Showing papers by "Institute for the Study of Labor published in 1999"

Cooperation and Punishment in Public Goods Experiments

Abstract: This paper provides evidence that free riders are heavily punished even if punishment is costly and does not provide any material benefits for the punisher. The more free riders negatively deviate from the group standard the more they are punished. As a consequence, the existence of an opportunity for costly punishment causes a large increase in cooperation levels because potential free riders face a credible threat. We show, in particular, that in the presence of a costly punishment opportunity almost complete cooperation can be achieved and maintained although, under the standard assumptions of rationality and selfishness, there should be no cooperation at all. We also show that free riding causes strong negative emotions among cooperators. The intensity of these emotions is the stronger the more the free riders deviate from the group standard. Our results provide, therefore, support for the hypothesis that emotions are guarantors of credible threats.

Fiscal Policy, Profits, and Investment

Abstract: This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries. In particular, we investigate how different types of fiscal policy affect profits and , as a result, investment. We find a sizable negative effect of public spending -- and in particular of its public wage component -- on business investment. This result is consistent with models in which government employment creates wage pressure for the private sector. Various types of taxes also have negative effects on profits, but, interestingly, the effects of government spending on investment are larger than the effect of taxes. Our results have important implications for the so called 'Non-Keynesian' (i.e. expansionary) effects of fiscal adjustments.

Instrumental Variables Estimates Of The Effect Of Subsidized Training On The Quantiles Of Trainee Earnings

Abstract: The effect of government programs on the distribution of participants? earnings is important for program evaluation and welfare comparisons. This paper reports estimates of the effects of JTPA training programs on the distribution of earnings. The estimation uses a new instrumental variable (IV) method that measures program impacts on the quantiles of outcome variables. This quantile treatment effects (QTE) estimator accommodates exogenous covariates and reduces to quantile regression when selection for treatment is exogenously determined. The QTE estimator can be computed as the solution to a convex linear programming problem, although this requires first-step estimation of a nuisance function. We develop distribution theory for the case where the first step is estimated nonparametrically. For women, the empirical results show that the JTPA program had the largest proportional impact at low quantiles. Perhaps surprisingly, however, JTPA training raised the quantiles of earnings for men only in the upper half of the trainee earnings distribution.

Racial Bias in Motor Vehicle Searches: Theory and Evidence

Abstract: African- American motorist in the United States are much more likely than white motorists to have their car searched by police checking for illegal drugs and other contraband. The courts are faced with the task of deciding on the basis of traffic-search data whether police behavior reflects a rackial bias. We discuss why a simple test for racial bias commonly applied by the courts is inadequate and develop a model of law enforcement that suggests an alternative test. The model assumes a population with two racial types who also differ along other dimensions relevant to criminal behavior. Using the model, we construct a test for whether racial disparities in motor vehicle searches reflect racial prejudice, or instead are consistent with the behavior of non-prejudiced police maximizing drug interdiction. The test is valid even when the set of characteristics observed by the police is only partially observable by the econometrician. We apply the test to traffic-search data from Maryland and find the observed black-white disparities in search rates to be consistent with the hypothesis of no racial prejudice. Finally, we present a simple analysis of the tradeoff between efficiency of drug interdiction and racial fairness in policing. We show that in some circumstances there is no trade-off; constraining the police to be color-blind may achieve greater efficiency in drug interdiction.

Does Training Generally Work? The Returns to In-Company Training

Abstract: This paper applies the familiar theoretical distinction between general and specific training to the empirical task of estimating the returns to in-company training. Using a firm-level dataset which distinguishes between general and specific training, we test for the relative effects of the two types of training on productivity growth. We find that although general training has a statistically positive effect on productivity growth, no such effect is observable for specific training. This positive effect of general training remains when we control for factors such as changes in work organization and corporate re-structuring, firm size and the initial level of human capital in the enterprise. Moreover, the impact of general training varies positively with the level of capital investment.

Assessing Affirmative Action

Abstract: Although the debate over Affirmative Action is both high-profile and high-intensity, neither side's position is based on a well-established set of research findings. Economics provides an extensive, well-known literature on which to draw regarding the existence and extent of labor market discrimination against women and minorities, although views may often conflict, and a less extensive but also well-known literature on the effects of Affirmative Action on the employment of women or minorities. However, research by economists provides much less evidence and even less of a consensus on the question of whether Affirmative Action improves or impedes efficiency or performance, which is perhaps the key economic issue in the debate over Affirmative Action. This review focuses on all of these issues regarding Affirmative Action, but the major focus is on the efficiency/performance question. All in all, the evidence suggests to us that it may be possible to generate Affirmative Action programs that entail relatively little sacrifice of efficiency. Most importantly, there is at this juncture very little compelling evidence of deleterious efficiency effects of Affirmative Action. This does not imply that such costs do not exist, nor that the studies we review have captured the overall welfare effects of Affirmative Action. It does imply, though, that the empirical case against Affirmative Action on the grounds of efficiency is weak at best.

Is Child Like Parent? Educational Attainment and Ethnic Origin

Abstract: The speed at which immigrants assimilate is the subject of debate. Human capital formation plays a major role in this discussion. This paper compares the educational attainment of second generation immigrants to those of natives in the same age cohort. Evidence using a large German data set suggests ethnicity does matter: the size of the ethnic network has a positive effect on educational attainment, and a clear pattern is exhibited between countries-of-origin and educational attainment even in the second generation. For the children of the foreign-born, parental schooling plays no role in making educational choices. However, for Germans, contrary to the general findings in the literature, there is a statistically significant difference in favor of father's education over mother's education.

Productivity Growth and Convergence in Agriculture and Manufacturing

Abstract: The growth of agricultural productivity is widely believed to be low. But this study finds the productivity growth rate in agriculture to be higher than that in manufacturing, both on average and for groups of countries at different stages of development. This suggests that a large agricultural sector need not be a disadvantage for growth performance - and may be an advantage. Martin and Mitra examine the growth and convergence of total factor productivity in agriculture and manufacturing in a large sample of countries spanning many levels of development over the period 1967-92. There is a widely held but rarely tested view that the rate of growth in agricultural productivity is invariably low. But Martin and Mitra find that the rate of productivity growth in agriculture has been higher than in manufacturing both on average and for groups of countries at different stages of development. Martin and Mitra find evidence of high rates of technical progress in both agriculture and manufacturing. At all levels of development, however, technical progress appears to have been faster in agriculture than in manufacturing. Moreover, there appears to be a stronger tendency for levels and growth rates of total factor productivity to converge in agriculture than in manufacturing - suggesting that international dissemination of innovations has been relatively rapid in agriculture. These results may well reflect the important investments in agricultural research and development in recent decades. They also highlight the need to continue developing and disseminating innovations if countries are to maintain high rates of productivity growth. This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to understand the links between trade and growth.

Teenage Childbearing and its Life Cycle Consequences: Exploiting a Natural Experiment

Abstract: In this paper, we exploit a 'natural experiment' associated with human reproduction to identify the effect of teen childbearing on subsequent educational attainment, family structure, labor market outcomes and financial self-sufficiency. In particular, we exploit the fact that a substantial fraction of women who become pregnant experience a miscarriage (spontaneous abortion) and thus do not have a birth. If miscarriages were purely random and if miscarriages were the only way, other than by live births, that a pregnancy ended, then women, who had a miscarriage as a teen, would constitute an ideal control group with which to contrast teenage mothers. Exploiting this natural experiment, we devise an Instrumental Variables (IV) estimators for the consequences of teen mothers not delaying their childbearing, using data from the National Longitudinal Survey of Youth, 1979 (NLSY79). Our major finding is that many of the negative consequences of not delaying childbearing until adulthood are much smaller than has been estimated in previous studies. While we do find adverse consequences of teenage childbearing immediately following a teen mother's first birth, these negative consequences appear short- lived. By the time a teen mother reachers her late twenties, she appears to have only slightly more children, is only slightly more likely to be single mother, and has no lower levels of educational attainment than if she had delayed her childbearing to adulthood. In fact, by this age teen mothers appear to be better off in some aspects of their lives. Teenage childbearing appears to raise levels of labor supply, accumulated work experience and labor market earnings and appears to reduce the chances of living in poverty and participating in the associated social welfare programs. These estimated effects imply that the cost of teenage childbearing to U.S. taxpayers is negligible. In particular, our estimates imply that the widely held view that teenage childbearing imposes a substantial cost on government is an artifact of the failure to appropriately account for pre- existing socioeconomic differences between teen mothers and other women when estimating the causal effects of early childbearing. While teen mothers are very likely to live in poverty and experience other forms of adversity, our results imply that little of this would be changed just by getting teen mothers to delay their childbearing into adulthood.

Personnel Economics: Past Lessons and Future Directions

Abstract: In 1987, the Journal of Labor Economics published an issue on the economics of personnel. Since then, personnel economics, defined as the application of labor economics principles to business issues, has become a major part of labor economics, now accounting for a substantial proportion of papers in this and other journals. Much of the work in personnel economics has been theoretical, in large part because the data needed to test these theories has not been available. In recent years, a number of firm-based data sets have surfaced that allow personnel economics to be tested. Using two such data sets, the implications of theories that relate to life-cycle incentives compression, and peer pressure are given support. The conclusion is that personnel economics is real. It is far more than a set of clever theories. It has relevance to the real world. Additionally, firm-based data make asking and answering new kinds of questions feasible. The value of research in this area is high because so little is known as compared with other fields in labor economics. Questions about the importance of a worker's relative position in a firm, about intrafirm mobility, about the effect of the firm's business environment on worker welfare, about the significance of first impressions can be answered using the new data. Finally, it is argued that the importance of personnel economics in undergraduate as well as business school curricula will continue to grow.

The Effects of Sons and Daughters on Men's Labor Supply and Wages

Abstract: In this paper we estimate the effects of children and the differential effects of sons and daughters on men's labor supply and hourly wage rates. The responses to fatherhood of two cohorts of men from the PSID sample--men born in and before 1950 and men born after 1950--are examined separately, and we use fixed effects estimation to control for unobserved heterogeneity. We find that fatherhood significantly increases the hourly wage rates and annual hours of work for men from both cohorts, and that it is important to allow for heterogeneity and non-linearity in estimating these effects. Most notably, men's labor supply and wage rates increase significantly more in response to the births of sons than to the births of daughters.

The Transmission Mechanism of Monetary Policy in Europe: Evidence from Banks' Balance Sheets

Abstract: Available studies on asymmetries in the monetary transmission mechanism within Europe are invariably based on macro-economic evidence: such evidence is abundant but often contradictory. This paper takes a different route by using micro-economic data. We use the information contained in the balance sheets of individual banks (available from the BankScope database) to implement a case-study on the response of banks in France, Germany, Italy and Spain to a monetary tightening. The episode we study occurred during 1992, when monetary conditions were tightened throughout Europe. Evidence on such tightening is provided by the uniform squeeze in liquidity, which affected all banks in our sample. We study the first link in the transmission chain by analysing the response of bank loans to the monetary tightening. Our experiment provides evidence on the importance of the Europe and thus on one possibly important source of asymmetries in the monetary transmission mechanism. We do not find evidence of a significant response of bank loans to the monetary tightening, which occurred during 1992, in any of the four European countries we have considered. However we find significant differences both across countries and across banks of different dimensions in the factors that allow them to shield the supply of loans from the squeeze in liquidity.

The Impact of U.S. News & World Report College Rankings on Admissions Outcomes and Pricing Policies at Selective Private Institutions

Abstract: Despite the widespread popularity of the U.S. News & World Report College rankings there has been no empirical analysis of the impact of these rankings on applications, admissions, and enrollment decisions, as well as on institutions' pricing policies. Our analyses indicate that a less favorable rank leads an institution to accept a greater percentage of its applicants, a smaller percentage of its admitted applicants matriculate, and the resulting entering class is of lower quality, as measured by its average SAT scores. While tuition levels are not responsive to less favorable rankings, institutions offer less visible price discounts in the form of slightly lower levels of expected self-help (loans and employment opportunities) and significantly more generous levels of grant aid. These decreases in net tuition are an attempt to attract additional students from their declining applicant pool.

The Effect of Attending a Small Class in the Early Grades on College-Test Taking and Middle School Test Results: Evidence from Project Star

Abstract: This paper provides a long-term follow up of students who participated in the Tennessee STAR experiment. The Tennessee STAR experiment randomly assigned 11,600 elementary school students and their teachers to a small class, regular-size class or regular-size class with a teacher-aide. The experiment began with the wave of students who entered kindergarten in 1985, and lasted for four years. After third grade, all students returned to regular-size classes. We analyze the effect of past attendance in a small class on standardized test scores through the eighth grade, on whether students took the ACT or SAT college entrance exam, and on how they performed on the ACT or SAT exam. The results suggest that attending a small class in the early grades is associated with somewhat higher performance on standardized tests, and an increase in the likelihood that students take a college-entrance exam, especially among minority students. Most significantly, being assigned to a small class appears to have narrowed the black-white gap in college-test taking by 54 percent.

Gross Worker and Job Flows in a Transition Economy: An Analysis of Estonia

Abstract: Estonia shows that intense restructuring after the opening of product and labor markets need not lead to massive increases in unemployment. The evidence suggests that flexibility in the labor market is vital in a transition's success, especially in a country undergoing rapid reform. With the transition in Estonia, worker flows increased greatly, driven by an increase in job flows. As the situation stabilized, the job and worker flows converged at rates similar to those observed in Western economies. In 1989, job reallocation accounted for only a small fraction of overall worker reallocation, which was less than 15 percent. By 1993, the worker reallocation rate exceeded 35 percent, more than two-thirds of it attributable to job reallocation. The dramatic increase in job flows was the result of increased separations, as jobs were eliminated. In 1992, early in the transition, the situation looked ominous but in only a couple of years new jobs and hires surged as well. By 1994, the hiring rate exceeded the separation rate, and jobs were being created faster than they were being eliminated. Increased job and worker reallocations did not affect all sectors or types of employee the same way. More jobs were eliminated in large state manufacturing firms and more jobs were created by smaller, private service and trade-oriented employers. Virtually all of the new jobs came from the private sector (although many jobs were eliminated there, too). The elimination of so many jobs accounted for about half the increase in direct job-to-job transitions (from less than 5 percent in 1989 to 15 percent in 1994). Opening product and labor markets in Estonia led to a remarkable surge in worker and job flows. Early in the transition so many jobs were eliminated that things looked ominous, but within a couple years small private firms led the surge in new jobs and hiring. This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to investigate labor markets. The study was funded by the Bank's Research Support Budget under research project Labor Market Adjustment in Estonia (RPO 679-71).

Information Acquisition in Financial Markets

Abstract: Previous work on information and financial markets has focused on a special set of assumptions: agents have exponential utility, and random variables are normally distributed. These assumptions are often necessary to obtain closed-form solutions. We present an example with alternative assumptions, and demonstrate that some of the conclusions from previous literature fail to hold. In particular, we show that in our example, as more agents acquire information, prices do not necessarily become more informative, and agents may have greater incentive to acquire information. Learning can therefore be a strategic complement, allowing for the possibility of multiple equilibria.

Regulation and Labour Market Performance

Abstract: The increasing literature on the interactions between liberalisation-integration of product markets and labour market reforms is often highly speculative and draws on a rather weak empirical basisCross-country indicators of regulatory frameworks are often lacking, making it difficult to identify the linkages with observed outcomes in the labour and product markets Moreover, empirical studies have often focused exclusively on the impact of certain labour market regulations, largely ignoring the role of product market regulations and the interactions between regulatory interventions in the two markets As a result, while there are convincing theoretical arguments pointing to a potentially positive effect of product market liberalisation on labour market performance, empirical investigations of this issue are lacking This paper aims at providing some preliminary evidence on these issues In particular, the cross-country patterns and changing profile of product and labour market regulations are identified Evidence on the relationships between product and labour market regulations is discussed in the context of other policies and institutional factors affecting the labour market, and the clustering and convergence of institutions across countries are characterised More importantly, the paper reports evidence of a potentially significant impact of product and labour market regulations on employment and its composition The evidence presented draws heavily on a novel set of cross-country indicators of regulation in the product and labour markets assembled at the OECD It should be stressed at the outset that these indicators are preliminary estimates and should be taken only as rough approximations of the regulatory stance across OECD countries

Fertility Assimilation of Immigrants: Evidence from Count Data Models

Abstract: This study applies count data estimation techniques to investigate the fertility adjustment of immigrants in the destination country. Data on completed fertility are taken from the 1996 wave of the German Socioeconomic Panel (GSOEP). While the economic literature stresses the role of prices and incomes as determinants of fertility, the demographic literature discusses whether assimilation or disruption effects dominate immigrants' fertility after migration. We find evidence in favor of the assimilation model according to which immigrant fertility converges to native levels over time. In addition, we confirm the negative impact of female human capital on fertility outcomes.

New Developments in Models of Search in the Labor Market

Abstract: This paper surveys recent work in equilibrium models of labor markets characterized by search and recruitment frictions and by the need to reallocate workers across productive activities. The duration of unemployment and jobs and wage determination are treated as endogenous outcomes of job creation and job destruction decisions made by workers and firms. The solutions studied are dynamic stochastic equilibria in the sense that time and uncertainty are explicitly modeled, expectations are rational, private gains from trade are exploited and the actions taken by all agents are mutually consistent. A number of alternative wage determination mechanisms are explored, including the frequently studied non-cooperative wage bargaining and wage posting by firms. We use the framework to study the influence of alternative labor market institutions and policies on wages and unemployment.

Immigrant Assimilation and Welfare Participation: Do Immigrants Assimilate Into or Out of Welfare?

Abstract: This paper analyzes differences in welfare utilization between immigrants and natives in Sweden using a large panel data set, LINDA, for the years 1990 to 1996. Both welfare expenditures and immigration increased substantially in Sweden in the 1990's. We find that immigrants use welfare to a greater extent than natives and that non-refugee immigrants utilize social assistance less than refugee immigrants. Differences in welfare participation and number of months on welfare between immigrants and natives cannot be explained by observable socioeconomic characteristics. Using a random effects probit model, we find that immigrants lower their participation rates in welfare with time spent in Sweden. Refugees display substantially higher public assistance participation rates upon arrival in Sweden compared to non-refugee immigrants, but they assimilate out of welfare at a faster rate than non-refugee immigrants. Neither immigrant group is predicted to reach the participation rates of native households within a 20 year period in Sweden. A fixed effects logit model supports these findings. The predicted differences in the length of social assistance spells follow a very similar pattern. Simulations of the move to a national uniform benefits structure in 1998 show a decrease in the participation rate and in expenditures.

The Employment, Earnings, and Income of Less-Skilled Workers over the Business Cycle

Abstract: In this paper, I examine the effect of business cycles on the employment, earnings, and income of persons in different demographic groups. I classify individuals by sex, education, and race. The analysis uses data from the Current Population Survey's Outgoing Rotation Group file, covering the period 1979-1992, and March Annual Demographic files (ADF) covering the period 1975-1997. Many different individual and family outcome measures are considered including: employment to population ratios, weekly earnings, hourly earnings, annual hours, annual earnings, family earnings, family transfer income, and total family income. The regression model is specified such that the key parameters measure how the labor market outcomes of less skilled workers vary with the business cycle relative to the variability for high skill groups. The analysis uses variation across MSAs in the timing and severity of shocks. The results consistently show that individuals with lower education levels, nonwhites, and low skill women experience greater cyclical fluctuation than high skill men. These results are the most striking when examining comprehensive measures of labor force activity such as the likelihood of full-time year around work. Government transfers and the earnings of other family members decrease the differences between groups, as business cycles have more skill-group neutral effects on family income than individual earnings. The paper examines the stability of these results by comparing evidence across the 1982 and 1992 recessions. The evidence suggests that the 1992 recession led to more uniform effects across skill groups than earlier cycles.

Trade, Technology and UK Wage Inequality

Abstract: The UK skill premium fell from the 1950s to the late 1970s and then rose very sharply This paper examines the contributions to these relative wage movements of international trade and technical change We first measure trade as changes in product prices and technical change as TFP growth Then we relate price and TFP changes to a set of underlying factors Among a number of results, we find that changes in prices, not TFP, were the major force behind the rise in inequality in the 1980s We also find that although increased trade pressure has raised technical change, its effect on wage inequality was not quantitatively significant

Active Labour Market Policies in Poland: Human Capital Enhancement, Stigmatization or Benefit Churning?

Abstract: This paper provides micro-econometric evidence on the effectiveness of Active Labor Market Policies (ALMP) in Poland. We sketch the theoretical framework of matching estimators as a substitute for randomization in labor market programs. Using retrospective data from the 18th wave of the Polish Labor Force Survey we implement a conditional difference-in-differences matching estimator of treatment effects. Treatment and control groups are matched over individual observable characteristics and pre-treatment labor market histories to minimize bias from unobserved heterogeneity. We also require that observations on controls are from the same regional labor market and from an identical phase of the transition cycle. Considering as the outcome a multinomial variable of labor market status, our first important finding suggests that training of men and women has a positive effect on the employment probability. For men public works and intervention works have negative treatment effects, while participation in intervention works does not affect women's employment probabilities. We attribute the negative treatment effects for men to benefit churning rather than to stigmatization of intervention and public works participants.

Schooling, Intelligence, and Income in America: Cracks in the Bell Curve

Abstract: One of the best documented relationships in economics is the link between education and income: higher educated people have higher incomes. Advocates argue that education provides skills, or human capital, that raises an individual's productivity. Critics argue that the documented relationship is not causal. Education does not generate higher incomes; instead, individuals with higher ability receive more education and more income. This essay reviews the evidence on the relationship between education and income. We focus on recent studies that have attempted to determine the causal effect of education on income by either comparing income and education differences within families or using exogenous determinants of schooling in what are sometimes called natural experiments.' In addition, we assess the potential for education to reduce income disparities by presenting evidence on the return to education for people of differing family backgrounds and measured ability. The results of all these studies are surprisingly consistent: they indicate that the return to schooling is not caused by an omitted correlation between ability and schooling. Moreover, we find no evidence that the return to schooling differs significantly by family background or by the measured ability of the student.

The Levels and Cyclical Behaviour of Mark-ups across Countries and Market Structures

Abstract: In this paper, we present estimates of the mark-up of product price over marginal costs for the manufacturing industries of the US and the other G-5 countries. The paper extends the analysis used in previous studies based on nominal productivity residuals by considering intermediate inputs and cyclical fluctuations of price margins. The estimated steady-state mark-ups are positive but moderate, generally in the range of 10-20 per cent, although with significant country differences. The results also support the hypothesis of countercyclical price margins in most manufacturing industries, especially in the presence of downward rigidities of labour inputs. This offers an appealing interpretation for the procyclicality of real wages and enables to better estimate TFP. Finally, we investigate the role of market structures on the levels and cyclicality of mark-ups. The distinction between fragmented and segmented industries provides a relatively robust evidence that the price-setting behaviour is indeed related to the type of market structures.

The Intriguing Relation between Adult Minimum Wage and Child Labor

Abstract: Raising adult wages through a minimum wage law can in some circumstances have the paradoxical effect of increasing the amount of child labor. In other words, using minimum wage legislation as a form of international labor standard can exacerbate problems of child labor. According to International Labour Organisation estimates, roughly 250 million children work full or part time, most of them in developing countries. Because most parents send their children to work only when compelled by poverty to do so, one would expect an increase in adult wages to reduce the amount of child labor. But an increase in adult wages achieved through a minimum wage law sometimes has a paradoxical effect. It can, for instance, cause some adults to be unemployed and force them to send their children to work. This in turn displaces more adult labor, with the result that more children are sent to work. Basu analyzes this process with a view to predicting the incidence of child labor. He shows that, for appropriate parametric configurations, child labor may rise or fall as the adult minimum wage is raised. This paper - a product of the Office of the Senior Vice President, Development Economics - is part of a larger effort in the Bank to promote understanding of the causes of child labor. The study was funded by the Bank's Research Support Budget under the research project Literacy and Child Labor (RPO 683-07).

Do Stock Markets Promote Economic Growth

Abstract: One of the most enduring debates in economics is whether financial development causes economic growth or whether it is a consequence of increased economic activity. Little research into this question, however, has used a true causality framework. This paper fills this lacuna by using Granger-causality tests and finds little evidence of a causal relationship going from stock market development to economic growth. We do find evidence that stock market development can cause currency appreciation, which may confound studies that use dollar denominated measures of economic growth.

Trade, technology and u.k. wage inequality*

Abstract: This paper examines the impact of international trade and technical change on changes in the UK skill premium. We first measure trade as changes in product prices and technical change as TFP growth. Then we relate price and TFP changes to a set of underlying forces. Among our results are (a) changes in prices, not TFP, were the major force behind the rise in inequality in the 1980s; (b) changes in OECD prices and UK tariffs significantly raised 1980s skill premia through their effects on prices, and that industry concentration significantly raised 1980s skill premia through its effect on TFP.

Male-Female Differences in Labor Market Outcomes During the Early Transition to Market: The Cases of Estonia and Slovenia

Abstract: Estonia adopted liberal labor market policies during the transition, and Slovenia took an interventionist approach. Even so, relative wages for women rose in both countries. Women were less mobile across jobs in both countries, so men disproportionately filled new jobs in expanding sectors. Orazem and Vodopivec analyze changes in women's relative wages, using social security data from Slovenia (1987-92) and a retrospective survey of Estonia's labor force (1989-94). Estonia adopted liberal labor market policies. Slovenia took an interventionist approach. Nevertheless, relative wages for women rose in both countries. Actually, real wages fell for both men and women, but women lost less than men did. Certain factors favored women: Returns to human capital rose during the transition. Relative labor demand shifted toward predominantly female sectors (health, education, financial services, retail trade) and away from traditionally male sectors (agriculture, manufacturing, mining, transportation). Women with low wages had a disproportionate incentive to exit the labor market, especially in Estonia. Women were less mobile across jobs in both countries, however, so men disproportionately filled new jobs in expanding sectors. Women who remained employed had higher average education levels. Women's relative immobility will tend to reduce their early relative gains. Their relative wages will also continue to fall if their share of the expanding sectors continues to fall. This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to investigate gender outcomes in transition economies. The study was funded by the Bank`s Research Support Budget under research project Labor Market Adjustment in Estonia (RPO 679-71).

Import Diversion Under European Antidumping Policy

Abstract: This Paper studies empirically the effects of European antidumping actions on import diversion from importers 'named' in an antidumping investigation, and potentially subject to protectionist measures, to countries 'not named' in the investigation. For this purpose we use a unique data set at the 8-digit product level. The amount of import diversion can be regarded as an indication of the effectiveness of antidumping policy, which is used to protect the home industry from foreign imports. We find that trade diversion in the European Union caused by antidumping actions-in contrast to the US-is limited, suggesting that the EU's antidumping policy is more effective in keeping imports out. This result holds even after controlling for selection-bias in the antidumping investigation procedure. A number of explanations for this difference in trade diversion as a result of antidumping policy between the EU and US are formulated.