Does Regulation Trade Off Quality against Inequality? The Case of German Architects and Construction Engineers

We exploit an exogenous price increase of 10 per cent for architectural services to answer the question how price regulation affects income inequality and service quality. Using individual‐level data from the German microcensus for the years 2006–2012, we find a significant reform effect of 8 per cent on personal net income for self‐employed architects and construction engineers. This group moved from the second lowest to the highest quintile of the net income distribution. This increase in inequality is associated with a deterioration of service quality. The reform reduced average scores of a peer ranking for architects by 18 per cent.     

The Prevalence and Effects of Occupational Licensing

Our study provides the first national analysis of the labour market implications of workers who are licensed by any agency of the government in the USA. Using a specially designed Gallup survey of a nationally representative sample of Americans, we provide an analysis of the influence of this form of occupational regulation. We find that 29 per cent of the workforce is required to hold a licence, which is a higher percentage than that found in other studies that rely on state‐level occupational licensing data or single states. Workers who have higher levels of education are more likely to work in jobs that require a licence. Union workers and government employees are more likely to have a licence requirement than are non‐union or private sector employees. Our multivariate estimates suggest that licensing has about the same quantitative impact on wages as do unions — that is about 15 per cent — and that being both licensed and in a union can increase wages by more than 24 per cent. However, unlike unions which reduce variance in wages, licensing does not significantly reduce wage dispersion for individuals in licensed jobs.     

The Gender Gap in Funeral Directors: Burying Women with Ready‐to‐Embalm Laws?

Over the last few decades, the gender composition of funeral directors in the United States has changed dramatically as women have entered this traditionally male‐dominated occupation. To practise as funeral directors, women (and men) must be licensed in all but one state. The most extensive training requirements exist in the 27 states with ‘ready‐to‐embalm’ laws, which require funeral directors to be embalmers. Using a sample of 45,989 licensing records from 40 states, we find that 18.1 per cent of funeral directors were women in 2006. However, the proportion is significantly lower in states with ready‐to‐embalm laws. Our regressions imply that these laws reduce the proportion of female funeral directors by 24 per cent. More generally, we find that the number of funeral directors per capita is 17 per cent lower, on average, in states with ready‐to‐embalm laws.     

Health Care Competition and Antibiotic Use in Taiwan

Antibiotic resistance, a negative externality of antibiotic use, is a growing threat to public health. Health care competition may encourage antibiotic use because receiving an antibiotic is a form of ‘quality’ for many patients. This paper examines the effect of market concentration on antibiotic use in a large, nationally‐representative data set from Taiwan. Moving from the 75th percentile to the 25th percentile of market concentration is associated with 6.6 per cent greater antibiotic use. We control for leading market‐level confounds, including population density and community health. We also show that the correlation is robust using fixed effects for patients, physicians and diagnoses. We document the correlation between antibiotic use and patient retention, which suggests a mechanism for this result. Finally, we show that strict regulation of antibiotics reduces but does not eliminate the effect of competition on antibiotic use.     

Music for a Song: An Empirical Look at Uniform Pricing and Its Alternatives

With digital music as its context, this paper quantifies how much money would be made using alternatives to uniform pricing. Using survey‐based data on nearly 1,000 students' valuations of 100 popular songs in early 2008 and early 2009, we find that various alternatives can raise both producer and consumer surplus. Digital music revenue could be raised by between a sixth and a third relative to profit‐maximizing uniform pricing. While person‐specific uniform pricing can raise revenue by over 50 per cent, none of the non‐discriminatory schemes raise revenue's share of surplus above 40 per cent of total surplus.     

Occupational Regulation in the European Union: Coverage and Wage Effects

We present the first EU‐wide study on the prevalence and labour market impact of occupational regulation in the European Union. Drawing on a new EU Survey of Regulated Occupations, we find that licensing affects about 22 per cent of workers in the European Union, although there is significant variability across member states and occupations. On average, licensing is associated with a 4 per cent higher hourly wage. Using decomposition techniques we show that rent capture accounts for one‐third of this effect and the remainder is attributed to signalling. We find considerable heterogeneity in the wage gains by occupation and level of educational attainment. Finally, occupational licensing increases wage inequality. After accounting for composition effects, licensing increases the standard deviation of wages by about 0.02 log points.     

Wage Effects of On‐the‐Job Training: A Meta‐Analysis

A meta‐analysis is used to study the average wage effects of on‐the‐job training. This study shows that the average reported wage effect of on‐the‐job training, corrected for publication bias, is 2.6 per cent per course. The analyses reveal a substantial heterogeneity between training courses, while wage effects reported in studies based on instrumental variables and panel estimators are substantially lower than estimates based on techniques that do not correct for selectivity issues. Appropriate methodology and the quality of the data turn out to be crucial to determine the wage returns.     

Sourcing from the Enemy: Horizontal Subcontracting in Highway Procurement

I empirically consider the effect of horizontal subcontracting on firm bidding strategies in California highway construction auctions. Subcontractors are hired by prime contractors prior to the auction, and the subcontractor may also be a competitor in the primary auction. While horizontal subcontracting may improve productive efficiency, it softens the horizontal subcontractor's bid strategy, since winning the auction may entail losing subcontracting business. I find that while each additional competitor supplied by the firm is estimated to increase its bid by 1.4 per cent, the winning bid is uncorrelated with horizontal subcontracting. This points toward an efficiency motive for cross‐supply.     

First Degree Price Discrimination Goes to School

Personalized pricing is widely discussed but seldom observed, making studies of its efficacy rare. Yet, first degree price discrimination is common in the pricing of higher education, and I use data on prices and the characteristics of students admitted to a professional graduate program at a public university to estimate a matriculation demand function. I then derive linear pricing functions that maximize revenue for a target number of students. By allowing these functions to depend on progressively richer sets of observables, I explore the effect of personalization of pricing on profit. Tailoring prices to a one‐dimensional measure of student quality would raise revenue by 2.2 per cent above the revenue with uniform pricing. Pricing based on both student quality and state residency raises revenue by 8.4 per cent, and further tailoring based on available observables raises prices 9.0 per cent above the maximum revenue under uniform pricing. Pricing that obeys current statutory tuition limits raises revenue less but still by just over half as much. I also infer the welfare weights that the pricing process implicitly attaches to student characteristics.     

Evaluating the Illegal Employer Practice of Under‐Reporting Employees’ Salaries

This article advances understanding of the prevalence and distribution of the illegal employer practice of under‐reporting employees’ salaries, explains this practice and evaluates policy approaches. Analysing a 2013 Eurobarometer survey of 11,025 employees in 28 European countries, one in 33 employees receive under‐reported salaries, mostly in small businesses and vulnerable groups (e.g. unskilled workers, with lower education levels and financial difficulties). Explaining this practice, not as an individual criminal act that increasing the risk of detection can tackle, but as a symptom of systemic problems, which require improvements both in tax morale at the individual level and in the formal institutional environment at the country level to resolve, we then discuss the implications for theory and policy.     

Home Safe: No‐Trade Clauses and Player Salaries in Major League Baseball

In this study, we examine the wage effects of no‐trade clauses in Major League Baseball. Using an accepted player salary equation and data from the 2003–2008 seasons, we find evidence that there is a trade‐off between monetary compensation and the risk reduction provided by a no‐trade clause. The results suggest that players may be able to simultaneously negotiate for a no‐trade clause and higher salaries, but this is constrained when players also seek to guarantee their income stream with long‐term contracts.     

PIRACY ON THE SILVER SCREEN*

Using survey data on movie consumption by about 500 University of Pennsylvania undergraduate students, we ask whether unpaid consumption of movies displaces paid consumption. A variety of cross‐sectional and longitudinal empirical approaches show large and statistically significant evidence of displacement. In the most appropriate empirical specification, we find that unpaid first consumption reduces paid consumption by about 1 unit. Unpaid second consumption has a smaller effect, about 0.20 units. Our analysis indicates that unpaid consumption, which makes up 5.2 per cent of movie viewing in our sample, reduced paid consumption in our sample by 3.5 per cent.     

The Determinants of Racial Harassment at the Workplace: Evidence from the British Nursing Profession

This paper examines which individual and work-related characteristics increase the probability of an employee being racially harassed at the workplace using a unique sample of NHS nurses. The reported incidence of racial harassment at the workplace is staggeringly high — 8.9 per cent of all nurses report such episodes involving work colleagues and 22.4 per cent have experienced such abuse from patients (or their families). Nurses who are young, male or from the ethnic minorities are the most likely to be affected. The findings have important implications for equal opportunities policies and the retention of nursing staff in the NHS.     

Workplace Flexibilities,Job Satisfaction and Union Membership in the US Workforce

Using individual‐level data from the 2008 National Study of the Changing Workforce, we quantify how workers' job satisfaction levels correlate with five schedule‐based workplace flexibilities. The data permit us to control for numerous variables that might otherwise explain variation in the probability of job satisfaction, including, but not limited to, income, benefits, stress, depression, job control and individual preferences over flexibilities. Conditional on this control set, we find that workplace flexibilities correlate with an 8.1 per cent increase in job satisfaction. The relationship between job satisfaction and workplace flexibilities prevails through several sensitivity analyses, bias assessments and a propensity score matching analysis. We also explore how job satisfaction, union membership and workplace flexibilities intermix; we find that workplace flexibilities may function as a partial substitute for union membership.     

Upper‐echelon executive human capital and compensation: Generalist vs specialist skills

This study extends current knowledge of upper echelon executive compensation beyond the CEO, specifically CFO compensation, based on whether they possess generalist or specialist skills. We find that “strategic” CFOs with an elite MBA (generalist) consistently command a compensation premium, while “accounting” CFOs (specialist) and CFOs with a non‐MBA master's degree, even from an elite institution, do not. Further, scarce “strategic” CFOs are awarded both higher salaries and higher equity‐based compensation. Our findings support the view that unique complementarities between scarce CFOs and firms increase these executives' bargaining power leading to pay premium. Our results are robust to post‐hiring years, firm sizes, board characteristics, and CFO's insider/outsider status. We contribute at the confluence of upper‐echelon compensation, executive human capital, resource‐based view, and assortative matching literatures. Copyright © 2014 John Wiley & Sons, Ltd.     

Stakeholder management as a predictor of CEO compensation: main effects and interactions with financial performance

We test the effects of stakeholder management on CEOs' salaries, bonuses, stock options, and total compensation. We also examine the extent to which the interaction of stakeholder management and financial performance determines compensation. Using a longitudinal database of 406 Fortune 1000 firms, our results suggest that stakeholder management is relevant to boards of directors when setting CEO compensation. Specifically, we found a significant, negative main effect of stakeholder management on CEO salaries. Further, we found that stakeholder management typically reduces the rewards CEOs may get for increasing levels of financial performance. In tandem, these results indicate that CEOs may jeopardize their personal wealth by pursuing stakeholder‐related initiatives. Copyright © 2005 John Wiley & Sons, Ltd.     

COMPATIBILITY INCENTIVES OF A LARGE NETWORK FACING MULTIPLE RIVALS*

Under network effects, we analyze when a firm with the largest market share of installed‐base customers prefers incompatibility with smaller rivals that are themselves compatible. With incompatibility, consumers realize that intra‐network competition makes the rivals' network more aggressive than a single‐firm network in adding customers. Consequently, under incompatibility the unique equilibrium can entail tipping away from the largest firm whatever its market share. The largest firm is more likely to prefer incompatibility as its share rises (above fifty per cent is necessary) or the potential to add consumers falls; the number of rivals and strength of network effects have ambiguous implications.     

Computer Use,Job Tasks and the Part‐Time Pay Penalty

Using data from the UK Skills Surveys 1997–2012, we show that the part‐time pay penalty (PTPP) for women within low‐ and medium‐skilled occupations has decreased significantly. The convergence in computer use and non‐routine job tasks between part‐time and full‐time workers explains a large share of the decrease in the PTPP. This convergence took place mainly within occupations, and was not driven by changes in occupational segregation between the two groups of workers. The lower PTPP is also related to changes in the returns to job tasks. Relative changes in the importance of and returns to computer use and job tasks together explain more than 50 per cent of the decrease in the PTPP.     

Service Regulations,Input Prices and Export Volumes: Evidence from a Panel of Manufacturing Firms

Using a panel of firm‐level data from Spanish manufacturers, this study shows that better service regulation reduces the price of intermediate inputs paid by downstream firms. The beneficial cost effects of services reforms extend to both large and small‐to‐medium sized corporations (SME’s), but the former tend to enjoy greater gains. This feature also manifests itself in international markets. We find evidence of an input cost channel through which service regulations affect the volume of exports of large manufacturers, while the evidence of such a channel is weaker for SME’s. Our estimates indicate that, from 1991 to 2007, large firms increased their volume of exports by an average of 20 per cent as a result of the direct input cost effect of services reforms, such that the firms that benefited the most typically belonged to industries more dependent on service inputs. Furthermore, convergence to the ‘best practice’ regulatory framework in services would have raised exports at least by an additional nine per cent. We conclude that firm size is relevant for the connection between services reforms, intermediate input prices and export volumes.     

Short Notice,Big Difference? The Effect of Temporary Employment on Firm Competitiveness across Sectors

This article is one of the first to examine how the use of fixed‐term employment contracts (FTCs) affects firm competitiveness (i.e. productivity, wages and profits) while controlling for key econometric issues such as time‐invariant unobserved workplace characteristics, endogeneity and state dependence. We apply dynamic panel data estimation techniques to detailed Belgian linked employer–employee data covering all years from 1999 to 2010. Results show that the effects of FTCs on firm competitiveness vary across sectors: while temporary employment is found (at the 10 per cent significance level) to enhance productivity and profits in (labour‐intensive) services, this is not the case in manufacturing and construction.