Knowledge that Transforms

How does impatience affect job search? More impatient workers search less intensively and set a lower reservation wage. The effect on the exit rate from unemployment is unclear. In this paper we show that, if agents have exponential time preferences, the reservation wage effect dominates for sufficiently patient individuals, so increases in impatience lead to higher exit rates. The opposite is true for agents with hyperbolic time preferences: more impatient workers search less and exit unemployment later. Using two large longitudinal data sets, we find that various measures of impatience are negatively correlated with search effort and the exit rate from unemployment, and are orthogonal to reservation wages. Overall, impatience has a large effect on job search outcomes in the direction predicted by the hyperbolic discounting model.

In 1942, all Japanese were evacuated from the West Coast and incarcerated in internment camps. To investigate the long‐run economic consequences of this historic episode, I exploit the fact that Hawaiian Japanese were not subject to mass internment. I find that the labor market withdrawal induced by the internment reduced the annual earnings of males by as much as 9%–13% 25 years afterward. This is consistent with the predictions of an economic model that equates the labor market withdrawal induced by the internment with a loss of civilian labor market experience or a loss of advantageous job matches.

This article analyzes firm and worker’s incentives to invest in general and specific training when these are separable in the production technology and wages are determined by the outside‐option principle. It is shown that firms pay for general training, while workers receive the full return on it, and firms and workers share both the costs and benefits of specific training. The case of delayed general training is also studied. When general training is delayed, it is shown that the strategic complementarity between specific and general training increases the worker’s incentives to invest in specific training.

This article measures the importance of job level assignment based on comparative advantage and learning about workers’ ability in explaining intrafirm wage and mobility dynamics using survey data from the German Socio‐Economic Panel. The results reveal the importance of nonrandom selection of workers into the rungs of the firm’s job ladder. Measured and unmeasured ability play important roles in workers' rank assignment, with unmeasured ability being more important at higher levels of the hierarchical job structure. There is some evidence of learning effects for workers below age 35 generating mobility between upper and executive levels.

This article considers the effect of offer matching on labor market outcomes when the current employer has better information about his worker’s productivity than potential employers. Previous research found that when current employers have better information than potential employers, the latter use job assignment to infer an employed worker’s qualifications. As a result, assignment of workers to jobs is inefficient. I find that when current employers can match outside offers, the equilibrium outcome may be efficient. I analyze the effect of the asymmetric information on investment in human capital made by employers and workers, and find these investment levels to be first best.

This article develops and estimates a model of wage determination that isolates the effects of alcohol use on wages as mediated through human capital accumulation. Although generally insignificant, estimation results suggest that moderate alcohol use while in school or working has a positive effect on the returns to education or experience, and therefore on human capital accumulation, but heavier drinking reduces this gain slightly. Based on these results, alcohol use does not appear to adversely affect returns to education or work experience and therefore has no negative effect on the efficiency of education or experience in forming human capital.

We estimate the incentive effects of income taxation in a life‐cycle model of consumption and labor supply without intratemporal strong separability. We find that consumption and hours worked are direct complements in utility; both increase with a compensated increase in the net wage. The compensated net wage elasticity is about 0.3, nearly double estimates for U.S. men from a linear labor supply specification. Estimated intertemporal elasticities indicate significant intertemporal smoothing of utility. The estimated marginal welfare cost of government revenue is 6%–20%, which is about half the estimated welfare cost when additivity between consumption and leisure is incorrectly imposed.

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.