Knowledge that Transforms

This paper makes use of panel data to consider the effects of unionization, schooling, sickness, and unemployment on individual earnings. Our results may be summarized as follows. The unionization effect is around 15%-20%. This measure is consistently estimated controlling for both fixed individual attributes and serially uncorrelated measurement error. Sickness has little immediate impact, but there is some indication that after 4 years earnings have fallen permanently by around 8% consequent on a 10-week spell of sickness. A spell of unemployment, on the other hand, leads to a sharp fall in earnings, but this effect decays rapidly leaving the possibility of a small permanent impact. Finally, controlling for all fixed individual attributes, we are unable to pin down the schooling effect with any accuracy owing to the absence of instruments that are both valid and effective within the data set.

Since 1964 all the increase in female labor force participation in Australia can be attributed to married women. About 90% of the increase can be attributed to women employed part time. The paper argues that aggregate female participation rate equations cannot be regarded as labor supply curves. The female wage rate relative to that of males is exogenously determined by wage-fixing authorities above market-clearing rates, and the excess supply of labor is not adequately measured by the unemployment rate. Married women and part-time workers have a high propensity to bypass the unemployment pool when leaving or seeking a job. Participation equations are dominated by employment demand for sex-segregated jobs.

A frequent practice in empirical work is to "preanalyze" the data via various sample inclusion rules. Truncation of "outliers" is common. These procedures are a form of sample censoring imposed by the investigator. Such censoring produces effects familiar from the sample selection literature. This paper investigates the question why an investigator might want to censor a sample and what the costs are. In an empirical example, using a variance components model of a wage equation, potential inconsistency problems are highlighted. The results indicate that while the slope coefficients, <tex-math>\hatβ</tex-math>, may typically be less sensitive to censoring than the variance components, some common forms of censoring also markedly affect <tex-math>\hatβ</tex-math>. Finally, a Bayesian estimator that incorporates prior information in a flexible way was developed. The usual Bayesian procedure was reversed, by using the Bayesian estimator to recover the prior beliefs that an investigator imposes by any proposed truncation of outliers. Especially in large samples, extremely dogmatic prior beliefs may be imposed when outliers are eliminated. Prior distributions of the type developed in the paper may be used by the investigator to clarify the nature of his prior beliefs revealed by a willingness to truncate data points and to assess whether or not any proposed truncation accurately reflects thoes beliefs.

This paper presents an empirical analysis of how job search requirements under various government programs influence job search behavior. The analysis indicates that job search requirements exert a significant impact on certain aspects of the job search process, but not those that generally lead to a higher probability of employment. It is also found that persons who utilize intensively search activities that result in direct employer contact have much shorter durations of unemployment than persons who do not utilize such activities intensively. It is speculated that altering job search requirements to include more direct employer contact could lead to a significant reduction in unemployment.

This study analyzes the manner in which certain favorable shifts in labor demand affect job search. Although all shifts increase reservation wages, they do not necessarily decrease expected unemployment spell durations and increase expected post-unemployment wages, so that upward-sloping short-run Phillips curves may occur. A result due to Chamberlain is used to demonstrate that if the wage offer distribution is restricted to be logconcave, two of the shifts guarantee downward-sloping Phillips curves. For one of these two shifts, previous research by Flinn and Heckman used logconcavity in a different manner to achieve properly shaped Phillips curves.

In Britain, female labor force participation rose steadily from the Second World War to 1977. To explain this, we estimate a pooled time-series, cross-section supply function for single-year age groups of women. The life-cycle pattern is explained quite well by the presence of children. At a second stage we try to explain the rising level of the cohort intercepts estimated at the first stage. Real wage growth may be an explanatory factor, as cross-section evidence suggests it should be. Finally, we point to the 15% rise in the relative pay of women in the mid-1970s caused by the Equal Pay Act. This did not cause the expected decline in the relative demand for female employees.

A multiperiod, general equilibrium model of the labor market is developed in which risk-averse workers are faced with job-related uncertainty and labor turnover is costly. If a worker is unlucky and suffers a bad job match, he quits and joins another firm, hoping that he will like its work environment more. Because the quality of a job match is unobservable, workers cannot insure against the risk of a bad match. The firm provides implicit insurance against job dissatisfaction, typically by paying workers more than their net marginal products in their early years with the firm and less subsequently. Since the probabilities of the insured-against events (the quit rates over time) are affected by the amount of such insurance provided, this implicit insurance is characterized by moral hazard. Individuals quit when in the absence of insurance they would not. The equilibrium contract balances out efficiency in risk bearing with efficiency in turnover incentives. We show that the equilibrium contract is not (constrained) efficient and indicate why.

Economists have often found it useful to look at the average length of an unemployment spell in evaluating labor market conditions and in considering the labor market experience of the unemployed. Usually this statistic has to be estimated from grouped observations on interrupted (incomplete) unemployment spells. This paper is a comparative study of some nonparametric and parametric methods of estimating this quantity using Australian Department of Social Security data on unemployment benefit recipients.

We develop a search model that focuses on the expected result of search. The model focuses on four conceptually different steps which are taken in changing jobs. First, the person is either voluntarily or involuntarily terminated. Second, the person who decides to quit (or who is involuntarily terminated with prior notification) chooses whether to search on the job or full time (i.e., by becoming unemployed). Third, as each job offer is received, the person decides either to accept it or to continue searching for a better offer. The fourth step occurs after the person has evaluated the "experience-good" aspects of the job. At that point he or she can determine whether the new job is better than the previous job. The question we ask is whether the type of termination and/or the experience of unemployment affects the probability that the person will find the new job preferable to the previous job. The model predicts that the type of termination will affect the probability of moving to a better job but the experience of unemployment will not. This prediction is verified using 1978-79 data from the PSID to estimate a bivariate probit model.

Until recently, the aggregate female labor force participation rate in Japan has shown a secular declining trend throughout the postwar period of economic development. Participation of paid female employees alone exhibits a steadily rising trend, more or less comparable to that in the United States and European countries. Although the fertility rate dropped drastically shortly after World War II, in the subsequent period increases in female education and a relative improvement of female wages appear to have promoted a substantial increase in paid female employment. Labor supply equations for paid employees estimated from time-series data provide negative income and positive wage elasticities. Cross-sectional analysis gives reasonable results, particularly for middle-age wives. Absolute values of estimated wage elasticity, notably, have almost always been smaller than income elasticity, unlike many research findings in the United States.