Knowledge that Transforms

Previous static analyses of the work disincentive effects of welfare programs are extended to a dynamic context. Using a sample of continuous longitudinal labor market histories, estimates are derived for welfare-nonwelfare differences in labor market flows among the states of employment, unemployment, and nonparticipation. The estimates are used to identify the main sources of the lower employment and labor force participation rates and higher unemployment rate of welfare recipients. The findings indicate that welfare programs have substantial effects on virtually every labor market transition examined but that the primary source of the static work disincentive effect is slower entry into employment.

This paper uses industry price-cost margin data to estimate the extent to which unions reduce profits. Estimates allowing for the endogeneity of union status are contrasted with estimates that assume union status is exogenous and not determined in part by either profitability or industry structure. Endogeneity is found to be an important consideration in estimating the union impact on profits: two-stage estimates are considerably larger than OLS estimates. The final section explores the total estimated redistribution from capital to labor in the manufacturing sector. An important conclusion is that unions raise prices less than was previously believed.

Decentralized wage setting in search equilibrium models is inefficient because the meeting firm and worker ignore the dependence of job-matching probabilities on the number of firms and workers engaged in search. This paper investigates whether risk-neutral monopolistic unions will have an incentive to internalize this externality. I find that the externality will be internalized only if the union's policy is chosen by unemployed persons. If employed persons influence union policy, both the union wage and unemployment will be too high. A tax on the union wage combined with an employment subsidy to firms can correct this inefficiency.

This paper analyzes a model that highlights imperfect monitoring and the threat of dismissal as microeconomic underpinnings for the efficiency-wage hypothesis. My major innovation is to allow the rules for dismissal as well as the wage to be determined endogenously as the equilibrium of a Stackelberg game played between firms and workers. The key results are as follows. A nontrivial equilibrium (where positive output is produced) must involve involuntary unemployment in that employed workers are strictly better off than are the unemployed. In addition, the equilibrium wage is rigid with respect to exogenous shifts in productivity.

Logit estimates of strike incidence are made based on a unique and comprehensive data set of 2,437 collective agreements-the appropriate level of aggregation since that is where bargaining occurs. The results are interpreted through a theoretical framework emphasizing that strikes are more likely when the joint costs of using the strike mechanism are low relative to the cost of alternative mechanisms for achieving the same purposes. Such functions of strikes are to generate information, elicit truth telling, establish reputations, provide catharsis, and solve intraorganizational conflict.

The steady-state effect on inequality of linear redistributive schemes based on the taxation of earnings, inheritances, or some combination of the two is examined. Dynasties that exhibit asexual reproduction and altruism are modeled. Earnings ability, which may be correlated across generations, is exogenous and drawn from a stationary distribution. Taxing inheritances increases inequality by reducing the intergenerational averaging of "luck." In an example, paying out the tax revenue in uniform transfers typically does not reverse this result. Taxing lifetime wealth or income adds a lump-sum tax on earnings, making redistribution more successful. However, this success is sensitive to the relative size of mean earnings and inheritances.

This paper examines the amount of precautionary savings and wealth inequality arising from life-span uncertainty by comparing saving behavior under perfect insurance arrangements with that arising under imperfect arrangements, namely, when longevity risk can be pooled only with members of one's own family. The central findings of the paper are that (1) perfecting insurance arrangements can sharply lower savings in both intergenerationally altruistic and life-cycle economies and that (2) in altruistic economies perfecting annuity insurance can greatly influence inequality; indeed, in the long run in our model, switching from imperfect family insurance to perfect insurance can mean the difference between absolute inequality and absolute equality.

The stock of U.S. physicians at any point in time is modeled as a weighted average of the supply that a perfect cartel would produce and that would prevail under perfect competition. Estimation of a system of stock and income equations over the post-World War II period shows that, after holding constant demand and marginal cost conditions and accounting for gradual adjustment to changes in equilibrium, the weighting parameter has moved toward the competitive extreme since 1965. This rise in the degree of competition is estimated to have increased physician stock by 6%-20% and concomitantly decreased medical incomes by 19%-45%.

With data from the Employment Opportunities Pilot Programs (EOPP) Employers' Survey, this paper uses a continuous-time hazard model to analyze male and female job-quitting behavior. The EOPP sample is composed of recently hired workers with, at most, 2.5 years of tenure with the firm. Within this early stage of tenure, it is found that the probability of quitting declines with tenure for males and increases with tenure for females. This result leads to the conclusion that the job-matching process operates differently for females than it does for males.