Knowledge that Transforms

The expansion of available data for research has transformed empirical labor economics over the past generation. This paper briefly highlights some of the changes and describes a few examples of papers that illustrate the advances. It also documents the changing ways data have been used in the Journal of Labor Economics over the past 30 years, including a trend toward a higher fraction of papers using any data and, among those papers using any data, a higher fraction using nonpublic data, a higher fraction using international data, and more frequent use of multiple data sources. Finally, this paper describes work that came out of the recent Princeton Data Improvement Initiative—a program that considers and furthers improved data collection.

This article examines the ex post flexibility of US labor contracts during the 1970–95 period by investigating whether unanticipated changes in inflation increase the likelihood of a contract being renegotiated prior to its expiration. We find empirical support for this hypothesis. Specifically, our results indicate that renegotiations are triggered principally by large and infrequent price shocks of either sign. When combined with evidence that ex ante contract durations are shorter during episodes of increased inflation uncertainty, our results suggest that these contracts are flexible both ex ante and ex post to changes in the evolution of inflation.

In 2004, the Chicago Public Schools and the Chicago Teachers Union signed a new collective bargaining agreement that gave principals the flexibility to dismiss probationary teachers (those with fewer than 5 years of experience) for any reason and without the hearing process typical in many urban districts. Results suggest that the policy reduced annual teacher absences by roughly 10% and reduced the incidence of frequent absences by 25%. The majority of the effect was due to changes in the composition of teachers in the district, although there is evidence of modest incentive effects for young untenured teachers.

This article tests whether the correlation between wages and concentration of employment can be explained by unobserved worker productivity. Residential location is used as a proxy for unobserved productivity, and average commute time to workplace is used to test whether location-based productivity differences are compensated away by longer commutes. Analyses using confidential data from the 2000 Decennial Census find that estimates of agglomeration wage premia within metropolitan areas are robust to comparisons within residential location and that estimates do not persist after controlling for commuting costs, suggesting that the productivity differences across locations are due to location, not individual unobservables.

Using a large data set that links individual Current Population Survey (CPS) records to employer-reported administrative data, we document substantial discrepancies in basic measures of employment status that persist even after controlling for known definitional differences between the two data sources. We hypothesize that reporting discrepancies should be most prevalent for marginal workers and for marginal or nonstandard jobs, and we find systematic associations between the incidence of reporting discrepancies and observable person and job characteristics that are consistent with this hypothesis. The paper discusses the implications of the reported findings for both micro and macro labor market analysis.

This paper extends the job creation–job destruction approach to the labor market to take into account a deterministic finite horizon. As hirings and separations depend on the time over which investment costs can be recouped, the life-cycle setting implies age-differentiated labor-market flows. While search by the unemployed falls with age, the separation rate is rather U-shaped over the life cycle. Worker heterogeneity in the context of undirected search implies an intergenerational externality, which is not eliminated by the Hosios condition. We show that age-specific policies are required to attain the first-best allocation.

We present a theoretical and empirical analysis of internal promotion versus external recruitment, using a job-assignment model involving competing firms with heterogeneous productivities and two-level job hierarchies with one managerial position. The model predicts that, controlling for the number of managers, increasing the number of lower-level workers is associated with (1) greater internal promotion as opposed to external recruitment, (2) higher profit, and (3) more general training. Empirical analysis of a large cross section of British employers is consistent with these predictions.