Labor force participation

Trends in U.S. female and male labor force participation are outlined, particularly for the post-World War II period. Potential causes of these trends are then discussed, both those that operate on the demand side and those that operate on the supply side of the labor market, along with some discussion of alternative approaches to modeling these employment changes. Effects of these trends and future direction of changes are also considered.     

Stable and efficient bargaining networks

Abstract. We examine a bargaining game among players connected by a network, where successively potential partners negotiate over terms of a project. For any network structure and ordering of selection of bargaining partners, there is a unique subgame perfect equilibrium outcome which coincides with the standard Rubinstein split. Based on this, we derive expected payoffs for players as a function of the network. We the characterize the pairwise stable and efficient bargaining networks. These two sets do not always coincide and in many situations pairwise stable networks are over-connected. Received: 10 April 2001 / Accepted: 17 January 2002 I am indebted to Matthew Jackson for suggesting this paper. I also thank Bernard Caillaud, Sanjeev Goyal, and the seminar participants at Universidad de Alicante, Universidad Carlos III de Madrid, CEMFI (Madrid), Universitat Autònoma de Barcelona, Erasmus University of Rotterdam, Universitat Pompeu Fabra (Barcelona) and CERAS (Paris) for helpful comments. This paper was written while at Universitat Pompeu Fabra and CERAS. Financial support from the Spanish Ministry of Education through research grant DGESIC PB96-0302, and from the Ecole Nationale des Ponts et Chaussées, Paris is gratefully acknowledged. All errors are of course mine.     

Chapter 11 bankruptcy and the termination of collective bargaining contracts

In 1984 the Supreme Court ruled that employers can unilaterally break an existing collective bargaining contract upon filing a chapter 11 bankruptcy petition. This ruling changed both the contractual responsibilities of the employer to honor the collective bargaining agreement and the rights that workers have under the National Labor Relations Act. The purpose of this article is to show the conditions under which a Chapter 11 bankruptcy proceeding will lead to the termination of a labor contract. Our results suggest that (a) legal rulings that reduce the costs of bankruptcy will increase the number of contractual dissolutions and (b) a Chapter 11 bankruptcy is more likely to occur when a firm operates in a climate of uncertain expectations.     

Endogenous labor force participation and firing costs

I construct a matching model to explain the labor market transition between employment, unemployment and nonparticipation, and evaluate the quantitative effects of firing costs. The model has several features that are distinguished from previous studies: endogenous labor force participation, different job-search decisions and imperfect insurance markets. I find that the model is able to account for the U.S. labor market, especially the gross labor-force transition rates. I also find that firing costs as a type of firing tax have a negative effect on the layoff rate, the job-finding probability and the participation rate. In particular, the effect of a decrease in the job-finding probability is greater than the effect of a decrease in the layoff rate, and this results in an increase in the unemployment-to-population ratio. Finally, firing costs make individuals' job tenures longer and skew the asset distribution to the right.     

Auctions with resale and bargaining power

We show that when the weak bidder’s bargaining power in the resale market is weakened, the auctioneer’s revenue from the first-price auction with resale is lower. Using the idea of Coase Theorem, we show that when the resale market is a sequential bargaining model with no commitment, the auctioneer’s revenue is substantially reduced, and the ranking is the opposite of Hafalir and Krishna (2009). We establish a version of the Coase Theorem in the context of the auctions with resale. When Coase Theorem holds, we show that the revenue of the auction with resale is lower than the revenue of the same auction without resale. We also provide the existence and uniqueness of equilibrium for our model of auctions with resale.     

Labor market search and capital accumulation: Some analytical results

This paper integrates labor market search into an intertemporal utility maximization framework and analytically solves for equilibrium dynamics. The integrated model improves upon a neoclassical model by generating the realistic hump-shaped response of output to a productivity shock and the counterclockwise dynamics of job vacancies and unemployment around the Beveridge curve. In contrast to a standard search model, our model endogenizes agents' reservation wage as the marginal rate of substitution between leisure and consumption, through which agents' intertemporal consumption decision directly affects the labor market behavior. As a result, even a permanent productivity shock generates non-monotonic dynamics in employment.     

Integration of collective bargaining and formal worker participation processes: Boon or barrier to worker rights?

Many employers are extending workplace rights by allowing for more employee voice in decision making. Numerous unionized organizations have established formal worker participation processes to help achieve this end and to improve organizational performance. Based largely on theory, such processes are normally designed to operate independently from the bargaining process. The purpose of this study was to examine the relationship between participation and bargaining processes, and the effect of this relationship on workplace satisfaction. A total of 712 Midwest union officials were surveyed, and the results indicate that the processes tend to become integrated in the workplace. Further, union officials' workplace satisfaction was greater where formal worker participation is institutionalized within the bargaining process.     

Employment contracts,job search theory,and labour turnover: Preliminary empirical: Results

The empirical implications of a model in which a worker participates in a labour market in which a job offer consists of a wage-hour pair are examined. Here, hours are not freely adjustable and the wage rate is typically different from the marginal value of leisure. A theoretical model is proposed; some natural conjectures on effects of wage changes are shown not to hold; and a preliminary empirical investigation based on Denver Income Maintenance Experiment data is undertaken.     

Decentralized trade with bargaining and voluntary matching

Rubinstein and Wolinsky (1990) study a market with one seller, two buyers, and voluntary matching. Both the competitive outcomep _c and the bilateral bargaining outcomep _b are possible in subgame perfect equilibrium. We consider two variations. First, if there is a cost larger thanp _c −p _c to the seller of changing partner,p _c is the unique outcome, otherwise no restriction expires. In the second variation the seller makes anε-binding preannouncement of whether he will change buyer after disagreement. Ifε is small there are equilibrium prices close top _c . But for anyε, if the discount factor is close to 1, the unique equilibrium price isp _c . The authors thank an anonymous referee for helpful comments.     

The effect of job flexibility on female labor market outcomes: Estimates from a search and bargaining model

In this article, we develop a search model of the labor market in which jobs are characterized by work hours’ flexibility. Workers value flexibility, which is costly for employers to provide. We estimate the model on a sample of women extracted from the CPS. The model parameters are empirically identified because the accepted wage distributions of flexible and non-flexible jobs are directly related to the preference for flexibility parameters. Results show that more than one-third of women place a small, positive value on flexibility. Women with a college degree value flexibility more than women with only a high school degree. Counterfactual experiments show that flexibility has a substantial impact on the wage distribution but a negligible impact on the unemployment rate. These results suggest that wage and schooling differences between males and females may be importantly related to flexibility.     

Multiple equilibria model with intrafirm bargaining and matching frictions

In this paper, we combine a matching model derived from Pissarides (2000) in the case of large firms with monopolistic competition on the product market and the model of intrafirm bargaining à la Stole and Zwiebel (1996). Moreover, we allow for increasing returns to scale in the aggregate production function leading to multiple equilibria. We study the dynamics of such a framework and propose numerical simulations. We show that labour market regulation can make unlikely the occurrence of the Pareto inferior equilibrium and that product market deregulation can have an effect on employment contrary to the expected result when the economy stands at this equilibrium. We give also some policy recommendations to reach the Pareto superior equilibrium when multiple equilibria exist.     

The efficiency of training and hiring with intrafirm bargaining

This paper demonstrates that firms hire and train workers efficiently in a matching and intrafirm bargaining economy when the Hosios condition holds and returns to scale are constant. This conclusion stands in contrast to the prevailing view that training costs are a source of inefficiency in imperfect labor markets. The efficiency of the competitive economy relies on the ability of large firms to take into account the negative impact of the training rate on the wages negotiated inside the firm through intrafirm bargaining: untrained workers accept a wage reduction in compensation for potential training that is accessible only following employment. This intrafirm bargaining process solves efficiency problems associated with training costs that would otherwise lead to inefficient hiring and training decisions. This conclusion holds true for both specific and general human capital.     

Profit sharing regulation and repeated bargaining with a shut-down option

We analyze the behavior of a firm where workers share profits with shareholders by using a model cast in an Aoki framework. There are two sorts of uncertainties: one relates to the market price, assumed to follow a random path in continuous time, while the other concerns internal organization, i.e. the share of profits to be distributed between workers and shareholders. In the institutional setting we adopt the firm is flexible, since it has the possibility of shutting down, by paying laid off workers a bonus, which represents a sunk cost. The distributive share is determined in the firm's internal labor market through a bargaining that takes place at two occasions: at the beginning of the firm's life and when profits reach a threshold level. The second bargaining is endogenized according to a procedure imposed upon shareholders and workers by a regulator who may use profit distribution as a way to intervene in the firm's internal labor market. Specificities make this market highly imperfect. Different share parameter patterns result, owing to a shut down option, according to whether (a) the regulator calls for renegotiation when profits are increasing or decreasing, (b) the regulator's rule is announced in advance or is discretionally set.     

Joint estimation of sequential labor force participation and fertility decisions using Markov chain Monte Carlo techniques

We analyze the effect of children on the labor supply of married women in a framework that accounts for the endogeneity of labor market and fertility decisions, for the heterogeneity of the effects of children and their correlation with the fertility decisions, and for the correlation of sequential labor market decisions. Women with stronger propensity for market work have fewer children, work more before the first birth, and face larger negative effects of children. The total effect of a child remains considerable long after birth; prior birth-related reductions in labor supply account for a significant share of the total effect.     

A smoothed maximum score estimator for the binary choice panel data model with an application to labour force participation

In a binary choice panel data model with individual effects and two time periods, Manski proposed the maximum score estimator based on a discontinuous objective function and proved its consistency under weak distributional assumptions. The rate of convergence is low ( N ^1/3) and its limit distribution cannot easily be used for statistical inference. In this paper we apply the idea of Horowitz to smooth Manski's objective function. The resulting smoothed maximum score estimator is consistent and asymptotically normal with a rate of convergence that can be made arbitrarily close to N ^1/2, depending on the strength of the smoothness assumptions imposed. The estimator can be applied to panels with more than two time periods and to unbalanced panels. We apply the estimator to analyze labour force participation of married Dutch females.     

Labor market policy evaluation in equilibrium: Some lessons of the job search and matching model

We analyze the consequences of counseling provided to job seekers in a standard job search and matching model. It turns out that neglecting equilibrium effects induced by counseling can lead to wrong conclusions. In particular, counseling can increase steady state unemployment although counseled job seekers exit unemployment at a higher rate than the non-counseled. Dynamic analysis shows that permanent and transitory policies can have effects of opposite sign on unemployment.     

The relationship between health and labour force participation: Evidence from a panel data simultaneous equation model

A concern when estimating the effect of health on labour supply is that health might be endogenous, and in particular that people might use poor health to justify non-participation. This would result in the effect of health being overestimated if health were treated as exogenous. The paper employs a simultaneous equation model to explore the relationship between health and labour force status, allowing for the endogeneity of health. In addition, the paper takes advantage of panel data to control for unobserved heterogeneity so that more efficient estimation results can be obtained than using cross-sectional data. The results confirm the finding in the literature that health has a positive and significant effect on labour force participation for both males and females. As for the reverse effect, it is found that labour force participation has a negative effect on male health but a positive effect on female health, implying that the justification hypothesis is rejected for males but not for females. The exogeneity hypothesis on the health variable is rejected for both samples based on a joint test.     

Tax-benefit systems and differences in aggregate labour force participation: Comparative evidence from the Czech Republic and Hungary

This paper investigates the extent to which cross-country differences in aggregate participation rates can be explained by differences in tax-benefit systems. We take the example of two countries, the Czech Republic and Hungary, which – despite a lot of similarities – differ markedly in labour force participation rates. Using comparable individual-level labour supply estimates, we simulate how the aggregate participation rate would change in one country if the other country’s tax and social welfare system were adopted. The estimation results for the two countries are quite similar, suggesting that individual preferences are essentially identical in the two countries. The simulation results show that about one-third of the difference in the participation rates of the 15–74 year-old population and more than two-thirds of the participation of the prime-age population can be explained by differences in the tax-benefit systems.     

Entry deterrence under financial intermediation with private information and hidden contracts

We study how financial intermediation affects market entry when an incumbent monopolist enters into non-public, short-term contracts for outside funds. Financial intermediation serves as a commitment device to avoid costly signalling, but at the same time leads to strategic experimentation by the bank. Without public commitment to the financial contract, signal-jamming affects the bank's strategic experiment. Unlike the previous literature on signalling and signal-jamming in entry deterrence in which entry is unaffected or its change indeterminate, the altered strategic experiment has the effect of increasing the amount of entry to the market. Received: 19 January 2004, Accepted: 18 May 2005 JEL Classification: C73, D8, L1 We thank Markus Daniel, Spiros Bougheas, James Peck, Tony Creane, two anonymous referees, the associate editor and seminar participants at the Wissenschaftszentrum Berlin, Emory, Ohio State, and Royal Holloway Universities and the Universities of Wisconsin, Nottingham and East Anglia, as well as Matt Jackson for editorial assistance.     

Redefining psychological contracts with the U.S. work force: A critical task for strategic human resource management planners in the 1990s

The well-publicized waves of layoffs in recent years have destroyed the long-standing psychological contract between employees and their employers which promised pay, promotion, and job security in exchange for worker skills, effort, and loyalty. This article provides empirical support for the transformational effect layoffs have had on psychological contracts and discusses the critical role human resource management must play in establishing and developing new contracts to guide future employment relationships between employers and employees. Implications for both academics and practitioners are provided. © 1998 John Wiley & Sons, Inc.