Modern Labor Economics : Theory and Public Policy,9780321305039

Modern Labor Economics : Theory and Public Policy

by ;
Edition: 9th
ISBN13: 9780321305039
ISBN10: 0321305035
Format: Paperback
Pub. Date: 2009-01-01
Publisher(s): Addison Wesley
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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.

Table of Contents

Preface xvii
Introduction
1(24)
The Labor Market
2(1)
Labor Economics: Some Basic Concepts
2(10)
Positive Economics
3(1)
The Models and Predictions of Positive Economics
4(3)
Normative Economics
7(3)
Normative Economics and Government Policy
10(2)
Plan of the Text
12(13)
Example 1.1 Positive Economics: What Does It Mean to ``Understand'' Behavior?
5(11)
Appendix 1A Statistical Testing of Labor Market Hypotheses
16(9)
Overview of the Labor Market
25(34)
The Labor Market: Definitions, Facts, and Trends
26(9)
The Labor Force and Unemployment
27(3)
Industries and Occupations: Adapting to Change
30(1)
The Earnings of Labor
30(5)
How the Labor Market Works
35(12)
The Demand for Labor
36(4)
The Supply of Labor
40(2)
The Determination of the Wage
42(5)
Applications of the Theory
47(12)
Who Is Underpaid and Who Is Overpaid?
47(6)
International Differences in Unemployment
53
Example 2.1 The Black Death and the Wages of Labor
45(5)
Example 2.2 Ending the Conscription of Young American Men: The Role of Economists
50(2)
Empirical Study Pay Levels and the Supply of Military Officers: Obtaining Sample Variation from Cross-Section Data
52(7)
The Demand for Labor
59(34)
Profit Maximization
60(3)
Marginal Income from an Additional Unit of Input
61(2)
Marginal Expense of an Added Input
63(1)
The Short-Run Demand for Labor When Both Product and Labor Markets Are Competitive
63(7)
A Critical Assumption: Declining MPL
64(1)
From Profit Maximization to Labor Demand
65(5)
The Demand for Labor in Competitive Markets When Other Inputs Can Be Varied
70(4)
Labor Demand in the Long Run
70(2)
More than Two Inputs
72(2)
Labor Demand When the Product Market Is Not Competitive
74(2)
Maximizing Monopoly Profits
74(1)
Do Monopolies Pay Higher Wages?
75(1)
Policy Application: The Labor Market Effects of Employer Payroll Taxes and Wage Subsidies
76(17)
Who Bears the Burden of a Payroll Tax?
76(3)
Employment Subsidies as a Device to Help the Poor
79
Example 3.1 The Marginal Revenue Product of College Football Stars
62(10)
Example 3.2 Coal Mining Wages and Capital Substitution
72(8)
Empirical Study Do Women Pay for Employer-Funded Maternity Benefits? Using Cross-Section Data over Time to Analyze ``Differences in Differences''
80(5)
Appendix 3A Graphical Derivation of a Firm's Labor Demand Curve
85(8)
Labor Demand Elasticities
93(36)
The Own-Wage Elasticity of Demand
94(9)
The Hicks-Marshall Laws of Derived Demand
96(3)
Estimates of Own-Wage Labor Demand Elasticities
99(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

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