Knowledge that Transforms

When unemployment insurance (UI) taxes are incompletely experience rated, a self-financing UI system has to impose additional taxes that are exogenous to the behavior of individual firms. In the United States, these nonrated tax components vary predictably over the business cycle. A model of firm behavior under such a tax is presented. Evidence suggests signs for the parameters of the model that predict that incomplete experience rating, while (as shown elsewhere) increasing the rate of temporary layoffs, leads to the use of multiple tax schedules in a way that exerts downward pressure on cyclical swings in aggregate unemployment.

This study is concerned with the impact of changes in economic conditions on the family. "Three issues are considered in this paper. First, the reasons why the family is not fading away as an economic entity are discussed. The argument of this paper is that, despite the declines in various economic functions of the family and the increases in divorces and in other failures, the survival capacity of the family is both strong and robust." Second, the author contends that the economic approach should be extended to deal with the effects of the life-span revolution, shifts in prices and incomes, and the ability of the family to cope with these changes. Third, the hypothesis is put forward that intergenerational transfers are less important than increases over time in real per capita incomes and changes in income composition, its permanent and temporary components, and the sources of income. The geographical focus is worldwide.

This paper examines the amount of precautionary savings and wealth inequality arising from life-span uncertainty by comparing saving behavior under perfect insurance arrangements with that arising under imperfect arrangements, namely, when longevity risk can be pooled only with members of one's own family. The central findings of the paper are: (1) perfecting insurance arrangements can lower savings in intergenerationally altruistic and life-cycle economies and (2) in altruistic economies perfecting annuity insurance can influence in-equality; indeed, in the long run in the model, switching from imperfect family insurance to perfect insurance can mean the difference between absolute inequality and absolute equality.

This paper estimates the effect of union work rules in the building trades on employment and costs by comparing factor demand elasticities for union and nonunion contractors and subcontractors over micro data from two different types of construction. The results show that the elasticities of substitution between labor and nonlabor inputs and own-price elasticities for nonlabor inputs are about the same for union and nonunion contractors. In contrast, the elasticities of substitution among different skill categories of labor and the own-price elasticities for each category are much lower under unionism.

In recent years a large literature has developed that investigates the role of insurance in labor market contracting. Papers in this literature typically assume that workers are completely restricted from borrowing. We argue, and to some extent demonstrate, that in many environments capital market imperfections do not lead to a noborrowing result but rather to a capital market assumption that is intermediate between the no-borrowing assumption and the perfect capital market assumption. We then consider some of the ramifications that this intermediate capital market assumption has on the type of insurance the firms provide through the labor market contract.

Existing models of incentive compatibility in life-cycle employment contracts arrive at different predictions partly because of the different kinds of "contract-breaking" behavior allowed in them. This paper sets out and classifies the full range of such behaviors, argues that no model has yet incorporated all of them, and examines the consequences of doing so in the context of Lazear's well-known model. In the extended model, wages cannot rise faster than marginal products throughout the entire contract, and the set of feasible contracts can often be empty, even when both parties can commit to terminate the contract whenever it is broken by the other party.

This paper describes changes in hours of work and income between 1959 and 1979 of women and men ages 25-64. It includes attempts to measure and value nonmarket production and leisure as well as market work, to take account of possible income sharing within households, and to allow for economies of scale in household production. The most important empirical result is that, relative to men, women's access to goods and services and leisure was lower in 1979 than in 1959. Changes in hourly earnings, hours of work, and household structure contributed to this result. The sex differential in hourly earnings is explored in detail.

The traditional model of collective bargaining confines unions to settlements constrained by the employer's labor demand curve, but an alternative model places wage-employment outcomes on a contract curve that extends beyond the labor demand curve. This paper derives a multidimensional (hedonic) contract-curve model in which employment-security provisions are used to maintain efficient bargains outside the employer's demand curve and distinguishes empirically between the contract-curve and demand-constraint models using data for public school teachers in New York State. Estimates clearly support the contract-curve model over the demand-constraint model by linking the gap between compensation and the value of the marginal product to the strength of employment-security provisions.