Knowledge that Transforms

The Personal Responsibility and Work Opportunity Reconciliation Act denied legal noncitizens who arrived in the United States after August 1996 access to means‐tested federal benefits for the first 5 years. However, using state funds, a number of states restored some of the benefits. I use this state‐level policy variation to study whether newly arrived immigrants make location decisions on the basis of benefit eligibility and generosity. I find that safety‐net programs have little effect on the location choices of newly arrived low‐skilled unmarried immigrant women.

This article studies a risk‐averse worker’s optimal savings and job search behavior as she moves back and forth between employment and unemployment. We show that job search effort is negatively related to wealth under the assumption of additively separable utility. Consequently, job search exhibits positive unemployment duration dependence because wealth is drawn down to smooth consumption as the spell progresses. Finally, given optimal search, savings still provide imperfect insurance against income fluctuations; precautionary savings are built up during employment spells and run down during unemployment spells, but the consumption path will not be perfectly smooth over states.

The effect of maternal employment on child development is examined using fixed effects models. Hausman tests suggest that ordinary least squares models produce biased and inconsistent estimates. Fixed effects results show that only one of three tests (PIAT math) was negatively affected by maternal hours and weeks worked in year 1 of the child’s life. The PIAT reading score was negatively affected by weeks worked in year 1 but not hours worked in year 1. None of the tests were affected by weeks or hours worked in year 2. Finally, weeks worked in year 3 positively affected PIAT math scores.

The article structually estimates an on‐the‐job search model of job separations. Given each employer pays observably equivalent workers the same but wages are dispersed across employers, an employer's separation flow is the sum of an exogenous outflow unrelated to the wage and a job‐to‐job flow that decreases with the employer's wage. Using data from the Danish Integrated Database for Labour Market Research, the empirical results imply, as predicted by theory, that search effort declines with the wage. Furthermore, the estimates explain the employment effect, defined as the horizontal difference between the distribution of wages earned and the wage offer distribution.

How does a typically European bargaining system, with collective bargaining and national minimum wage, coexist with low unemployment and high wage flexibility? A unique data set on workers, firms, and collective bargaining contracts in Portugal is used to analyze the determinants of both the contractual wage and the wage cushion (difference between contractual and actual wages). The results indicate that the wage cushion stretches the returns to worker and firm attributes, whereas it shrinks the returns to union power. Therefore, firm‐specific arrangements partly offset collective bargaining, granting firms certain freedom when setting wages. Contractual wages reflect trade unions' egalitarian policy.

Controlling for cognitive skills, we find that men who occupied leadership positions in high school earn more as adults. The pure leadership‐wage effect varies, depending on definitions and time period, from 4% to 33%. This effect is not an artifact of measurement error in cognitive skills or differences in a wide array of other physical or psychological traits. High school leaders are more likely to occupy managerial occupations as adults, and leadership skills command a higher wage premium within managerial occupations than elsewhere. Finally, it appears that leadership skills may be fostered by exposure to high school leadership opportunities.

Labor mobility is considered to be an important source of knowledge externalities, making it difficult for firms to appropriate returns to research and development (R&D). Interfirm transfers of knowledge embodied in people should be analyzed within a human capital framework. Testing such a framework, I find that the technical staff in R&D‐intensive firms pays for the knowledge they accumulate on the job through lower wages early in their career. They later earn a return on these implicit investments through higher wages. This suggests that the potential externalities associated with labor mobility are, at least partially, internalized in the labor market.

Beginning in 1997, the price of concert tickets took off and ticket sales declined. From 1996 to 2003, for example, the average concert price increased by 82%, while the CPI increased by 17%. Explanations for price growth include (1) the possible crowding out of the secondary ticket market, (2) rising superstar effects, (3) Baumols and Bowen's disease, (4) increased concentraion of promoters, and (5) the erosion of complementarities between concerts and album sales because of file sharing and CD copying. The article tentatively concludes that the decline in complementarities is the main cause of the recent surge in concert prices.

This article investigates the assimilation role of intermarriage between immigrants and natives. Intermarried immigrants earn significantly higher incomes than endogamously married immigrants, even after we take account of human capital endowments and endogeneity of intermarriage. The premium does not appear to be a reward for unobservable individual characteristics. Natives who intermarry do not receive this premium, nor do immigrants who intermarry into another ethnic group. The premium is mainly attributable to a faster speed of assimilation rather than any difference in labor‐market quality between intermarried and nonintermarried immigrants at the point of arrival.

The theory below is that entrepreneurs must be jacks-of-all-trades who need not excel in any one skill but are competent in many. A model of the choice to become an entrepreneur is presented. The primary implication is that individuals with balanced skills are more likely than others to become entrepreneurs. Using data on Stanford alumni, the predictions are tested and found to hold. Those who have varied work and educational backgrounds are much more likely to start their own businesses than those who have focused on one role at work or concentrated in one subject at school.