Capitalism and Freedom

This essay reviews progress in empirical economics since Leamer's (1983) critique. Leamer highlighted the benefits of sensitivity analysis, a procedure in which researchers show how their results change with changes in specification or functional form. Sensitivity analysis has had a salutary but not a revolutionary effect on econometric practice. As we see it, the credibility revolution in empirical work can be traced to the rise of a design-based approach that emphasizes the identification of causal effects. Design-based studies typically feature either real or natural experiments and are distinguished by their prima facie credibility and by the attention investigators devote to making the case for a causal interpretation of the findings their designs generate. Design-based studies are most often found in the microeconomic fields of Development, Education, Environment, Labor, Health, and Public Finance, but are still rare in Industrial Organization and Macroeconomics. We explain why IO and Macro would do well to embrace a design-based approach. Finally, we respond to the charge that the design-based revolution has overreached.

The Credibility Revolution in Empirical Economics: How Better Research Design is Taking the Con out of Econometrics

It is increasingly common for analysts to seek out the opinions of individuals and organizations using attitudinal scales such as degree of satisfaction or importance attached to an issue Examples include levels of obesity, seriousness of a health condition, attitudes towards service levels, opinions on products, voting intentions, and the degree of clarity of contracts Ordered choice models provide a relevant methodology for capturing the sources of influence that explain the choice made amongst a set of ordered alternatives The methods have evolved to a level of sophistication that can allow for heterogeneity in the threshold parameters, in the explanatory variables (through random parameters), and in the decomposition of the residual variance This book brings together contributions in ordered choice modeling from a number of disciplines, synthesizing developments over the last fifty years, and suggests useful extensions to account for the wide range of sources of influence on choice

Modeling Ordered Choices: A Primer

Subjective well-being (SWB) is an extremely active area of research with about 170,000 articles and books published on the topic in the past 15 years. Methodological and theoretical advances have been notable in this period of time, with the increasing use of longitudinal and experimental designs allowing for a greater understanding of the predictors and outcomes that relate to SWB, along with the process that underlie these associations. In addition, theories about these processes have become more intricate, as findings reveal that many associations with SWB depend on people’s culture and values and the context in which they live. This review provides an overview of many major areas of research, including the measurement of SWB, the demographic and personality-based predictors of SWB, and process-oriented accounts of individual differences in SWB. In addition, because a major new focus in recent years has been the development of national accounts of subjective well-being, we also review attempts to use SWB measures to guide policy decisions.

Advances and Open Questions in the Science of Subjective Well-Being

This chapter reviews recent developments in research on public sector labor markets Public sector labor markets have two important characteristics which account for the interest in their operation First, public sector labor markets are large -- in most developed countries the public sector workforce accounts for over 15% of total employment Second, public sector labor markets are different from private sector labor markets Most importantly, politicians or bureaucrats may have objectives which differ from those of the owners of private sector firms; and the political system can allow scope for achieving those objectives where a market system would not The introductory sections of the chapter present a simple conceptual framework for thinking about the operation of public sector labor markets, and background information on a range of key characteristics of public sector labor markets such as union structure and the institutional environment for wage bargaining The main sections summarize a variety of research relating to earnings and employment outcomes in public sector labor markets First, studies which compare average earnings outcomes of public sector and private sector employees in a range of countries are reviewed Second, studies of the determinants of earnings of local government employees in the United States are described Third, various information on the earnings structure and distribution of earnings in the public sector and private sector is presented Fourth, studies of the level and composition of public sector employment are summarized A concluding section presents an overview of the main findings and themes from research on public sector labor markets, and suggests topics for future research

Recent developments in public sector labor markets

Effects of positive attitude on happiness and wage: Evidence from the US data

Using samples from the National Longitudinal Survey of Youth (NLSY) and following a bivariate probit approach, the current study estimates the worker's employment probability equations in both cross-sectional and panel data frameworks. The study demonstrates that the employment of the worker, which depends on both the worker's labor market participation decision and the employer's hiring decision, is determined partly by the positive and optimistic attitude of the worker. The effects of these attitude variables on both decisions are even larger than the effects of standard human capital variables. The study further demonstrates that the attitude variables affect employment probabilities of men and women differently because their effects on participation and hiring decisions are different.

Effects of positive attitude and optimism on employment: Evidence from the US data

To examine whether or not the worker's attitude to life affects his/her earnings, this study estimates wage equations with positive attitude as an explanatory variable under different econometric specifications. The results obtained from both cross-sectional and panel data confirm that positive and optimistic attitude to life influence the worker's wages positively, and that the magnitude of this effect is comparable to or even higher than the individual effects of the standard human capital variables on earnings. The study further demonstrates that in addition to its direct effects, positive attitude also affects earnings indirectly through its effects on schooling.

Effects of positive attitude on earnings: Evidence from the US longitudinal data

Following a bivariate probit approach and using the 1990 Public Use Microdata Samples (PUMS) for Los Angeles County, this study shows that the employment of teenage workers depends on both the worker's participation decision as well as the employer's hiring decision. Omission of the role of participation decision from the estimation of employment probability yields misleading evidence of hiring discrimination against Blacks. This evidence, however, disappears when the participation and hiring equations are estimated jointly in a bivariate framework. The study finds no evidence of discrimination against females and Latinos. In addition, the study shows that family, household and neighbourhood characteristics play significant roles in the determination of teen employment.

A bivariate probit approach to the determination of employment: a study of teen employment differentials in Los Angeles County

Past research on the federal sector job queue fails to incorporate the important role of unioniz- ation. We estimate a two-stage bivariate probit in which the willingness of a worker to queue for a union job enters the estimation of the federal queue. We demonstrate that the failture to implement our approach may lead to the inappropriate conclusion that there does not exist a federal queue in the US labour market. We identify the characteristics that lead workers to seek employment in the federal sector and, as a byproduct, also provide independent confirm- ation of the presence of a queue for union jobs. ability in bivariate probit models to examine job queues.' Abowd and Farber (1982) use Poirier's technique and find evidence of a queue of workers waiting for union jobs. They estimate separate equations determining which character- istics make a worker more likely to enter the queue and which characteristics make a worker more likely to be chosen from the queue. Indeed, Farber (1983), Leigh (1985) and Heywood (1990) have all reaffirmed the existence of a union queue under varying degrees of partial observability. Recently Venti (1987), Krueger (1988) and Heywood and Mohanty (1990) have examined whether or not a queue exists for federal government jobs. While this research confirms the existence of a federal queue, it fails to incorporate the earlier research indicating the presence of a union queue. Indeed, none of the authors controls for any dimension of unionization in the federal queue esti- mates. This failure is problematic, for several related reasons. First, Heywood and Mohanty (1994) demonstrate that statistical confirmation of a federal job queue is highly sensitive to specification, particularly the inclusion or exclusion of specific variables.2 Second, the federal sector is far more heavily unionized than the private sector (see Freeman 1986, 1988; Ichniowski 1988; and Reder 1988).' Thus, if the earlier research is correct and workers do queue for union

Madhu S. Mohanty

Papers

Effects of positive attitude on happiness and wage: Evidence from the US data

Effects of positive attitude and optimism on employment: Evidence from the US data

Effects of positive attitude on earnings: Evidence from the US longitudinal data

A bivariate probit approach to the determination of employment: a study of teen employment differentials in Los Angeles County

Estimation of the US Federal Job Queue in the Presence of an Endogenous Union Queue