Knowledge that Transforms

This paper focuses on earnings differentials in the for-profit and private nonprofit sectors, with specific reference to lawyers. An earnings equation for private lawyers is estimated and is used to predict what the nonprofit sector "public interest" lawyers could earn in the private sector. The finding is that the public interest lawyers are paid substantially less, that they know this, and that the financial sacrifice is permanent. Next, a job choice equation is estimated which suggests that those lawyers who choose public interest work have different "preferences" from those who choose private law practices. The difference may help to account for the willingness of the public interest lawyers to accept lower monetary rewards. Further research is needed to determine whether the differences found for lawyers in the two sectors are also found in other industries, and whether such differences are found only at the level of management or at lower levels. The goal is improved understanding of behavioral differences between for-profit and nonprofit firms.

This paper examines the extent of response errors in labor market survey data and explores the implications of such errors for economic analysis. Explicitly examined are responses to questions on industry, occupation, union status, hours worked, and wages. Analyses are based on two sources: (1) a special supplement to the January 1977 Current Population Survey that obtained data from workers and their employers and (2) an exact match of workers and their employers interviewed in the Employment Opportunity Pilot Project Survey. The dual nature of these surveys provides a basis for analyzing the effect of response error on a variety of economic analyses including the trade-off between wages and risk, the wage impact of unionism, and the sensitivity of wage-determination models to alternative responses to earnings questions.

Past attempts to estimate the magnitude of compensating wage differentials have been hindered by the biasing effects of omitted variables and measurement error. We argue that a wage change formulation, estimated with panel data that contain worker reports of their own job characteristics, reduces both of these biases. Our empirical results, based on a large panel of workers in Sweden, confirm these conjectures by giving many more reasonable coefficient estimates for a wage change equation than for a wage level formulation.

This paper tests the hypothesis that the classifications "unemployed" and "out of the labor force" are behaviorally meaningless distinctions. This hypothesis is rejected. Distinct behavioral equations govern transitions from out of the labor force to employment and from unemployment to employment. The evidence reported in this paper is broadly consistent with versions of search theory in which unemployment is a state that facilitates the job search process. In an Appendix, we demonstrate that log concavity of the wage-offer distribution implies that the exit rate from unemployment is an increasing function of the rate of arrival of job offers.

This paper considers the problem of hiring scientists for research and development projects when one takes explicit account of the fact that the scientist may be able to use the information acquired during the project in a rival enterprise. Management's problem is to determine an optimum labor policy for its project. The policy consists of an employment decision and a labor contract. Given optimum behavior, it is straightforward to analyze the effect of the potential for mobility of scientific personnel on project profitability and on research employment. We also formalize conditions under which one would expect to observe a scientist leaving his employer to set up or join a rival.

Incentives for specialization, trade, and the production of comparative advantage through investment are shown to arise from increasing returns to utilization of human capital. Indivisibilities imply fixed-cost elements of investment that are independent of subsequent utilization. Hence the rate of return is increasing in utilization and is maximized by utilizing specialized skills as intensively as possible. Identically endowed individuals have incentives to specialize their investments in skills and trade with each other for this reason, even if production technology exhibits constant returns to scale.

The size and rapid growth of the Hispanic population in the United States raise many questions about the effects of language on the process of economic assimilation. This paper uses data on earnings for 1975 to explore the role of English language proficiency in the assimilation of Hispanic men into the U.S. labor market. The results are strong: differences associated with English language skills explain virtually all of the Hispanic wage differences usually attributed to ethnicity, national origin, and time in the United States. The analysis is completed by relating the measure of English language proficiency to assimilation-related variables.

info:eu-repo/semantics/published