A MATCHING MODEL WITH ENDOGENOUS SKILL REQUIREMENTS>*

We consider a labor market in which workers differ in their abilities and jobs differ in their skill requirements. The distribution of worker abilities is exogenous, but we model the choice of skill requirements by firms. High‐skill jobs produce more output than low‐skill jobs, but high‐skill jobs require high‐skill workers and thus are more difficult to fill. We use a matching model together with a Nash bargaining approach to wage setting to determine the equilibrium mix of job types, along with the equilibrium relationship between worker and job characteristics, wages, and unemployment.     

Special Repo Rates: An Empirical Analysis

Duffie (1996) examines the theoretical impact of repo “specials” on the prices of Treasury securities and concludes that, all else the same, an issue on special will carry a higher price than an otherwise identical issue. We examine this hypothesis and find strong evidence in support of it. We also examine whether the liquidity premium associated with “on-the-run” issues is due to repo specialness and find evidence of a distinct effect. Finally, we investigate whether auction tightness and percentage awarded to dealers are related to subsequent specialness and find that both variables àre generally significant.     

THE IMPACT OF HEALTH ON POVERTY: EVIDENCE FROM THE SOUTH AFRICAN INTEGRATED FAMILY SURVEY

This paper examines the impact of health status on poverty status, accounting for the endogeneity of health status. Using exogenous measures of health status from the South African Integrated Health Survey, we instrument for health status while allowing for covariation among the unobservables influencing both health and household poverty status. Health status, as captured by the body mass index, is shown to strongly influence poverty status. Households that contain more unhealthy individuals are 60 per cent more likely to be income poor than households that contain fewer unhealthy individuals, and this finding appears invariant to the choice of poverty line.     

The Role of Social Media in the Capital Market: Evidence from Consumer Product Recalls

We examine how corporate social media affects the capital market consequences of firms’ disclosure in the context of consumer product recalls. Product recalls constitute a “product crisis” exposing the firm to reputational damage, loss of future sales, and legal liability. During such a crisis it is crucial for the firm to quickly and directly communicate its intended message to a wide network of stakeholders, which, in turn, renders corporate social media a potentially useful channel of disclosure. While we document that corporate social media, on average, attenuates the negative price reaction to recall announcements, the attenuation benefits of corporate social media vary with the level of control the firm has over its social media content. In particular, with the arrival of Facebook and Twitter, firms relinquished complete control over their social media content, and the attenuation benefits of corporate social media, while still significant, lessened. Detailed Twitter analysis confirms that the moderating effect of social media varies with the level of firm involvement and with the amount of control exerted by other users: the negative price reaction to a recall is attenuated by the frequency of tweets by the firm, while exacerbated by the frequency of tweets by other users.     

Equilibrium Directed Search with Multiple Applications

We analyse a model of equilibrium directed search in a large labour market. Each worker, observing the wages posted at all vacancies, makes a fixed, finite number of applications, a . We allow for the possibility of ex post competition should more than one vacancy want to hire the same worker. For each a , there is a unique symmetric equilibrium in which all vacancies post the same wage. When a = 1, the common posted wage lies between the competitive and monopsony levels, and equilibrium is efficient. When a > 1, all vacancies post the monopsony wage. Some workers fail to find a job, some find a job at the monopsony wage, and some—those for whom there is competition—get the competitive wage. Equilibrium is inefficient when a > 1; in particular, there is excessive vacancy creation.     

Investment Decisions for Retirement Savings

We conducted a choice experiment to investigate whether retirement savers follow simple portfolio theory when choosing investments. We modeled experimental survey data on 693 participants using a scale-adjusted version of the latent class choice model. Results show that underlying variability in response was explained by age and “risk profile” score and that preferences varied with income and age. Younger individuals were conventionally risk averse, but older, higher-income individuals may react positively to both higher returns and increasing risk, when risk is presented as widening ranges of possible outcomes. Respondents tended to choose among a few similar investment options.