A central question in labor economics and macroeconomics is whether the textbook competitive model provides an adequate representation of the labor market. Using longitudinal data on companies and establishments, this article suggests that it may not. As predicted by rent-sharing models of the labor market, changes in profitability are shown to feed through into long-run changes in wages. These are not temporary wage effects and are not driven by the unionized workplaces in the data. The article's estimates imply that, for rent-sharing reasons alone, Lester's "range" of wages is approximately 16%.

The paper discusses the economics of promotion and, in particular, studies wage and employment structure in an economy with internal labor markets. It is shown—under a wide range of assumptions—that firms will set a nondecreasing wage profile that, for reasons apparently not suggested before, both junior and senior workers may be paid more or less than their marginal product, and that firms will offer a flat wage schedule if labor hours are supplied perfectly inelastically.

The paper provides evidence to show that many U.S. labor contracts havelittle or no private unemployment insurance provision. A model of an optional contract under asymmetric information, with no private unemployment insurance, is presented. Underemployment and involuntaryunemployment may coexist.

This article uses various micro data sets to study entrepreneurship. Consistent with the existence of capital constraints on potential entrepreneurs, the estimates imply that the probability of self-employment depends positively upon whether the individual ever received an inheritance or gift. When directly questioned in interview surveys, potential entrepreneurs say that raising capital is their principal problem. Consistent with our theoretical model's predictions, the self-employed report higher levels of job and life satisfaction than employees. Childhood psychological test scores, however, are not strongly correlated with later self-employment.

In Happiness for All? Unequal Hopes and Lives in the Pursuit of the American Dream, Carol Graham raises disquieting ideas about today’s United States. The challenge she puts forward is an important one. Here we review the intellectual case and offer additional evidence. We conclude broadly on the author’s side. Strikingly, Americans appear to be in greater pain than citizens of other countries, and most subgroups of citizens have downwardly trended happiness levels. There is, however, one bright side to an otherwise dark story. The happiness of black Americans has risen strongly since the 1970s. It is now almost equal to that of white Americans.

This paper uses Behavioral Risk Factor Surveillance System data to study life satisfaction and mental health across the geography of the United States. The analysis draws on a sample of 1.3 million citizens. Initially we control for people's personal characteristics (though not income). There is no correlation between states' regression-adjusted well-being and their GDP per capita. States like Louisiana, plus Washington, D.C., have high psychological well-being levels; California and West Virginia have low well-being. When we control for incomes, satisfaction with life is lower in richer states, just as compensating-differentials theory would predict. Nevertheless, some puzzles remain.

What determines human beings' political preferences? Using nationally representative longitudinal data, we show that having daughters makes people more likely to vote for left-wing political parties. Having sons leads people to favor right-wing parties. The paper checks that our result is not an artifact of family stopping rules, discusses the predictions from a simple economic model, and tests for possible reverse causality.

The paper develops an efficiency-wage model in which input prices affect the equilibrium rate of unemployment. We show that a simple framework based on only two prices (the real price of oil and the real rate of interest) is able to explain the main postwar movements in the rate of U.S. joblessness. The equations do well in forecasting unemployment many years out of sample, and provide evidence that the oil-price spike associated with Iraq's invasion of Kuwait appears to be a component of the “mystery” recession that followed.

Some firms say they care about the well-being and ‘happiness’ of their employees. But are such claims hype, or scientific good sense? We provide evidence, for a classic piece-rate setting, that happiness makes people more productive. In three different styles of experiment, randomly selected individuals are made happier. The treated individuals have approximately 12% greater productivity. A fourth experiment studies major real-world shocks (bereavement and family illness). Lower happiness is systematically associated with lower productivity. These different forms of evidence, with complementary strengths and weaknesses, are consistent with the existence of a causal link between human well-being and human performance.