Labor Market Institutions and Gender Differences in Wage Inequality.

In this paper, we present graphical and quantitative evidence on the important role played by changes in labor market institutions on the rise in wage inequality in the United States during the 1980s. We show that the decline in the real value of the minimium wage and in the rate of unionization explains over a third of the rise in inequality among men.

On Labor Complementarity, Cultural Frictions and Strategic Immigration Policies

In this paper we consider a model with two industrialized countries that face a flow of immigration from the "rest of the world." The countries differ in three characteristics: the labor complementarity between the "native" population and immigrants, the population size, and the magnitude of the cultural friction between the natives and immigrants. We consider a non-cooperative game between two countries' when their strategic instrument is the choice of an immigration quota and the world immigrant wages introduce the spill-over effect between two countries. We first show that the quota game admits unique pure strategies Nash equilibrium. We then compare the equilibrium choices of two countries and show that even though the larger country attracts more immigrants, it chooses lower quota than its smaller counterpart. It also turns out that higher degree of labor complementarity between natives and immigrants and a lower degree of cultural friction between two groups yield higher immigration quota. We also examine the welfare implications of countries choices' and argue that coordinated and harmonized immigration policies may improve the welfare of both countries.

Social service provision, efficiency labor and economic development

This dissertation provides a theory of the effects and determinants of an economy's level of social services. The dissertation focuses on how the provision of social services will affect the effort decisions of workers, which will ultimately determine the economy's level of output. A worker decides on how much effort to contribute in relation to the level of social services he/she receives. The higher the level of social services received, the lower the cost—disutility—from providing effort will be. The government provides public infrastructure and social services (i.e. health services) in accordance with the economy's endowment of effort. In doing so, the government takes the aggregate effort endowment as given. Since, with higher individual work effort the higher the economy's total level of effort, failure by workers to coordinate effort levels will result in possible instances of low effort, low social services and low output; and, other instances of high effort, high social services and high output. Therefore, this dissertation predicts that in the context of social services, coordination failures in effort levels can lead to development traps. ^

Three essays on entrepreneurial entry, serial entrepreneurship, and labor turnover

This study explores two important aspects of entrepreneurship — liquidity constraints and serial entrepreneurs, with an additional analysis of occupational choice among wage workers. In the first essay, I revisit the question of whether entrepreneurs face liquidity constraints in business formation. The principle challenge is that wealth is correlated with unobserved ability, and adequate instruments are often difficult to identify. This paper uses the son's birth order as an instrument for household wealth. I exploit the data available in the Korean Labor and Income Panel Study, and find evidence of liquidity constraints associated with self-employment in South Korea. The second essay develops and tests a model that explains entry into serial entrepreneurship and the performance of serial entrepreneurs as the result of selection on innate ability. The model supposes that agents establish businesses with imperfect information about their entrepreneurial ability and the profitability of business ideas. Agents continually observe signals with which they update their beliefs, and this process eventually determines their next business choice. Selection on ability induces a positive correlation between entrepreneurial experience (measured by previous business earnings and founding experience) and serial business formation, as well as its subsequent performance. The predictions in the model are tested using panel data from the NLSY79. The analysis permits a distinction to be made between selection on innate ability and learning by doing. Motivated by previous empirical findings that white-collar workers had higher turnover rates than blue-collar workers during firm expansion, the third essay further examines job turnover among workers with or without specific skills. I present a search-matching model, which predicts that when firm growth is driven by technological advance, workers whose skills are specific to the obsolete technology show a higher tendency to separate from their jobs. This hypothesis is tested with data from the PSID. I find supportive evidence that in the context of technological change, having an occupation requiring specific skills, such as computer specialists or engineers, increases the odds of job separation by nearly eight percent. ^

Economics of Environmental Conservation

This fully updated and comprehensively revised edition of a classic text concentrates on the economics of conserving the living environment. It begins by covering the ethical foundations and basic economic paradigms’ essential for understanding and assessing ecological economics. General strategies for global environmental conservation, policies for government intervention, developing countries, preserving wildlife and biodiversity, open-access to and common property in natural resources, conservation of natural areas, forestry, agriculture and the environment, tourism, sustainable development and demographic change are also all covered.

A Framework for Analyzing Language and Welfare

The paper proposes a general model that will encompass trade and social benefits of a common language, a preference for a variety of languages, the fundamental role of translators, an emotional attachment to maternal language, and the threat that globalization poses to the vast majority of languages. With respect to people’s emotional attachment, the model considers minorities to suffer losses from the subordinate status of their language. In addition, the model treats the threat to minority language as coming from the failure of the parents in the minority to transmit their maternal language (durably) to their children. Some familiar results occur. In particular, we encounter the usual social inefficiencies of decentralized solutions to language learning when the sole benefits of the learning are communicative benefits (though translation intervenes). However, these social inefficiencies assume a totally different air when the con-sumer gains of variety are brought in. One fundamental aim of the paper is to bring together contributions to the economics of language from labor economics, network externalities and international trade that are typically treated separately.

A Framework for Analyzing Language and Welfare

The paper proposes a general model that will encompass trade and social benefits of a common language, a preference for a variety of languages, the fundamental role of translators, an emo-tional attachment to maternal language, and the threat that globalization poses to the vast ma-jority of languages. With respect to people’s emotional attachment, the model considers minor-ities to suffer losses from the subordinate status of their language. In addition, the model treats the threat to minority language as coming from the failure of the parents in the minority to transmit their maternal language (durably) to their children. Some familiar results occur. In particular, we encounter the usual social inefficiencies of decentralized solutions to language learning when the sole benefits of the learning are communicative benefits (though translation intervenes). However, these social inefficiencies assume a totally different air when the con-sumer gains of variety are brought in. One fundamental aim of the paper is to bring together contributions to the economics of language from labor economics, network externalities and international trade that are typically treated separately.

Labor Market Signaling and Self-Confidence: Wage Compression and the Gender Pay Gap

I extend Spence's signaling model by assuming that some workers are overconfident-they underestimate their marginal cost of acquiring education-and some are underconfident. Firms cannot observe workers' productive abilities and beliefs but know the fractions of high-ability, overconfident, and underconfident workers. I find that biased beliefs lower the wage spread and compress the wages of unbiased workers. I show that gender differences in self-confidence can contribute to the gender pay gap. If education raises productivity, men are overconfident, and women underconfident, then women will, on average, earn less than men. Finally, I show that biased beliefs can improve welfare.

Wage Policy of Firms: an Empirical Investigation.

This paper analyzes the dynamics of wages and workers' mobility within firms with a hierarchical structure of job levels. The theoretical model proposed by Gibbons and Waldman (1999), that combines the notions of human capital accumulation, job rank assignments based on comparative advantage and learning about workers' abilities, is implemented empirically to measure the importance of these elements in explaining the wage policy of firms. Survey data from the GSOEP (German Socio-Economic Panel) are used to draw conclusions on the common features characterizing the wage policy of firms from a large sample of firms. The GSOEP survey also provides information on the worker's rank within his firm which is usually not available in other surveys. The results are consistent with non-random selection of workers onto the rungs of a job ladder. There is no direct evidence of learning about workers' unobserved abilities but the analysis reveals that unmeasured ability is an important factor driving wage dynamics. Finally, job rank effects remain significant even after controlling for measured and unmeasured characteristics.

Rank Regressions, Wage Distributions and the Gender Gap.

In this paper, we model the interactions between the distribution of male and female wages under the assumption that any change in the wage distribution of women must be offset by an opposite change in the wage distribution of men.

Wage Flexibility and Contract Structure in Germany

In this paper, we look at how labor market conditions at different points during the tenure of individuals with firms are correlated with current earnings. Using data on individuals from the German Socioeconomic Panel for the 1985-1994 period, we find that both the contemporaneous unemployment rate and prior values of the unemployment rate are significantly correlated with current earnings, contrary to results for the American labor market. Estimated elasticities vary between 9 and 15 percent for the elasticity of earnings with respect to current unemployment rates, and between 6 and 10 percent with respect to unemployment rates at the start of current firm tenure. Moreover, whereas local unemployment rates determine levels of earnings, national rates influence contemporaneous variations in earnings. We interpret this result as evidence that German unions do, in fact, bargain over wages and employment, but that models of individualistic contracts, such as the implicit contract model, may explain some of the observed wage drift and longer-term wage movements reasonably well. Furthermore, we explore the heterogeneity of contracts over a variety of worker and job characteristics. In particular, we find evidence that contracts differ across firm size and worker type. Workers of large firms are remarkably more insulated from the job market than workers for any other type of firm, indicating the importance of internal job markets.

Methods to Estimate Dynamic Stochastic General Equilibrium Models

This paper employs the one-sector Real Business Cycle model as a testing ground for four different procedures to estimate Dynamic Stochastic General Equilibrium (DSGE) models. The procedures are: 1 ) Maximum Likelihood, with and without measurement errors and incorporating Bayesian priors, 2) Generalized Method of Moments, 3) Simulated Method of Moments, and 4) Indirect Inference. Monte Carlo analysis indicates that all procedures deliver reasonably good estimates under the null hypothesis. However, there are substantial differences in statistical and computational efficiency in the small samples currently available to estimate DSGE models. GMM and SMM appear to be more robust to misspecification than the alternative procedures. The implications of the stochastic singularity of DSGE models for each estimation method are fully discussed.