This paper studies the settlements generated by several variants of a compulsory-arbitration scheme called ``final-offer arbitration'' (FOA). Some of these are now in use in several states, and one has been recommended by Clifford Donn as an improvement on existing schemes. Under reasonable economic assumptions, two versions of FOA now being used are equivalent to imposing z̄, the settlement the arbitrator would impose in conventional compulsory arbitration would impose in conventional compulsory arbitration, a result contrary to the intent of the FOA statues. However, a simple modification of Donn's proposal leads to a scheme that generates Pareto-efficient settlements that are at least as good for each agent as z̄. This suggests that substantial gains in welfare could be realized by a simple change in existing FOA statues and possibly also by using the new procedure in situations where compulsory arbitration is not now prescribed by law.

This paper offers an explanation of the use of mandatory-retirement clauses in labor contracts. It argues that the date of mandatory retirement is chosen to correspond to the date of voluntary retirement, but the nature of the optimal wage profile results in a discrepancy between spot wage and spot VMP (value of the worker's marginal product). This is because it is preferable to pay workers less than VMP when young and more than VMP when old. By doing so the "agency" problem is solved, so the contract with mandatory retirement is Pareto efficient. A theory of agency is presented and empirical evidence which supports the hypothesis is provided.

This paper investigates the influence of wives' earnings on the distribution of family earnings. In the process, some differences in the manner in which family earnings are distributed within racial groups are highlighted. Earnings of wives equalize income distributions in white families but increase dispersion among blacks. Because they have conflicting effects, covariances between spouses in their wage rates and labor supply are isolated. Male and female wage functions are adjusted for sample censoring to fill out the true population variances and covariances in wages across all families. Due to the larger positive correlation in wages of black spouses, black family earnings would be distributed more unequally even if all individuals worked the same amount. Our labor supply analysis indicates that white families attempt to stabilize family earnings with some family members increasing their labor supply in response to a decline in participation of other family members. This compensatory function of wives' earnings is much less prevalent in black families.

This paper offers an explanation of the use of mandatory-retirement clauses in labor contracts. It argues that the date of mandatory retirement is chosen to correspond to the date of voluntary retirement, but the nature of the optimal wage profile results in a discrepancy between spot wage and spot VMP (value of the worker's marginal product). This is because it is preferable to pay workers less than VMP when young and more than VMP when old. By doing so, the problem is solved, so the contract with mandatory retirement is Pareto efficient. A theory of agency is presented and empirical evidence which supports the hypothesis is provided.

This paper investigates the influence of wives' earnings on the distribution of family earnings. In the process, some differences in the manner in which family earnings are distributed within racial groups are highlighted. Earnings of wives equalize income distributions in white families but increase dispersion among blacks. Because they have conflicting effects, covariances between spouses in their wage rates and labor supply are isolated. Male and female wage functions are adjusted for sample censoring to fill out the true population variances and covariances in wages across all families. Due to the larger positive correlation in wages of black spouses, black family earnings would be distributed more unequally even if all individuals worked the same amount. Our labor supply analysis indicates that white families attempt to stabilize family earnings with some family members increasing their labor supply in response to a decline in participation of other family members. This compensatory function of wives' earnings is much less prevalent in black families.

This paper examines the rules governing the optimal distribution of educational resources originally developed by Arrow, in the context of a model in which some attempt is made to provide a rationale for government expenditure. Thus while there is a private market providing a perfect substitute for government education, if the government cannot adopt the lump-sum taxation which would make exclusive reliance on the private market optimal, but has to rely on an income tax for redistribution, then an optimally chosen scheme of educational provision by the government will powerfully reinforce the redistributive effect of income tax.

This paper studies the settlements generated by several variants of a compulsory-arbitration scheme called ``final-offer arbitration'' (FOA). Some of these are now in use in several states, and one has been recommended by Clifford Donn as an improvement on existing schemes. Under reasonable economic assumptions, two versions of FOA now being used are equivalent to imposing z̄, the settlement the arbitrator would impose in conventional compulsory arbitration would impose in conventional compulsory arbitration, a result contrary to the intent of the FOA statues. However, a simple modification of Donn's proposal leads to a scheme that generates Pareto-efficient settlements that are at least as good for each agent as z̄. This suggests that substantial gains in welfare could be realized by a simple change in existing FOA statues and possibly also by using the new procedure in situations where compulsory arbitration is not now prescribed by law.

This paper examines the rules governing the optimal distribution of educational resources originally developed by Arrow, in the context of a model in which some attempt is made to provide a rationale for government expenditure. Thus while there is a private market providing a perfect substitute for government education, if the government cannot adopt the lump-sum taxation which would make exclusive reliance on the private market optimal, but has to rely on an income tax for redistribution, then an optimally chosen scheme of educational provision by the government will powerfully reinforce the redistributive effect of income tax.