Knowledge that Transforms

Does import competition alter the extent to which employers, after negotiating workers’ wages upon hire, subsequently shield those wages from external labor‐market conditions? If increased competition induces a switch away from these wage implicit agreements, then (1) the sensitivity of workers’ wages to the current unemployment rate should increase as competition increases and (2) the sensitivity of workers’ wages to the unemployment rate prevailing upon hire should decrease. Using exchange‐rate movements to generate exogenous variation in import competition, I find evidence supporting both of these predictions. I show that increased financial pressures on employers is one mechanism driving these effects.

The large literature on labor‐market rent sharing consists of closed economy analyses. In this article we examine whether profits are shared across borders and also conditioned by international linkages that help shape economic openness. In a sample of 1,014 Canadian manufacturing union contracts from 1980 through 1992, we find that U.S. industry profitability affects Canadian wage outcomes and that the pattern of rent sharing varies significantly across international linkages, including multinational ownership, union type, and trade barriers. There seems to be international rent sharing, with profit sharing across borders conditioned by firm‐ and industry‐level institutions.

Earnings shocks should affect divorce probability by changing a couple’s expected gains from marriage. We find that the divorce hazard rises after a spouse’s job displacement but does not change after a spousal disability. This difference casts doubt on a purely pecuniary motivation for divorce following earnings shocks, since both types of shocks exhibit similar long‐run economic consequences. Furthermore, the increase in divorce is found only for layoffs and not for plant closings, suggesting that information conveyed about a partner’s noneconomic suitability as a mate due to a job loss may be more important than financial losses in precipitating divorce.

Using experimental design, this research examines the impact of the nation’s first family cap policy, implemented in New Jersey, on the fertility behavior of welfare recipients. We explore whether the change in welfare parameters mandated by the policy induces differential impact among black, white, and Hispanic recipients. We examine if impacts are conditioned by racial‐ethnic group concentration. Results show that reduced welfare payments have contributed to a decline in births for black women. While we find a large response for blacks (on average), we find no response for blacks who live in geographic areas where they form a racial‐ethnic majority.