Knowledge that Transforms

Statistical analysis of the job-search model has isolated the role played by the minimum observed wage in identifying and estimating behavioral parameters. Estimators based on order statistics, however, are influenced by measurement error in ways that estimators based on averages are not, and there is ample evidence that wage data contain measurement errors. We propose a model in which worker behavior is captured by the prototypal search model but wages are observed with error.

Following permanent layoffs most women search for new jobs, but some withdraw from the labor force. We develop a joint model of the choice to undertake postdisplacement job search and unemployment durations for searchers and estimate it, using data from the 1988 Displaced Worker Survey. Maximum likelihood estimates of this "split-population" model show that labor force withdrawal is an important factor explaining the distribution of postdisplacement jobless spells. The model also allows us to distinguish the effect of any covariate on the decision to engage in postdisplacement search from its effect on search duration. Single-population models obscure this distinction.

Estimates of the intertemporal labor supply behavior of males in Canada using micro data are reported. Individuals make the intertemporal labor supply decision on the basis of annual hours and weeks. Precision of the parameter estimates is improved by using tenure variables as instruments for the wage. Further, the age and tenure variables are allowed to have taste parameters in the structural equations. The evidence suggests that this is required only for the two age variables. Elasticity evidence suggests that evolutionary changes in the wage cause changes in the number of weeks with the elasticity being 0.6 and statistically significant.

We study wage bargaining in which the union is uncertain about the firm's willingness to pay and threat payoffs vary over time. Strike payoffs change as replacement workers are hired, as strikers find temporary jobs, and as inventories or strike funds run out. We find that bargaining outcomes are substantially altered if threat payoffs vary. If dispute costs increase in the long run, then dispute durations are longer, settlement rates are lower, and wages decline more slowly during the short run (and may even increase). The settlement wage is largely determined from the long-run threat, rather than the short-run threat.

This article characterizes labor markets in which the heterogeneity of workers and firms results in thin markets and rents. Neoclassical marginal analysis and matching are blended into a computable general equilibrium model of trade in efficiency units of labor. Although workers' bargaining problems are interrelated, a simple wage contract generates wage flexibility and efficient matching in the model's equilibrium. Equilibrium wages are predicted to vary with the diversity of firms, the scarcity of skills, and the costliness of search. The model is applied to superstar markets, union bargaining in sports, interindustry wage differentials, and the relationship between pay and profit.

This study examines the difficult choice faced by members of a striking bargaining unit between withholding labor or crossing the picket line in violation of the prevailing behavioral norm. Using duration analysis, we test a model of crossing behavior using data on individual football players during the 1987 National Football League strike. A notable finding is that nonwhite players are less willing to cross the picket line if their team union representative is also nonwhite. Willingness to cross the line is also influenced by teammate crossing and proxies for expected career length, demand for current income, and expected benefits from union demands.

Three to 5 years after job displacements, workers receiving the advance notice mandated by current law earn approximately 10% more than their nonnotified counterparts. This differential is not the result of firms systematically notifying persons with favorable reemployment prospects-early warnings are disproportionately obtained by individuals expected to earn relatively low wages in subsequent employment. It is not clear, however, whether prenotification has a causal effect. The notification differential may occur because the advance notice is frequently provided by employers offering other kinds of adjustment assistance such as job counseling, skill retraining, supplemental unemployment benefits, or outplacement assistance.

We examine cyclicality of strike frequency and incidence, using Canadian data on strikes and contracts. Total strike frequency exhibits significant procyclicality, to which within-contract strikes contribute appreciably. Evidence is weaker for procyclical behavior of contract-expiry strikes, both in total and disaggregated by issue. Strike incidence is also procyclical, particularly in manufacturing, though the procyclicality here is confined to strikes over nonwage issues. These results mirror those obtained by analyzing the frequency of strikes in the contract data. Industry-specific cyclical variables positively affect strike incidence in manufacturing, but region-specific variables have no effect.

Wage and unemployment responses to changes in economic environment are compared for efficiency wage and frictional models. Changes in aggregate demand, persistence of job-specific shocks, cost of living, and unemployment benefits are considered. Wages and unemployment move in the same direction in the two models, except that an upward shift in aggregate labor demand can reduce the real wage in the efficiency wage, but not the frictional, model. In a numerical simulation calibrated to U.S. data, real productivity shocks in the efficiency wage model yield a ratio of unemployment to wage variability close to that of the United States.

This article argues that the predictions of standard trade union models and the tests for distinguishing between these models are not robust to quite small and reasonable changes in the conventional assumptions. In particular, it considers the effect of assuming that the ex post substitutability between labor and capital is less than the ex ante substitutability. The paper shows that much of the conventional wisdom about the effects of trade unions is not necessarily true in this framework.