Knowledge that Transforms

This article examines a model of "semiefficient" bargaining in which the union and the firm bargain over wages and various types of work rules. The results are compared to the outcomes that are associated with fully efficient bargaining (i.e., over wages and the level of employment) and bargaining solely over wages.

This article investigates the effect of external, national, and sectoral shocks on Canadian employment fluctuations at the national, industrial, and provincial levels. We assume that employment growth in each industry-province pair depends on U.S. growth, lagged Canadian growth at the national, industrial, and provincial levels, an aggregate shock, and shocks specific to each industry, province, and industry-province pair. We estimate that the U.s. and Canadian shocks account for two-thirds and a quarter, respectively, of aggregate variation. Sectoral shocks account for only one-tenth of aggregate variation but represent 30% of the variation from Canadian sources.

This article investigates cyclicality in real wages between 1969 and 1982, using Panel Study of Income Dynamics data. There is little evidence that movements in and out of the labor market induced aggregate wage cyclicality during these years. However, cyclicality in the movement of workers between heterogeneous labor-market sectors affected aggregate wage cyclicality. While sector location is important, sector selectivity is not correlated with wages. Yet, even within sectors, cyclicality is present in real wages over this time period and is the result of cyclicality in overall wage levels, as well as in the coefficients associated with particular worker characteristics.

This article presents a static and dynamic intertemporal analysis of employment and income distribution in unionized and labor-managed firms. Motivated by theoretical considerations and institutional features of Western trade unions and labor-managed firms, we examine firms in which worker-members share the risk of layoffs by (acting as if) compensating laid-off members. In the static framework we show that, although the firms do not behave perversely, their behavior depends crucially on the initial membership. Since the issue of optimal initial membership has been virtually ignored in the literature, we analyze it next within a dynamic framework.

This article reports on an experiment that was designed to test predictions about the frequency of disagreement (strikes) in games with complete information. An empirical test of the "joint-cost" theory, which relates strike activity to the marginal cost of striking, is based on a set of "shrinking pie" games in which subjects bargained in consecutive periods over how to divide a sum of money. Strike activity was a frequent occurrence in these games and, moreover, did not disappear over time. The joint-cost theory received some support, indicating that further tests may be useful.

This article builds and tests a model of the impact of a firm's bank-ruptcy probability on its propensity to offer deferred compensation schemes. Using 1983 Current Population Survey data, we find that, ceteris paribus, lower failure rates raise the incidence of pensions for nonunion workers outside manufacturing. Further, we find some evidence that, among those workers with a pension, a higher industry failure rate steepens tenure-earnings profiles (jointly controlling for union-nonunion and pension-no pension selectivity). Such a result suggests that workers discount implicit promises of future earnings increases by the likelihood that the firm will not survive.

This article uses a hazards model permitting continuous covariates and fixed effects to estimate the effect of local employment opportunity and family background on the cohabitation and childbearing of black youths from low-income households. Support is found for W. J. Wilson's hypothesis that employment opportunity encourages the formation of cohabitational unions, as well as for the "opportunity-cost" hypothesis that employment opportunity discourages childbearing outside such unions. However, the latter effect appears to be larger, suggesting that the opportunity-cost hypothesis is the primary channel through which higher employment rates result in lower rates of illegitimacy among underclass youths.

When creditors do not honor human capital as collateral, firms can mediate financially by offering workers long-term wage contracts. The optimal contract specifies a wage consisting of a spot general skill component plus a component equal to the expected time-averaged value of the worker's specific skills with a competitor. Variations in the smoothed specific component are due only to changes in expectations about the likelihood of quitting a competing firm. The theory also explains interindustry disparities in wage paths and statistical discrimination by firms.