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)     

A Better Method for Analyzing the Costs and Benefits of Fundraising at Universities

This article develops a new methodology for a more comprehensive and useful analysis of the costs and benefits of fundraising, as well as the total costs and net benefits associated with development efforts in general. This approach does a better job of linking the timing of return of fundraising efforts and measuring the actual return on investments in fundraising (as opposed to the reported return) than the widely used guidelines from the Council for Advancement and Support of Education and the National Association of College and University Business Officers (CASE/NACUBO) (1990). The implications are a better methodology for practitioners that they can use to enhance internal decision making and a better methodology for boards to use in evaluating performance and accountability. Recently, other large, public universities have begun using several of these concepts in the assessment of their development offices (Rooney, 1998).     

Less cheating? The effects of prefilled forms on compliance behavior

As a consequence of digital transformation, individuals are often confronted with prefilled forms or prefilled data entry masks. In situations where cheating and lying are of concern, prefilling might reduce dishonest behavior. In a controlled experiment, we investigate how correctly and incorrectly prefilled forms influence compliance behavior. We frame our experiment as filing the annual income tax return. We show that correct prefilling enhances compliance. However, in cases of incorrect prefilling, we observe asymmetric effects. If prefilled income is lower than true income, we find no positive compliance effect, and compliance is on the same level as with blank forms. If prefilled income is higher than true income, prefilling still has a positive effect on compliance. In that case, compliance is on the same level as with correctly prefilled forms and higher than with blank forms. Our study contributes to the literature on cheating and lying by showing that prefilled forms affect compliance.     

Turkish Immigrants’ Hopes and Fears around Return Migration

This paper seeks to understand the process by which immigrants decide whether or not to return to their home countries. It aims to analyse the potential for return migration rather than the actual migration process. Empirically, it is based on the narratives of 30 Turkish immigrants living in the United States. The findings indicate that: (1) multiple controllable and uncontrollable, micro‐ and macro‐level factors in both the home and the host countries interact over time to tip the scales towards – or away from – return migration; and (2) most immigrants live in a perpetual state of ambivalence about whether or not to engage in return migration. These findings are discussed, and implications are presented for both practice and policy.     

Migration between imperfectly competitive economies

We study the role of bargaining as a barrier to migration in the equilibrium of a two-region world with imperfectly competitive labour markets. Equilibrium migration is jointly determined by relative labour market bargaining powers, productivity and costs of migration. If migrants complement host factors, higher migration generally benefits both source and host economies. An enhancement of the bargaining power of typically weak migrant workers in host regions improves welfare.     

Return migration to Jamaica and its development potential

Return migration to Jamaica is associated closely with the existence and nature of the transnational linkages established between migrants and their home country, especially at the level of the household and family. Remittances invariably precede, accompany and follow the actual return of migrants and comprise money as well as a range of consumer goods.
Data on the number of returning migrants to Jamaica have been collected officially only since 1992; other information is derived from field studies. The figures show that the US is the source of most return migrants to Jamaica, with the United Kingdom second.
Likewise, there are few official statistics on remittances, especially of those entering the country through informal channels. Nevertheless, data on the receipt of money through the Bank of Jamaica, indicate that during the 1990s remittances as a percentage of GDP exceeded that of the traditional foreign currency earners of bauxite and sugar.
Growing awareness of the potential of the Jamaican overseas community has led the Government of Jamaica to establish programmes, including The Return of Talent programme, supported by the International Organization for Migration (IOM), to encourage the return of nationals.
Different types of return migrants have the potential to make different kinds of contributions to national development – some through their skills, educational and professional experience, others through the financial capital which they transfer for investment or as retirement income. However, the most significant development potential of return lies in the social and economic conditions in Jamaica itself. If confidence levels are high, there will be little difficulty in attracting persons to return and financial transfers and investments will increase. Furthermore, the social and economic environment largely conditions the extent to which skills and talent as well as the financial capital are effectively utilized.     

Investing in Turbulent Times: The Investment Behavior of Polish Firms in the Early Transition

We examine the investment behavior of a sample of Polish industrial firms over the period 1991–1993 by means of a model that views investment flows as part of the firm’s effort to adjust its assets and liabilities so as to maximize the returns to the firm. We argue that the application of neoclassical models of investment is more appropriate in cases where net investment is positive and where the returns to other assets and costs of liabilities are stable. If firms are seeking to reduce their capital stock, then the major constraints are not financial but rather set by the speed of physical depreciation. If the returns to other assets or the costs of liabilities change, then the firm will be forced to reconfigure its balance sheet in a way that may be inconsistent with the neoclassical model of investment. This paper examines the adjustments undertaken by Polish firms and shows that firms that did make positive net investments in this period were influenced by their capital intensity, profitability and by their costs of and returns to financial assets. The explanatory power of the model is relatively high when compared to previous studies of the investment behavior of firms in the early years of transition.     

Incremental cost sharing: Characterization by coalition strategy-proofness

Each one of n users consumes an idiosyncratic commodity produced in indivisible units. The n commodities are jointly produced by a central facility and total cost must be shared by the users.  A “sequential stand alone mechanism” shares costs incrementally according to a fixed ordering of the users: the first user always pays stand alone cost, the second pays the stand alone cost of the first two users minus that of the first and so on. If the second derivatives of costs are of a constant sign, such a method yields a unique strong equilibrium at every profile of convex preferences in the game where each user chooses his own demand. This equilibrium, in turn, defines a coalition strategy-proof social choice function.  Under decreasing marginal costs and submodular costs, the sequential stand alone mechanisms are almost characterized by these properties; the only exception is the binary demand case (each agent consumes zero or one unit) where a rich family of cost sharing methods (the Shapley value among them) yields a coalition strategy-proof equilibrium selection. Under increasing marginal costs and supermodular costs, coalition strategy-proofness characterizes a richer family of cost sharing methods: they give out one unit at a time while charging marginal costs, with the users taking turns according to a sequence fixed in advance. These methods contain serial cost sharing as a limit case. Received: 8 July 1997/Accepted: 22 January 1998     

Women and agricultural productivity: Reframing the Issues

Should agricultural development programmes target women in order to increase productivity? This article analyzes the challenges in distinguishing women's agricultural productivity from that of men. Most of the literature compares productivity on plots managed by women with those managed by men, ignoring the majority of agricultural households in which men and women are both involved in management and production. The empirical studies which have been carried out provide scant evidence for where the returns to projects may be highest, in terms of who to target. Yet, programmes that do not consider gendered responsibilities, resources and constraints, are unlikely to succeed, either in terms of increasing productivity or benefitting men and women smallholder farmers.     

The dynamic transformation of political systems through social contract: a game theoretic approach

 We consider how the political system of the state evolves in the process of economic development. We present a dynamic public goods economy with non-overlapping generations, which confronts the free-rider problem without the state. In each generation, individuals enter under the unanimous rule a social contract of the political system, either monarchy or democracy, and then attempt to establish the state under the contracted political system. If the state is established, it provides public goods by enforcing tax on its members. Our game theoretic analysis shows: (i) the state can be established if and only if social productivity in terms of the capital stock of public goods is lower than a critical level; (ii) individuals choose democracy if social productivity is sufficiently high, while monarchy may be chosen if it is not; (iii) social productivity stochastically converges to the critical level over generations; and (iv) a simulation result shows several transformation patterns of political systems. Received: 21 June 1994/Accepted: 7 November 1995     

THE COMPETITIVE RETURNS TO THE GLOBAL SEARCH FOR TALENT: PROFESSIONAL SPORTS MARKETS AND FOREIGNERS

We examine the geographical and racial diversity of a market's labor supply. While the likely impact of expanding supply is to increase the level of productivity, it is not obvious what impact the expansion would have on the overall level of competition. If the added labor increases productivity differentials or are disproportionately populated on high achieving firms, then the likely result would be greater imbalance. We find that while increases in the foreign‐born component are associated with an increase in the overall level of competition, the impact has diminished across time. (JEL C22, D23, D30)     

Learning and the Form of Compensation

Using data from the PSID and an empirical setup similar to the one used in Altonji and Pierret (Q J Econ 116(1):313–350, 2001)’s paper on wages and employer learning, we find that the coefficient of a hard-to-observe correlate of productivity—parents’ educational attainment—in a wage regression increases more rapidly with experience in performance pay jobs than in nonperformance pay jobs. This result is driven entirely by bonus pay jobs as opposed to commission/piece rate jobs. In the latter, there is no evidence that the importance of parental education in the wage determination process increases over time. This is consistent with the notion that explicit pay-for-performance compensation schemes are, by design, revealing workers’ productivities and that employers need not infer anything about worker productivity when the payment is ex post as is the case for commissions and piece rates as opposed to having to set pay ex ante.     

WHAT'S BEHIND THE FIGURES? QUANTIFYING THE CROSS‐COUNTRY EXPORTER PRODUCTIVITY GAP

We present a simple framework that allows us to examine the cross‐country exporter productivity gap without accessing confidential firm‐level data. This gap depends on the three readily available statistics: the productivity gap between two countries; the export participation rates; and export premia. This gap holds irrespective of the distribution underlying firm productivity and irrespective of the presence of fixed costs. Under specific conditions, allocative efficiency may affect the exporter productivity gap. The empirical analysis globally validates this exercise. (JEL F1, D24)     

COSTLY INTERMEDIATION AND CONSUMPTION SMOOTHING

This paper studies quantitatively how intermediation costs affect household consumption loans and welfare. Agents face uninsurable idiosyncratic shocks to labor productivity in a production economy with costly financial intermediation and a borrowing limit. Reducing intermediation costs has two effects: (1) For a given decrease in the interest rate on borrowing, agents' ability to smooth consumption over time improves. (2) The demand for loans increases, which increases the interest rate. The net welfare gain of reducing intermediation costs from 3.927% (U.S. level) to 1% is about 1.14% of equivalent consumption in the baseline economy for an endogenous interest rate and 1.90% for an exogenous interest rate. The gains are distributed unevenly: households at the bottom wealth decile improve welfare by 3.96% and 5.86% of equivalent consumption, while those at the top decile have welfare gains of 0.35% and 0.2%, respectively. Sufficiently high intermediation costs eliminate borrowing and hence the welfare gain of reducing costs is not substantial. The welfare analysis includes transitional dynamics between steady states. (JEL D91, E60, G38)     

A STUDY OF AUTOMOBILE INVENTORY INVESTMENT

The volatile fluctuations in automobile inventory levels are explained well by the stock-adjustment model estimated in this paper on monthly time-series data. In contrast to the findings of most previous inventory studies, fluctuations in financial inventory carrying costs (as measured by a service cost of capital) are found to influence the target auto stocks in both a statistically significant and economically important manner. Also, the speed-of-adjustment of automobile inventories to their target level is estimated to be relatively fast, about thirty percent per month.     

Preliminary estimates of cost-effectiveness for marital therapy

Cost‐effectiveness of marital therapy was examined beginning with a simple question: If government or health insurers paid for the screening and, where indicated, empirically supported treatment of 100,000 randomly selected married persons (i.e., 50,000 couples) from the general population, would the financial benefits outweigh costs? Two empirically supported forms of marital therapy, behavioral marital therapy and emotionally focused therapy, were considered in aggregate as possible treatments of choice. Marital therapy appears to be cost‐effective when paid for by government to reduce public costs of divorce or when paid for by insurers to offset the increased health‐care expenses associated with divorce. Implications and specific needs for future research to substantiate these conclusions are discussed.     

EXPLAINING INDUSTRY LABOR PRODUCTIVITY MOVEMENTS

The paper investigates the importance of three shocks at the industry level for explaining industry labor productivity movements; industry demand shocks, supply shocks, and labor supply shocks. The results from vector autoregressions show that the two supply shocks are the main determinants of labor productivity movements, where increases in labor supply are associated with persistently declining labor productivity. Labor supply shocks can explain from 65% to 73% of labor productivity variation at a three-year horizon in the trade and services industries. ( JEL O, O3, J22, L6-L9)     

Unions and productivity: Evidence from academe

In order to test competing hypotheses about the effect of unions on labor productivity, we examine research performance in a sample of 889 Ph.D.-granting departments (175 unionized) in public universities. We find no support for the hypothesis that unions enhance productivity in academe. If we compare union and nonunion departments endowed with (sample) mean amounts of labor and capital, we find that unionization is associated with a 17 percent reduction in output of published articles and a 9 percent reduction in peers’ survey evaluations of a department’s level of scholarly achievement.     

Farm-level constraints on agri-environmental scheme participation: a transactional perspective

Voluntary agri-environmental schemes based on management agreements characterise much agri-environmental policy across the EU at present, and have expanded following the implementation of Regulation 2078/92 in all member states. Schemes generally motivate individual farmers to contract with government agencies to produce countryside goods in return for compensatory payments. Hence, farmers’ decisions to participate are central to achieving policy objectives. An enhanced understanding of farmers’ attitudes to and perceptions of schemes and their implementation would be of value for policy development. Recent transactions-cost research has observed that such schemes involve potentially heavy transactions costs, for both the state and farmers. In addition to reducing scheme cost-effectiveness, the transactions costs incurred by farmers can form a significant constraint on participation in schemes, with adverse effects on the supply of conservation goods. This paper considers behavioural and transactional perspectives on scheme participation. Some new data on the transactional burdens experienced by farmers when participating in schemes is examined from the perspective of identifying ways to improve policy transacting to ease constraints on participation where these exist. At the level of the individual participant, the development of agri-environmental one-stop-shops in member states for all schemes would allow transactions-cost economies, saving on the overhead costs of applying to different schemes with different objectives, as well as allowing a more integrated, less confused approach to participation. The longer-term value of farmer networks and capacity-building for agri-environmental management is important too.     

DOES OFFSHORING PAY? FIRM‐LEVEL EVIDENCE FROM JAPAN

This article explores the impact of offshoring on productivity using firm‐level data for the Japanese manufacturing industries during the period 1994–2000. We find that intrafirm offshoring, that is, sourcing of intermediate inputs to foreign affiliates within a particular multinational firm, has generally a positive effect on productivity of the offshoring firm, while arm’s‐length offshoring, that is, sourcing to unaffiliated foreign firms, does not have such an effect. In addition, the impact of arm’s‐length offshoring is negative for nonmultinationals and nonexporters but nonnegative for multinationals and exporters. These results suggest that the costs of searching foreign firms suitable for offshoring are nonnegligible. (JEL F14, L23)