Knowledge that Transforms

Sales quotas are a fixture of sales compensation plans and are often associated with a significant discrete bonus. This article shows that, under certain assumptions about salesperson utility and the distribution of sales outcomes, the optimal compensation is a discrete bonus for meeting a sales quota. The results are similar when the assumption of agent risk neutrality is relaxed. The model has implications for many moral hazard problems where the agent has a liability limitation and job‐specific skill.

We estimate the employment effects of federal minimum wage increases using monthly Current Population Survey (CPS) data from 1979 through 1997. We find that the empirical differences in the new minimum wage literature based on CPS data primarily can be traced to alternative methods of controlling for macroeconomic conditions. We argue that the macroeconomic controls commonly included in models where no employment impact is found are inappropriate. We consistently find a significant but modest negative relationship between minimum wage increases and teenage employment using alternative controls or allowing employer responses to the policy to occur with some delay.

The Swedish record of enormous compression of relative wages under centralized “solidarity” bargaining, followed by substantial decompression of wages after central bargaining broke down, supplies observations well suited to empirical evaluation of arguments about the response of productive efficiency to shifts in wage distribution. We obtain no results supporting “fairness, morale, and cohesiveness” theories implying that wage leveling within workplaces and industries may enhance productivity. Reduction of interindustry wage differentials evidently did, however, contribute positively to aggregate output and productivity growth, most likely for the structural reasons first emphasized by Swedish trade union economists almost a half century ago.

A structural econometric model of retirement of dual-career couples is specified and estimated with panel data from the National Longitudinal Survey of Mature Women. A coincidence of spouses retiring together, despite the younger ages of wives, suggests explicit efforts at coordination. The estimates suggest that one reason is a correlation of tastes for leisure. More important, each spouse, and perhaps husbands in particular, values retirement more once their spouse has retired. The opportunity set accounts for peaks in the retirement hazards of each spouse individually, but not for peaks in the simultaneous retirement of both spouses.

Using data from the National Longitudinal Survey of Youth (1979-96) and the Panel Study of Income Dynamics (1981-91), I seek to determine whether there is any net positive return to tenure with the current employer once we control for industry-specific capital. Including total experience in the industry as an additional explanatory variable, I show that the return to seniority is markedly reduced using GLS while it virtually disappears using IV-GLS, at both the one-digit and three-digit levels. Therefore, it seems that what matters most for the wage profile in terms of human capital is industry-specificity, not firm-specificity.

Previous research on unemployment insurance (UI) has emphasized the program's effect on individual search behavior. This state‐contingent income may also reduce the labor supply of family members during the unemployment spell. We investigate this question within the context of wives' labor supply responses to their husbands' unemployment spells. We find strong “crowdout” of this form of family self‐insurance; our estimates imply that for each dollar of UI receipt wives earn up to 73 cents less. The reduction in spousal hours of work is over 40% as large as previous estimates of the effect of UI on search time of husbands.

This article analyzes an important aspect of the contemporary reorganization of work within firms: the shift from “Tayloristic” organization (characterized by specialization by tasks) to “holistic” organization (featuring job rotation, integration of tasks, and learning across tasks). We examine four driving forces behind this restructuring process: advances in production technologies promoting technological task complementarities, advances in information technologies promoting informational task complementarities, changes in worker preferences in favor of versatile work, and advances in human capital that make workers more versatile. Our analysis also helps explain the recent widening of wage differentials and disparities in job opportunities within narrowly defined groups.

In this article we explore the effects of labor demand shifts and population adjustments across metropolitan areas on the employment and earnings of various demographic groups during the 1980s. We find that population shifts across areas at least partially offset the effects of these demand shifts, but less‐educated workers showed substantially lower population adjustments in response to these demand shifts. These limited supply responses apparently contributed importantly to relatively greater deterioration of employment and earnings of these groups in declining areas during the 1980s.

We use data from the National Longitudinal Surveys to investigate the relative importance of family financial and human capital in the transition into self-employment. Specifically, we estimate the impacts of individual's own wealth and human capital and parental wealth and self-employment experience on the probability that an individual transits from wage-and-salary to self-employment. We find young men's own financial assets exert a statistically significant but quantitatively modest effect on the transition. In contrast, the parents' capital exerts a large influence. Parents' strongest effect runs, not through financial means, but rather through their own self-employment experience and business success.