How to value a life

The tradeoff between money and small risks of death is the value of statistical life (VSL), which has become the standard for assessing the benefits of risk and environmental regulations. Labor market estimates of the VSL average about $7 million. This valuation amount rises with age and then declines, closely tracking the pattern of consumption over the life cycle. The VSL for those at age 60 is higher than for people in their 20s. Application of this methodology to assess the mortality costs to smokers indicates a personal mortality cost on the order of $200 per pack for men and $100 for women using a 3% discount rate, but based on smokers’ rates of time preference the costs are reduced by about an order of magnitude.

History Repeats Itself: Child Labor in Latin America

Child labor occurs on almost every continent in the world. Very few countries seem to escape this exploitative phase as they develop into fully industrialized countries. Child labor began during the eighteenth century in Great Britain and it continues in the twenty-first century in Argentina, Mexico, Brazil, Chile, Guatemala, Costa Rica and Honduras. This paper offers an explanation for the persistence of child labor through history. The increase in the employment of children during industrialization is caused by an increase in the supply of children from poor and working-class families and an increase in the demand for child labor by the factory owners. Parents trapped in poverty have no other choice but to send their children off to work to contribute to the family income. Children’s wages, moreover, often make the difference between starvation and survival. Employers are happy to oblige the parents because children are more productive than adults in the new industrial regimen. As the principle of the division of labor has been applied to the production process, unskilled children replace skilled adults in factories, mills, and mines. Children are preferred to adults because they are cheap, submissive, uneducated and nimble. These economic forces are so strong that neither child labor laws nor mandatory schooling legislation are an effective deterrent against employers or families. Since history is repeating itself in the developing world by industrializing on the backs of children, alternative policies are recommend to cut this stage short so that the future generations of Latin America will become educated instead of exploited.

Matching in local labor markets: a stochastic frontier approach

This paper investigates the technical efficiency of labor market matching from a stochastic frontier approach. The true fixed-effects model (Greene J Prod Anal 23:7–32, 2005a; J Econom 126:269–303, 2005b) is utilised in order to separate cross-sectional heterogeneity from inefficiency, and inefficiency terms are modelled following Battese and Coelli (Empir Econ 20:325–332, 1995). The data set consists of almost 17,000 observations from Local Labor Offices (LLOs) in Finland. According to the results, there are notable differences in matching efficiency between regions, and these differences contribute significantly to the number of filled vacancies. If all regions were as efficient as the most efficient one, the number of total matches per month would increase by over 23%. The heterogeneity of the job-seeker stock is an important determinant of matching efficiency: the weight of the composition of the job-seeker stock in the inefficiency terms is on average 85%.

A Historian’s Perspective on the PATCO Strike, Its Legacy, and Lessons

This article argues that the unsuccessful 1981 strike of federal air traffic controllers was the most significant single event in accelerating the decline of organized labor in the United States in the late 20th century. Like the failed Homestead steel strike of 1892, the PATCO strike cast a long shadow over US labor relations for many years after the event itself. Among the effects of the strike was the role it played in legitimizing the use of permanent replacement workers during strikes. This article draws lessons from the PATCO debacle that are worth considering 25 years later.

The effect of marketing regulations on efficiency: LeChatelier versus coordination effects

Government regulations designed to promote social welfare can have unintended consequences on efficiency. According to the LeChatelier Principle, regulations that effectively limit substitution possibilities among inputs will reduce firm and industry-wide efficiency. In imperfectly competitive markets, however, government constraints on a strategic variable can facilitate coordination. An advertising restriction, for example, would improve efficiency if it enables firms to produce the same level of sales with less advertising spending. We use data envelopment analysis to estimate the effect of marketing regulations on efficiency in the U.S. cigarette industry. Unlike previous studies, we do not assume that marketing and production technologies are separable. Our results demonstrate that coordination effects dominate LeChatelier effects. Cigarette producers have benefited from advertising restrictions, a result consistent with the capture theory of regulation.

Public Sector Employee Discipline: Comparing Police to Other Public Sector Employees

This study compares the disciplinary process for police vs. nonpolice public employees. A random sample of 200 cases was drawn from the 806 public sector discipline cases published in volumes 111–118 of Labor Arbitration Reports. Case characteristics, classification of conduct unbecoming, proposed discipline, arbitrator behavior, reasons for reversing management’s penalty other than conduct unbecoming, procedural outcomes and findings were analyzed. The frequency of the finding for the employer was actually higher for police than for the nonpolice cases. Managerial actions that resulted in reversing the disciplinary penalty were not as suggested by the literature. Multivariate analyses of the case characteristics led to the conclusion that police discipline may have been distinctive from nonpolice public employee discipline in the past, but is no longer so distinctive.

The cost implications of waste reduction: factor demand, competitiveness and policy implications

Manufacturing produces both good and “bad” outputs, such as waste, which have negative environmental effects. Economic (e.g., tax) and non-economic (e.g., reputation) incentives encourage firms to reduce waste. However, such practices are costly because decreases in output produced or increases in inputs used may accompany waste reduction. We employ a cost function approach to evaluate patterns of output and waste production and capital, labor, and materials use, for UK manufacturing plants. We find that costs of waste reduction generally imply increasing materials use and capital and labor input saving, but vary by county, region, and industry.

Trade,wages, and the specific factors model: empirical evidence from manufacturing industries in Ghana

This study analyzes the impact of trade on wages in the context of the specific factors model by focusing on the link between trade and the average real wage. A recent paper by Jones and Ruffin (Rev Int Econ, 16:234–249, 2008) shows how one can use the specific factors model to predict how labor should fare from an improvement in the terms of trade. For this purpose, I use annual firm-level data on the manufacturing sector in Ghana during the period 1991–1997. I find that a ceteris paribus increase in the price of exportables in the wood industry would help labor but labor would be hurt by price increases in the food-baker, furniture, textile-garment, and metal-machinery industries.

Firm entry and exit in Italian provinces and the relationship with unemployment

This study investigates the influence of the unemployment rate on firm entry, exit and net entry in Italian provinces. We attempt to explain these market dynamics in six different sectors, including manufacturing, construction, commerce, hotels and restaurants, transport and financial services. We control for other regional factors, such as patenting activity, economic growth, economic welfare, tourism, industrial districts and whether being a major city. Findings indicate that the effects of unemployment on entry and exit are dependent upon the sector under study, but are mainly negative. This suggests a lack of dynamics in the Italian regional labor markets.

Regional variation in productivity: a study of the Danish economy

We develop a model of labor productivity as a combination of capital-labour ratio, vintage of capital stock, regional externalities, and total factor productivity (TFP). The skewness of TFP distribution is related to different growth theories. While negative skewness is consistent with the neo-Schumpeterian idea of catching up with leaders, zero skewness supports the neoclassical view that deviations from the frontier reflect only idiosyncratic productivity shocks. We argue that positive skewness is consistent with an economy where exogenous technology is combined with non-transferable knowledge accumulated in specific sectors and regions. This argument provides the framework for an empirical model based on stochastic frontier analysis. The model is used to analyse regional and sectoral inequalities in Denmark.

The contributions of productivity, price changes and firm size to profitability

Sources of profit change for Telstra, Australia’s largest telecommunications firm, are examined. A new method allows for changes, in a firm’s profits to be broken down into separate effects due to productivity change, price changes, and growth in the firm’s size. This in turn allows us to calculate the distribution of the benefits of productivity improvements between consumers, labor, and shareholders. The results show that around half the benefits from Telstra’s productivity improvements from 1984 to 1994 were passed on to consumers in the form of real price reductions.

Recouping Training and Development Costs Using Preemployment Agreements

The dollars associated with training and development investments for organizations are considerable. Employers are unable to recoup these expenditures if workers leave the firm before it has had an opportunity to realize the benefits of such training. To assist businesses in maximizing their return on investments in human capital, it is suggested that training and development professionals and legal counsel examine the applicability of preemployment agreements to recover their training expenses. Such cost-sharing agreements—provided they are clear and narrowly written, reasonable, moderate, and serve legitimate business interests—are permissible contracts that require employees to continue in service for a period of time or reimburse the organization an agreed-upon sum if they leave before an agreed-upon time.

Employment Discrimination and the International Workplace: A Review of Recent US Court Rulings

The extraterritoriality clause in the Civil Rights Act of 1991 amended Title VII and the ADA to include employment discrimination protection for US citizens working abroad for US employers. A review of recent court rulings demonstrates an absence of lawsuits involving alleged violations of the extraterritorial provision. Instead, recent cases show that Americans working outside of the US are filing charges against foreign employers rather than US employers and applying state level employment statutes rather than federal legislation. In addition, non US citizens are exhibiting a trend toward invoking US federal and state statutes against US employers. These cases are reviewed and implications discussed for managing employment relations in an increasingly international workplace.

The cost of strikes in the Spanish mining sector: modelling an undesirable input with a distance function

In some contexts, firms have to deal with certain elements or factors that affect the production outcome but which are non-market in nature and therefore do not have a price. In this paper we propose a new use of a production economics tool, the input distance function, to empirically measure the effects of these factors. Although we suggest a general use of this methodology, it has been developed in the context of measuring the effects of labor disputes in a particular declining industry, that of Spanish coal mining. We have estimated an equation system comprising an input distance function and cost share equations to calculate the cost generated by strikes.

Allocative efficiency of rural water supply – a globally flexible SGM cost frontier

This contribution investigates the efficiency of water suppliers in rural areas of East and West Germany. A non-radial measure of input specific allocative inefficiency is used to reduce the distributional dependency with respect to the inefficiency parameters. It is based on the demand system of a flexible cost function for the variable inputs labour, energy and chemicals modelled by applying a modified symmetric generalized McFadden functional form. Concavity restrictions, as required by economic theory, are imposed. The analysis reveals that efforts towards increasing suppliers’ allocative efficiency should focus on the relatively inefficient usage of the input chemicals. The input specific allocative model specification was found to be superior to the overall allocative specification.

Parametric estimation of inefficiency in cargo handling in Spanish ports

Port workers services have been usually heavily regulated and reserved exclusively for a special kind of workers, dockworkers, which seems to have been the cause of serious inefficiencies worldwide. During the eighties, law reforms have been introduced to solve this problem. In this paper we analyze and decompose efficiency in cargo handling operations in 19 Spanish ports from 1990 to 1998. The method chosen is that of the parametric estimation of both allocative and technical inefficiency using panel data and a quadratic cost function. Results show that although inefficiency has decreased overall, there has been over utilization of labor regarding capital, and technical inefficiency. This supports the need of further consideration of other aspects including competition.

The impact of desirability and feasibility on entrepreneurial intentions: A structural equation model

There is general agreement that attitudes towards entrepreneurship are determinant factors to decide to be an entrepreneur. In this context, this research is focused on analyzing the relationship between desirability and feasibility on university student’s intentions to create a new firm in Catalonia. A structural equation model supported by Krueger & Brazeal’s Model was tested with different groups of students. The main results reveal most of university students consider desirable to create a new firm, although the perception of feasibility is not positive. Also, there is a statistical significant and positively relationship between credibility and the intention to create a new firm.

Individual, organizational and environmental determinants of new firm employment growth: evidence from Latin America

New ventures are increasingly playing an important role in Latin American economies. However, little is known about the determinants of new firm growth in this context. The purpose of this study is to gain an understanding of the factors influencing new firm growth in Argentina, Brazil, Mexico and Peru. Individual, organizational and environmental factors are included in an empirical model, which is tested using data collected by face-to-face interviews with 582 entrepreneurs. Different specifications of employment growth and regression approaches are employed. Results suggest that growth strongly depends on the characteristics of the entrepreneur. National environment and firm-related factors are also important factors in determining growth.

Do liquidity induced changes in aggregate dividends signal aggregate future earnings growth?

Extant empirical literature does not provide abundant evidence for the information content hypothesis regarding firm-level dividend signaling. Although this is consistent with the argument against an optimal firm-level dividend policy, this does not imply an absence of an optimal aggregate dividend level. Aggregate dividends and earnings may exhibit stronger associations if aggregation filters out firm-specific earnings information and indicates macroeconomic trends. Using macroeconomic data, we show that aggregate payout ratios signal aggregate future earnings growth for horizons up to 4 years, and that excess aggregate liquidity plays an important role in this relationship.

The geography of new firm formation: Evidence from independent start-ups and new subsidiaries in the Netherlands

This paper investigates to what extent determinants of the rate of independent start-ups and the rate of new subsidiaries are different. Using a regional database for the Netherlands over the period 1988–2002, we investigate the impact of two types of agglomeration effects, localization and urbanization, while controlling for a range of economic variables. We find urbanization economies to be particularly important for the creation of new subsidiaries while localization economies are more important for the creation of independent new ventures. Finally, the effect of agglomeration variables is found to be stronger for manufacturing industries compared to services industries.