Knowledge that Transforms

We examine how firms can use employee discounts and perks to extract information rents from employees who have private information about their preferences and outside opportunities. The firm creates different bundles of the perk and salary in response to different employee characteristics and marginal costs of the perk. Strategic bundling can lead firms to provide perks even without a cost advantage over the outside market and to deviate from the marginal cost pricing. We characterize how optimal perk provision depends on the set of feasible contracts, on the perk’s marginal cost, and on the perk’s price in the outside market.

A performance measure may or may not reflect the relative importance of different tasks for the production of benefit: it can be aligned or unaligned. Here, I examine when using an aligned measure generates a larger surplus in a principal‐agent relationship than using an unaligned but otherwise identical measure. I find that (i) the agent’s effort costs matter for the optimal way of measuring performance, and (ii) the optimal measure is not aligned but tilted toward tasks that the agent finds easy. Failing to recognize these insights may lead to false predictions about the use of incentives.

This paper explores the determinants of earnings growth in corporate hierarchies using static and dynamic panel data techniques. The novelty derives from the distinction between base pay and bonus, the asymmetric effects of promotion and demotion, and the consideration of dynamic effects. We find that the convexity of pay structures is robust to the allowance for unobserved individual heterogeneity. Demotion has a stronger effect on compensation growth in absolute value than promotion. Dynamic models indicate that the causal effect of past promotion is positive on the growth in base and total pay but has no significant effect on bonus growth.

A structural empirical job search model is presented that incorporates the labor supply decision of individuals. The arrival of a job offer is modeled as a random draw from a wage‐hours offer distribution. Subjective information is used on desired working hours to identify optimal hours from offered hours. Policy simulations are performed to address several policy questions: Does a decrease in unemployment benefits lead to the acceptance of jobs with less preferred working hours? How does a decrease in the length of the standard working week affect the job acceptance behavior of the unemployed?

Daylight, television schedules, and time zones can alter timing and induce temporal coordination of economic activities. With the American Time Use Survey for 2003–2004 and data from Australia for 1992, we show that television schedules and the locations of time zones affect the timing of market work and sleep, with differences in timing being generated partly by returns to coordination with other agents. The responsiveness to time zone differences is greatest among workers in industries in national markets. An exogenous shock resulting from an area’s nonadherence to daylight saving time leads its residents to alter work schedules to coordinate with people elsewhere.

Using data from the New Immigrant Survey 2003, this article shows that skin color and height affect wages among new lawful immigrants to the United States, controlling for education, English language proficiency, occupation in source country, family background, ethnicity, race, and country of birth. Immigrants with the lightest skin color earn on average 17% more than comparable immigrants with the darkest skin color. Taller immigrants have higher wages, but weight does not affect wages. Controls for extensive current labor market characteristics that may be influenced by discrimination do not eliminate the negative effect of darker skin color on wages.