Knowledge that Transforms

This article analyzes the effect of coworker discrimination on wage and unemployment differentials between males and females using a search model. An increase in female participation drives up the wage offer to female workers and raises female employment. Moreover, an increase in the degree of discrimination by males results in gains to them in terms of higher wages and lower unemployment but results in losses to females in terms of lower wages and higher unemployment. The benefit to males provides an explanation for the persistence of discrimination.

This article examines a dynamic adverse‐selection model that generates equilibrium employment cycles. In the model, firms hire workers from unemployment, observe workers' productivity through time, and (following the profit‐maximizing rule) eventually fire unproductive workers. If hiring costs are low, the dynamical system converges to a steady state in which the unemployment pool contains mostly low‐ability workers. However, if hiring costs are sufficiently large, this “lemons effect” would make firms unwilling to hire workers. In this case, the system converges to a cyclical equilibrium in which firms alternate between hiring and not hiring.

This article analyzes wage changes with an unbalanced panel from the Spanish Collective Bargaining in Large Firms survey. Central to the analysis are the joint determination of strike and wage outcomes and, in particular, the estimation of the slope of the wage concession curve. I control for the possible endogeneity of strike variables in the wage equation and suggest two sets of instruments: lagged strike outcomes or reduced‐form predictions of the strike variables. When controlling for endogeneity, a negative relationship between strike duration and the size of the wage change arises. However, short strikes still produce higher wage changes.

When union‐firm pairs bargain sequentially, and when unobserved components of firms' abilities to pay are subject to correlated shocks, unions that bargain later in a sequence can acquire valuable information by observing previous bargaining outcomes in their industry. We derive the implications of this kind of learning in an asymmetric information model of wage negotiations and argue that the most robust implication is a lower incidence of strikes among “followers” than “leaders” in wage negotiations. Considerable empirical support for this implication is found in a long panel of Canadian contract negotiations.

In contrast to nonunion workers, reemployment wages of workers displaced from unionized jobs decline with tenure on the lost job. This finding cannot easily be explained by firm‐ or industry‐specific human capital accumulation, deferred‐pay policies, standard matching models, or a correlation between tenure and reentry rates into unionized jobs. Possible explanations include negative selection of senior union workers and a negative causal effect of unionism on workers' alternative skills. Despite a much flatter predisplacement tenure‐wage profile, displaced union workers' wage losses increase with tenure at a rate comparable to or higher than those of nonunion workers.

Using data from the National Longitudinal Survey of Youth, this article examines the impact of employer‐provided training on the wage profile and on the mobility of young workers. The main results are that (i) training with the current employer has a positive effect on the wage; (ii) employers seem to reward skills acquired through training with previous employers as much as skills they provide themselves; and (iii) part of the skills acquired through training programs provided by the current employer seem to be fairly specific as they are shown to reduce mobility, even after controlling for unobserved heterogeneity.

Recent work on the economic effects of minimum wages has stressed that the standard economic model, where increases in minimum wages depress employment, is not supported by empirical work in some labor markets. We present a general theoretical model whereby employers have some degree of monopsony power, which allows minimum wages to have the conventional negative impact on employment but which also allows for a neutral or positive impact. Studying the industry-based British Wages Councils between 1975 and 1992, we find that minimum wages significantly compress the distribution of earnings but do not have a negative impact on employment. I.

This article examines the effects of unemployment compensation finance in a labor market in which firms pay efficiency wages. Two self‐financing unemployment compensation systems are compared: one in which benefits are financed by a proportional payroll tax and another in which experience rating is introduced by taxing firms in proportion to their separations. We find that experience rating leads to less unemployment, less shirking, and higher output.