Knowledge that Transforms

This paper examines firms' problem of how to motivate risk-averse workers not to shirk when workers' utility functions are unknown. The problem is studied in a 2-period setting in which a worker's actions today can influence not only his compensation today but the firms' beliefs about his preferences. Firms cannot credibly commit to ignore the revealed information, so workers' actions today affect their future compensation contracts. It is shown that, in the Wilson/Miyazaki equilibrium, firms may pool workers and learn about their types gradually over time rather than inducing them to separate and reveal their types immediately.

Our paper simulates the likely effects of a comparable-worth wage-adjustment policy in the state and local sector on female employment in the sector. The simulation is based on estimates of within-occupation male/female substitution and across-occupation occupational employment substitution that we obtain using data from the 1980 Census of Population.

This paper presents an empirical analysis of the economic functions of defined benefit (DB) pensions. Firms providing pensions choose between DB and defined contribution formats. The latter is essentially a tax-preferred savings account; the former may fill other roles. Determinants of firms' choice of plan are estimated using plan sponsors' reports to the Internal Revenue Service. Firms that are larger, are unionized, employ mainly one sex, invest in specific training, and pay lower wages are more likely to provide DB coverage. These results suggest that the economic role of pensions is broader than mere provision of tax-preferred savings accounts.

According to the family utility function approach, the labor supply functions of married men should differ according to whether their wives also work. In this paper, I explicitly model the switching nature of labor supply while also accounting for the endogeneity of the labor force participation decision of the wife, using an endogenous switching regressions model based on the quadratic family utility function. The model is estimated from a cross section of 1,210 married couples from the Panel Study of Income Dynamics.

A wage offer can be either acceptable or unacceptable to a worker, but in cross-sectional and panel data only acceptable wage offers are observed. An OLS wage equation will not reveal how job tenure affects wage offers but rather will reveal how tenure affects acceptable wage offers. By jointly modeling the firm's determination of the wage offer and the worker's decision to accept or reject the offer, we are able to estimate the effect of job tenure on wage offers consistently. In contrast to the usual OLS results, we find that job tenure has no statistically significant effect on wage offers.

In this paper I examine the effect of the current social security system on the structure of compensation that a wealth-maximizing worker selects. I show that the current method of benefit determination encourages an upward-sloping wage profile and that the social security system alters the mix of wage and pension payments. In addition, the intragenerational transfers of the social security system alter the level of investment in human capital. As a result, the social security system reduces the disparity of income within the economy.

This paper hypothesizes that the quit propensity of married men rises with an increase in their wives' income. Assuming that individuals are risk averse and that quitting is risky, the wife's income increases the husband's expected value of quitting by reducing the variance of expected family income. Using the longitudinal data from the Michigan Panel Study of Income Dynamics (PSID), the wife's income is found to have a large effect on quits. The average husband's quit rate increases by about 45% when the wife's income rises from zero to two-thirds that of the husband's. The wife's income effect nearly offsets the negative effect that marriage typically has on male quit rates.

We hypothesize that past strike experience will have a negative or "teetotaler" effect on a collective bargaining unit's propensity to strike in future negotiations, other things being equal. We test this using a unique micro-level sample comprising four consecutive negotiations by 147 bargaining units in U.S. manufacturing industries, controlling for observable and unobservable differences among bargaining pairs in the propensity to strike. Our results are consistent with the view that the experience of striking is, indeed, sobering: lagged strike experience variables have a significantly negative effect on the propensity to strike in the current negotiation.

This paper shows that unemployment insurance benefits could decrease the expected duration of unemployment induced by search. An unemployed person who has to finance search from limited resources may use the benefits to intensify search effort and lower the expected duration of unemployment.

Adam Smith's discussion of the payment of teachers is reviewed in terms of industrial organization and agency theory. The implicit student fees necessary to support annual salaries average $1.30 per class meeting in primary and secondary schools and rise to $4.00 per lecture and up for college teachers. While salaries in teaching are much smaller than in the large-scale visual media, implicit valuations per contact hour in teaching are at least 600 times larger than in television. Classroom teaching is expensive because a teacher's scale of operations is sharply constrained by the student-teacher ratio.