Knowledge that Transforms

This paper describes trends in labor force participation of Spanish women since 1900. Earnings-generating functions and logit participation models are estimated using a 1979 survey of married women. Estimates are shown to overpredict historical changes in labor force participation rates. A new specification of the participation model using average experience of married women as endogenous variable produces estimates that fit time-series data. These results suggest an increasing effect of education on participation, which confirms Schultz's hypothesis of increasing returns to various quality components of the labor force in modernizing economies.

Because the relative quantities and prices of blue- and white-collar labor have changed dramatically over time, aggregation into a single factor of production distorts estimates of the substitutability between capital and labor. This distortion is a function of growth rates of human and nonhuman capital and the rate of shift of the labor force from blue- to white-collar occupations. Conventional methods of adjusting for labor quality may actually increase the problem. Previous estimates of unity or less for the elasticity of substitution between capital and aggregate labor are shown to be consistent with a production function with a constant elasticity of substitution of about 2.5.

The evidence that unions substantially increase productivity is contradicted by the evidence that the effect of unions on employment is small. It is shown in this paper that if the union is constrained by the firm's demand function, and it is the efficiency units of labor that are in the demand function, then essentially the only way to resolve this contradiction is for unions to raise the productivity of capital (and not of labor) under conditions where the substitutability between labor and capital is very limited. But estimates of the substitutability parameter are near unity, so that one of these effects must be wrong: either unions do not substantially increase productivity or they substantially reduce employment.

This paper attempts to develop a behavioral model of female labor supply in Italy using cohort data. Our starting theoretical assumptions of perfect information, intertemporal separability, and utility maximization under a lifetime wealth constraint are relaxed in a second stage. The results suggest that the flat female participation rate profile (from both a time-series and a cross-section perspective) is presumably produced by economic incentive effects that counter-balance each other. However, with the recent rise in cohort-specific earning power, we identify a decrease in the work-disincentive effects of aging and of children under 6.

The rate of participation in the labor force by married women is lower in the Netherlands than in similar industrialized countries. However, since the end of the Second World War the participation rate increased from almost zero to almost one-fourth in less than 35 years. Using estimation results obtained with a probit model on a 1979 nationwide cross-section, this paper tries to reconstruct the postwar growth in this participation rate. It is found in particular that the increase in the real wage for female workers contributes substantially to the explanation of the observed long-run change. Given the relatively high own-wage elasticity, one would also expect Dutch wives to catch up in the future with the level of participation observed in neighboring countries.

The labor force participation of Jewish women in Israel increased between 1955 and 1980, accelerating in the 1970s. Schooling accounts for most of the change. The sharpest rise is among mothers ages 25-44. Thus differentials in participation by marital status have been sharply narrowed and the life cycle in participation has been transformed, the M-shaped curve being replaced by an inverted U with delayed labor force entry due to prolonged schooling and more continuous participation throughout the childbearing period. The reduced incompatibility between child rearing and market work is associated with part-time work and increased reliance on day-care services. The increased employment of women is concentrated in the service industries, mostly public, and is accompanied by some decline in the relative wage of highly educated women. Successive cross-section estimates corroborate this picture in general but do not support the notion that over time preschool children interfere less in women's labor supply.

This paper presents a wage-bargaining model in which the employer and employee are each uncertain about the other's reservation wage. Under specified circumstances, the model's equilibrium is shown to involve unilateral wage setting and inefficient labor turnover. In addition, aggregate demand shocks affect the equilibrium in a way that produces procyclical quits and countercyclical layoffs. These results are obtained without resorting to assumptions of nominal wage rigidity, long-term contracting, or aggregate price misperceptions.

We consider the relation between wages and productivity by means of a model based on the following assumptions. Workers live for 2 periods, firms live forever, senior workers differ nontrivially from junior, seniority enhances workers' expected second-period earnings, both firms and workers recognize the prospect of promotion and the senior-junior wage differential at the time of hiring, and firms have monopsony power in hiring junior workers. We show that senior wages are equal to the senior marginal product, but junior wages are set below the junior marginal product by an amount that depends on the elasticity of the firm's labor supply.

The rationale for government policies aimed at promoting market work by women is examined according to the criteria of efficiency and equity. Efficiency involves the issues of market failure and labor market discrimination. Equity involves the economic well-being of women compared to that of men. The case for interventionist policies on behalf of women is found to be weak on efficiency grounds but strong on equity grounds. It is suggested that conventional measures of labor market discrimination against women are hopelessly ambiguous, and an alternative measure of economic discrimination is proposed. Lifetime measures of income for men and women are constructed to measure this concept of discrimination, and it is shown that women are poorer than men throughout most of their adult lives.

Matching models usually assume an exogenously given distribution of match productivity, and the act of changing jobs then has the worker taking a new, independent sample from this distribution. Using a "characteristics" approach to matching two heterogeneous populations, this article shows that assumptions concerning the normality and serial independence of match productivity (across successive matches) follow from some simple axioms. Moreover, the normality assumption receives support from an empirical test that uses data on the output of a large group of workers.