Knowledge that Transforms

Using U.S. panel data on adult males, I compare the "profile heterogeneity model" of earnings dynamics, in which the earnings/experience profile varies across individuals, to a competing model in which earnings "has a unit root." The latter specification enjoys increasing popularity among researchers. My analysis questions this favor, suggesting the profile heterogeneity model provides a more consistent representation of the data. I also provide new estimates of the variation in earnings growth rates. Previous evidence is from relatively unrepresentative samples. Individuals one standard deviation above the mean enjoy a 20%-30% earnings advantage in just 10 years.

"This article investigates the role of surprises in marital dissolution [in the United States]. Surprises consists of changes in the predicted earning capacity of either spouse. Data from the National Longitudinal Study of the High School Class of 1972 is used. We find that an unexpected increase in the husband's earning capacity reduces the divorce hazard, while an unexpected increase in the wife's earning capacity raises the divorce hazard. Couples sort into marriage according to characteristics that are likely to enhance the stability of the marriage. The divorce hazard is initially increasing with the duration of marriage, and the presence of children and high levels of property stabilizes the marriage."

This article uses British firm-level panel data on actual innovative activity drawn from different statistical sources to identify the effect of technical change on jobs. Previous work tends to find positive associations of proxies for technical change and employment, but such studies suffer from various statistical drawbacks. In this study, even when one controls for fixed effects, dynamics, and endogeneity, innovations have a positive and significant effect on employment, which persists over several years. There seems to be little direct role for spillover effects from industry innovations, or any role for industry wages or union power.

This article examines the effect of Catholic secondary schooling on high school graduation rates, college graduation rates, and future wages. The article introduces new measures of access to Catholic schools that serve as potential instruments for Catholic school attendance. Catholic secondary schools are geographically concentrated in urban areas and Catholic schooling does increase educational attainment significantly among urban minorities. The gains from Catholic schooling are modest for urban whites and negligible for suburban students. Related analyses suggest that urban minorities benefit greatly from access to Catholic schooling primarily because the public schools available to them are quite poor. Copyright 1997 by University of Chicago Press.

This article analyzes the effect of trade liberalization on employment and wages in the Mexican manufacturing sector. The study documents that many of the rents generated by trade protection were absorbed by workers in the form of a wage premium. Trade liberalization affected firm‐level employment and wages by shifting down industry product and labor demand. This in itself may have accounted for a 3%–4% decline in real wages on average. But trade reform also reduced the rents available to be captured by firms and workers. This had an additional negative effect on firm‐level employment and wages.

This article examines the long-term wage and earnings losses of displaced workers using longitudinal data from the Panel Study of Income Dynamics. Consistent with previous research, the author finds that the effects of displacement are quite persistent, with earnings and wages remaining approximately 9 percent below their expected levels six or more years after displacement. She then shows that much of this persistence can be explained by additional job losses in the years following an initial displacement. Workers who avoid additional displacements have earnings and wage losses of 1 percent and 4 percent six or more years after job loss. Copyright 1997 by University of Chicago Press.

Using Michigan Panel Study of Income Dynamics data for 1979 and 1988, the authors analyze how a falling gender wage gap occurred despite changes in wage structure unfavorable to low-wage workers. The decrease is traced to 'gender-specific' factors which more than counterbalanced changes in measured and unmeasured prices working against women. Supply shifts net of demand were unfavorable for women generally and hurt high-skilled more than middle- and low-skilled women. By analyzing wages, the authors find support for the notion of a gender twist in supply and demand having its largest negative effect on high-skilled women. Copyright 1997 by University of Chicago Press.