Sorting by search intensity

In this paper, I characterize matching in an on-the-job search model with endogenous search intensity, heterogeneous workers and firms, and match surplus is shared between workers and firms through bargaining. I provide proof of existence and uniqueness of steady state equilibrium. Given equally efficient matched and unmatched search, the worker skill conditional distribution of firm productivity over matches is stochastically increasing (decreasing) in worker skill if the production function is supermodular (submodular). I also show that this strong notion of sorting does not obtain everywhere for the firm productivity conditional match distribution.     

Income Taxes,Subsidies to Education,and Investments in Human Capital

We study a two‐sector economy with investments in human and physical capital and imperfect labor markets. Investments are irreversible and noncontractible, due to random matching between firms and workers. Income is allocated according to the Nash bargaining mechanism. At equilibrium, given the distribution of the agents across sectors, there is underinvestment in both human and physical capital, due to the holdup problem generated by bargaining and noncontractibility. Self‐selection of the agents into the two sectors typically induces too many workers to invest in high skills. Compared to the constrained efficient allocation, at each equilibrium, there are too many people investing too little effort in the high‐skill sector. We also study the effects of several tax policies on total expected surplus.     

On-the-job search and strategic bargaining

This paper studies wage bargaining in a simple economy in which both employed and unemployed workers search for better jobs. The axiomatic Nash bargaining solution and standard strategic bargaining solutions are inapplicable because the set of feasible payoffs is nonconvex. I instead develop a strategic model of wage bargaining between a single worker and firm that is applicable to such an environment. I show that if workers and firms are homogeneous, there are market equilibria with a continuous wage distribution in which identical firms bargain to different wages, each of which is a subgame perfect equilibrium of the bargaining game. If firms are heterogeneous, I characterize market equilibria in which more productive firms pay higher wages. I compare the quantitative predictions of this model with Burdett and Mortensen's [1998. Wage differentials, employer size and unemployment. International Economic Review 39, 257-273.] wage posting model and argue that the bargaining model is theoretically more appealing along important dimensions.     

A MATCHING MODEL WITH ENDOGENOUS SKILL REQUIREMENTS>*

We consider a labor market in which workers differ in their abilities and jobs differ in their skill requirements. The distribution of worker abilities is exogenous, but we model the choice of skill requirements by firms. High‐skill jobs produce more output than low‐skill jobs, but high‐skill jobs require high‐skill workers and thus are more difficult to fill. We use a matching model together with a Nash bargaining approach to wage setting to determine the equilibrium mix of job types, along with the equilibrium relationship between worker and job characteristics, wages, and unemployment.     

Efficiency of two sided investments in an equilibrium unemployment framework

This paper investigates the efficiency of investments by firms and workers in a matching model with high- and low-productivity jobs. Search is sector specific and random within sectors. Search frictions and ex-post bargaining imply that wage inequality arises as a result of the difference in investment costs between the sectors. The efficiency properties of the equilibrium are analyzed under the particular division in bargaining proposed by Hosios (1990). The conclusion is that the equilibrium is inefficient, with a too low fraction of workers and a too high vacancy-unemployment ratio in the high-productivity sector. The opposite happens in the low-productivity sector.     

Wage bargaining and turnover costs with heterogenous labor and perfect history screening

We study effects of mobility costs in a model of (Nash) wage bargaining between workers and firms, with instantaneous matching, heterogeneous workers, identical firms and free firm entry, and where firms can screen workers perfectly according to their previous work history but not their actual productivity. We derive the employment level and the minimum worker quality standard, in the market solution, and in the efficient solution established by a social planner. When workers have positive bargaining power, there is always some inefficient unemployment among desired workers in the market solution. The lowest hiring standard chosen by firms is higher than the planner's standard when firing costs are high relative to hiring costs, but may be lower in the opposite case. We show that any higher established hiring standard corresponds to a market equilibrium. The model explains a tendency for a high initial unemployment rate to remain high, particularly for low-skilled workers.     

Economic transition, higher education and worker productivity in China

We investigate the role of education on worker productivity and firms' total factor productivity using a panel of firm-level data from China. We estimate the returns to education by calculating the marginal productivity of workers of different education levels based on estimates of the firm-level production function. We also estimate how the education level of workers and CEO contributes to firms' total factor productivity. Estimated marginal products are much higher than wages, and the gap is larger for highly educated workers. Our estimate shows that an additional year of schooling raises marginal product by 30.1%, and that CEO's education increases TFP for foreign-invested firms. Estimates vary substantially across ownership classes, the effect of schooling on productivity being highest in foreign-invested firms. We infer that market mechanisms contribute to a more efficient use of human capital within firms.     

Labor market integration policies and the convergence of regions: the role of skills and technology diffusion

We study the role of different labor market integration policies on economic performance and convergence of two distinct regions in an agent-based model. Production is characterized by a complementarity between the quality of the capital stock and the specific skills of workers using the capital stock. Hence, productivity changes in a region are influenced both by the investment of local firms in high quality capital goods and by the evolution of the specific skill distribution of workers employed in the region. We show that various labor market integration policies yield, via differing regional worker flows, to distinct regional distributions of specific skills. Through this mechanism, relative regional prices are affected, determining the shares that the regions can capture from overall consumption good demand. There occurs a trade-off between aggregate output and convergence of regions with closed labor markets resulting in relatively high convergence but low output, and more integrated labor markets yielding higher output but lower convergence. Furthermore, results differ substantially in several respects as distinct labor market opening policies are applied.     

Search, mismatch and unemployment

This paper explores the efficiency of the equilibrium allocation in a matching model with heterogeneous workers and jobs. In the basic setup there are two types of workers with different skill levels. Both types can perform the simple tasks of unskilled jobs, while the complex tasks of skilled jobs require a high-ability worker. We demonstrate that the equilibrium outcome with random search and ex-post bargaining is never efficient. Under the Hosios condition, the average wage is correct, but bargaining compresses the wage distribution relative to workers’ shadow values. This feature distorts the relative profits of jobs, making it too attractive for firms to create skilled jobs. Furthermore, due to the low-skill premium, the high-ability workers may accept too many jobs. Finally, in an extension, we show that the introduction of separate markets for the two types of jobs is not sufficient to guarantee efficiency.     

Micro Foundations for Wage Flexibility: Wage Insurance at the Firm Level*

To what extent do firms insulate their workers' wages from fluctuations in product markets? Which firm and worker attributes are associated with wage flexibility at the micro level? We first rely on Guiso, Pistaferri and Schivardi (2005) to estimate dynamic models of sales and wages, finding that in Portugal, workers' wages respond to permanent shocks on firm performance, as opposed to transitory shocks. We then explore the factors associated with wage flexibility, finding that collective bargaining and minimum wages are associated with higher wage insurance by the firm, while the threat of firm bankruptcy reduces it. Managers receive less protection against permanent shocks than other workers.     

North–South technology transfer in unionised multinationals

We study how incentives for North–South technology transfers in multinational enterprises are affected by labour market institutions. If workers are collectively organised, incentives for technology transfers are partly governed by firms' desire to curb trade union power. Higher union bargaining power in the North leads to more technology transfer along two different dimensions – skill upgrading of Southern workers and quality upgrading of products produced in the South – possibly to the extent that the utility of Northern workers decline. Policies to raise the wage levels of Southern workers might spur technology transfer if wages are initially very low, but have a dampening effect on North–South technology transfer once the Southern wage level has surpassed a certain threshold level. These conclusions are reached in a setting where a unionised multinational multiproduct firm produces vertically differentiated products in Northern and Southern subsidiaries.     

International Trade and Collective Bargaining Outcomes: Evidence from German Employer–Employee Data

In theoretical trade models with variable mark‐ups and collective wage bargaining, exposure to international markets might reduce the exporter wage premium. We test this prediction using linked German employer–employee data covering the years 1996–2007. To separate the rent‐sharing mechanism from assortative matching, we exploit individual worker information to construct profitability measures that are free of skill composition. Our results show that rent‐sharing is less pronounced in more export‐intensive firms or in more open industries. The exporter wage premium is highest for low‐productivity firms. In line with theory, these findings are unique to the subsample of plants covered by collective bargaining.     

Trade and unions: Does size matter?

Our empirical analysis builds upon the hypothesis that unions are detrimental to a firm's efficiency. Using a rich survey of German manufacturers, we investigate firm-level determinants on the probability of collective wage bargaining with particular focus on the impact of a firm's engagement in foreign markets. An interesting and very robust finding is that exporters are less likely to engage in union wage bargaining. This finding is in line with a pessimistic perception of unions. The negative effect of collective bargaining can be offset by efficiency gains for larger exporters, who can benefit from operation cost saving effects. Size does matter as larger firms export and may find bargaining with a single entity representing the workforce more convenient than bargaining with each worker individually. We are using firm level information on IT investment as instrument for the export dummy and successfully test for the validity of this instrument.     

技术工人激励机制研究

技术工人供求矛盾尖锐成为中国经济持续增长的重要障碍。技术工人具备知识、技能、健康等人力资本条件，理应属于人力资本。因此，应注重从从技术工人自身、企业、国家三方面入手来吸引、留住并激励技术工人。     

STRATEGIC WITHHOLDING OF FIRM‐SPECIFIC SKILLS IN WAGE BARGAINING

The bargaining relationship between a firm and its incumbent worker who possesses firm‐specific human capital is examined. It is shown that the worker's ability to withhold his/her skills strategically increases his/her bargaining power. Multiple efficient as well as inefficient equilibria involving delays in negotiation are characterized. When the firm has outside options, the range of both efficient and inefficient equilibria shrinks; moreover, delays are shortened in inefficient equilibria. The model predicts that wages are procyclical.     

Endogenous Persistent Occupations and Inequality

The paper argues that human capital is the leading force determining inequality persistence. We show that, in a context of a perfect capital market where agents inherit human capital and wealth, it is the inherited human capital level that determines agents' occupational choice and investment. The critical assumption is that the entrepreneurial activity is of increasing returns to scale. This creates a higher profile of revenue for entrepreneurs. Although every agent can choose to become an entrepreneur, and although there is no barrier of entry in entrepreneurship, only those who receive a relatively higher human capital will do so. Agents whose inherited human capital is lower than the human capital threshold, endogenously determined, are better off becoming workers. Even in the context of a perfect capital market, which allows less endowed agents to borrow and invest in education, it turns out that the agents who inherit a low level of human capital bear a greater utility cost in their education investment. So they are better off investing less in education, lending their savings, and working as workers. As a result, agents' occupational choice depends on the intergenerational transmission of human capital. In the long run, the population is polarized into the rich entrepreneurs and the poor workers, magnifying inequality persistence in human capital level and revenue.     

Job creators,job creation,and the tax code

This paper considers the role of the tax code in determining income dispersion and vacancy creation. A “span‐of‐control” model is embedded into a search and matching environment. A cut to the tax on profits in isolation improves job creation and reduces before‐tax income inequality. The impact of a budget‐balancing increase in the wage tax depends on the bargaining power of firms. When it is high, firms pick up the lion's share of the tax burden. The tax acts like a barrier to entry: it benefits large firms at the expense of marginal ones. Net effects are an increase in unemployment and before‐tax income dispersion. Low firm bargaining power means workers pick up more of the tax burden. It acts like a subsidy to entrepreneurship reinforcing the impact of the profit tax reduction. Taxes on the returns to capital leave everyone worse off.     

Holdups and Efficiency with Search Frictions

A natural holdup problem arises in a market with search frictions: Firms have to make a range of investments before finding their employees, and larger investments translate into higher wages. In particular, when wages are determined by ex post bargaining, the equilibrium is always inefficient: Recognizing that capital-intensive production relations have to pay higher wages, firms reduce their investments. This can only be prevented by removing all the bargaining power from the workers, but this, in turn, depresses wages below their social product and creates excessive entry of firms. In contrast to this benchmark, we show that efficiency is achieved when firms post wages and workers can direct their search toward more attractive offers. This efficiency result generalizes to an environment with imperfect information where workers only observe a few of the equilibrium wage offers. We show that the underlying reason for efficiency is not wage posting per se, but the ability of workers to direct their search toward more capital-intensive jobs.     

Capital–Skill Complementarity and Inequality in Sweden

Income inequality increased in Sweden during the 1980s and 1990s, as did the returns to higher education. The main conclusion of this study is that increased income inequality between high‐ and low‐skilled workers is demand driven and is due to the presence of capital–skill complementarity in production. Increased investments in new, more efficient capital equipment, along with a slowdown in the growth rate of skilled labor, have raised the ratio of effective capital inputs per skilled worker, which, in turn, has increased the relative demand (and market return) for skilled labor through the capital–skill complementarity mechanism.     

HUMAN CAPITAL FORMATION AND CONTINUOUS TRAINING: EVIDENCE FOR EU COUNTRIES

This paper links data on continuous training from the EU Labour Force Survey (LFS) to information on skill levels and earnings from the EU KLEMS growth and productivity accounts, to examine the relative magnitudes of continuous workforce training versus human capital formation through the general education system in the European Union. The measurement methodology draws from the literature on measuring intangible investments by firms and sources of growth in an accounting framework. The results suggest that in the EU15 group of countries, intangible investments in continuous training represent just under 2 percent of GDP or about 35 percent of expenditure on general education. The share of GDP accounted for by training is less than a third as large in the new member states. A growth accounting method is employed to show that failure to account for continuous training leads to an underestimate of the impact of human capital on output growth in the EU.