This article examines the determinants of changes in the U.S. wage structure from 1976 to 2000. Our main empirical observation is that changes in both the level of wages and the returns to skill over this period were primarily driven by changes in the ratio of human capital to physical capital. We show that this pattern conforms extremely well to a simple model of technological adoption following a major change in technological opportunities. In contrast, we do not find much empirical support for the view that ongoing (factor‐augmenting) skill‐biased technological progress has been an important driving force over this period.
I use panel data to examine whether long‐term changes in industry wages are positively related to long‐term changes in industry employment. Previous research using repeated cross‐sectional data found no systematic relationship between these variables. Using standard fixed effects models to deal with individual heterogeneity, I find a robust positive relationship between changes in composition‐constant industry wages and industry employment. This suggests that growing industries attract less skilled individuals in a manner that biases down the estimated relationship between industry employment and wages in repeated cross‐sectional data. The results imply that supply curves facing industries are elastic but upward sloping.
In certain industries, sales agent contracts include provisions for sales commissions and clawbacks of commissions if clients are not retained. We show that contracts with these features arise in environments having up‐front selling costs recouped from ongoing sales; heterogeneous customers; limited agent access to capital markets; and imperfect commitment to long‐term contracts. We test the model using information on insurance sales agent contracts from New Zealand prior to and after bank entry into insurance sales. The evidence indicates that banks cream‐skimmed customers. We predict that this should reduce the values of sales commissions and clawbacks. The data support this prediction.
Dans cet article, nous cherchons à développer un modèle par lequel le salaire d'un travailleur est fonction de ses qualifications. Le marché ainsi que le travailleur sont au préalable dans l'incertitude quant à certaines de ces qualifications. L'endogénéité à la fois des changements de salaire et des décisions de changements du secteur d'affiliation résulte du processus d'apprentissage relié aux qualifications du travailleur. Nous montrons ensuite comment le modèle peut être estimé par les méthodes des variables instrumentales non-linéaires. Nous appliquons notre méthodologie à l'étude des salaires et de l'allocation des travailleurs aux différentes occupations et industries. Nous trouvons que les secteurs à salaires élevés emploient des travailleurs ayant davantage de qualifications et que ces secteurs rémunèrent ces qualifications à un taux supérieur relativement aux secteurs à faibles salaires. Les estimés des rendements associés aux qualifications qui ne tiennent pas compte du fait que les rendements diffèrent d'un secteur à un autre sont par conséquent erronés. Nous proposons enfin d'autres applications possibles de notre méthodologie.
Turnover falls with tenure, but wages do not always rise (and sometimes fall) with tenure. We reconcile these findings by revisiting an old issue: how gains from firm‐specific training are split between workers and firms. The division is determined by a stationary distribution of outside offers. The lower the wage a firm pays to a specifically trained worker, the more profit it makes but the more likely the employee is to leave. The optimal time paths of wages and turnover show that, if marginal product is increasing, wages need not be increasing but it always implies a falling turnover rate.
In many countries, an expired labor contract is automatically extended during the often‐protracted delay before the new contract is signed. Our theoretical model focuses on macroeconomic factors in explaining the delay. It emphasizes the importance of the realized nominal and real shocks, and of the levels of nominal and real uncertainty. The model is tested using Israeli collective wage agreements where long delays are frequent. The empirical findings strongly support the theoretical model. Thus, nominal uncertainty is found to increase the delay, and real uncertainty to decrease the delay, but less in the public than in the private sector.
Many people are fired from their jobs for poor performance. However, it is difficult to distinguish whether they are fired because they are not well suited for their job (sorting explanation) or because the firms are trying to provide incentives for effort (incentive explanation). This article develops a dynamic incentive model of dismissal and proposes a methodology to distinguish between these two explanations. The methodology is based on learning‐by‐doing and changes in the slope of dismissal probability with respect to tenure. Using personnel data from a large U.S. company, this study finds significant evidence for the incentive explanation.
In 1942, all Japanese were evacuated from the West Coast and incarcerated in internment camps. To investigate the long‐run economic consequences of this historic episode, I exploit the fact that Hawaiian Japanese were not subject to mass internment. I find that the labor market withdrawal induced by the internment reduced the annual earnings of males by as much as 9%–13% 25 years afterward. This is consistent with the predictions of an economic model that equates the labor market withdrawal induced by the internment with a loss of civilian labor market experience or a loss of advantageous job matches.
This article analyzes firm and worker’s incentives to invest in general and specific training when these are separable in the production technology and wages are determined by the outside‐option principle. It is shown that firms pay for general training, while workers receive the full return on it, and firms and workers share both the costs and benefits of specific training. The case of delayed general training is also studied. When general training is delayed, it is shown that the strategic complementarity between specific and general training increases the worker’s incentives to invest in specific training.
This article measures the importance of job level assignment based on comparative advantage and learning about workers’ ability in explaining intrafirm wage and mobility dynamics using survey data from the German Socio‐Economic Panel. The results reveal the importance of nonrandom selection of workers into the rungs of the firm’s job ladder. Measured and unmeasured ability play important roles in workers' rank assignment, with unmeasured ability being more important at higher levels of the hierarchical job structure. There is some evidence of learning effects for workers below age 35 generating mobility between upper and executive levels.