Knowledge that Transforms

This article studies the effect of changes in foreign competition on the structure of compensation and incentives of U.S. executives. We find that import penetration (instrumented with exchange rates and tariffs) leads to more incentive provision in a variety of ways. First, it increases the sensitivity of pay to performance. Second, it increases within-firm pay differentials between executive levels, with CEOs typically experiencing the largest wage increases. Finally, higher foreign competition is also associated with a higher demand for talent. These results suggest that increased foreign competition can explain some of the recent trends in compensation structures.

We estimate peer effects for fourth graders in six European countries. The identification relies on variation across classes within schools, which we argue are formed roughly randomly. The estimates are much reduced within schools compared to the standard ordinary least squares (OLS) results. This could be explained either by selection into schools or by measurement error in the peer variable. Correcting for measurement error, we find within‐school estimates close to the original OLS estimates. Our results suggest that the peer effect is modestly large, measurement error is important in our survey data, and selection plays little role in biasing peer effects estimates.

This article investigates the existence of compensating wage differentials across seasonal and long‐term jobs that arise due to anticipated working time restrictions. Using longitudinal information from the Austrian administrative records, we derive a definition of seasonality based on observed regularities in employment patterns. As wages change across seasonal and long‐term jobs for the same individual over time, we can control for individual‐specific effects and use variation in the starting month of seasonal jobs as an exogenous predictor of anticipated unemployment. We find that employers pay, on average, a positive wage differential of about 11% for seasonal jobs.

We use British panel data to investigate single women’s labor supply changes in response to three reforms that affected individuals’ work incentives. We use these reforms to identify changes in labor supply. There is evidence of small hours of work effects for two of such reforms. A third reform in 1999 instead led to a significant increase in single mothers’ hours of work. The mechanism by which the labor supply adjustments were made occurred largely through job changes rather than hours changes with the same employer. This is little overall effect of the reforms on wages.

We study the relation between workers’ skill dispersion and firm productivity using a unique data set of Italian manufacturing firms with individual records on all their workers. Our measure of skill is the individual worker’s effect from a wage equation. We find that a firm’s productivity is positively related to skill dispersion within occupational status groups (production and nonproduction workers) and negatively related to skill dispersion between these groups. Consistently, most of the overall skill dispersion is within and not between firms. These findings are consistent with some recent hierarchical models of the firms’ organizational structure.

We model team formation as a random matching process influenced by agents’ preferences for team size and gender composition. We then test if the coauthorship pattern in articles published during 1991–2002 in three top economics journals is gender neutral, exploiting variation in female presence across subfields. Controlling for author, team, and field characteristics, we find that the gender gap in the propensity to coauthor with a woman increases in the presence of women in the subfield. We also find that women single author significantly more than men. These findings allow us to reject gender neutrality in team formation in economics.

Little is known about the mechanisms underlying the transfer of economic status between generations. This paper addresses the question of whether inter-generational correlations in health contribute to the perpetuation of economic status. We examine inter-generational correlations in birth weight, a key indicator of the health of newborns that we link to future educational attainment and earnings using a unique data set based on California births from 1960s to the present. We use names and birth dates to link the records of mothers and children. We also identify mothers who are siblings. We show that there is a strong intergenerational correlation in the birth weight of mothers and children, but that a measure of household income at the time of the mother's birth is also predictive of low birth weight and that there is an interaction between maternal low birth weight and poverty in the production of low birth weight. Together these findings suggest that intergenerational correlations in health could play a role in the intergenerational transmission of income. Parent's income affects child health, and health at birth affects future income.

Recent evidence suggests that employers acquire more precise information about a worker’s productivity the more time he or she spends in the labor market. The following question arises: Is learning symmetric, that is, do all employers have the same information about workers’ productivity, or is learning asymmetric, that is, does the current employer have superior information about workers’ productivity? This article develops a learning model with endogenous mobility that nests both learning hypotheses. It then proposes new tests for asymmetric employer learning. Overall, learning appears to be mostly symmetric, except possibly when the employees involved are college graduates.

This article considers how divorce law alters the incentives for couples to invest in their marriage, focusing on the impact of unilateral divorce laws on investments in new marriages. Differences across states between 1970 and 1980 provide useful quasi‐experimental variation with which to consider incentives to invest in several types of marriage‐specific capital: spouse’s education, children, household specialization, and home ownership. I find that adoption of unilateral divorce—regardless of the prevailing property‐division laws—reduces investment in all types of marriage‐specific capital considered except home ownership. In contrast, results for home ownership depend on the underlying property division laws.