This article uses aggregate birth year/calendar year level data derived from the Current Population Survey (CPS) to estimate the effect of Social Security wealth on the labor supply of older men in the 1970s and 1980s. The analysis focuses on measuring the impact of the 1977 amendments to the Social Security Act, which created a substantial, unanticipated reduction in Social Security wealth for individuals born after 1916. This differential in benefits has become known as the benefit notch. Results indicate that labor supply continued to decline for the "notch babies" who received lower Social Security benefits than earlier cohorts.

We analyze the impact of increased immigration on employment outcomes of natives in Germany using a data set of county-level variables for the late 1980s. In order to construct more unified labor market regions, we aggregate the 328 counties to 167 larger regions. We study two measures of immigration, the change in the share of foreigners between 1985 and 1989 as well as one-year gross and net flows of immigrants to an area. In order to address the potential problem of immigrant selection into local labor markets, we condition on previous labor market outcomes, which may serve as the basis of immigrant selection. This specification allows for mean reversion in the unemployment rate, which is strong in our data set and period of study. We show that this rules out some other approaches of identifying the impact of immigration. Our results indicate no detrimental effect of immigration. We find no support for the hypothesis that the absence of displacement effects is due to a response of native migration patterns.

In the human capital model with perfect labor markets, firms never invest in general skills and all cost of general training are borne by workers. When lobor market frictions compress the structure of wages, firms may pay for these investments. The distortion in the wage structure turns "technologically" general skills into de facto "specific " skills. Credit market imperfections are neither neccessary nor sufficient for firm‐sponsored training. Since labor market frictions and insititutions shape the wage structure, they may have an important impact on the financing and amount of human capital investments and account for some international differences in training practices.

Previous tests for liquidity constraints using consumption Euler equations have frequently split the sample on the basis of wealth, arguing that low-wealth consumers are more likely to be constrained. We propose alternative tests using different and more direct information on borrowing constraints obtained from the 1983 Survey of Consumer Finances. In a first stage we estimate probabilities of being constrained, which are then utilized in a second sample, the Panel Study of Income Dynamics, to estimate switching regression models of the Euler equation. Our estimates indicate stronger excess sensitivity associated with the possibility of liquidity constraints than the sample splitting approach.