Fellowship Stipend Support and the Supply of Science and Engineering Students: NSF Graduate Research Fellowships by Richard B. Freeman. Published in volume 95, issue 2, pages 61-65 of American Economic Review, May 2005

New developments in development in the 1980's contravened several widely held tenets about how labor markets and other institutional arrangements affect the performance of low-income countries. If you believe that massive urban-rural earnings differentials due to bias plague Developia, new evidence will ease your concerns: urban workers suffered mightily in the lost-growth decade in many countries. If you fear that government or union interventions in labor markets impede stabilization or structural adjustment, think again: countries with diverse interventions reduced real wages under the gun of economic crisis. If you believe that clear property rules and privatization are necessary for rational economic behavior and transition to a market economy, the decade's growth success, China, should challenge your priors. If you fear that industrial policy is the road to disaster, state interventions in Taiwan, Korea, and Singapore tell a different story. Finally, if you think that military dictatorships that suppress labor necessarily produce high income inequality, the income distributions of Korea and Taiwan should give you pause. These emerging patterns and facts run so counter to conventional views on development as to raise major doubts about the depth of our knowledge and the extent to which narrow perfect competition or political economy perspectives illuminate the growth process.

Employee involvement (EI) programs are the leading-edge form of personnel and labor relations in the United States. While many managers believe that these programs raise productivity and profits, the statistical evidence that EI improves the performance of firms is equivocal. The coefficients on measures of EI in production functions are usually positive but often insignificant or small (Commission on the Future of Worker–Management Relations, 1994 Ch. 2; Peter Cappelli and David Neumark, 1999) or contingent on other factors (Sandra E. Black and Lisa M. Lynch, 1997; Casey Ichniowski et al., 1997). A detailed case study of EI has further confirmed these small effects that were found in large data sets (Kleiner et al., 1999). If EI programs do not greatly affect productivity, why does business think so highly of them? In this study, we argue that the main beneficiaries of EI are workers and managers. We estimate the effects of EI on productivity using panel data on firms and the effects of EI on workers using a survey of employees and find that EI barely affects firm productivity but substantially improves worker well-being. We offer two explanations for this result.