Knowledge that Transforms

Decentralized wage setting in search equilibrium models is inefficient because the meeting firm and worker ignore the dependence of job-matching probabilities on the number of firms and workers engaged in search. This paper investigates whether risk-neutral monopolistic unions will have an incentive to internalize this externality. I find that the externality will be internalized only if the union's policy is chosen by unemployed persons. If employed persons influence union policy, both the union wage and unemployment will be too high. A tax on the union wage combined with an employment subsidy to firms can correct this inefficiency.

This paper analyzes a model that highlights imperfect monitoring and the threat of dismissal as microeconomic underpinnings for the efficiency-wage hypothesis. My major innovation is to allow the rules for dismissal as well as the wage to be determined endogenously as the equilibrium of a Stackelberg game played between firms and workers. The key results are as follows. A nontrivial equilibrium (where positive output is produced) must involve involuntary unemployment in that employed workers are strictly better off than are the unemployed. In addition, the equilibrium wage is rigid with respect to exogenous shifts in productivity.

Logit estimates of strike incidence are made based on a unique and comprehensive data set of 2,437 collective agreements-the appropriate level of aggregation since that is where bargaining occurs. The results are interpreted through a theoretical framework emphasizing that strikes are more likely when the joint costs of using the strike mechanism are low relative to the cost of alternative mechanisms for achieving the same purposes. Such functions of strikes are to generate information, elicit truth telling, establish reputations, provide catharsis, and solve intraorganizational conflict.

The steady-state effect on inequality of linear redistributive schemes based on the taxation of earnings, inheritances, or some combination of the two is examined. Dynasties that exhibit asexual reproduction and altruism are modeled. Earnings ability, which may be correlated across generations, is exogenous and drawn from a stationary distribution. Taxing inheritances increases inequality by reducing the intergenerational averaging of "luck." In an example, paying out the tax revenue in uniform transfers typically does not reverse this result. Taxing lifetime wealth or income adds a lump-sum tax on earnings, making redistribution more successful. However, this success is sensitive to the relative size of mean earnings and inheritances.

This paper examines the amount of precautionary savings and wealth inequality arising from life-span uncertainty by comparing saving behavior under perfect insurance arrangements with that arising under imperfect arrangements, namely, when longevity risk can be pooled only with members of one's own family. The central findings of the paper are that (1) perfecting insurance arrangements can sharply lower savings in both intergenerationally altruistic and life-cycle economies and that (2) in altruistic economies perfecting annuity insurance can greatly influence inequality; indeed, in the long run in our model, switching from imperfect family insurance to perfect insurance can mean the difference between absolute inequality and absolute equality.

The stock of U.S. physicians at any point in time is modeled as a weighted average of the supply that a perfect cartel would produce and that would prevail under perfect competition. Estimation of a system of stock and income equations over the post-World War II period shows that, after holding constant demand and marginal cost conditions and accounting for gradual adjustment to changes in equilibrium, the weighting parameter has moved toward the competitive extreme since 1965. This rise in the degree of competition is estimated to have increased physician stock by 6%-20% and concomitantly decreased medical incomes by 19%-45%.

With data from the Employment Opportunities Pilot Programs (EOPP) Employers' Survey, this paper uses a continuous-time hazard model to analyze male and female job-quitting behavior. The EOPP sample is composed of recently hired workers with, at most, 2.5 years of tenure with the firm. Within this early stage of tenure, it is found that the probability of quitting declines with tenure for males and increases with tenure for females. This result leads to the conclusion that the job-matching process operates differently for females than it does for males.

This paper integrates the labor and assets markets equilibria to determine and evaluate the wage differentials generated for cyclical and noncyclical risks of unemployment. The relative wage differential is a linear function of unemployment risk measured by the covariance of an index of employment with the rate of change in aggregate output. Seniority and the hoarding of skilled labor are characteristics of minimum cost contracts because employees with more human capital prefer safer jobs. Empirical results suggest that a 14%-41% wage differential can be explained by interindustry differences in unemployment risks.

Among fraternal pairs from the Wisconsin Longitudinal Study, we model the effects of measured and unmeasured family background factors, mental ability, and schooling on occupational status and earnings. The models are estimated from incomplete data with corrections for measurement error, and they permit direct comparisons of within- and between-family regressions. We find no evidence that the effects of family background lead to a bias in the effect of mental ability on schooling or in the effects of schooling on occupational status or earnings. Family background does have large independent effects on ability, schooling, and, to a lesser degree, socioeconomic attainment.

There are jobs for which firms employ older workers but tend not to hire new older workers. This may be attributable in part to implicit contracts that discourage worker shirking and malfeasance by shifting compensation to the end of the contract. Such "delayed payment" contracts can introduce a form of fixed costs into the employment relationship. Much as with hiring and training costs, these fixed costs lead firms to hire primarily young (long-term) workers. While firms employ older workers-workers who are serving out the last years of their contract-they tend not to hire them. This paper presents empirical evidence that is consistent with this argument.