Modern Labor Economics : Theory and Public Policy

by: Ehrenberg, Ronald G.; Smith, Robert S.

ISBN 13:
9780321305039
ISBN 10:
0321305035
Edition: 9th
Format: Paperback
Copyright: 01/01/2009
Publisher: Addison Wesley
Newer Edition

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Summary

This text is the product of the authors' three decades experience in teaching labor market economics and conducting research aimed at influencing public policy. The authors develop the modern theory of labor market behavior, summarize empirical evidence supporting or contradicting each hypothesis, and illustrate the usefulness of various theories for public policy analysis. Theory is presented within context nontraditional, business, historical, and cross-cultural through numerous detailed policy examples in each chapter. This thoroughly revised Ninth Edition includes updated material throughout, plus new chapters on frictions in the labor market, and a new boxed feature focused on empirical techniques.

Preface

xvii

Introduction

(24)

The Labor Market

(1)

Labor Economics: Some Basic Concepts

(10)

Positive Economics

(1)

The Models and Predictions of Positive Economics

(3)

Normative Economics

(3)

Normative Economics and Government Policy

(2)

Plan of the Text

(13)

Example 1.1 Positive Economics: What Does It Mean to ``Understand'' Behavior?

(11)

Appendix 1A Statistical Testing of Labor Market Hypotheses

(9)

Overview of the Labor Market

(34)

The Labor Market: Definitions, Facts, and Trends

(9)

The Labor Force and Unemployment

(3)

Industries and Occupations: Adapting to Change

(1)

The Earnings of Labor

(5)

How the Labor Market Works

(12)

The Demand for Labor

(4)

The Supply of Labor

(2)

The Determination of the Wage

(5)

Applications of the Theory

(12)

Who Is Underpaid and Who Is Overpaid?

(6)

International Differences in Unemployment

Example 2.1 The Black Death and the Wages of Labor

(5)

Example 2.2 Ending the Conscription of Young American Men: The Role of Economists

(2)

Empirical Study Pay Levels and the Supply of Military Officers: Obtaining Sample Variation from Cross-Section Data

(7)

The Demand for Labor

(34)

Profit Maximization

(3)

Marginal Income from an Additional Unit of Input

(2)

Marginal Expense of an Added Input

(1)

The Short-Run Demand for Labor When Both Product and Labor Markets Are Competitive

(7)

A Critical Assumption: Declining MPL

(1)

From Profit Maximization to Labor Demand

(5)

The Demand for Labor in Competitive Markets When Other Inputs Can Be Varied

(4)

Labor Demand in the Long Run

(2)

More than Two Inputs

(2)

Labor Demand When the Product Market Is Not Competitive

(2)

Maximizing Monopoly Profits

(1)

Do Monopolies Pay Higher Wages?

(1)

Policy Application: The Labor Market Effects of Employer Payroll Taxes and Wage Subsidies

(17)

Who Bears the Burden of a Payroll Tax?

(3)

Employment Subsidies as a Device to Help the Poor

Example 3.1 The Marginal Revenue Product of College Football Stars

(10)

Example 3.2 Coal Mining Wages and Capital Substitution

(8)

Empirical Study Do Women Pay for Employer-Funded Maternity Benefits? Using Cross-Section Data over Time to Analyze ``Differences in Differences''

(5)

Appendix 3A Graphical Derivation of a Firm's Labor Demand Curve

(8)

Labor Demand Elasticities

(36)

The Own-Wage Elasticity of Demand

(9)

The Hicks-Marshall Laws of Derived Demand

(3)

Estimates of Own-Wage Labor Demand Elasticities

(2)

Applying the Laws of Derived Demand: Inferential Analysis

101

(2)

The Cross-Wage Elasticity of Demand

103

(4)

Can the Laws of Derived Demand Be Applied to Cross-Elasticities?

104

(2)

Estimates Relating to Cross-Elasticities

106

(1)

Policy Application: Effects of Minimum Wage Laws

107

(8)

History and Description

107

(1)

Employment Effects: Theoretical Analysis

108

(4)

Employment Effects: Empirical Estimates

112

(2)

Does the Minimum Wage Fight Poverty?

114

(1)

Applying Concepts of Labor Demand Elasticity to the Issue of Technological Change

115

(14)

Example 4.1 Why Are Union Wages So Different in Two Parts of the Trucking Industry?

102

(11)

Example 4.2 The Employment Effects of the First Federal Minimum Wage

113

(3)

Empirical Study Estimating the Labor Demand Curve: Time Series Data and Coping with ``Simultaneity''

116

(6)

Appendix 4A International Trade and the Demand for Labor: Can High-Wage Countries Compete?

122

(7)

Frictions in the Labor Market

129

(36)

Frictions on the Employee Side of the Market

130

(15)

The Law of One Price

130

(3)

Monopsonistic Labor Markets: A Definition

133

(1)

Profit Maximization under Monopsonistic Conditions

134

(4)

How Do Monopsonistic Firms Respond to Shifts in the Supply Curve?

138

(2)

Monopsonistic Conditions and the Employment Response to Minimum Wage Legislation

140

(2)

Job Search Costs and Other Labor Market Outcomes

142

(2)

Monopsonistic Conditions and the Relevance of the Competitive Model

144

(1)

Frictions on the Employer Side of the Market

145

(8)

Categories of Quasi-Fixed Costs

145

(4)

The Employment/Hours Trade-Off

149

(4)

Training Investments

153

(4)

The Training Decision by Employers

153

(1)

The Types of Training

153

(1)

Training and Post-Training Wage Increases

154

(2)

Employer Training Investments and Recessionary Layoffs

156

(1)

Hiring Investments

157

(8)

The Use of Credentials

158

(1)

Internal Labor Markets

159

(2)

How Can the Employer Recoup Its Hiring Investments?

161

Example 5.1 Does Employment Protection Legislation Protect Workers?

146

(4)

Example 5.2 ``Renting'' Workers as a Way of Coping with Hiring Costs

150

(8)

Example 5.3 Why Do Temporary-Help Firms Provide Free General Skills Training?

158

(2)

Empirical Study What Explains Wage Differences for Workers Who Appear Similar? Using Panel Data to Deal with Unobserved Heterogeneity

160

(5)

Supply of Labor to the Economy: the Decision to Work

165

(42)

Trends in Labor Force Participation and Hours of Work

166

(9)

Labor Force Participation Rates

166

(2)

Hours of Work

168

(7)

A Theory of the Decision to Work

175

(17)

Some Basic Concepts

170

(5)

Analysis of the Labor/Leisure Choice

175

(14)

Empirical Findings on the Income and Substitution Effects

189

(3)

Policy Applications

192

(15)

Budget Constraints with ``Spikes''

192

(3)

Programs with Net Wage Rates of Zero

195

(5)

Subsidy Programs with Positive Net Wage Rates

200

Example 6.1 The Labor Supply of Pigeons

173

(13)

Example 6.2 Do Large Inheritances Induce Labor Force Withdrawal?

186

(2)

Example 6.3 Daily Labor Supply at the Ballpark

188

(3)

Example 6.4 Labor Supply Effects of Income Tax Cuts

191

(4)

Example 6.5 Staying Around One's Kentucky Home: Workers' Compensation Benefits and the Return to Work

195

(4)

Example 6.6 Wartime Food Requisitions and Agricultural Work Incentives

199

(3)

Empirical Study Estimating the Income Effect Among Lottery Winners: The Search for ``Exogeneity''

202

(5)

Labor Supply: Household Production, the Family, and the Life Cycle

207

(32)

The Theory of Household Production

208

(3)

Graphing the Model

208

(2)

Implications of the Model

210

(1)

The Tripartite Choice: Market Work, Household Work, and Leisure

211

(4)

Time Use by Women and Men

211

(2)

Two Substitution Effects

213

(2)

Joint Labor Supply Decisions within the Household

215

(6)

Specialization of Function

215

(1)

Do Both Partners Work for Pay?

216

(1)

The Joint Decision and Cross-Effects

217

(2)

Labor Supply in Recessions: The ``Discouraged'' versus the ``Added'' Worker

219

(2)

Life-Cycle Aspects of Labor Supply

221

(8)

The Labor Force Participation Patterns of Married Women

221

(2)

The Substitution Effect and When to Work over a Lifetime

223

(2)

The Choice of Retirement Age

225

(4)

Policy Application: Child Care and Labor Supply

229

(10)

Child-Care Subsidies

229

(2)

Child Support Assurance

231

Example 7.1 Obesity and the Household Production Model

212

(6)

Example 7.2 Husbands, Wives, Neighbors, and the End of the Six-Hour Workday at Kellogg's

218

(5)

Example 7.3 The Value of a Homemaker's Time

223

(11)

Empirical Study The Effects of Wage Increases on Labor Supply (and Sleep): Time-Use Diary Data and Sample Selection Bias

234

(5)

Compensating Wage Differentials and Labor Markets

239

(36)

Job Matching: The Role of Worker Preferences and Information

239

(7)

Individual Choice and Its Outcomes

240

(2)

Assumptions and Predictions

242

(2)

Empirical Tests for Compensating Wage Differentials

244

(2)

Hedonic Wage Theory and the Risk of Injury

246

(14)

Employee Considerations

247

(1)

Employer Considerations

248

(2)

The Matching of Employers and Employees

250

(4)

Normative Analysis: Occupational Safety and Health Regulation

254

(6)

Hedonic Wage Theory and Employee Benefits

260

(15)

Employee Preferences

260

(1)

Employer Preferences

261

(4)

The Joint Determination of Wages and Benefits

265

Example 8.1 Working on the Railroad: Making a Bad Job Good

246

(7)

Example 8.2 Parenthood, Occupational Choice, and Risk

253

(2)

Example 8.3 Compensating Wage Differentials in Nineteenth-Century Britain

255

(9)

Empirical Study How Risky Are Estimates of Compensating Wage Differentials for Risk? The ``Errors in Variables'' Problem

264

(6)

Appendix 8A Compensating Wage Differentials and Layoffs

270

(5)

Investments in Human Capital: Education and Training

275

(48)

Human Capital Investments: The Basic Model

277

(4)

The Concept of Present Value

277

(2)

Modeling the Human Capital Investment Decision

279

(2)

The Demand for a College Education

281

(7)

Weighing the Costs and Benefits of College

281

(1)

Predictions of the Theory

282

(5)

Market Responses to Changes in College Attendance

287

(1)

Education, Earnings, and Post-schooling Investments in Human Capital

288

(9)

Average Earnings and Educational Level

288

(2)

On-the-Job Training and the Concavity of Age/Earnings Profiles

290

(2)

The Fanning Out of Age/Earnings Profiles

292

(1)

Women and the Acquisition of Human Capital

293

(4)

Is Education a Good Investment?

297

(26)

Is Education a Good Investment for Individuals?

297

(3)

Is Education a Good Social Investment?

300

(8)

Is Public Sector Training a Good Social Investment?

308

Example 9.1 War and Human Capital

276

(9)

Example 9.2 Did the G.I. Bill Increase Educational Attainment for Returning World War II Vets?

285

(13)

Example 9.3 Valuing a Human Asset: The Case of the Divorcing Doctor

298

(8)

Example 9.4 The Socially Optimal Level of Educational Investment

306

(4)

Empirical Study Estimating the Returns to Education Using a Sample of Twins: Coping with the Problem of Unobserved Differences in Ability

310

(3)

Appendix 9A A ``Cobweb'' Model of Labor Market Adjustment

313

(4)

Appendix 9B A Hedonic Model of Earnings and Educational Level

317

(6)

Worker Mobility: Migration, Immigration, and Turnover

323

(30)

The Determinants of Worker Mobility

324

(1)

Geographic Mobility

325

(8)

The Direction of Migratory Flows

326

(1)

Personal Characteristics of Movers

326

(2)

The Role of Distance

328

(1)

The Earnings Distribution in Sending Countries and International Migration

329

(1)

The Returns to International and Domestic Migration

330

(3)

Policy Application: Restricting Immigration

333

(10)

U.S. Immigration History

333

(3)

Naive Views of Immigration

336

(2)

An Analysis of the Gainers and Losers

338

(2)

Do the Overall Gains from Immigration Exceed the Losses?

340

(3)

Employee Turnover

343

(10)

Wage Effects

344

(1)

Effects of Employer Size

344

(1)

Gender Differences

345

(1)

Cyclical Effects

345

(1)

Employer Location

346

(1)

International Comparisons

346

(3)

Is More Mobility Better?

349

Example 10.1 The Great Migration: Southern Blacks Move North

327

(2)

Example 10.2 Migration and One's Time Horizon

329

(12)

Example 10.3 The Mariel Boatlift and Its Effects on Miami's Wage and Unemployment Rates

341

(7)

Empirical Study Do Political Refugees Invest More in Human Capital than Economic Immigrants? The Use of Synthetic Cohorts

348

(5)

Pay and Productivity: Wage Determination Within the Firm

353

(36)

Motivating Workers: An Overview of the Fundamentals

355

(7)

The Employment Contract

355

(1)

Coping with Information Asymmetries

356

(2)

Motivating Workers

358

(2)

Motivating the Individual in a Group

360

(2)

Compensation Plans: Overview and Guide to the Rest of the Chapter

362

(1)

Productivity and the Basis of Yearly Pay

362

(7)

Employee Preferences

362

(1)

Employer Considerations

363

(6)

Productivity and the Level of Pay

369

(3)

Why Higher Pay Might Increase Worker Productivity

369

(1)

Efficiency Wages

370

(2)

Productivity and the Sequencing of Pay

372

(8)

Underpayment Followed by Overpayment

373

(3)

Promotion Tournaments

376

(2)

Career Concerns and Productivity

378

(2)

Applications of the Theory: Explaining Two Puzzles

380

(9)

Why Do Earnings Increase with Job Tenure?

380

(2)

Why Do Large Firms Pay More?

382

Example 11.1 The Wide Range of Possible Productivities: The Case of the Factory That Could Not Cut Output

354

(6)

Example 11.2 Calorie Consumption and the Type of Pay

360

(6)

Example 11.3 Poor Group Incentives Doom the Shakers

366

(5)

Example 11.4 Did Henry Ford Pay Efficiency Wages?

371

(7)

Example 11.5 Demanding Employers, Overworked Employees, and Neglected Families

378

(6)

Empirical Study Are Workers Willing to Pay for Fairness? Using Laboratory Experiments to Study Economic Behavior

384

(5)

Gender, Race, and Ethnicity in the Labor Market

389

(48)

Measured and Unmeasured Sources of Earnings Differences

391

(15)

Earnings Differences by Gender

391

(9)

Earnings Differences between Black and White Americans

400

(4)

Earnings Differences by Ethnicity

404

(2)

Theories of Market Discrimination

406

(14)

Personal Prejudice Models: Employer Discrimination

407

(4)

Personal Prejudice Models: Customer Discrimination

411

(1)

Personal Prejudice Models: Employee Discrimination

412

(2)

Statistical Discrimination

414

(1)

Noncompetitive Models of Discrimination

415

(4)

A Final Word on the Theories of Discrimination

419

(1)

Federal Programs to End Discrimination

420

(17)

Equal Pay Act of 1963

420

(1)

Title VII of the Civil Rights Act

420

(3)

The Federal Contract Compliance Program

423

(3)

Effectiveness of Federal Antidiscrimination Programs

426

Example 12.1 Bias in the Selection of Musicians by Symphony Orchestras

394

(3)

Example 12.2 The Gender Earnings Gap across Countries

397

(16)

Example 12.3 Fear and Lathing in the Michigan Furniture Industry

413

(11)

Example 12.4 Comparable Worth and the University

424

(4)

Empirical Study Can We Catch Discriminators in the Act? The Use of Field Experiments in Identifying Labor Market Discrimination

428

(5)

Appendix 12A Estimating Comparable-Worth Earnings Gaps: An Application of Regression Analysis

433

(4)

Unions and the Labor Market

437

(50)

Union Structure and Membership

438

(5)

International Comparisons of Unionism

438

(2)

The Legal Structure of Unions in the United States

440

(3)

Constraints on the Achievement of Union Objectives

443

(7)

The Monopoly-Union Model

445

(1)

The Efficient-Contracts Model

446

(4)

The Activities and Tools of Collective Bargaining

450

(16)

Union Membership: An Analysis of Demand and Supply

451

(5)

Union Actions to Alter the Labor Demand Curve

456

(2)

Bargaining and the Threat of Strikes

458

(5)

Bargaining in the Public Sector: The Threat of Arbitration

463

(3)

The Effects of Unions

466

(21)

The Theory of Union Wage Effects

466

(4)

Evidence of Union Wage Effects

470

(2)

Evidence of Union Total Compensation Effects

472

(1)

The Effects of Unions on Employment

473

(1)

The Effects of Unions on Productivity and Profits

473

(2)

Normative Analyses of Unions

475

Example 13.1 The Effects of Deregulation on Trucking and Airlines

454

(7)

Example 13.2 Permanent Replacement of Strikers

461

(14)

Example 13.3 Do Right-to-Work Laws Matter?

475

(3)

Empirical Study What Is the Gap between Union and Nonunion Pay? The Importance of Replication in Producing Credible Estimates

478

(4)

Appendix 13A Arbitration and the Bargaining Contract Zone

482

(5)

Inequality in Earnings

487

(30)

Measuring Inequality

488

(3)

Earnings Inequality Since 1980: Some Descriptive Data

491

(7)

The Occupational Distribution

492

(2)

Changes in Relative Wages

494

(1)

Relative Changes in Hours of Work

495

(1)

Growth of Earnings Dispersion within Human Capital Groups

496

(2)

Summarizing the Dimensions of Growing Inequality

498

(1)

The Underlying Causes of Growing Inequality

498

(19)

Changes in Supply

499

(2)

Changes in Institutional Forces

501

(1)

Changes in Demand

502

Example 14.1 Labor's Share of Total Income: ``Raw'' Labor vs. Human Capital

498

(9)

Example 14.2 Changes in the Premium to Education at the Beginning of the Twentieth Century

507

(1)

Empirical Study Do Parents' Earnings Determine the Earnings of Their Children? The Use of Intergenerational Data in Studying Economic Mobility

508

(4)

Appendix 14A Lorenz Curves and Gini Coefficients

512

(5)

Unemployment

517

(36)

A Stock-Flow Model of the Labor Market

519

(4)

Sources of Unemployment

520

(1)

Rates of Flow Affect Unemployment Levels

521

(2)

Frictional Unemployment

523

(7)

The Theory of Job Search

524

(3)

Effects of Unemployment Insurance Benefits

527

(3)

Structural Unemployment

530

(6)

Occupational and Regional Unemployment Rate Differences

530

(2)

International Differences in Long-Term Unemployment

532

(1)

Do Efficiency Wages Cause Structural Unemployment?

533

(3)

Demand-Deficient (Cyclical) Unemployment

536

(6)

Downward Wage Rigidity

536

(4)

Financing U.S. Unemployment Compensation

540

(2)

Seasonal Unemployment

542

(2)

When Do We Have Full Employment?

544

(9)

Defining the Natural Rate of Unemployment

545

(1)

Unemployment and Demographic Characteristics

545

(1)

Demographic Change and the Natural Rate

546

(1)

What Is the Natural Rate?

547

Example 15.1 Unemployment Insurance and Seasonal Unemployment: A Historical Perspective

543

(5)

Empirical Study Do Reemployment Bonuses Reduce Unemployment? The Results of Social Experiments

548

(5)

Answers to Odd-Numbered Review Questions and Problems

553

(36)

Name Index

589

(6)

Subject Index

595

Modern Labor Economics : Theory and Public Policy

9780321305039

0321305035

Summary

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