MINIMUM WAGES AND HEALTHY DIET

A healthy diet is often unaffordable for low‐income individuals, so income‐lifting policies may play an important role in not only alleviating poverty but also in improving nutrition. We investigate if higher minimum wages can contribute to an improved diet by increasing consumption of fruits and vegetables. Exploiting recent minimum wage increases in the United States and using individual‐level data from the Behavioral Risk Factor Surveillance System we identify the causal effect of minimum wage changes on fruit and vegetable intake among low‐wage individuals in a triple‐differences framework. The estimated minimum wage elasticity of fruit and vegetable consumption equals 0.12. (JEL I12, I18, J38)     

MINIMUM WAGES AND GROSS DOMESTIC PRODUCT

This study is the first to explore the relationship between minimum wage increases and state gross domestic product (GDP). Using data drawn from the Bureau of Economic Analysis (BEA) and the Current Population Survey (CPS) from 1979 to 2012, I find no evidence that minimum wage increases were associated with changes in overall state GDP. However, this null finding masks substantial heterogeneity in the productivity effects of minimum wages across industries and over the business cycle. Difference‐in‐difference‐in‐difference estimates suggest that a 10% increase in the minimum wage is associated with a short‐run 1% to 2% decline in state GDP generated by lower‐skilled industries relative to more highly skilled industries. This differential appears larger during troughs as compared to that during peaks of the state business cycle. (JEL J3, J4, L5)     

HAS NEW ZEALAND'S EMPLOYMENT CONTRACTS ACT INCREASED EMPLOYMENT AND REDUCED WAGES?*

The Employment Contracts Act 1991 substantively altered the structure of the industrial relations system in New Zealand. This study estimates the effects of this legislation on employment levels and average hourly earnings in this country using disaggregate industry level data from 1986(1) to 1996(2). In the five years following the enactment of the ECA, nonagricultural union membership declined from 49.5 to 27.2 per cent of the work force. This is an important consideration because our regression analysis suggests that this decrease in unionisation is solely responsible for any effects of the ECA on the labour market. Full-time equivalent employment grew by 14.2 per cent between 1991(2) and 1996(2). At least 2.3 percentage points of this employment growth can be attributed to this legislation. If the ECA was partly responsible for the recent economic recovery, then more of this employment growth could be credited to this act. There are two basic reasons why the ECA might have increased employment over the past five years. It could have lowered hourly earnings, or increased effective labour demand. Estimates of a reduced-form wage equation and a structural labour demand function both point to the latter explanation. Since there is no statistical evidence that ECA reduced hourly earnings, falling unionisation must have increased effective labour demand.     

WELFARE GAINS FROM FINANCIAL LIBERALIZATION*

Financial liberalization has been a controversial issue, as empirical evidence for growth enhancing effects is mixed. Here, we find sizable welfare gains from liberalization (cost to repression), although the gain in economic growth is ambiguous. We take the view that financial liberalization is a government policy that alters the path of financial deepening, whereas financial deepening is endogenously chosen by agents given a policy and occurs in transition toward a distant steady state. This history‐dependent view necessitates the use of simulation analysis based on a growth model. Our application is a specific episode: Thailand from 1976 to 1996.     

COMPUTER SKILLS AND WAGES*

Data from the 1993 Survey of Training and Education show that 52 per cent of males and 60 per cent of females had at some time used a computer. An analysis using earnings functions reveals that computer usage is associated with a wage premium of between 12 and 16 per cent. Experiments show that omission of a variable recording computer usage from a wage equation will result in a bias of between 10 and 15 per cent in the estimated return to a year of schooling and similar distortion to the estimated return to experience.     

PROTECTION,INVOLUNTARY SELF‐EMPLOYMENT AND WELFARE

A small open economy operates with a unionized import‐competing sector and an informal “self‐employed” sector. Productivity varies across people in the informal sector. The full‐employment structure accommodates “underemployment or involuntary self‐employment” in the flexible‐wage informal sector. Protection increases the cost of capital and may increase the set of people who are involuntarily employed in the informal sector. Even if one ignores the consumption distortion effect of a tariff, the tariff may fail to be second‐best because it may raise underemployment. Our results on tariff‐reform are consistent with some recent empirical evidence.     

SENIORITY WAGES AND ECONOMIC GROWTH*

Economies that lack well‐developed markets for mobilizing household savings may, in some instances, grow faster than those that are financially more developed, provided that their labour markets are also characterized by seniority rather than spot wages. This occurs because of a Kaldorian redistribution effect in a model where households have finite‐horizons and where older workers, as an endogenous feature, have higher saving rates.     

WAGES AND EMPLOYMENT IN THE U.S. APPAREL INDUSTRY

This article uses individual-level data from the U.S. Census, Public Use Microdata Sample (PUMS), to examine wages and employment in the U.S. apparel industry. Total employment in this sector has been falling since 1970, and its overall average wage is the lowest of 25 industry aggregates. But disaggregation by gender, education, and nativity reveals that groups of highly educated male native workers earn higher average wages in apparel than in other industries. Moreover, after adjusting for observed individual differences in human capital (in addition to the three characteristics used to form worker subsets), highly educated male natives earn positive wage premiums in this sector. In contrast, most categories of immigrants and female natives earn relatively low average wages and experience negative wage premiums in apparel. This variation in the adjusted industry wage premiums across worker groups may be related to apparel's relative exposure to imports and immigrant workers.     

IMMIGRATION AND NATIVE WELFARE*

This article unifies two approaches for identifying the welfare and wage effects of immigration, one emphasizing the immigration surplus, the other stressing a potential welfare loss due to a terms‐of‐trade effect. We decompose the native welfare effect into a standard complementarity effect, augmented by a Stolper–Samuelson effect, and a terms‐of‐trade effect. We illustrate the welfare and wage effects of endogenous goods prices in a stylized‐specific factors model. Finally, we calibrate this model to a generic OECD economy and provide simulation results. The key insight is that endogenous goods prices play a quantitatively important role, sometimes even overturning received results.     

INTERNATIONAL COMPETITION AND U.S. R&D SUBSIDIES: A QUANTITATIVE WELFARE ANALYSIS*

In the early 1970s U.S. firms were the uncontested world leaders in R&D investment in most manufacturing sectors. Later, led by Japan and Europe, foreign firms began to challenge American R&D leadership in many sectors of the economy. This period of increasing technological competition is contemporaneous with a substantial increase in U.S. R&D subsidies. What is the effect of the observed increase in international competition on U.S. welfare? How does foreign competition affect the optimal R&D subsidy in the United States, and, consequently, how far is this from the subsidy observed in the data? This article addresses these questions in a two‐country quality ladder growth model.     

ON INTERNATIONAL MIGRATION AND THE SOCIAL WELFARE FUNCTION

In defining optimum population, economists have used two distinct concepts of the social welfare function: the Millian and the Benthamite. Although analytically the issue of the welfare impact of international migration is closely related to the concept of optimum population, the migration analysis has been based almost exclusively on the Benthamite welfare function. As its point of departure, the present note explores the implications of the alternative Millian welfare function for migration analysis.
An interesting aspect of the results derived from the present exercise is that they are in sharp contradiction with the results based on the Benthamite social welfare function. This highlights the sensitivity of the results to the welfare criteria used and the need for greater caution in policy formulation.     

WAGES,PROFITS AND CAPITAL FLIGHT*

We model capital flight as the outcome of a non-cooperative differential game between workers (who control the wage share) and capitalists (who control investment at home and abroad). There are three equilibria for such a game. Along the interior equilibrium, the domestic economy becomes “decapitalized” as investors build up their holdings of foreign assets, in a situation reminiscent of the experience of several developing countries.     

DEPRIVATION,INEQUALITY AND WELFARE*

Welfare ranking of income distributions involves a trade‐off between equity and efficiency. A person's feeling of deprivation about higher incomes may be of a relative or absolute type. We consider an intermediate notion of deprivation, a convex mix of relative and absolute deprivations. We then look at the problem of welfare ranking of income distributions when welfare increases under a globally equitable redistribution and under an income increase that keeps intermediate deprivation fixed. All deprivation indices can be regarded as inequality indices but the converse is not true. We also provide a numerical illustration of our results.     

EMPLOYMENT EFFECTS OF THE MINIMUM WAGE: PANEL DATA EVIDENCE FROM CANADIAN PROVINCES

Recent U.S. studies offer conflicting evidence on minimum wage impacts. This paper studies the effects of 185 amendments to minimum wage on employment rates using panel data across Canadian provinces from 1981 to 2011. Ordinary least squares and instrumental variables (IV) estimates imply a 10% increase in minimum wage is associated with a 1%–4% reduction to employment rates for both male and female teens. We also find that an increase in the minimum wage is associated with lower employment of prime‐aged immigrants. Our results are robust to a wide array of IV and the use of controls for spatial heterogeneity. (JEL J30, J71, J23)     

PRIZES VERSUS WAGES WITH ENVY AND PRIDE*

We show that if agents are risk‐neutral, prizes outperform wages if and only if there is sufficient pride and envy relative to the noisiness of performance. If agents are risk‐averse, prizes are a necessary supplement to wages (as bonuses).     

WAGE AND EMPLOYMENT DETERMINATION WHEN EMPLOYMENT ADJUSTMENT IS COSTLY*

The paper introduces employment adjustment costs into two widely used models of the trade union, and contrasts the resulting equilibrium wage and employment levels with those which result if employment can be costlessly adjusted.