Knowledge that Transforms

This article analyzes Becker’s ([1957] 1971) theory of employer discrimination within a search and wage‐bargaining setting. Discriminatory firms pay workers who are discriminated against less and apply stricter hiring criteria to these workers. The highest profits are realized by firms with a positive discrimination coefficient. Moreover, once ownership and management are separated, both highest profits and highest utility can be realized by firms with a positive discrimination coefficient. Thus, market forces, like entry or takeovers, do not ensure that wage differentials due to employer discrimination disappear.

A structural approach is used to examine who matches with whom. A two‐sided matching model that allows for marital sorting in response to marriage market flexibility and agents’ preferences is utilized. Estimation is based on imbedding the numerical solution of a matching model within a maximum likelihood procedure. Results indicate that wage is more desirable than education in predicting marriageability for white men; education is more desirable for black men. The marriage market for white men is more flexible. Both marriage market flexibility and the chance of being classified correctly using agents’ wage and education decrease with age for white men.

This article explores the claim that college‐educated workers are increasingly likely to be in “noncollege” occupations. We provide a conceptual framework that gives analytical content to the previously vague distinction between “college” and noncollege jobs. We show that, when there is heterogeneity in preferences, equally productive college workers can be in college and noncollege jobs. This framework is also used to show that skill‐biased technological change will lead to a decline in the proportion of college workers in noncollege jobs. This prediction is supported by the data.

This article develops and estimates an on‐the‐job search model of the entry of highly skilled immigrants from the former Soviet Union into the Israeli labor market. The estimated parameters of the model, together with information on the wages of immigrants from earlier waves, imply that, on average, immigrants can expect lifetime earnings to fall short of the lifetime earnings of comparable natives by 57%. Of this figure, 14 percentage points reflect frictions associated with nonemployment and job distribution mismatch, and 43 percentage points reflect the gradual adaptation of imported schooling and experience to the local labor market.

In this article, we analyze the impact of uncertainty on the hiring process. We show the connection between models of statistical discrimination where uncertainty can work against groups that have less reliable indicators of future productivity and models of option value where uncertainty about future productivity can be beneficial for these groups. These models generate hypotheses about the relationship between ex ante hiring patterns and ex post productivity. This is applied to the market for NFL football players. We provide various estimates of NFL success, which suggest that statistical discrimination and option value influence choices in this market.

A comparison of the correlations between brothers and neighboring boys in their adult earnings suggests that the earnings resemblance between brothers stems more from growing up in the same family than from growing up in the same neighborhood. Much of the neighbor correlation is explicable in terms of the large earnings differential between urban and nonurban areas combined with the strength with which urbanicity of childhood neighborhood predicts urbanicity of adult location. This pattern is subject to a variety of interpretations, but it is quite different from the usual view of neighborhood effects.

The aim of this article is to analyze the effects of housing discrimination on the wages and unemployment rates of black workers. The unemployment effect is first analyzed using a simple minimum‐wage model. An efficiency‐wage model is then adopted in order to endogenize both unemployment and wages. Under both models, suburban housing discrimination leads to a higher unemployment rate for blacks in the central city than in the suburbs. Under the efficiency‐wage model, black wages are also lower in the center. The analysis thus generates a link between unemployment and a seemingly unrelated phenomenon: racial discrimination in the housing market.

The 1918–47 employee records of the Ford Motor Company provide a rare opportunity to study a firm willing to hire black workers when similar firms would not. The evidence suggests that Ford did profit from discrimination elsewhere, but not by paying blacks less than whites. An apparent “wage‐equity constraint” prevailed, resulting in virtually no racial variation in wages inside Ford. An implication was that blacks quit Ford jobs less often than whites, holding working conditions constant. Arbitrage profit came from exploiting this nonwage margin, as Ford placed blacks in hot, dangerous foundry jobs where quit rates were generally high.

We examine the impact of immigration on self‐employed natives. In a new general equilibrium model of self‐employment and wage/salary work, a range of plausible parameter values implies small negative effects of immigration on native self‐employment rates and earnings. Using 1980 and 1990 Census microdata, we then examine the relationship between changes in immigration and native self‐employment rates and earnings across 132 of the largest U.S. metropolitan areas. We find evidence suggesting that self‐employed immigrants displace self‐employed natives but do not have a negative effect on native self‐employment earnings. The effects are much larger than those predicted by the theoretical model.

This article uses variation in the labor supply of twelfth‐grade students created by interstate variations in child labor laws to estimate the effect of school‐year work on twelfth‐grade math achievement. The instrumental variable estimates in this article indicate that an exogenous decrease in school‐year hours worked of 10 hours per week would result in a 0.2 standard deviation increase in math scores. Comparisons to ordinary least squares estimates suggest that failure to account for the endogeneity of the labor supply decisions of high school students will result in underestimates of the negative impact of school‐year work on academic achievement.