Knowledge that Transforms

Swedish data on workers matched with firms’ balance‐sheet reports are used to examine the relation between wages and firms’ ability to pay. Results indicate that experienced and highly educated workers are sorted into profitable firms. Wages are positively correlated with profits and the capital‐labor ratio, after controlling for worker quality, degree of effort supervision, job characteristics, local unemployment, firms’ employment history, and employer size. Lester’s “range of pay” due to rent sharing is around 12%–24% of the mean wage in Sweden, which is close to the estimates for the United States and United Kingdom.

More mothers engage in marketplace work today than ever before, with over 33% returning to work by the time their child is 3 months old. This article identifies the effects of maternal marketplace work in the initial months of an infant’s life on the child's cognitive development. Results suggest that such work in the first year of a child’s life has detrimental effects. Where significant, the results also indicate negative effects of maternal employment in the child’s first quarter of life. However, the negative effects of maternal marketplace work are partially offset by positive effects of increased family income.

Using an extraordinary database drawn from longitudinal income tax records, we decompose Canada’s growth in earnings inequality into its persistent and transitory components. We find that the growth in earnings inequality reflects both an increase in long‐run inequality and an increase in earnings instability. The Canadian data strongly reject several restrictions commonly imposed in the U.S. literature, and they also suggest that imposing these evidently false restrictions may lead to distorted inferences about earnings dynamics and inequality trends.

Unique new data from a college with a mandatory work‐study program are used to examine the relationship between working during school and academic performance. Particular attention is paid to the importance of biases that are potentially present because the number of hours that are worked is endogenously chosen by the individual. The results suggest that, even if results appear reasonable, a researcher should be cautious when drawing policy conclusions about the relationship between hours worked and a particular outcome of interest unless he or she is confident that potential problems associated with the endogeneity of hours have been adequately addressed.

Using microdata for 22 countries over the 198594 period, we find that more compressed male wage structures and lower female net supply are both associated with a lower gender pay gap, with an especially large effect for wage structures. Reduced-form specifications indicate that the extent of collective bargaining coverage is also significantly negatively related to the gender pay gap. Together, the wage compression and collective bargaining results suggest that the high wage floors that are associated with highly centralized, unionized wage setting raise women's relative pay, since women are at the bottom of the wage distribution in each country.

Using 1998 data, we show that the gender log wage gap in Sweden increases throughout the wage distribution and accelerates in the upper tail. We interpret this as a strong glass ceiling effect. We use quantile regression decompositions to examine whether this pattern can be ascribed primarily to gender differences in labor market characteristics or in the rewards to those characteristics. Even after extensive controls for gender differences in age, education (both level and field), sector, industry, and occupation, we find that the glass ceiling effect we see in the raw data persists to a considerable extent.

This article proposes a formal model of migration in which workers are heterogeneous and markets are stochastically correlated. We derive and characterize the optimal migration pattern of a family. We show that migration can take place even when migrants earn less abroad and, surprisingly, when earnings in the foreign country are riskier for every member of the family. Moreover, it may well be an optimal arrangement to have only dependents migrate, thus rationalizing the recent dependent-oriented migration flows from places like Hong Kong and Taiwan. We provide some evidence in support of our theory.

Over the past 3 decades, the U.S. Temporary Help Services (THS) industry grew five times more rapidly than overall employment. Contemporaneously, courts in 46 states adopted exceptions to the common law doctrine of employment at will that limited employers' discretion to terminate workers and opened them to litigation. This article assesses the contribution of "unjust dismissal" doctrine to THS employment specifically, and outsourcing more generally, finding that it is substantialexplaining 20% of the growth of THS between 1973 and 1995 and contributing 500,000 additional outsourced workers in 2000. States with smaller declines in unionization also saw substantially more THS growth.