Do state borders matter for U.S. intranational trade? The role of history and internal migration

Abstract.  Empirical evidence of the impact of borders on international trade flows using the gravity equation approach abounds. This paper examines the empirical relevance of state borders in U.S. interstate trade for various specifications of the gravity equation. We find a large and economically significant subnational border effect for some specifications. However, two model specifications drastically reduce (if not eliminate) the border effect: (i) dynamic panel specifications controlling for past levels of trade and (ii) models conditioning on internal migration.     

Labour migration in the enlarged EU: a new economic geography approach

This paper studies the impact of migration policy liberalisation on international labour migration in the enlarged European Union (EU) in a structural economic geography approach. The liberalisation of migration policy would induce an additional 1.80–2.98% of the total EU workforce to change their country of location, with most of migrant workers relocating from the East to the West. The average net migration rate is decreasing in the level of integration, suggesting that from an economic point of view no regulatory policy responses are necessary to labour migration in the enlarged EU.     

Cheating to win: Dishonesty and the intensity of competition

We argue that the intensity of competition within a group or organization can have an important influence on whether or not people cheat. To make this point we first work through a simple model of strategic misreporting in the workplace. For low and high levels of competition we show that, in equilibrium, few are predicted to misreport. It is for medium levels of competition that misreporting is predicted to be highest. We test this prediction experimentally and find good support for it. This finding has implications for the design of incentive structures within groups and organizations.     

Golden cages for showy birds: Optimal switching costs in labor contracts

Under what circumstances do workers sign contracts with high quitting penalties? Our answer points to market transparency. When the worker's performance is privately observed by the incumbent firm, alternative employers face an adverse selection problem. As a result, efficient separations can only take place through involuntary layoffs and there is no role for quitting fees. In contrast, when performance is public, quitting fees are useful devices to appropriate the surplus from workers’ reallocation. Separations are amicable and take the form of quitting after downwardly renegotiating the fees. Qualitative features of contracts are independent of the distribution of ex-post bargaining power. The impact of switching costs on total welfare and its distribution depends on the degree of market transparency and the ex-ante distribution of market power.     

The Turkish wage curve: Evidence from the Household Labor Force Survey

This paper examines the Turkish wage curve using individual data from the Household Labor Force Survey including 26 NUTS-2 regions over the period 2005-2008. We find an unemployment elasticity of −0.099, with a higher elasticity for younger, less educated, less experienced and female workers.     

Information, bilateral negotiations, and worker recruitment

This paper studies experimentally how firms choose between using a centralized market and bilateral negotiations to recruit new personnel. In the market firms interact with several workers but do not have information about workers’ behavior in the past. In the bilateral negotiations firms negotiate bilaterally with prospective workers and learn about workers’ performance in previous jobs. We show that the interaction between social preferences, the incompleteness of contracts and the existence of information about a worker’s past performance provides an explanation for firms forgoing market opportunities and bilaterally negotiating with a worker. We observe that approximately 30% of all job contracts were bilaterally negotiated when these contracts are incomplete as opposed to only 10% when contracts were complete. The surplus from trade is higher when incomplete contracts can be bilaterally negotiated, which can be attributed to the presence of information.     

Gender differences in time preferences

This paper reports the results from a large online experiment in which we examine gender differences in time preferences. Subjects choose in different situations between receiving an immediate payment and receiving a different sum later. We find that more men than women are impatient and choose to receive the immediate payment, at least if the implicit interest rate of the “late” option is neither too high nor too low.     

With whom do you trade? Defensive innovation and the skill‐bias

Abstract We examine whether increased trade with countries with ineffective protection of intellectual property has contributed to the skill‐deepening of the 1980s. We construct an index of effective protection of intellectual property at the country level, combining data on protection of patents and rule of law. Next, we construct an industry‐specific version of this index, using as weights each country's trade share in the total trade of the industry. We find a decline in this trade‐weighted index, owing to a rise in trade with countries with low effective protection of intellectual property, which explains 29% of the rise in within‐industry skill‐intensity.     

Endogenous phase switch in Baumol's service paradox model

This paper develops a two-sector model that considers Baumol's service paradox. The paper simultaneously incorporates two ideas about technological progress in the model: (1) the consumption of services contributes to human capital accumulation and (2) the production of manufacturing leads to technological progress due to learning-by-doing. Accordingly, productivity growth in both services and manufacturing is endogenously determined. We show that initially, a shift in the employment share toward the services sector decreases the per capita real GDP growth rate, but at some point in time, the shift begins to increase the growth rate. Therefore, we observe an endogenous phase switch from a phase where the employment shift toward services depresses the economy to another where the employment shift promotes the economy.     

Property rights and investments: An evolutionary approach

When contracts are not enforceable, or property rights are not clearly defined, individuals may lack an incentive to carry out costly investments even when they are socially efficient. Some recent contributions such as Ellingsen and Robles (2002) prove that this problem may be less dramatic than standard economic models would suggest. They propose evolutionary models in which only efficient equilibria can be (stochastically) stable. In this paper we show that these results are not robust with respect to the introduction of individual heterogeneity. When individuals have different cost functions, stochastically stable states may be inefficient, even when they induce a positive (suboptimal) level of investment.     

FEMALE DUAL LABOUR MARKETS AND EMPLOYEE BENEFITS

The American workforce and the role of employee benefits have changed dramatically since the 1980s when economists seriously considered dual labour market models to describe pay and employment patterns. Then, dual labour market models described men's labour markets, but not women's and the tests applied to wages and salaries, not total compensation including employee benefits. Applying a switching regression technique using the 2000 Current Population Survey and including women workers and employee benefits, we find that the dual labour market hypothesis is consistent with both female and male labour market structures, especially when total compensation is considered.     

Training and worker effort: a signalling perspective

Abstract This paper analyzes the interaction between firms’ investment in general skills training and workers’ incentives. It shows that when a firm has an informational advantage over its workers, its provision of free general skills training can serve as a signal that there will be a long‐term relationship between the firm and its workers. This signal induces the workers to exert more effort in learning firm‐specific skills, which enhances the firm's profits. In contrast with most of the existing literature, the model implies that firms may provide free general skills training even if there is no labour market friction.     

Do the world’s largest cities follow Zipf’s and Gibrat’s laws?

We examine whether the size distribution and the growth process of the world’s largest cities follow Zipf’s law and Gibrat’s law. The parametric results of the size distribution analysis reject Zipf’s law for all sample sizes and also show the Zipf exponent systematically declines as the sample size increases. The growth process analysis confirms Gibrat’s law and yields a local Zipf exponent of one for cities with a normalized population less than 0.53%, which includes about 95% of the total observations. The deviations from Zipf’s law occur at the extreme upper tail and are likely a result of restricted mobility of population across countries. However, given that Gibrat’s law holds, we can expect the size distribution to converge to Zipf’s law with a decline in the barriers to immigration.