INTEGRATING ECONOMIC DUALISM AND LABOR MARKET SEGMENTATION:

Although the U.S. economy of the early twenty-first century is vastly different from the U.S. economy prior to the 1970s, the nature of these economic changes and their impact on U.S. workers is unclear. This article claims that despite contemporary economic shifts, differential labor and employer power continues to segment the economy, and workers' position in the labor market continues to predict their rewards, beyond the effects of gender, race, and human capital. Drawing on segmented labor market and dual economy research, we propose a four-category model of the structural factors that influence variance in work-related rewards. We examine the distribution of jobs in each of four categories between 1974 and 2000 and observe that losses and gains across categories are unevenly distributed by race and gender. While white men have experienced the greatest declines in employment and earnings, they have maintained their absolute advantage over women and nonwhites. In multivariate analyses, we find that the structural position of employment continues to be a significant determinant of wages. Although women and racial minorities have experienced sizable increases in employment in primary labor market jobs in the core of the economy, both groups remain overrepresented in low-paying jobs. Moreover women, but not nonwhite men, consistently receive significantly fewer rewards for their labor in both low-paying and high-paying jobs. Our findings suggest that structural factors continue to influence earnings inequality, especially across race and gender lines.     

BACK-LOADED WAGES AND ON-THE-JOB TRAINING IN A FRICTIONAL LABOR MARKET

This paper analyzes the coexistence of on-the-job (general) training and on-the-job search in a frictional labor market where firms post skill-dependent labor contracts to preemptively back-load compensation after training. The back-loaded compensation scheme discourages trained workers' efficient job-to-job transition, as if they accumulated relationship-specific capital, which induces overintensified training among more productive firms. The quantitative analysis predicts that the market equilibrium, relative to the efficiency benchmark, gets more skilled workers (training inefficiency) and less output (allocation inefficiency). It further demonstrates that efficiency loss is moderate due to positive externality and can be improved, as search friction is mitigated. (JEL J24, J31, J64)     

LABOR MARKET SEGMENTATION AND INCOME INEQUALITY IN URBAN CHINA

Though central to the market transition debate, the effect of the institutional realignment on stratification order has not been adequately addressed. I reformulate market transition hypotheses and use data from a recent survey in a Chinese city to test market transition theory and path dependence arguments. I make the linkage between literatures on labor market segmentation and literatures on market transition. I show different returns to human and political capital in the private and state sectors in urban China. My research suggests modifications of the conceptual issues used in the market transition debate.     

ACCOUNTING FOR URBAN CHINA'S RISING INCOME INEQUALITY: THE ROLES OF LABOR MARKET,HUMAN CAPITAL,AND MARRIAGE MARKET FACTORS

This paper analyzes China's rising family income inequality since the early 1990s when the urban labor market started its transformation from a centrally controlled to a market‐driven one. We document the trends in income inequality over the period of 1992–2009 using the Urban Household Survey data, and adopt the approach recently proposed by Eika et al. (2014) to decompose changes in income inequality. We find that labor market factors accounted for about three‐quarters of the overall increases in income inequality while falling marriage rate contributed the other quarter. Changes in human capital levels and marital assortativeness have not contributed to the rising inequality. (JEL D31, I26, J12)     

INFLATION DYNAMICS AND LABOR MARKET SPECIFICATIONS: A BAYESIAN DYNAMIC STOCHASTIC GENERAL EQUILIBRIUM APPROACH FOR JAPAN'S ECONOMY

Which labor market specification is better able to describe inflation dynamics, a widely used sticky wage model or a recently investigated labor market search model? Using a Bayesian likelihood approach, we estimate these two models with Japan's data. This article shows that the labor market search model is superior to the sticky wage model in terms of both marginal likelihood and out‐of‐sample forecast performance, particularly regarding inflation. The labor market search model is better able to replicate the cross‐correlation among inflation, real wages, and output in the data. Moreover, in this model, real marginal cost is determined by both hiring cost and unit labor cost that varies with employment fluctuations, which gives rise to a high contemporaneous correlation between inflation and real marginal cost as represented in the New Keynesian Phillips curve. (JEL E24, E32, E37)     

LABOR MARKET SEGMENTATION AND INCOME DETERMINATION IN POLAND

The model of income determination, as introduced by labor market segmentation students, is applied to Polish data. This article argues that divisions between sectors, industries, branches, and enterprises, imposed institutionally by the Polish central management system, determine dimensions of labor market segmentation in Polish society. Research findings demonstrate a substantive effect of economic segmentation dimensions on income inequalities, with industrial divisions affecting income variation the most strongly. The second stage of anaysis shows substantive differences in the process of income determination between five industries. This article argues that industrial differentials cannot be explained away by differences in labor force composition and that there are substantial variations in how worker characteristics are rewarded. The results are interpreted as evidence of the effect of labor market segmentation on social inequalities in Poland. In addition, differences in structural mechanisms of segmentation between Poland and capitalist societies are noted.     

BEYOND EDUCATION AND FAIRNESS: A LABOR MARKET TAXATION MODEL FOR THE GREAT GATSBY CURVE

Applied researchers have been drawn to models that attribute the demonstrated cross‐country differences in intergenerational income transmission to government failures to invest in the human capital of poor children. To highlight another potential mechanism, the disincentive effects of labor market taxation and redistribution, we present a simple model that can explain cross‐country differences in intergenerational mobility and other previously observed empirical patterns. Empirical tests using data on income mobility, tax rates, and public expenditures largely support the model predictions. We conclude that the common presumption that intergenerational mobility largely measures fairness or opportunity, and the resultant policy recommendations, are premature. (JEL D31, J24, J62)     

THE DIFFERENTIAL EFFECT OF LABOR MARKET CONTEXT ON MARGINAL EMPLOYMENT OUTCOMES

Transformation of the labor market creates a complex and dynamic environment where jobs and skills are exchanged. Studies suggest that contemporary industrial shifts provided less opportunity than in the past, and that technological change led to a complicated melange of employment outcomes. Many of the new jobs are characterized by a series of negative qualities related to income and hours. Accordingly, this analysis concentrates on inadequate employment through low-wage work and involuntary part-time work. I examine the effect of contextual factors, specifically area levels of occupational sex-segregation and the size of the service sector industry, on men and women's marginal employment outcomes. Several findings stand out. First, women post higher chances of working for low-wages than their male counterparts. However, employment in the expanding service sector does reduce men and women's chances of experiencing part-time work. Second, the protection afforded by individual level, human capital qualities remains relatively constant for women across metro areas, but labor market context significantly affects women's odds of employment marginalization. Context is not as salient for men, but the value of their personal attributes vary across labor markets. Finally, women working in areas with higher levels of occupational sex-segregation were relatively worse off than those in areas with more integration. Industrial restructuring clearly contributed to recent shifts in U.S. employment and inequality. Studies suggest that contemporary industrial shifts have provided less opportunity than in the past, greater inequality between rich and poor, and a complicated melange of inadequate employment outcomes (Colclough and Tolbert 1992; Farley 1996; Harrison and Bluestone 1988; Morris, Bernhardt, and Handcock 1994; Sassen 1994). Deindustrialization, as it is sometimes called, offers opportunity for highly-educated, skilled, or technologically-innovative men and women. However, lower skilled workers or those with less education may face relatively good job markets filled with positions that are low quality in terms of wages, hours, or benefits. This bifurcation of work is credited with not only reducing the sex-wage gap, but also increasing inequality within sex groups (Bernhardt, Morris, and Handcock 1995). By employing a new structuralist approach and focusing on the area opportunity structure, along with the traditional human capital framework, I link both the local labor market context and individual qualities that affect employment outcomes (Browne 1997; Cotter et al. 1997; McCall 2000). In this article, I examine the effect of contextual factors, specifically the area industrial composition and the openness of the labor market, on men and women's marginal employment outcomes during the early 1990s.     

LABOR MARKET DYNAMICS WITH SEARCH FRICTIONS AND FAIR WAGE CONSIDERATIONS

Fairness considerations in wage setting can improve the ability of the Diamond‐Mortensen‐Pissarides search and matching model to account for U.S. labor market dynamics. Firms' production is influenced by workers' effort input, which depends on whether workers consider the employment relation as fair. A typical worker's effort is determined in a comparison of individual current wage with wage norms, including the outside option, the individual past wage, and the wage level in the steady state. The fairness considerations in the search framework give rise to endogenous real wage rigidity, and realistic volatilities of unemployment, vacancies, and labor market tightness. (JEL E24, E32, J64)     

LABOR'S SHARE,THE FIRM'S MARKET POWER,AND TOTAL FACTOR PRODUCTIVITY

We investigate the relationship between labor's share, firm's market power, and the elasticity of output with respect to labor input using an approach based on an unobserved components model. The approach yields time‐varying estimates of market power and the elasticity. Evidence on the market power of firms (which we find to be rising since 2000) gives a deeper understanding of movements in labor's share and the labor wedge. The generated values of the elasticity yield revised estimates of total factor productivity growth which is informative about the extent of the downward bias inherent in traditional estimates which use labor's share as a proxy for the elasticity. (JEL O47, C32, E25)     

INTERNATIONAL TRADE AND THE COMPOSITION OF LABOR MARKET TURNOVER

The composition of labor market turnover is shown to influence patterns of international trade. Job and worker turnover have opposing marginal effects on industry export intensity, highlighting the importance of relative turnover shares on either side of the labor market, as opposed to total volumes of labor mobility, in shaping economic outcomes. Industries with relatively greater shares of worker turnover export more of total production, and those with higher job turnover export less. Furthermore, relatively high job turnover hinders industry adjustment following trade liberalization. These predictions receive support for U.S. manufacturing industries using turnover data in the Quarterly Workforce Indicators available from the U.S. Census Bureau. (JEL F16)     

LABOR MARKET PERFORMANCE EFFECTS OF DISCRIMINATION AND LOSS OF SKILL

We examine the impact of discrimination on labor market performance when workers are subject to a risk of losing skills during an unemployment experience. Within a search and matching framework, we show that both natives and immigrants are affected by discrimination. Discrimination in one sector has positive spillovers, inducing employment to increase in the other sector and the effect on labor market performance therefore depends on whether discrimination is present in only one sector or in both. Discrimination may induce workers to train more or less than natives after having lost their skills, dependent upon in which sector there is discrimination. Net output tends to be most negatively affected by discrimination among high‐skilled workers. (JEL J15, J31, J61, J64, J71)     

Modes of labor market incorporation and occupational cost among new immigrants to Israel

"The present study contributes to the literature on international migration by examining social, demographic and contextual factors that influence modes of labor market incorporation and occupational cost among new immigrants during their first years after migration. The data for the analysis were obtained from the 1983 Census of Population conducted by Israel's Central Bureau of Statistics. The analysis focuses on men who immigrated to Israel between 1979 to 1983.... The data reveal that the likelihood of finding employment, the mode of labor market incorporation, and the size of the occupational cost are significantly affected by geocultural origin, occupation in the country of origin, and individual-level demographic and human capital resources. The meaning of the differentiated effects are discussed in detail. The findings point toward two central aspects that should be examined in the study of labor market incorporation of new immigrants: employment status and occupational cost."     

LABOR CONTRACTS AND FLEXIBILITY: EVIDENCE FROM A LABOR MARKET REFORM IN SPAIN

This paper evaluates the effects of a labor market reform in Spain that removed restrictions on fixed‐term or temporary contracts. Our empirical results are based on longitudinal firm‐level data that cover observations before and after the reform. We posit and estimate a dynamic labor demand model with indefinite and fixed‐term labor contracts, and a general structure of labor adjustment costs. Experiments using the estimated model show important positive effects of the reform on total employment (i.e., a 3.5% increase) and job turnover. There is a strong substitution of permanent by temporary workers (i.e., a 10% decline in permanent employment). The effects on labor productivity and the value of firms are very small. In contrast, a counterfactual reform that halved all firing costs would produce the same employment increase as the actual reform, but much larger improvements in productivity and in the value of firms. (JEL J23, J32, J41)     

THE IMPACT OF SOCIAL CAPITAL ON THE EARNINGS OF PUERTO RICAN MIGRANTS

There is a paucity of studies examining the relationship between Puerto Ricans' social capital and their earnings. I utilized data from the Latin American Migration Project (collected in 1998 and 1999) to test five hypotheses derived from social capital theory to predict the hourly earnings of Puerto Rican migrants. My study illustrates that Puerto Rican migrants' social capital is positively related with their earnings. Interestingly, the social capital effects only pertain to Puerto Rican females. Additionally, Puerto Rican migrants do not benefit from ethnic solidarity in terms of increased wages. My analyses point toward social capital's ability to provide important labor market information to Puerto Rican females, which they appear to use to acquire jobs paying higher wages.
Social capital theory has been applied to many different phenomenon including banking, education, immigration, labor markets, and nation building ( Massey et al. 1987 ; Coleman 1988 ; Uzzi 1999 ; Fernandez, Castilla, and Moore 2000 ; Putnam 2000 ). Within the labor market, social capital has been found to be related with earnings, employment, formal employment, and job tenure ( Mier and Giloth 1986 ; Donato, Durand, and Massey 1992 ; Aguilera 1999; 2003 ; Philips and Massey 1999 ; Aguilera and Massey 2003 ). Within the immigration field, social capital has been linked with the migration process, labor market outcomes, and attainment of citizenship ( Massey et al. 1987 ; Baker 2000 ; Aguilera and Massey 2003 ; Fussell 2004 ). Unfortunately, Puerto Ricans have been unstudied within this massive literature about social capital. Additionally, gender differences in returns to social capital are only just beginning to be recognized and there is little agreement as to whether males or females benefit most from social capital. I studied the relationship between social capital and labor market outcomes of Puerto Rican migrants, paying special attention to differences in gender.     

Global Changes and Gendered Responses: The Feminization of Migration From Georgia

While frequently discussed, the feminization of migration remains among the least understood trends in migration literature. Existing research links feminization of migration to socioeconomic change in migrant origin countries, changes in destination‐country labor markets, structural factors, and changing social attitudes. However, questions of how the feminization of migration begins and how it becomes socially institutionalized remain largely unanswered. Having experienced a recent, dramatic increase in female migration, Georgia provides an excellent case to study the emergence of women's labor migration. Our findings highlight the importance of human capital, increasing divorce rates, and an absence of local economic opportunities in motivating increasing numbers of women to migrate. Additionally, changing destination patterns and shifts in labor‐market demand toward feminized occupations act as key initial conditions enabling the growth of women's migration. As migration is feminized, cultural beliefs stigmatizing female migrants can be renegotiated to frame women's migration within normative gender approaches, providing pathways for cultural maintenance. In the early stages of the feminization of migration, we find the initial attempts to reframe migration are powerful; they can challenge, or at least delay, the expansion of women's autonomy that is often associated with migration.     

The role and significance of endogenous firing costs in a matching model with endogenous job destruction

Traditional models of the labor market assume fixed firing costs. This paper explores the implications of variable firing costs, building this new assumption into a matching model with endogenous job destruction. The available evidence on the outcomes of cases brought to labor courts suggests that firing costs are negatively related with labor market tightness. In such a case, we may no longer invoke “rigidities” on labor markets as the cause of their poor performance. Our model yields three interesting results. First, labor markets may have multiple equilibria that cannot be Pareto-ordered; each with its own configuration in terms of average duration of unemployment and filled jobs, as well as employment protection. Second, the variability of firing costs produces a positive externality affecting the stability properties of these equilibria. Finally, the two externalities affect the efficiency of the social optimum, modifying the Hosios [Hosios, A.J., 1990. On the efficiency of matching and related models of search and unemployment. Review of Economic Studies 57, 279–298] condition. We use these results to interpret the recent history of European unemployment.     

PRODUCT CHARACTERISTICS, HUMAN CAPITAL, AND LABOR MARKET SEGMENTS:

This article contends that one key to understanding different forms of work organization lies in the nature of the products being created. Product characteristics are proposed to be critical determinants of the type of human capital, either general or firm specific. Following from prior theory, labor market barriers develop based on type of human capital. These barriers then have a direct bearing on employee rewards. The nature of the product distinction is captured with a comparison of two product-types (goods and services) conceived as theoretically distinct. General skills are hypothesized to be more important in the service-producing sector, while firm-specific skills are hypothesized to be more important in the goods-producing sector. Empirical analyses using the 1991 General Social Survey compare workers in the service-producing and goods-producing sectors to illustrate differences in the salience of firm-specific and general skills. Two hypotheses are supported. Firm-specific skills have a stronger effect on earnings in manufacturing industries than in service industries. Also, skills acquired from on-the-job training, when compared with other skills, are more weakly related to service employee rewards. These distinctions between sectors suggest insights into structures unique to the service employment workplace.     

INFORMATION VALUE UNDER DEMAND UNCERTAINTY AND ENDOGENOUS MARKET LEADERSHIP

In an oligopoly model with firms choosing to produce in one of two periods, we identify the circumstance under which a firm's having early information regarding stochastic demand results in market leadership. High demand volatility leads to Stackelberg competition with the information‐advantaged firm leading. In the N‐firm case an equilibrium with multiple leaders and multiple followers emerges endogenously. In a duopoly information acquisition game we identify conditions that determine whether neither, one, or both firms will pay to acquire early information and note that one firm's obtaining early information may generate a positive externality benefitting its competitor. Both symmetric and asymmetric outcomes are possible and Stackelberg market leadership may occur in equilibrium, but only when firms have different costs of information. Our finding that an information advantage may convey leadership which then affects the value of information to the players applies to other settings exhibiting first‐mover advantage such as certain public good provision games. (JEL C72, D82, L13)     

THE CREDIT‐CHANNEL TRANSMISSION MECHANISM AND THE NONLINEAR GROWTH AND WELFARE EFFECTS OF INFLATION AND TAXES

With the credit‐channel effect driven by the central bank's open market operations, this paper's model easily gives rise to the nonlinear inflation‐growth nexus, which is evidenced by a number of cross‐country empirical studies. The threshold level of the inflation rate is found to be lower when tax rates are higher. The presence of the credit‐channel effect also provides the rationale for setting positive (and smaller than 1) tax rates on consumption, labor income, and capital income. The optimal tax rates rise as the inflation target declines. Under a fiscal policy rule where labor and capital income taxes move proportionally to each other, the optimal capital income tax rate could be higher than the optimal labor income tax rate. Under a sufficiently large central bank balance sheet, the credit‐channel effect will be so weak that inflation and all kinds of taxes are growth and welfare repressing. This provides a rationale for central banks that have implemented quantitative easing policies to shrink their balance sheets. (JEL E58, E62, O42)