OPTIMAL ENFORCEMENT OF NONCOMPETE COVENANTS

Noncompete covenants or covenant not to compete (CNC) are clauses in employment contracts in which the employee agrees not to gain employment with a competitor firm. In this article, we study the efficiency aspects of such contracts by incorporating the effect of labor mobility restrictions on knowledge transfer across firms, investment decisions by firms, and investment by workers. Following research that shows state‐wise variations in the degree of CNC enforcement, we allow the strength of CNC enforcement to vary as a matter of regulatory policy and derive the optimal strength of enforcement. We also look at how regulations around CNCs should be optimally designed when employers can use collusive agreements, such as “no poaching” agreements, as an alternative to noncompete clauses. Given recent allegations of employer collusion among large Silicon Valley firms, we argue for a cautious approach in designing policies on CNC enforcement. (JEL J24, J41, J63, K31)     

MUNICIPAL GOVERNMENT APPROACHES TO SERVICE DELIVERY: AN ANALYSIS FROM A TRANSACTIONS COST PERSPECTIVE

Municipal governments are less likely to contract out for service delivery if citizen preferences for the service are heterogeneous. This conclusion is based on an analysis that extends to the public sector the empirical industrial organization literature on transaction costs and the "make or buy" decision faced by private firms. Service delivery practices for sixty-three municipal services are examined. The findings are consistent with the proposition that the cost for writing and monitoring contracts may be an important consideration in municipal service delivery approach and that bureaucratic supply may not be as inefficient as some previous studies indicate.     

Labour segmentation and outmigration in Japan: Evidence using firm–worker matching data

Determinants of foreigner outmigration from host countries have attracted considerable attention. However, minimal research examines the influence of firms’ working environments. Although the third largest economy, Japan's inability to attract skilled foreign labour remains a concern. This study is the first to investigate the effect of Japanese firms’ labour segmentation practices on foreign workers’ outmigration intentions. Segmentation refers to firms’ concentration on foreigner-specific skills, regarding foreign labour as complementary to local workers. This is widely practised because of immigration policy's avoidance of substituting Japanese labour or causing unemployment. The findings suggest that although foreigner-specific skills are highly valued in Japan, segmentation could significantly increase foreign workers’ outmigration intention. The lifetime employment system in Japan, job satisfaction and original migration motivations also affect outmigration. The results indicate that Japanese policies encouraging firms to employ foreign workers as complementary may harm its attractiveness to skilled foreign labour.     

Organizational Uncertainty and Labor Contracts in China's Economic Transition

Lifetime employment was a cornerstone of the Chinese socialist system constructed under Mao. In this system, organizations served the function of social security, and as a result, many organizations were overburdened with bloated work forces and retirees that drew from organizational coffers well into old age. Labor contracts fundamentally alter this system, as they allow firms to end the socialist institution of lifetime employment. Yet there is significant variation on the institutionalization of labor contracts in organizations. Based on a sample of 81 firms in industrial Shanghai, I show that organizations that are experiencing uncertainty in the economic transition are more likely to institutionalize labor contracts on an organizationwide basis. There are two types of organizational uncertainty in the economic transition: economic uncertainty and administrative uncertainty. In cases of economic uncertainty, firms that lost money in 1990 and firms that are burdened by large forces of retired workers are more likely to place their workers on labor contracts. In the case of administrative uncertainty, firms that are at the highest levels of the industrial hierarchy are also significantly more likely to place their workers on labor contracts. Although these upper level firms were the most protected under the command economy, they are being forced to handle the greatest among the responsibilities in the economic transition, and as a result, they experience the greatest sense of being set adrift by the state.     

TRADING UNCERTAINTY, ENFORCEMENT AND LABOR UNIONS

It is shown that when contracts can be perfectly enforced, trading uncertainty leads to discrimination among workers with the same skills and experience. In this case anti-discrimination laws lead to inefficiencies. In the absence of perfect enforcement, anti-discrimination practices may be used as enforcement devices and need not lead to inefficiencies. In particular, firms may wish to precommit to an anti-discrimination policy, say by inviting in a labor union, in order to offer credible insurance to its workers. This leads to an equilibrium in which union workers get a higher wage than non-union workers, but unions do not have monopoly power.     

A Note on Dual Internal Labor Markets and Wages of Temporary Workers: Evidence from Linked-Employer-Employee Data

I use linked employer-employee data from the German Federal Statistical Office to estimate within-firm wage differentials between temporary workers with fixed-term contracts and workers with permanent contracts in the context of dual internal labor markets. Wage-tenure profiles of permanent workers are estimated separately for each firm to obtain a proxy for the prevalence of internal labor markets. Temporary workers earn significantly lower wages in firms with steeper wage-tenure profiles. This finding is consistent with the segmentation in a primary permanent workforce with high wages and a secondary temporary workforce with low wages, if internal labor markets are more prevalent.     

Institutional legacies in TNCs and their management through training academies: the case of transnational law firms in Italy

In this article we highlight the effects of heterogeneous institutional contexts on transnational professional service firms, a relatively poorly studied issue. Specifically, we provide empirical analysis of how the specificities of the Italian institutional context affect the activities of English legal professional service firms in Milan. This reveals the intimate connection between a variety of capitalism, place specific workplace cultures and practices, and the institution‐related challenges transnational professional service firms and all transnational corporations (TNCs) face. We also reveal the way institutionally generated differences at the level of work practices are managed in transnational law firms through worldwide training programmes designed to ‘govern’ the practices of workers in different parts of the TNC's network. This emphasizes the importance of studying attempts to manage institutional heterogeneity at the level of workplace practices, something often missed in existing mesoscale studies of TNC governance structures. Consequently, we highlight detailed empirical archaeologies that explore the direct links between institutions and practices as an important component of future research on the effects of institutions on TNCs.     

Bending but Not Breaking?: Foreign Investor Pressure and Dividend Payouts by Japanese Firms

This article examines the global diffusion of shareholder‐oriented governance practices, using the case of dividend payouts by Japanese firms. While Japanese firms previously retained profits for rainy days or new ventures, their dividend payouts began to increase in the 1990s, rapidly catching up with the levels prevailing in the United States. Following prior research, we focus on the role of foreign investors in this process but provide a more nuanced account of their influence, using panel data on 2,036 publicly traded Japanese firms from 1990 to 2005. First, we show that pressure from foreign investors increased dividends by Japanese firms not only directly but also indirectly, by extending the cognitive boundaries of organizational fields of Japanese firms beyond their local peers and toward their global competitors. Second, we show that although Japanese firms that remained deeply embedded in the traditional, stakeholder‐oriented governance system resisted shareholder‐oriented governance practices, even such firms yielded under pressure from both foreign and domestic investors. We conclude with theoretical implications of our findings for the literature on the global diffusion of shareholder value and its broader political and social consequences.     

The adoption of family-friendly practices in family-owned firms

Most family business research on managing work and family conflict focuses on the family unit while ignoring non-family employees. This study investigates how family businesses manage the work and family conflicts facing non-family employees by examining the adoption of work–family practices in family-owned firms. Two research questions are addressed. First, to what extent do family-owned firms adopt work–family practices? Second, do family-owned firms offer the same level of work–family practices as non-family-owned firms? Results indicate that when family-owned firms do adopt work–family practices, they favour flexible scheduling arrangements for non-family employees to reduce work–family conflict. In general, however, work–family practices are used less in family-owned firms than non-family-owned firms.     

Les groupements d'employeurs : la sécurité dans la flexibilité ?

An employer pool is an association that, formed under a French act of 1901, hires wage-earners who share their time between two or even three employers who are members of the association. The objectives of these pools are: to turn contingent or part-time jobs into steady, full-time occupations covered by permanent employment contracts; and to make the employer's need for economic flexibility compatible with the individual's need for security. The results of a survey conducted in two employer pools are used to examine actual practices by inquiring into the meaning of a "shared worktime" for wage-earners and by observing the various uses that these employers make of this work force and the new social forms that thus arise. Employees' intermittent presence in the firms and the triangular features of their employment relationship lead to socially distributed sets of constraints and resources, as well as a stronger individualization of work relations.     

Passed over for promotion because of age: An empirical analysis of the consequences

I test whether older individuals who report that their firms favor younger workers in promotion decisions are harmed by this oftencited discriminatory practice. Using the Health and Retirement Study, I determine whether such workers are more likely to experience lower wage growth, to separate from their employer, or to retire early, in comparison with workers with similar demographic and job characteristics. The evidence is consistent with lower wage growth and a greater likelihood of early retirement. Much of the effect, however, is likely to stem from a high correlation between delayedpayment contracts and promotion practices. I thank Jeff Biddle, John Goddeeris, David Neumark, John Strauss, and Jeff Wooldridge for helpful comments and suggestions. I gratefully acknowledge fellowship support during the completion of this paper from the Robert Wood Johnson Foundation.     

Does the early bird always get the worm? market institutions and the timing of employment decisions

Unravelling of appointment dates can be observed in some entry-level labor markets but not in others. A comparison of different markets shows how the costs of breaking contracts and being rematched can affect the timing of appointments and market behavior. If contracts can be terminated at any time by workers and if rematching costs are relatively small compared to the benefits from changing matches, early appointments in an entry-level labor market confers no benefit on firms. Firms then have no incentives to make early offers. However, if the costs offset the benefits from changing employment, firms that cannot compete with their principal competitors may prefer to make offers before some critical information becomes available rather than wait for the time when employment can actually start. Such a labor market may experience early appointments. But if the most desirable firms do not issue early offers, other firms may be rejected in any early period. Therefore, the most desirable firms can work together to halt unravelling. I am indebted to Esquire Donna Gerson and Koh Song Hui who extended help in writing this paper. My special thanks should be given to Alvin Roth for his suggestions and comments.     

A Davis-Bacon musicale: Symphony orchestras as migrant labor

One of the original arguments in support of the Davis-Bacon Act was that local construction labor would be protected from wage-busting on federal projects by “ruthless non-local contractors” using low-wage, itinerant labor. A related, current claim is that Davis-Bacon prevents lower quality non-local firms from winning contracts by underbidding local labor; thus, Davis-Bacon helps to ensure the quality of construction. This paper first evaluates whether the use of itinerant non-local firmsnecessarily results in lower quality output. Using the “traveling” symphony orchestra as an analogy, the answer is clearly “no.” Second, if higher quality output may be produced by non-local firms, is this likely to happen in construction? Third, does a Davis-Bacon type of wage floor ensure that local projects will be built by local firms or crews?     

PROMOTIONS AS WORK INCENTIVES

Why do professional partnerships like law firms, accounting practices, and management consulting groups to name a few, rely almost exclusively on promotions for incentives and do not typically use incentive pay to motivate their associates? We compare three schemes (relative-input-based piece rates, tournaments with monetary prizes, and tournaments with promotions as prizes) within an environment characterized by group production and double moral hazard induced by possible wealth constraints on the supervisors. We find that the difficulty in implementing promotion tournaments is possibly an important reason for the existence of firms.     

THE IMPACT OF LABOR CONTRACTS: EVIDENCE FROM BRAZIL

The conventional Keynesian model suggests that frictions created by nominal wage contracts generate a positive relationship between inflation and output. On the other hand, the New Classical/Real Business Cycle theory claims that firms and workers base their employment behavior, and hence output, on the marginal product of labor ignoring the efficiencies of fixed nominal wage contracts. Using Brazilian data, where nominal wages were indexed by law, tests show that fixed nominal wage contracts insignificantly affected output. Thus, the data support the view that fixed nominal wages play an insignificant role in determining the evolution of output. ( JEL E31)     

STICKY WAGES AND IMPLICIT CONTRACTS: A TRANSACTIONAL APPROACH

Sticky wages have been explained in the recent implicit contracts literature as a risk shifting device. Risk averse employees purchase insurance via an implicit contract from risk neutral firms. This paper offers an alternative explanation of the phenomenon. Various alternative organizational forms for labor markets are analyzed from a transactions cost viewpoint. Observed labor market institutions (including sticky wages) are seen as ways to economize on transactions costs. In fact, it is argued that sticky wages would be observed even if workers were risk neutral. Thus the emphasis on risk shifting in the implicit contracts literature seems misplaced.
A fall (in price) arising from temporary distress will be attended probably with no correspondent fall in the rate of wages: for the fall in price, and the distress, will be understood to be temporary, and the rate of wages, we know, is not so variable as the price of goods.     

UNEMPLOYMENT AND FINANCIAL CONSTRAINTS FACED BY SMALL FIRMS

A distinguishing feature of small firms is that most small business owners work for themselves and only employ relatives and friends. We examine conditions under which this labor market practice is an economic outcome and consider the link between this outcome and unemployment. The model is motivated by empirical evidence that suggests that small firms are subject to financial constraints that are supported by information asymmetries. I show that, in a constrained equilibrium, sole proprietorship and unemployment arise from an information imperfection in the credit market that makes infeasible the consummation of mutually beneficial contracts in the labor market.     

Wo'Lakol Kiciyapi

ABSTRACT

This pilot study hypothesized that the ancient traditions of help and healing among traditional Lakota people represent an alternative or complementary model for understanding a distinctive approach to American social work theory and practice which includes “shamanic” or spirit healing as a constituent part of the help and healing process. Thirty-two individuals, Including traditional Lakota elders, educators, leaders, and mental health providers, were interviewed about their views on traditional ideas of help and healing and about social work and social service practices. The findings show that there were distinctive approaches to ensure social health and well-being among pre-reservation Lakota peoples, and that the traditions of help and healing are intimately linked to the “natural law” and to the ceremonial life of the tribe. The findings show a resurgence of traditional healing practices among the Lakota with important implications for Social Work theory and practice.     

Employing policy and purchasing levers to increase the use of evidence-based practices in community-based substance abuse treatment settings: reports from single state authorities

State public health authorities are critical to the successful implementation of science based addiction treatment practices by community-based providers. The literature to date, however, lacks examples of state level policy strategies that promote evidence-based practices (EBPs). This mixed-methods study documents changes in two critical state-to-provider strategies aimed at accelerating use of evidence-based practices: purchasing levers (financial incentives and mechanisms) and policy or regulatory levers. A sample of 51 state representatives was interviewed. Single State Authorities for substance abuse treatment (SSAs) that fund providers directly or through managed care were significantly more likely to have contracts that required or encouraged evidence-based interventions, as compared to SSAs that fund providers indirectly through sub-state entities. Policy levers included EBP-related legislation, language in rules and regulations, and evidence-based criteria in state plans and standards. These differences in state policy are likely to result in significant state level variations regarding both the extent to which EBPs are implemented by community-based treatment providers and the quality of implementation.     

Career Planning in Spain: Do Fixed-term Contracts Delay Marriage and Parenthood?

The aim of this paper is to find an empirical connection between the striking increase in the use of fixed-term contracts in Spain and the observed delay in the age at marriage and maternity. Using the eight waves of individual information from the European Household Panel for Spain, we find that for men, the decision whether to get married is strongly negatively affected by holding unstable contracts or not working, relative to when an indefinite contract is held. However, for women, results suggest that holding fixed-term contracts is not a deterrent for the decision whether to get married. With respect to the decision of whether to enter into parenthood, results indicate that for all childless women, either with no partner, holding fixed-term contracts delays entry into motherhood relative to the holding of indefinite contracts. The discouragement effect is stronger for women with no partner, though.JEL classification: D1, J1