Knowledge that Transforms

This paper surveys union wage effect estimates drawn from empirical cross-section wage equations fitted to macro (aggregated) data in 34 post-1963 studies containing such equations. Each estimate is the partial derivative of the dependent wage variable (in logarithmic units) with respect to the extent-of-unionism (fraction unionized) variable in the equation. This paper shows that these estimates contain a mixture in uncertain ratio of the union/nonunion wage differential or wage gap, on the one hand, and an "extent-of-unionism" effect, on the other. Therefore the Macro estimates should not be interpreted as wage gap estimates.

A model of labor force participation, market wages, and labor supply of annual hours and weeks of work is estimated for married males and unmarried females in a sample from the retirement history survey, 1969-75, matched with social security earnings records. Emphasis is placed on the effects of variables associated with retirement and old age and on the estimation of net age profiles purged of biases associated with specific years and cohorts and with the other included variables. The effects of most of the usual variables appear to be consistent with the theory and with other empirical findings for both sexes. In addition, age itself has a strong net autonomous effect on each of the dependent variables due to biological, societal, or institutional factors.

Previous estimates of the effects of the Seattle and Denver income maintenance experiments on labor supply indicate that persons eligible for experimental payments reduced their work effort by appreciable amounts. However, these estimates have all been based on data that were self-reported during interviews by participants in the experiment. This paper investigates whether the estimates are biased by differences between treatment and control groups in reporting accuracy. Our results, which utilize employer-reported information on participants' work effort, suggest that the experiment's effects on several categories of Seattle and Denver participants were less adverse than estimates based on self-reported interview data imply.

This paper analyzes the earnings and employment of Chinese, Japanese, Filipino, and white men born in the United States. The Chinese and Japanese have higher levels of schooling and earnings than white men, and the Japanese work more weeks. Ceteris paribus, there are no substantive group differences in these variables or in returns from schooling. The Filipinos have a lower level of schooling, earnings, employment, and returns from schooling. It is, therefore, not appropriate to view Asian-Americans as a single disadvantaged minority group. Further, the success of the Chinese and Japanese challenges conventional wisdom regarding the consequences of racial discrimination.

This paper begins an investigation into the incentive problems at a firm when the effort of the employer and the employees combines to determine final output. The major conclusion is that optimal reward functions in this circumstance will in general value the performance of a worker relative to that of his peers. The paper thus joins a growing literature associated with the work of Lazear and Rosen on rank-order tournaments.

This paper focuses on earnings differentials in the for-profit and private nonprofit sectors, with specific reference to lawyers. An earnings equation for private lawyers is estimated and is used to predict what the nonprofit sector "public interest" lawyers could earn in the private sector. The finding is that the public interest lawyers are paid substantially less, that they know this, and that the financial sacrifice is permanent. Next, a job choice equation is estimated which suggests that those lawyers who choose public interest work have different "preferences" from those who choose private law practices. The difference may help to account for the willingness of the public interest lawyers to accept lower monetary rewards. Further research is needed to determine whether the differences found for lawyers in the two sectors are also found in other industries, and whether such differences are found only at the level of management or at lower levels. The goal is improved understanding of behavioral differences between for-profit and nonprofit firms.

This paper examines the extent of response errors in labor market survey data and explores the implications of such errors for economic analysis. Explicitly examined are responses to questions on industry, occupation, union status, hours worked, and wages. Analyses are based on two sources: (1) a special supplement to the January 1977 Current Population Survey that obtained data from workers and their employers and (2) an exact match of workers and their employers interviewed in the Employment Opportunity Pilot Project Survey. The dual nature of these surveys provides a basis for analyzing the effect of response error on a variety of economic analyses including the trade-off between wages and risk, the wage impact of unionism, and the sensitivity of wage-determination models to alternative responses to earnings questions.

Past attempts to estimate the magnitude of compensating wage differentials have been hindered by the biasing effects of omitted variables and measurement error. We argue that a wage change formulation, estimated with panel data that contain worker reports of their own job characteristics, reduces both of these biases. Our empirical results, based on a large panel of workers in Sweden, confirm these conjectures by giving many more reasonable coefficient estimates for a wage change equation than for a wage level formulation.

This paper tests the hypothesis that the classifications "unemployed" and "out of the labor force" are behaviorally meaningless distinctions. This hypothesis is rejected. Distinct behavioral equations govern transitions from out of the labor force to employment and from unemployment to employment. The evidence reported in this paper is broadly consistent with versions of search theory in which unemployment is a state that facilitates the job search process. In an Appendix, we demonstrate that log concavity of the wage-offer distribution implies that the exit rate from unemployment is an increasing function of the rate of arrival of job offers.

This paper considers the problem of hiring scientists for research and development projects when one takes explicit account of the fact that the scientist may be able to use the information acquired during the project in a rival enterprise. Management's problem is to determine an optimum labor policy for its project. The policy consists of an employment decision and a labor contract. Given optimum behavior, it is straightforward to analyze the effect of the potential for mobility of scientific personnel on project profitability and on research employment. We also formalize conditions under which one would expect to observe a scientist leaving his employer to set up or join a rival.