I estimate a function that matches vacant jobs and unemployed workers to produce new hires. Israeli law requiring vacancy registration yields unique data quality. The literature underestimates matching function coefficients because of a simultaneity bias, as the outflow of hires depletes stocks of unemployed and vacancies. Instruments and a new simulation method address this bias. A new test reveals strong evidence of heterogeneity in unemployed and vacancies. Estimates imply labor market dynamics that absorb shocks completely within only 2 months. Reductions in the hire rate of referrals can explain a 2.1 percentage point increase in unemployment between 1978 and 1990.

Israeli Ultra-Orthodox men study full-time in yeshiva until age 40 on average. Why do fathers with families in poverty choose yeshiva over work? Draft deferments subsidize yeshiva attendance, yet attendance typically continues long after exemption. Fertility rates are high (TFR = 7.6) and rising. A social interaction approach explains these anomalies. Yeshiva attendance signals commitment to the community, which provides mutual insurance to members. Prohibitions strengthen communities by effectively taxing real wages, inducing high fertility. Historically, the incursion of markets into traditional communities produces Ultra-Orthodoxy. Subsidies induce dramatic reductions in labor supply and unparalleled increases in fertility, illustrating extreme responses social groups may have to interventions.

Demand for less-skilled workers plummeted in developed countries in the 1980s. In open economies, pervasive skill-biased technological change (SBTC) can explain this decline. SBTC tends to increase the domestic supply of unskill-intensive goods by releasing less-skilled labor. The more countries experiencing a SBTC, the greater its potential to decrease the relative wages of less-skilled labor by increasing the world supply of unskill-intensive goods. We find strong evidence for pervasive SBTC in developed countries. Most industries increased the proportion of skilled workers despite generally rising or stable relative wages. Moreover, the same manufacturing industries simultaneously increased demand for skills in different countries. Many developing countries also show increased skill premiums, a pattern consistent with SBTC.

We examine the effect of air quality regulation on productivity in some of the most heavily regulated manufacturing plants in the United States, the oil refineries of the Los Angeles (South Coast) Air Basin. We use direct measures of local air pollution regulation to estimate their effects on abatement investment. Refineries not subject to these regulations are used as a comparison group. We study a period of sharply increased regulation between 1979 and 1992. Initial compliance with each regulation cost $3 million per plant and a further $5 million to comply with increased stringency. We construct measures of total factor productivity using Census of Manufacturers output and materials data that report physical quantities of inputs and outputs for the entire population of refineries. Despite high costs associated with the local regulations, productivity in the Los Angeles Air Basin refineries rose sharply between 1987 and 1992, which was a period of decreased refinery productivity in other regions. We conclude that abatement cost measures may grossly overstate the economic cost of environmental regulation as abatement can increase productivity.

Most interpretations of prevalent counterinsurgency theory imply that increasing government services reduces rebel violence. Empirically, however, development programs and economic activity sometimes increase violence. Using new panel data on development spending in Iraq, we show that violence-reducing effects of development assistance are greater when: (i) projects are small; (ii) troop strength is high; and (iii) professional development expertise is available. These findings are consistent with an information-centric (“hearts and minds”) model, which implies that violence-reduction is greatest when projects are secure, valued by community members, and services derived are conditional on government control of the territory.