Dismissals and match-specific rents

Labor contracts that result in dismissals are quite common in the real world. The question that arises is why employers do not just offer reduced wages instead of asking workers with low realized productivity to leave. This paper argues that such behavior can be explained by workers' understandable unwillingness to agree to contracts that an employer will not have an incentive to honor in the future. Specifically, we construct a matching model in which the employer and the worker are both uncertain about the value the other places on the match. Because the worker's match-specific productivity is the employer's private information, a commitment to pay a wage equal to the worker's value of marginal product is not enforceable. In the absence of a wage guarantee, the employer will offer retained workers wages below their value of marginal product, which causes quits to be inefficiently high. The employer can reduce quits by contractually promising a guaranteed wage to retained workers. Although this will lead to some involuntary dismissals, the loss from dismissals will be less than the gain from lower quits if the wage guarantee is not too high.     

Migration of young labor force entrants

The analysis focuses on what factors encourage or discourage migration among recent high school graduates. Youth represent an important group to study because they have the highest rates of both job and location mobility in the U.S. population. Of interest to policy-makers is the role of migration in the school-to-work transition and its more general role as a manpower allocation mechanism.

The empirical specification is based on a theoretical model of individual decision-making in Black [1]. A logit model of the probability of migration is estimated separately by elapsed time since graduation, sex, and marital status. The data source consists of the National Longitudinal Study of the High School Class of 1972 that has been merged with local labor market data from the 1970 decennial census. The analysis yields several insights into the determinants of migration: local labor market conditions, an individual's employment success, migration experience before and after high school graduation, and personal characteristics such as aptitude, sex, family status, school experience, and family background.     

The equilibrium allocation of investment capital in the presence of adverse selection and costly state verification

Summary We consider credit rationing in an environment with adverse selection and costly state verification. The presence of costly state verification permits debt contracts to emerge under conditions that we specify. When debt contracts are observed, so is credit rationing. This rationing occurs even if it is possible for rationed borrowers to bid up expected returns to lenders and hence is voluntary. We also show how the adverse selection and costly state verification problems interact and investigate how improvements in information gathering technology impact on the extent of credit rationing.The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System. We have benefitted from comments on an earlier draft of this paper by Franklin Allen, Charlie Calomiris, V. V. Chari, Ed Green, Craig Holden, Jeff Lacker, George Pennachi, Neil Wallace, Anne Villamil, and an anonymous referee and from discussions with Edward Prescott.     

The Social Structure of the Australian Urban Labour Market: 1976–1991

Abstract
The changing social structure of the labour market has both distributional and efficiency implications for Australian society. This article analyses the increase in the employment inequality among Australian urban neighbourhoods (that is, Collectors Districts or CDs) between the 1976 and 1991 censuses. When CDs are ranked by socioeconomic status we find that the employment rate falls by more in the low status areas than in other areas. Given that participation and population growth rates are higher in the high status areas, this phenomenon is likely to be driven by differences in employment levels. Shift share analysis of changes in employment levels shows that the lower demand for workers who live in the low status areas has led to falls in employment in those areas. Therefore the structural shift in the Australian economy has been a major explanation of the differences in employment rate within Australian cities. The results raise questions about the current ability of Australia's economy to adjust to the structural change necessary in an open economy .     

Size and effectiveness: a case study of a small union

This article challenges the conventional wisdom that increasing size is the key to effective trade union representation. We draw on case study research at the National Union of Lock and Metal Workers (NULMW), which has allowed certain assumptions about small and independent unions to be challenged and suggests some possible alternatives to concentration strategies as a response to a hostile environment     

Retailers in social program strategy: the case of family planning

The provision of contraceptive agents and devices through hospitals and clinics is not a cost-efficient procedure, therefore the distribution through retailers in a preexisting network is an attractive prospect. To really distribute contraceptives, e.g., birth control pills, the retailer would have to be trained in a format of questions. Two studies of retail marketing were conducted, one in Jamaica for condoms and one in Kenya where a subsidized marketing program for condoms was started in rural areas. More urban shops, which were larger in size, carried condoms than rural shops. Retailers in both areas were completely oriented to their immediate vicinity. Their concerns were with volume and with aggregate demand both before and after subsidized programs. The distribution system requires the additional support of advertising and marketing, but since the structure is in place it can be used with relatively little capital outlay. Research of retailers' attitudes and perceptions is inexpensive and often indicates customer preference and local market conditions.