Institute for the Study of Labor

About: Institute for the Study of Labor is a nonprofit organization based out in Bonn, Germany. It is known for research contribution in the topics: Wage & Unemployment. The organization has 2039 authors who have published 13475 publications receiving 439376 citations.

Do Incentive Contracts Undermine Voluntary Cooperation

Abstract: In this paper we provide experimental evidence indicating that incentive contracts may undermine voluntary cooperation. This suggests that explicit incentives may have costly side effects that have been largely neglected by economists. In our experiments the undermining effect is so strong that the incentive contracts are less efficient than contracts without any incentives. Buyers, who are in the role of principals, nonetheless, prefer the incentive contracts because they allow them tonappropriate a much larger share of the (smaller) total surplus and are, hence, more profitable for them. The undermining of voluntary cooperation through incentives is, in principle, consistent with models of inequity aversion and reciprocity. Additional experiments show, however, that the reduction of voluntary cooperation throughnincentives is partly due to a framing effect.

Migrant Opportunity and the Educational Attainment of Youth in Rural China

Abstract: In this paper, we investigate how reductions of barriers to migration affect the decision of middle school graduates to attend high school in rural China. Change in the cost of migration is identified using exogenous variation across counties in the timing of national identity card distribution, which made it easier for rural migrants to register as temporary residents in urban destinations. We show that timing of ID card distribution is unrelated to local rainfall shocks affecting demand for migration, and not related to proxies reflecting time-varying changes in village policy or administrative capacity. We find a robust negative relationship between migrant opportunity and high school enrollment. The mechanisms behind the negative relationship are suggested by observed increases in subsequent local and migrant non-agricultural employment of high school age young adults as the size of the current village migrant network increases.

Coastal climate change, soil salinity and human migration in Bangladesh

Abstract: Climate change is not only altering weather patterns but also accelerating sea-level rise, leading to increased inundation and saline contamination of soils. Given projected sea-level rise, it is imperative to examine the extent to which farmers in coastal Bangladesh can adapt by diversifying economic activities before resorting to migration within and across borders. Here, to identify patterns in how households adapt to increased sea/freshwater flooding and soil salinity, we analyse nationally representative socioeconomic and migration data against a suite of environmental variables constructed at the sub-district level. Our results show that inundation alone has negligible effects on migration and agricultural production. However, gradual increases in soil salinity correspond to increasing diversification into aquaculture and internal migration of household members. Salinity is also found to have direct effects on internal and international migration even after controlling for income losses, with mobility restricted to certain locations within Bangladesh. Our study suggests that migration is driven, in part, by the adverse consequences of salinity on crop production. Projected sea-level rise and increased flooding threaten coastal agriculture. Gradual increases in soil salinity, but not inundation alone, are shown to correspond to increasing diversification into aquaculture and higher levels of internal migration.

Does Measured School Quality Really Matter? An Examination of the Earnings-Quality Relationship

Abstract: This paper examines the economic and empirical foundations of the aggregate evidence on the effect of schooling quality on earnings. A common framework is presented which nests all previous studies as special cases. We discuss two crucial identifying assumptions and test them. The first assumption is the absence of region of birth - region of resident interactions in the return to schooling. This rules out patterns of migration on the basis of realized earnings in the destination state. Both parametric and nonparametric versions of this hypothesis are tested. Using 1970, 1980 and 1990 Census data, it is decisively rejected. A second assumption is that log earnings equations are linear - or nearly linear in schooling. This assumption is false. We find that estimated earnings-quality relationships are sensitive to specification of the earnings function. When false linearity assumptions are relaxed, the only effect of measured schooling quality is on the returns for college graduates. The evidence for an aggregate earnings-quality relationship is weak once false empirical restrictions are relaxed.

Real estate investors, the leverage cycle, and the housing market crisis

Abstract: We explore a mostly undocumented but important dimension of the housing market crisis: the role played by real estate investors. Using unique credit-report data, we document large increases in the share of purchases, and subsequently delinquencies, by real estate investors. In states that experienced the largest housing booms and busts, at the peak of the market almost half of purchase mortgage originations were associated with investors. In part by apparently misreporting their intentions to occupy the property, investors took on more leverage, contributing to higher rates of default. Our findings have important implications for policies designed to address the consequences and recurrence of housing market bubbles.