Knowledge that Transforms

This article uses Survey of Households' Income and Wealth microdata to investigate the role the Scala Mobile played in the initial fall and subsequent rise in earnings inequality in Italy between 1977 and 1993. The Scala Mobile was a wage indexation mechanism granting the same absolute wage increase to all employees as prices rose, thereby potentially compressing wage differentials. Over time, the potential equalizing effect of this mechanism fell. This article argues that the rise in inequality from the mid‐1980s was a response to the compression of differentials operated over the previous years by the Scala Mobile.

This article identifies the part‐time wage effect, using hours variation caused by the social security rules. We show that work hours and wages drop sharply at ages 62 and 65. We argue that the hours decline causes the wage decline, resulting in a 25% wage penalty for men who cut their work week from 40 to 20 hours. However, we find little evidence for such an effect among women. We also show that models that fail to account for the joint determination of hours and wages will understate the labor supply response to a tax change by about 26%.

This article examines worker sorting across occupations in response to the risk of death on the job. We use family structure as a proxy for willingness to trade safety for wages to test the proposition that workers with strong aversion to this risk sort into safer jobs. We estimate conditional logit models of occupation choice as a function of injury risk and other job attributes. Our results confirm the sorting hypothesis: within gender, single moms and dads are the most averse to risk. Overall, differences in the risk of death across occupations explain about one-quarter of occupational gender segregation.

This article decomposes the participation process of a prototypical program into eligibility, awareness, application, acceptance, and enrollment. With this decomposition, we determine the sources of unequal participation for different groups and demonstrate that variables often have very different effects at different stages in the participation process. Our analysis shows that personal choices substantially affect participation and that awareness of program eligibility is a major source of variation in participation.

Using a confidential version of the NLSY79, we estimate large effects of neighborhood social characteristics and job proximity on labor market activity. A variety of neighborhood social characteristics are associated with less market work. Social characteristics have nonlinear effects, with the greatest impact in the worst neighborhoods. Social characteristics are also more important for less‐educated workers. Exploiting the panel aspects of our data, we find that estimates that do not account for neighborhood selection on the basis of time‐invariant and time‐varying unobserved individual characteristics substantially overstate the social effects of neighborhoods but understate the effects of job access.

This article examines the extent to which agency theory may explain chief executive officer (CEO) compensation in Chinese state‐owned enterprises during the 1980s. We find support for the agency theory: CEO pay sensitivity decreases with the variance of performance. Moreover, the performance sensitivity of CEO pay increases with the marginal return to executive action. While the elasticity of pay to sales is slightly smaller than that found for conventional firms in the West generally, our estimate of the semielasticity of pay with respect to profitability is comparable with estimates for regulated industries in the United States.

This article provides theoretical and empirical analyses of a firing costs model with adverse selection. Our theory suggests that, as firing costs increase, firms increasingly prefer hiring employed workers, who are less likely to be lemons. Estimates of re‐employment probabilities from the National Longitudinal Survey of Youth support this prediction. Unjust‐dismissal provisions in U.S. states reduce the re‐employment probabilities of unemployed workers relative to employed workers. Consistent with a lemons story, the relative effects of unjust‐dismissal provisions on the unemployed are generally smaller for union workers and those who lost their previous jobs due to the end of a contract.

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.