968–91. It distinguishes part‐time and full‐time employment sectors, which differ by pecuniary and nonpecuniary returns and transferability of human capital. The model with unobserved heterogeneity in earning ability and preferences for children fits the data and produces reasonable forecasts of labor force participation in decisions. The estimates unpack important features of the persistence in labor market decisions, intertemporal substitution of leisure over the life cycle, and the effect of work interruptions, due to childbirth, on lifetime utility.

For young male immigrants, naturalization facilitates assimilation into the U.S. labor market. Following naturalization, immigrants gain access to public‐sector, white‐collar, and union jobs, and wage growth accelerates—consistent with removal of employment barriers. The faster wage growth of immigrants who naturalize might alternatively result from greater human capital investment prior to naturalization, stemming from a long‐term commitment to U.S. labor markets, but there is no evidence that wage growth accelerates or the distribution of jobs improves until citizenship is attained. Finally, the gains from naturalization are greater for immigrants from less‐developed countries and persist when we control for unobserved productivity.

The 1986 Immigration Reform and Control Act (IRCA) granted amnesty to approximately 1.7 million long‐term unauthorized workers in an effort to bring them “out of the shadows” and improve their labor market opportunities. An analysis of wages using panel data for a sample of legalized men provides evidence that wage determinants are structurally different after amnesty for them but not for the comparison group as measured during the same time periods. The wage penalty for being unauthorized is estimated to range from 14% to 24%. The wage benefit of legalization under IRCA was approximately 6%.

This article examines the "added worker effect," which is the labor supply response of wives to their husbands' job losses. Unlike past studies, which focused on the husbands' current unemployment status, this article analyzes wives' responses before and after job losses to examine the life-cycle labor supply adjustments. Using Panel Study of Income Dynamics data reveals small predisplacement effects and large, persistent postdisplacement effects. The timing of the responses differs with type of displacement, possibly because of differences in the information acquired before job loss. Long-run labor supply increases compensate for over 25% of the husbands' lost income.

The recent rise in wage inequality is usually attributed to skill-biased technical change (SBTC), associated with new computer technologies. We review the evidence for this hypothesis, focusing on the implications of SBTC for overall wage inequality and for changes in wage differentials between groups. A key problem for the SBTC hypothesis is that wage inequality stabilized in the 1990s despite continuing advances in computer technology; SBTC also fails to explain the evolution of other dimensions of wage inequality, including the gender and racial wage gaps and the age gradient in the return to education.