Showing papers in "Journal of Labor Economics in 2009"

Does Your Cohort Matter? Measuring Peer Effects in College Achievement

Abstract: We estimate peer effects in college achievement using a data set in which individuals are exogenously assigned to peer groups of about 30 students with whom they are required to spend the majority of their time interacting. This feature enables us to estimate peer effects that are more comparable to changing the entire cohort of peers. Using this broad peer group, we measure academic peer effects of much larger magnitude than found in previous studies. The effects persist at a diminished rate into follow‐on years, and we find evidence of nonlinearities in the magnitude of the effects across student academic ability.

New Evidence about Brown v. Board of Education: The Complex Effects of School Racial Composition on Achievement

Abstract: Uncovering the effect of school racial composition is difficult because racial mixing is not accidental but instead an outcome of government and family choices. Using rich panel data on the achievement of Texas students, we disentangle racial composition effects from other aspects of school quality and from differences in abilities and family background. The estimates strongly indicate that a higher percentage of black schoolmates reduces achievement for blacks, while it implies a much smaller and generally insignificant effect on whites. These results suggest that existing levels of segregation in Texas explain a small but meaningful portion of the racial achievement gap.

Ethnic Enclaves and Immigrant Labor Market Outcomes: Quasi‐Experimental Evidence

Abstract: I examine the effects of the ethnic enclave size on labor market outcomes of immigrants. I account for ability sorting into enclaves by exploiting a Danish spatial dispersal policy under which refugees were randomly dispersed across locations. First, I find strong evidence that refugees with unfavorable unobserved characteristics self‐select into ethnic enclaves. Second, a relative standard deviation increase in the ethnic enclave size increases annual earnings by 18% on average, irrespective of skill level. Third, further findings are consistent with the explanation that ethnic networks disseminate job information, which increases the job‐worker match quality and thereby the hourly wage rate.

Peer Effects in European Primary Schools: Evidence from the Progress in International Reading Literacy Study

Abstract: We estimate peer effects for fourth graders in six European countries. The identification relies on variation across classes within schools, which we argue are formed roughly randomly. The estimates are much reduced within schools compared to the standard ordinary least squares (OLS) results. This could be explained either by selection into schools or by measurement error in the peer variable. Correcting for measurement error, we find within‐school estimates close to the original OLS estimates. Our results suggest that the peer effect is modestly large, measurement error is important in our survey data, and selection plays little role in biasing peer effects estimates.

Student Demographics, Teacher Sorting, and Teacher Quality: Evidence from the End of School Desegregation

Abstract: The reshuffling of students due to the end of student busing in Charlotte‐Mecklenburg provides a unique opportunity to investigate the relationship between changes in student attributes and changes in teacher quality that are not confounded with changes in school or neighborhood characteristics Comparisons of ordinary least squares and instrumental variable results suggest that spatial correlation between teachers’ residences, students’ residences, and schools could lead to spurious correlation between student attributes and teacher characteristics Schools that experienced a repatriation of black students experienced a decrease in various measures of teacher quality I provide evidence that this was primarily due to changes in labor supply

Manager Race and the Race of New Hires

Abstract: Using personnel data from a large U.S. retail firm, we examine whether the race or ethnicity of the hiring manager affects the racial composition of new hires. We exploit manager turnover to estimate models with store fixed effects and store‐specific trends. First, we find that all nonblack managers—that is, whites, Hispanics, and Asians—hire more whites and fewer blacks than do black managers. This is especially true in the South. Second, in locations with large Hispanic populations, Hispanic managers hire more Hispanics and fewer whites than do white managers. We also examine possible explanations for these differential hiring patterns.

GLOBALIZATION AND THE PROVISION OF INCENTIVES INSIDE THE FIRM: The Effect of Foreign Competition

Abstract: This paper studies the effect of changes in foreign competition on the structure of compensation and incentives of U.S. executives. We measure foreign competition as import penetration and use tariffs and exchange rates as instrumental variables to estimate its causal effect on pay. We find that higher foreign competition leads to more incentive provision in a variety of ways. First, it increases the sensitivity of pay to performance. Second, it increases whithin-firm pay differentials between executive levels, with CEOs typically experiencing the largest wage increases, partly because they receive the steepest incentive contracts. Finally, higher foreign competition is also associated with a higher demand for talent. These results indicate that increased foreign competition can explain some of the recent trends in compensation structures.

Renouncing Personal Names: An Empirical Examination of Surname Change and Earnings

Abstract: We study the effects of surname change to Swedish‐sounding or neutral names on earnings for immigrants from Asian/African/Slavic countries. To estimate this effect, we exploit the variation resulting from different timing of name changes across individuals during the 1990s. The results imply that there is a substantial increase in annual earnings after a name change, no effects on earnings prior to a name change, and no positive general effects of a new name for other groups that renounced a foreign name. Based on these findings, we argue that these effects are due to name change as a response to discrimination.

The Effect of Teachers’ Unions on Education Production: Evidence from Union Election Certifications in Three Midwestern States

Abstract: Using a unique data set on teachers’ union election certifications from Iowa, Indiana, and Minnesota, I estimate the effect of teachers’ unions on school district resources and on student educational attainment. My empirical strategy allows for nonparametric leads and lags of union age. I find no impact on teacher pay or per student district expenditures but that unions increase teacher employment by 5%. I find no class size effect because of enrollment increases in unionized districts, and I estimate that unions have no net effect on high school dropout rates. These findings highlight the importance of correctly measuring unionization status.

Dismissals for Cause: The Difference That Just Eight Paragraphs Can Make *

Abstract: This paper provides evidence about the effects of dismissals-for-cause requirements, a specific component of employment protection legislation that has received little attention despite its potential relevance. We study a quasi-natural experiment generated by a law introduced in Portugal in 1989: out of the 12 paragraphs in the law that dictated the costly procedure required for dismissals for cause, eight did not apply to firms employing 20 or fewer workers. Using detailed matched employer-employee longitudinal data and differencein-differences matching methods, we examine the impact of that differentiated change in firing costs upon several variables, measured from 1991 to 1999. Unlike predicted by theory, we do not find robust evidence of effects on worker flows. However, firm performance improves considerably while wages fall. Overall, the results suggest that firing costs of the type studied here decrease workers’ effort and increase their bargaining power.

Are Training Programs More Effective When Unemployment Is High

Abstract: We estimate short‐run, medium‐run, and long‐run individual labor market effects of training programs for the unemployed by following program participation on a monthly basis over a 10‐year period. Since analyzing the effectiveness of training over such a long period is impossible with experimental data, we use an administrative database compiled for evaluating German training programs. Based on matching estimation adapted to address the various issues that arise in this particular context, we find a clear positive relation between the effectiveness of the programs and the unemployment rate over time.

The Impact of Low-Skilled Immigration on the Youth Labor Market

Abstract: The employment to population rate of high school–aged youth has fallen by about 20 percentage points since the late 1980s. One potential explanation is increased competition from substitutable labor, such as immigrants. I demonstrate that the increase in the population of less educated immigrants has had a considerably more negative effect on employment outcomes for native youth than for native adults. At least two factors are at work: there is greater overlap between the jobs that youth and less educated adult immigrants traditionally do, and youth labor supply appears more responsive to immigration-induced wage changes.

Performance pay and managerial experience in multitask teams: evidence from within a firm

Abstract: This article exploits a quasi‐experimental setting to estimate the impact that a commonly used performance‐related pay scheme had on branch performance in a large distribution firm. The scheme, which is based on the Balanced Scorecard, was implemented in all branches in one division but not in another. Branches from the second division are used as a control group. Our results suggest that the Balanced Scorecard had some impact but that it varied with branch characteristics, and, in particular, branches with more experienced managers were better able to respond to the new incentives.

Using Alsace-Moselle local laws to build a difference-in-differences estimation strategy of the employment effects of the 35-hour workweek regulation in France

Abstract: France’s 1998 implementation of the 35‐hour workweek has been one of the greatest regulatory shocks on labor markets. Few studies evaluate the impact of this regulation because of a lack of identification strategies. For historical reasons due to the way Alsace‐Moselle was returned to France in 1918, the implementation of France’s 35‐hour workweek was less stringent in that region than in the rest of the country, which is confirmed by double and triple differences. Yet it shows no significant difference in employment with the rest of France, which casts doubt on the effectiveness of this regulation.

Accounting for Racial Differences in Marriage and Employment

Abstract: What can account for the differences in marriage and employment decisions across blacks and whites? To answer this question, I develop a dynamic, equilibrium model of marriage. Two explanations for the racial differences in behavior are considered: differences in population supplies and wages. Black‐white differences in population supplies explain one‐fifth of the difference in marriage rates and between one‐fifth and one‐third of the differences in employment rates across race. Removing the racial gap in wages eliminates the differences in employment but increases the differences in marriage rates.

Firm‐Size Wage Gaps, Job Responsibility, and Hierarchical Matching

Abstract: I present the fact that wage gaps due to firm size increase with job responsibility. I use Swedish data to determine whether wage gaps increase with a direct measure of job responsibility, to compare the age patterns of the wage gaps for blue‐ and white‐collar workers, and to compare wages by job responsibility and spans of control. With U.S. data, I compare supervisory to nonsupervisory occupations and find that wage gaps increase with job responsibility for most occupational ladders. This fact is consistent with hierarchical matching models in which the larger number of subordinates amplifies managerial talent.

Job Security Legislation and Job Duration: Evidence from the United Kingdom

Abstract: Even in countries with high average job security, workers with low tenure typically enjoy very limited job protection. This study analyzes the impact of such a feature on job duration. It uses a 1999 British reform that increased job security for workers with 1–2 years of tenure. The firing hazard for these workers decreased by 26% relative to the hazard for workers with 2–4 years of tenure. The firing hazard for workers with 0–1 year of tenure also decreased by 19%, which is consistent with better recruitment practices and hence improved match quality.

Why Does Spousal Education Matter for Earnings? Assortative Mating and Cross‐Productivity

Abstract: Spousal education is correlated with earnings for two reasons: cross‐productivity between couples and assortative mating. This article empirically disentangles the two effects by using Chinese twins data. We have two innovations: using twins data to control for the unobserved mating effect in our estimations and estimating both current and wedding‐time earnings equations. We find that both crossproductivity and mating are important in explaining the current earnings. Although the mating effect exists for both husbands and wives, the cross‐productivity effect mainly runs from Chinese husbands to wives. Our findings shed light on the theories of human capital, marriage, and the family.

Work and Leisure: A History of Ideas

Abstract: This article reexamines an old question: what is work and why do we do it? A straightforward “economic” answer is that work is any time activity for which we receive a positive wage, but this raised the question of which activities command a positive wage. Now the answer depends on market level considerations such as the available technology and the joint distribution of preferences and skills in the population. Unfortunately, these fundamentals are not directly observed, and we must infer them somehow from observations on wages and individual choices. This circular logic leaves a lot of room for speculation and arbitrary definitions. In this article, I survey this speculative territory and examine the views of classical economists (and philosophers) on work, its pain, and its rewards. I also discuss the impact of the economic and social context in which work is performed on individual attitudes toward work. My main objective is to review labor economics from the broader perspective of outsiders, including those who established our field. Labor is a familiar activity that most humans have experienced and many have thought about. The ideas and questions raised here are intended to stimulate current professional economists to step back and rethink concepts

When to Start a Fight and When to Fight Back: Liability Disputes in the Workers' Compensation System

Abstract: Contrary to the original intention of no‐fault workers’ compensation laws, employers deny liability for a substantial fraction of on‐the‐job injuries. We develop and estimate a simple structural model that explains the high rate of litigation as a consequence of asymmetric information. We estimate the model using data for a large sample of back injuries in Minnesota. Simulations under the counterfactual assumption that all denied workers pursue their claims suggest that the strategic incentive accounts for 30%–40% of observed liability disputes.