Verifiable wage offers and recontracting: effect on wage and consumption profiles

This paper analyzes the effect of recontracting and matching verifiable wage offers on the intertemporal structure of contract wage and consumption profile for a two-period economy. A contract firm provides specific training for a worker during the first period, which increases his productivity if he stays in the second period, but the worker may quit to accept an alternative wage offer after a successful search. Wage offers are private to the worker but can be presented to the contract firm for matching. This paper shows that when capital markets are imperfect and wage offers are verifiable, the contract firm recontracts and matches any wage offers the worker receives up to the second-period productivity. The ex ante contract wage profile will be flat. Inefficient quits will be eliminated and there will be complete ex ante consumption smoothing. It is significant to note that the result of rising wage profile derived in numerous contract models is fragile with respect to assumptions on mechanism of interfirm labor mobility.     

Job mobility and careers in firms

This paper presents a theoretical model that combines employers learning about worker productivity, human capital acquisition, job-assignment and resolution of worker uncertainty regarding disutility of work from a job, to show how widely documented findings on both wage and promotion dynamics and turnover can be captured in a single set-up. Specifically we show how our model can capture results such as; probability of turnover decreases with labor market experience, wage changes during job changes is more in earlier periods, serial correlation in wages and probability of promotion increases in wages, amongst others.     

Performance, seniority, and wages: formal salary systems and individual earnings profiles

This paper replicates studies by Medoff and Abraham [Quart. J. Eco. 95 1980 703; J. Hum. Res. 16 1981 186] and Flabbi and Ichino [Lab. Eco. 8 2001 359] using personnel data from the Dutch national aircraft manufacturer Fokker. It shows how a formal salary system, as is widely used by large firms, brings about that seniority-wage profiles are largely independent of controls for reported performance in cross-sectional wage regressions even though supervisors' evaluations shape life-cycle earnings profiles. Performance ratings determine how fast a worker climbs the firm's career and wage ladder. The paper also reveals that real wage growth depends on the employer's prosperity, and it demonstrates that formal salary systems cause serial correlation in wage growth and “Green Card” effects.     

Can a minimum wage increase employment and reduce prices in a neoclassical perfect information economy?

This paper investigates the possibility that the imposition of a minimum wage increases employment in the affected sector, measured in terms of hours of work, and lowers product prices. Unlike related prior theoretical research, I consider a neoclassical perfect information economy. Both labor and product markets are assumed to be perfectly competitive. Workers choose the number of hours of work and their effort level. Workers can potentially, but not necessarily, differ in their preferences over income, leisure, and effort. Effort is perfectly observable by the employers. The general framework that highlights the channels through which a minimum wage can increase employment and reduce prices is introduced and necessary and sufficient conditions derived. The paper also develops a number of comparative statics and some illustrative examples. The results provide a simple theoretical foundation that explains some recent findings of the empirical literature on minimum wages. Auxiliary results help explain the effects of minimum wage on the entire wage distribution in a way that is consistent with empirical findings. Finally, welfare analysis shows that worker welfare and employment tend to go in opposite directions; in particular, if employment increases after the imposition of the minimum wage, worker welfare will be reduced, though not necessarily vice versa (the opposite is true for consumer welfare). Strikingly, if a minimum wage increases worker welfare, the chief beneficiaries are not the affected workers but those with incomes that exceed the minimum wage.     

The Value of Household Services

A bstract . A family, in appraising the value of a housewife's services , does not necessarily consider the services of the housewife to be free even though there is no explicit money payment for her services. When the housewife devotes time to housekeeping , either she sacrifices leisure or the family sacrifices labor market income which the wife could earn. Empirical evidence supports the notion that families do not consider the supply price of housekeeping services to be zero. Traditional methods of assessing the aggregate value of household services load to underestimates. The actual market wage rate is a good measure of the value of the marginal housekeeping services of a housewife who also spends time in the labor market. But the potential market wage rate of a full-time housewife understates the value of her marginal product in the home.     

工资粘性、经济波动与货币政策模拟——基于DSGE模型的分析

本文在BGG模型的基础上,引入了工资粘性,使之成为综合考虑价格粘性、金融加速器效应以及工资粘性的DSGE模型,我们模拟并比较了中国不同货币政策的影响。贝叶斯估计结果验证了中国工资粘性的存在,说明中国劳动力市场的配置尚存在改善的余地。货币政策模拟结果显示,价格型货币政策效应较强但持续期较短,而数量型货币政策效应较为温和但影响相对持久,央行需注重价格型货币政策与数量型货币政策的合理搭配与使用。     

The New Keynesian Phillips Curve and staggered price and wage determination in a model with firm-specific labor

We develop a DSGE model with firm-specific labor where wage and price setting are subject to Calvo-type staggering. This is in general an intractable problem due to complicated intertemporal dependencies between price and wage decisions. However, the problem is significantly simplified if we, in line with empirical evidence, assume that prices can be changed whenever wages are. We show that the price- and wage-setting relationships are substantially altered by the introduction of firm-specific labor. Specifically, the inflation response is substantially dampened, whereas the wage inflation response is increased as compared to models with freely mobile labor. These distinctive features of the model with firm-specific labor are supported by empirical evidence from a structural VAR.     

Performance Pay and Offshoring

In this paper, we construct a North–South general equilibrium model of offshoring, highlighting the nexus among endogenous effort‐based labor productivity and the structure of wages. Offshoring is modeled as international transfer of management practices and production techniques that allow Northern firms to design and implement performance compensation contracts. Performance–pay contracts address moral hazard issues stemming from production uncertainty and unobserved worker effort. We find that worker effort augments productivity and compensation of those workers assigned to more offshorable tasks. An increase in worker effort in the South, caused by a decline in offshoring costs, an increase in worker skill, or a decline in production uncertainty in the South, increases the range of offshored tasks and makes workers in the North and South better off. An increase in Southern labor force increases the range of offshored tasks, benefits workers in the North, and hurts workers in the South. International labor migration from low‐wage South to high‐wage North shrinks the range of offshored tasks, makes Northern workers worse off and Southern workers (emigrants and those left behind) better off. Higher worker effort in the North, caused by higher worker skills or lower degree of production uncertainty, decreases the range of offshored tasks and benefits workers in the North and South.     

An empirical investigation of owner–manager labor-supply behavior

This paper uses data from the University of Michigan's Panel Study of Income Dynamics to examine an owner–manager's labor-supply decision. Graphical analysis is used to motivate the central hypothesis tested, which is that the hourly wage paid to comparable hired managers is the marginal price of leisure to the owner–manager and will help determine his hours worked. The results suggest that this is an appropriate interpretation, with the average elasticity of hours-worked with respect to cost of comparable hired managerial services equal to + 0.23.     

The effect of match quality and specific experience on career decisions and wage growth

This paper constructs and estimates a career decision model where individuals search for both careers and firms that are a good match for their idiosyncratic skills using the NLSY79. It departs from previous papers in that career mobility decisions and participation decisions are explicitly modeled. I find substantial returns to career-specific experience. However, college graduates' wage grows little through career-match upgrading, which results in a lower incidence of career changes than high school graduates. The finding suggests that college graduates learn about their suitable careers before they enter a labor market.     

Temporary international migration and the nontraded sector of the labor-importing developing economy

In this paper the author examines the effects of external migration on the nontraded sector of the labor-importing developing economy. It is found that devaluation by the labor-exporting country will reduce the pressure on excess demand for labor and reduce the price of nontraded goods. Increases in the migrant workers’ consumption expenditures, the government expenditures on nontraded goods and the price of traded goods will increase the pressure on excess demand for labor and raise the price of nontraded goods. The effects of an increase in host country nominal wage, however, will remain ambiguous.     

Do salaries improve worker performance?

We establish the effects of salaries on worker performance by exploiting a natural experiment in which some workers in a particular occupation (football referees) switch from short-term contracts to salaried contracts. Worker performance improves among those who move onto salaried contracts relative to those who do not. The finding is robust to the introduction of worker fixed effects indicating that it is not driven by better workers being awarded salary contracts. Nor is it sensitive to workers sorting into or out of the profession. Improved performance could arise from the additional effort workers exert due to career concerns, the higher income associated with career contracts (an efficiency wage effect) or improvements in worker quality arising from off-the-job training which accompanies the salaried contracts.     

Firm-specific wage growth and changes in the labor market for managers

This paper analyzes recent changes in the employment relationships between managers and firms. In both Becker's and Lazear's models of firm-specific wage growth, compensation is deferred from early in an employee's tenure with a firm until later in the contract. The deferred compensation bonds the worker to the firm. Based on cross-sectional data from Current Population Surveys, rates of firm-specific wage growth are estimated for the managerial labor market. The findings show that the rate of wage growth that is firm-specific for managers in manufacturing industries declined significantly during the early 1980s. It is estimated, for example, that a manager with 12 years of tenure in a manufacturing firm enjoyed, on average, a 25% wage premium in 1979 over an otherwise similar manager who was a new hire in a firm. By 1983 the firm-specific wage premium for a manager with 12 years of tenure was only 5%. These changes represent a significant reduction in the strength of the employment bond between firms and managers, and a reduction in the incentive effects previously enjoyed by firms from the use of deferred-compensation schemes. This change is consistent with the significant increases in the displacement rates of managers that occurred during the 1980s.     

Price and Quantity Competition in a Differentiated Duopoly with Upstream Suppliers

This paper analyzes the noncooperative game on the choice of strategic variable to set in duopoly in the presence of an upstream market for the input. For the case of labor input, the analysis shows that if the wage is the result of decentralized firm-union bargain, a duopoly producing substitutes may choose to compete either in the quantity space or in the price space, depending upon the distribution of bargaining power in the wage negotiation and the union's relative preference over the wage. For the case of input suppliers as profit-maximizing firms, the paper shows that a vertically differentiated duopoly may prefer to compete either in the quantity space or in a mixed strategy setting where the high-quality firm plays price and the low-quality firm plays quantity, depending upon the extent of substitutability, the degree of vertical product differentiation and the distribution of bargaining power in the input price negotiation.     

Economics and operations management: towards a theory of endogenous production speed

A firm chooses the production speed and amount of labor that maximizes profit in a perfectly competitive market. Faster production raises management expenses and the unit cost of production mistakes. Adding workers enhances the division of labor on the production line and raises work‐in‐process inventory. When the division of labor is high, a rise in the wage can increase the optimal production speed and quantity of output. When price falls, optimal production speed and optimal division of labor can move in opposite directions. Output quantity can also rise, generating a downward sloping supply curve in the absence of increasing returns to scale. Copyright © 2002 John Wiley & Sons, Ltd.     

Wage incentives and wage rigidity: A representative view from within

A recent literature has used surveys of those who set wages to learn about the nature of wage incentives and the sources of wage rigidity. Methodologically, we overcome many of the objections that have been raised against this work. Substantively, we find that: (i) the reasons for real wage rigidity differ significantly between large and small firms, and between the high- and low-end of the labor market; (ii) efficiency wage mechanisms reinforce rigidities due to worker bargaining power; (iii) money illusion is a widespread phenomenon across all segments of the labor market; (iv) unions reinforce nominal wage rigidities due to external pay comparisons; (v) there appears to be gender differences in pay bargaining and work morale.     

Language and urban labor market segmentation: Theory and evidence

I propose a language theory of labor market segmentation. People of different language origins form separate urban labor submarkets and can switch between submarkets. Two types of wage differentials emerge, namely the Within-Labor-Market Wage Gap and the Within-Language-Group Wage Gap. The average wage in each market and a worker’s choice of the labor market depend on the population sizes of the relevant groups. These implications are tested using the 2001 Census of Canada Public Use Microdata. A unique feature of these data is the reported work language, which helps me to identify labor market segments. The empirical evidence supports my theory.     

How do workers decide their jobs? The influence of income,wage and job characteristics

This paper provides results on the economic decision‐making process of Spanish workers, who decide their jobs from the effects of variations in the non‐wage income, the wage and the prices of non‐pecuniary job characteristics. To that end, we formulate a non‐separable generalization of the Linear Expenditure System (NLES) as a joint model of labor supply and job characteristics demand, estimated separately for both males and females, using a 1991 Spanish survey. The main results show that: (i) some job characteristics have a positive effect on the wage, whereas others have a negative effect; (ii) the average percentage effect of employer size and the complexity index are higher for males than for females, with the fatal accident risk displaying similar values; (iii) if the non‐wage income of every worker increases, these individuals will prefer to devote less hours to work, and will also prefer jobs in smaller companies and with a lower risk; and (iv) if the wage and hedonic prices of non‐pecuniary job characteristics increase, then both males and females will prefer to reduce their labor supply, and devote their available time to jobs in bigger firms, with a higher risk and complexity. Copyright © 1999 John Wiley & Sons, Ltd.     

成本上升的产业竞争力效应研究

随着农村可转移劳动力减少和资源环境压力的不断上升,中国劳动力工资和原材料价格呈现快速上涨的趋势,引发了对中国制造业国际竞争力丧失的担忧。然而,成本上升对竞争力的影响到底有多大还缺乏相应的实证研究。基于投入产出模型,定量分析原材料和工资成本上升对综合成本、进而制造业竞争力的影响。研究结果表明,要素价格上升使中国工业品综合成本在2001~2011年平均每年提高7%左右,但生产效率提升则在很大程度上抵消了要素成本上升对竞争力的不利影响。     

Equal-treatment policy in a random search model with taste discrimination

We consider a search model of the labor market with two types of equally productive workers and two types of firms, discriminators and non-discriminators. Without policy intervention, there is wage dispersion between and within the two worker groups, but all wage differences become negligible when the taste for discrimination is small. We analyze the effect of an equal-pay policy, both in combination with affirmative action and without. When equal opportunity of hiring cannot be enforced, wage dispersion increases and wages for minority workers fall substantially relative to laissez faire. Sometimes also the wage gap between worker groups widens in response to the policy.