Employment and wage dynamics in Estonia, 1989-951

This study monitors the effects of economic transition on wages and employment in a former Soviet Republic. Estonia's case is of particular interest because of its early adoption of relatively free labour market policies. Relative wages for the highest educated groups rose for all age groups. There were also rapid increases in returns to job experience, particularly at young ages. Increasing wage dispersion across human capital groups was accompanied by narrowing wage dispersion within human capital groups. Relative wages rose in sectors which gained relative employment, while they fell in shrinking sectors. In addition, there were large flows of labour between shrinking and growing sectors, suggesting that labour market equilibrating mechanisms developed very rapidly in Estonia.     

Rural Population Growth, 1950–1990: The Roles of Human Capital, Industry Structure, and Government Policy

Human capital raises rural incomes, but this effect is swamped by higher returns to human capital in urban markets. This leads to "brain drain" from rural areas. Populations grow more rapidly in rural counties that have a diversified employment base. Farm population grows faster (or declines more slowly) in counties with relatively high farm income, and nonfarm populations grow faster in counties with relatively high nonfarm income. However, higher farm incomes lead to slower nonfarm population growth and vice versa. Rural county government services financed by local taxes or debt have neutral or negative effects on population growth.     

Long-Term Attachments and Long-Run Firm Rates of Return

Long-term attachments between workers and firms are common. Numerous studies have examined worker returns to tenure, but little is known of firm returns to firm-worker matches. Yet these attachments represent a human capital asset quasi-held by the firm, which is not captured by traditional accounting measures of firm assets. Firms with large quasi-holdings of human capital will have higher measured return on assets, other things equal. Analysis of data on 250 large manufacturing firms supports the view that firms profit from long-term attachments with their workers. Consequently, unmeasured human capital assets contribute to the explanation of persistence in measured long-run excess profits across firms.     

Winners and losers after 25 years of transition: Decreasing wage inequality in Slovenia

Over the past twenty-five years, wage inequality has fallen in Slovenia, even as it has risen in most developed economies. The rates of return to education and work experience rose and remained high on average. However, rapid increases in the number of college graduates have outpaced the rising relative demand for skill among the youngest labor market entrants. As a result, the youngest cohorts of college graduates have experienced declining returns to education and a downward shift in their occupational distribution, which has not been experienced by older college graduates. These changes coincide with the implementation of the Bologna Reform, which reduced the length of time necessary to complete a bachelor’s degree and contributed to the incentives to attend college. Falling returns to tertiary education contributed to declining within-cohort wage inequality among the young, which was large enough to reduce overall wage inequality.     

Winners and Losers in Transition: Returns to Education, Experience, and Gender in Slovenia

This article, using an unusually rich data set on Slovenianworkers over the 1987–91 period, explores changes in thestructure of wages and employment produced by transition toa market economy. Employment and real wages fell dramaticallyover the period, but the losses were borne disproportionatelyby the least skilled. Across all sectors of the economy, relativewages and employment rose for the most-educated workers. Womengained in comparison with men, primarily because women occupiedsectors less adversely affected by the transition. Pension policies,which encouraged retirement, are shown to have drastically reducedemployment of experienced workers and helped contribute to risingreturns to skill. Increases in returns to education and experiencecontributed to rising wage inequality, but the variance of wagesincreased for workers with identical skills as well.     

Entry threat,entry delay,and Internet speed: The timing of the U.S. broadband rollout

In a rapidly growing industry, potential entrants strategically choose which local markets to enter. Facing the threat of additional entrants, a potential entrant may lower its expectation of future profits and delay entry into a local market, or it may accelerate entry due to preemptive motives. Using the evolution of local market structures of broadband Internet service providers from 1999 to 2007, we find that the former effect dominates the latter after allowing for spatial correlation across markets and accounting for endogenous market structure. On average, it takes 2 years longer for threatened markets to receive their first broadband entrant. Moreover, this entry delay has long‐run negative implications for the divergence of the U.S. broadband infrastructure: 1 year of entry delay translates into an 11% decrease on average present‐day download speeds.     

Off-farm labor supply responses to permanent and transitory farm income

A sample of Iowa farm couples is used to evaluate whether off‐farm labor supply decisions respond to permanent and transitory components of farm income. Off‐farm labor supply of both spouses declines in response to increases in permanent farm income. Farm wives also reduce off‐farm labor supply in response to positive transitory farm income shocks. Consequently, one mechanism farm households use to smooth their goods consumption when facing fluctuating farm income is to modify their consumption of leisure. Ability to smooth goods consumption does not imply the absence of liquidity constraints among farm households unless leisure consumption is also smoothed.     

Cyclicality and the Labor Market for Economists

The 1987 academic market was strong, whereas the 1997 market was weak. A multimarket theory of optimal search suggests that job seekers will respond to a weakening market by changing their search strategies at the extensive margin (which markets to enter) and the intensive margin (how many applications to submit per market). Employers respond to the weakening market by raising their hiring standards. High-quality applicants will obtain an increased share of academic interviews in weak markets while applicants from weaker schools will increasingly secure interviews outside of the academic market. Empirical results show that in the bust market, graduates of elite schools shifted their search strategies to include weaker academic institutions, while graduates of lower-ranked schools shifted their applications away from academia and toward the business sector. In bust conditions, academic institutions increasingly concentrate their interviews on elite school graduates, women, and U.S. residents.     

Do Market Pressures Induce Economic Efficiency? The Case of Slovenian Manufacturing, 1994–2001

Using a unique longitudinal data set on all manufacturing firms in Slovenia from 1994 to 2001, this article analyzes how firm efficiency changed in response to changing competitive pressures associated with the transition to market. Results show that the period was one of atypically rapid growth of total factor productivity (TFP). The rise in firm efficiency occurs across almost all industries and firm types: large or small, state or private, domestic or foreign owned. Changes in firm ownership type have no direct impact on firm efficiency. However, increased market competition related to rising market share of private firms, new market entrants, foreign‐owned firms, and international trade raises TFP across all firms in an industry, whether private or state owned. In addition, competitive pressures that sort out inefficient firms of all types and retain the most efficient, coupled with the entry of new private firms that are at least as efficient as surviving firms, prove to be the major source of TFP gains. Results strongly confirm that market competition fosters efficiency.     

Central Mandates and Local Incentives: The Colombia Education Voucher Program

In decentralized education systems programs that promote centralmandates may have to be devolved to local governments, communities,and providers. When participation by local governments and providersis voluntary rather than compulsory, the determinants of programplacement are important in predicting potential benefits toindividuals. This article analyzes incentives for municipalitiesand private schools to participate in Colombia's voucher program.It finds that the demand for secondary education relative tothe capacity of public schools and the availability of spacesin private schools in the municipality were key predictors ofmunicipal participation, whereas the number of underserved studentshad a nonlinear effect on participation. Schools whose educationalquality was moderate and charged moderate tuition fees werethe most likely to participate; the program was less attractiveto schools whose quality and fees were high and to schools whosequality and fees were low.