Knowledge that Transforms

The paper examines whether unionization by workers discourages the adoption of labor-saving techniques. This is done in the context of an oligopolistic industry with a small number of firms, some of which are unionized. We find that unionization can actually encourage the adoption of labor-saving technology, provided that the technological improvement is mild and that demand is sufficiently high (or demand elasticity sufficiently low). If there is an effective threat of entry that causes the union to moderate its wage demands, then unionization may encourage the adoption of new technology even at low levels of demand.

"This paper designs a multiarmed bandit (MAB) sequential model for the analysis of the migration-job search process. The implications either are compatible with well-known migration behavior or, when novel, are also plausible. For example, regions with large wage variability attract migrants, and regions with large nonpecuniary returns increase both in migration and out migration. A major advantage of this approach is the relative ease with which martingale estimators can be derived from the martingale structure of the model. These martingale methods are exemplified for the return migration phenomenon."

This paper examines when and to what extent an individual's relative wage depends on his/her productivity relative to others doing the same job. Starting wages were influenced by background characteristics and training cost realizations but not by relative productivity. Wages one year later were influenced by productivity but the effects were small. The wage elasticity was .2 at small establishments and 0 at establishments with over 400 employees. The wage response to relative productivity and training costs was weaker in small labor markets, suggesting that wages do not fully respond to performance because of the firm specificity of job performance differentials.

An employer must choose a procedure for screening job applicants, a rate of hire, a training program for new employees, a criterion for the retention of new employees after observing their on-the-job performance, a compensation package, and a rate of capital investment so as to minimize production costs across time. This paper examines the effects of employer size on these hiring and training decisions when larger employers have greater monitoring costs. A unique data set is employed to estimate the empirical relation among employer size and employer search, training, capital investment, and wages.

This paper uses recent results from incentive theory to study heretofore informal critiques of piece-rate compensation schemes. The informal critiques are based on the history of failed attempts to install piece-rate compensation schemes at the turn of the century. The formal analysis emphasizes the importance of information and commitment in contracting. The main result is as follows. In a work environment characterized by hidden information and a hidden action, if neither the firm nor the worker can commit to future behavior, then no compensation scheme, piece-rate or otherwise, can induce the worker not to restrict output.

We examine Henry Ford's introduction of the five-dollar day in 1914 in an effort to evaluate the relevance of efficiency wage theories of wage and employment determination. We conclude that the Ford experience strongly supports the relevance of these theories. Ford's decision to increase wages dramatically is most plausibly the consequence of labor problems of the kind efficiency wage theorists stress. The structure of the five-dollar day program is consistent with the predictions of efficiency wage theories. There is vivid evidence that the introduction of the five-dollar day resulted in substantial queues for Ford jobs. Significant increases in Ford productivity and profits accompanied the new regime.

A model of unemployment duration is estimated with weekly micro data on Canadian men. Ent itlement provisions in the unemployment insurance program and demand conditions are found to have a significant effect on the probability of leaving unemployment. The probability of a worker leaving unemploy ment declines with the duration of unemployment, holding unemployment insurance entitlement constant. When entitlement is allowed to vary, the probability of leaving first falls and then generally rises with unemployment duration. These results are robust with respect to allo wing for person-specific unobserved heterogeneity and alternative spe cifications of duration dependence. Copyright 1987 by University of Chicago Press.