Knowledge that Transforms

Using establishment‐level data, we shed light on the sources of the changes in the structure of production, wages, and employment that have occurred over recent decades. Our findings are: (1) the between‐plant component of wage dispersion is an important and growing part of total wage dispersion; (2) much of the between‐plant increase in wage dispersion is within industries; (3) the between‐plant measures of wage and productivity dispersion have increased substantially over recent decades; and (4) a significant fraction of the rising dispersion in wages and productivity is accounted for by changes in the distribution of computer investment across plants.

About 30% of workers in the Current Population Survey have earnings imputed. Wage gap estimates are biased toward zero when the attribute being studied (e.g., union status) is not a criterion used to match donors to nonrespondents. An expression for “match bias” is derived in which attenuation equals the sum of match error rates. Attenuation can be approximated by the proportion with imputed earnings. Union wage gap estimates with match bias removed are presented for 1973–2001. Estimates for recent years are biased downward 5 percentage points. Bias in gap estimates accompanying other non–match criteria (public sector, industry, etc.) is examined.

An important component of the long‐run cost of a war is the loss of human capital suffered by school‐age children who receive less education. Austrian and German individuals who were 10 years old during the conflict, or were more directly involved through their parents, received less education than comparable individuals from nonwar countries, such as Switzerland and Sweden. We also show that these individuals experienced a sizable earnings loss some 40 years after the war, which can be attributed to the educational loss caused by the conflict. The implied consequences in terms of gross domestic product loss are calculated.

In the Netherlands, the average exit rate out of welfare is dramatically low. Most welfare recipients have to comply with guidelines on job search effort that are imposed by the welfare agency. If they do not, then a sanction in the form of a temporary benefit reduction can be imposed. This article investigates the effect of such sanctions on the transition rate from welfare to work using a unique set of rich register data on welfare recipients. We find that the imposition of sanctions substantially increases the individual transition rate from welfare to work.

The gift‐exchange game has established that, in the laboratory, higher wages offered by an employer lead to considerably more costly effort provision. However, it is unclear whether this behavior reflects reciprocity or other forms of social preferences. This article tests whether attribution of volition in choosing a wage has a significant effect on subsequent costly effort provision. Treatments varied whether wages were chosen by the employer or by an external process. We see that both distributional concerns and reciprocity play a major role. The data are examined in the light of recent utility models.

I assess the long‐run implications for children of growing up in a unilateral divorce environment, which increases the ease of divorce by not requiring the explicit consent of both partners. Using 40 years of census data to exploit the variation across states and over time in changes in divorce regulation, I confirm that unilateral divorce regulations do significantly increase the incidence of divorce. Adults who were exposed to unilateral divorce regulations as children are less well educated, have lower family incomes, marry earlier but separate more often, and have higher odds of adult suicide.

We develop a model that clarifies how to measure CEO incentive strength and how to reconcile the enormous differences in pay sensitivities between executives in large and small firms. The crucial parameter is shown to be the elasticity of CEO productivity with respect to firm size. We find that CEO marginal products rise significantly with firm size (confirming Rosen's conjecture that CEOs of large firms have a "chain letter" effect on firm performance), and overall CEO incentives are roughly constant, or decline slightly, with firm size. We employ a multitask model to discuss implications for the design of control systems.