The provision of public goods in a growing urban economy

The growth path of a mixed open urban economy is considered. In the private sector profit maximizing firms produce an all-purpose output with labor, capital and public infrastructure. Workers move between the urban area and the rest of the nation so as to increase their real income which is the sum of wages and income derived from the use of the urban infrastructure. The public sector determines infrastructure investments so as to maximize the current value of future per capita felicity. Infrastructure has public good characteristics and is used jointly by firms and workers. The urban growth path is derived and public sector policies are analyzed.     

Urban Wages and Labor Market Agglomeration

Using the 5% public use micro sample of the 1990 U.S. census, we find that observationally equivalent workers in the manufacturing sector earn higher wages when they are in urban labor markets that have a larger share of national or metropolitan employment in their same occupation and industry groups. Quantitatively, the effect is large, with an elasticity (measured at the means) of between 1.2 and 3.6 for these effects. We interpret the willingness of firms to pay more for equivalent workers in dense markets as evidence of an agglomeration economy in urban labor.     

Worker poaching in a supply chain: Enemy from within?

Worker poaching represents the primary mode by which workers change employers. We examine worker poaching between firms linked in a value chain. We find that, in a value chain, the less productive firm may offer its workers higher wages and poach workers from the more productive firm. We also find that worker flows accomplished via poaching impact supply chain management: (a) the identity of the bottleneck firm may depend on whether poaching is available; (b) poaching between linked firms may benefit both, and (c) the value chain cannot be fully coordinated without controlling wages in the labor market.     

The effect of reimbursement of worker's transport costs: The case of urban areas in Japan

In some economies, workers are compensated for their commuting costs to the workplace. The spatial structure of an urban area is analyzed comparing a transport cost compensated system to one where expenses are borne by workers. Profit maximizing behavior by firms results in lower wages being paid in the city where transport costs are compensated. It is shown that worker renters achieve a higher level of utility in the area where transport costs are not compensated. Numerical examples are constructed using a range of parameter values which yields measures of the increase in spatial size of the city where transport costs are compensated. The loss in welfare is also evaluated.     

THE IMPACT OF IMMIGRATION ON THE LABOR MARKET

The literature on the impact of immigration on the labor market is highly controversial. The aim of this paper is to review the existing literature and draw some general conclusions on how wages and employment respond to immigration. Economic studies indicate that the impact of immigration on the average wage and employment of native workers is null or slightly positive. However, because adjustments take time, the immediate labor market effects of unexpected (as opposed to expected) migration episodes can be detrimental. Immigration also can have distributional consequences. In particular, the skill composition of immigrants matters in determining their impact on native labor market outcomes. An inflow of immigrants will tend to reduce the wages of competing native workers (with skills similar to those of the migrants), and increase those of complementary workers (with skills that complement those of immigrants). By affecting the skill composition of the workforce, immigration can create winners and losers among native workers via changes in the wage structure.     

LOCATION OF HIGH TECHNOLOGY INDUSTRIES AND REGIONAL DEVELOPMENT – THE ISRAELI CASE

This paper reviews and empirically examines the effectiveness of the Israeli government's declared policy to induce the location of high technology industries in developing regions. The first section of the paper reviews the literature on high technology industry location. The second section presents the findings from the analyses of a sample of 53 high technology Israeli firms in regard to their critical locational determinants. The findings corroborate the results reported in other similar studies. High technology industries, primarily those engaged in research and development, appear to favor the large urban concentrations, where agglomeration economies, large pools of skilled workers and high quality educational and cultural facilities exist. High technology firms which choose to locate in peripheral regions engage primarily in production activities and employ larger proportions of unskilled and semi-skilled labor. The average size of these firms is greater than their counterparts, firms located in and around urban concentrations.     

Minimum wages,wages and employment in various sectors in Honduras

This paper contributes to our understanding of the impact of minimum wages on labor markets of developing countries, where there are often multiple minimum wages and compliance is weak. We examine how changes in more than 22 minimum wages over 1990–2004 affect employment, unemployment and average wages of workers in different sectors, defined by coverage under the legislation. The evidence suggests that minimum wages are effectively enforced only in medium and large-scale firms, where a 1% increase in the minimum wage leads to an increase of 0.29% in the average wage and a relatively large reduction in employment of ? 0.46%. We find that public sector wages emulate minimum wage trends but the higher cost of labor does not reduce employment there. There are no discernable effects of minimum wages on the wages of workers in small-firms or the self-employed; yet, higher minimum wages may create more unemployment. We conclude that (even under our upper bound estimate of the effect on the wages of workers) the total earnings of workers in the large-firm covered sector fall with higher minimum wages in Honduras, which warrants a policy dialogue on the structure and level of minimum wages.     

Measuring immigration's effects on labor demand: A reexamination of the Mariel Boatlift

Why do immigration shocks tend to have benign effects on native wages? One reason is that immigrants as consumers contribute to the demand for their services. We model an economy where workers spend their wages on a locally produced good, then test it via a reexamination of the 1980 “Mariel Boatlift” using Wacziarg's Channel Transmission methodology. Current Population Survey data on workers in 9 different retail labor markets and Survey of Buying Power data on retail spending by consumers in Miami and four comparison cities are used. We find strong evidence that the Mariel Boatlift augmented labor demand.     

Labor unions and productivity: An empirical analysis using Japanese firm-level data

This paper empirically analyzes the relationship between labor union and firm performance in areas such as productivity and profitability by using data on more than 4000 Japanese firms, ranging from listed large firms to unlisted SMEs, in both the manufacturing and non-manufacturing sector. The presence of labor unions has statistically and economically significant positive effects on firm productivity. Unions' effects on wages are also positive, their magnitude being slightly larger than those on productivity. The decrease in the number of employees is greater at unionized firms than at non-unionized firms. The difference in employment growth is mainly attributable to the change in the number of part-time workers. In order to enhance productivity, close cooperation between management and unions is essential.     

Discrimination,technology and unemployment

I study the interaction between discrimination and investment using a directed search model where firms decide the capital intensity of their production technologies before being matched. Discrimination makes some workers cheap to hire. As a consequence, some firms might save on capital costs adopting labour intensive technologies. This framework allows one to reconcile search models with three well-known facts regarding the labour market outcomes of minority workers: low wages, high unemployment and occupational segregation. Furthermore, the model questions the role of equal pay legislation in reducing inequality since removing this restriction, i.e., allowing firms to post type-contingent wages, eliminates the negative effects of discrimination on investment and wages.     

A theory of minimum wage compliance (or voluntary recognition of unions)

An urn-ball matching model of the labor market is used to develop a theory of minimum wage compliance or voluntary recognition of unions. Workers can direct their search but, in the absence of wage commitment from the firms, they have no basis to do so. The default means of wage formation in one-on-one matches is Nash bargaining. When there are multiple applicants competition drives the workers down to their continuation value. By attracting more applicants, a binding wage floor provides a means for firms to increase matching rates and improve match quality. An otherwise poorly enforced minimum wage acts as a commitment device for the payment of more generous wages.     

Are shirking and leisure substitutable? An empirical test of efficiency wages based on urban economic theory

Recent theoretical work has examined the spatial distribution of unemployment using the efficiency wage model as the mechanism by which unemployment arises in the urban economy. This paper extends the standard efficiency wage model in order to allow for behavioral substitution between leisure time at home and effort at work. In equilibrium, residing at a location with a long commute affects the time available for leisure at home and therefore affects the trade off between effort at work and risk of unemployment. This model implies an empirical relationship between expected commutes and labor market outcomes, which is tested using the Public Use Microdata sample of the 2000 U.S. Decennial Census. The empirical results suggest that efficiency wages operate primarily for blue collar workers, i.e. workers who tend to be in occupations that face higher levels of supervision. For this subset of workers, longer commutes imply higher levels of unemployment and higher wages, which are both consistent with shirking and leisure being substitutable.     

Are Suburban Firms More Likely to Discriminate against African-Americans?

This paper assesses whether African-Americans are more likely to experience employment discrimination in the suburbs relative to the central city. We compare central city–suburban differences in racial hiring outcomes for firms where whites are in charge of hiring to the comparable difference for firms where blacks are in charge of hiring. Both suburban black and white employers hire fewer blacks than their central-city counterparts. This geographic gap among black employers is at least as large as that of white employers. Assuming no discrimination by black employers in any location, this implies that the probability of experiencing discrimination does not vary over space. Black firms, however, are substantially more likely to hire black workers regardless of location.     

Expected income and labor market choices of US married couples: A locally weighted regression approach

This paper applies a locally weighted scatterplot smoothing (loess) method to estimate the spatially heterogeneous wages of demographic groups of workers across precisely defined US labor markets. We estimate a location choice model using data from the National Longitudinal Survey of Youth (NLSY79) using these estimates of labor market specific wages for men and women as determinants of their place of residence. We compare estimates of this model to a model using more aggregated measures of wages and locations from CPS. We show that potential wages based on these more refined definitions of labor markets and demographic groups provide more explanatory power in a simple migration model than do those based upon less detailed definitions of labor markets and demographic groups.     

Job hopping, earnings dynamics, and industrial agglomeration in the software publishing industry

This paper investigates the implications of industrial clustering for labor mobility and earnings dynamics in one large and increasingly important high-technology sector. Taking advantage of longitudinal employee-employer matched data, I exploit establishment-level variation in agglomeration to explore how clustering in the software publishing industry affects labor market outcomes. The results show that clustering makes it easier for workers to job hop within the sector. Higher earnings levels in more agglomerated areas are partly attributable to sorting across locations among workers and firms in the industry on the basis of observable and unobservable characteristics. Controlling for this heterogeneity, workers in clusters have relatively steep earnings-tenure profiles, accepting lower wages early in their careers in exchange for stronger earnings growth and higher wages later. These findings are consistent with theoretical models in which agglomeration improves labor market coordination and facilitates greater learning and human capital formation.     

The effects of labor supply shocks on labor market outcomes: Evidence from the Israeli–Palestinian conflict

Since September 2000, as a result of mobility restrictions, the supply of Palestinian workers competing for local jobs in the West Bank has increased by about fifty percent. This paper takes advantage of this unique natural experiment to study the effects of labor supply shocks on labor market outcomes. Using quarterly information on wages and employment in each city in the West Bank, the paper analyzes the short-run adjustment of labor markets to a large inflow of workers separately from the effects of political instability. The results suggest that low-skilled wages are adversely affected by an increase in the supply of low- and high-skilled workers, while high-skilled wages are only weakly negatively related to an increase in their own supply. This is consistent with a scenario in which high-skilled workers compete for low-skilled jobs, pushing the low-skilled into unemployment. This latter hypothesis is confirmed by analyzing the effects of changes in labor supply on unemployment.     

Location choices of firms and workers in an urban model with heterogeneities in skills and preferences

This paper investigates the location choices of firms and workers, and the implied commuting behavior, in a city comprising several jurisdictions. Jurisdictions are geographically represented by segments that are connected to each other at the center. Each jurisdiction has its own amenities. Workers are classified into types on the basis of their skills and amenity preferences. Firms employ all types of worker. A business area may be formed in the center or in the suburban segments. A monocentric configuration arises when the commuting cost is small and heterogeneity of workers is large.     

Job hopping,earnings dynamics,and industrial agglomeration in the software publishing industry

This paper investigates the implications of industrial clustering for labor mobility and earnings dynamics in one large and increasingly important high-technology sector. Taking advantage of longitudinal employee-employer matched data, I exploit establishment-level variation in agglomeration to explore how clustering in the software publishing industry affects labor market outcomes. The results show that clustering makes it easier for workers to job hop within the sector. Higher earnings levels in more agglomerated areas are partly attributable to sorting across locations among workers and firms in the industry on the basis of observable and unobservable characteristics. Controlling for this heterogeneity, workers in clusters have relatively steep earnings-tenure profiles, accepting lower wages early in their careers in exchange for stronger earnings growth and higher wages later. These findings are consistent with theoretical models in which agglomeration improves labor market coordination and facilitates greater learning and human capital formation.     

Acquisition of skills, labor subsidies, and agglomeration of firms

The paper develops an analytically solvable model of new economic geography in which agglomeration of firms is caused by workers' investment in the acquisition of skills. Skilled workers earn high wages and have a large demand for goods. Since firms are attracted towards the demand, they locate at proximity of skilled workers. More workers invest in the acquisition of skills when more firms ask for these skills. Consequently, partial or full agglomeration of firms may be the location equilibrium. We also show that a reduction in transport costs increases the regional governments' incentives to subsidize the acquisition of skills.     

Endogenous job destruction and job matching in cities

We propose a spatial search-matching model where both job creation and job destruction are endogenous. Workers are ex ante identical but not ex post since their jobs can be hit by a technological shock which decreases their productivity. They reside in a city, and commuting to the job center involves both pecuniary and time costs. As a result, workers with high wages are willing to live closer to jobs to save on time commuting costs. We show that, in equilibrium, there is a one-to-one correspondence between the productivity space and the urban location space. Workers with high productivities and wages reside close to jobs, have low per distance commuting costs and pay high land rents. We also show that higher per distance commuting costs and higher unemployment benefits lead to more job destruction.