LABOR MARKETS, INDUSTRIAL MONOPOLIZATION, WELFARE, AND IMPRISONMENT:

Various theorists posit that the rate of unemployment is linked to the rates of both welfare and imprisonment. This assumes a competitive labor market tied to specific controls of surplus populations. This article argues that contemporary labor markets lie on a continuum between competitive (secondary) and relatively non-competitive (primary) structures which creates a pattern of labor market segmentation. Such segmentation is linked with specific policies of incarceration or welfare, depending on the competitiveness of the labor market. Data from a cross-section of urban, industrial U.S. counties test the relationship between labor market segmentation, monopolization of industries, and the rates of welfare and imprisonment, controlling for a variety of other relevant variables. Regression analyses results suggest that as labor market structures become less competitive (i.e., move from predominantly secondary toward predominantly primary labor market characteristics), rates of welfare recipients and welfare benefits rise and rates of imprisonment fall. They also suggest that increasing industrial monopolization raises rates of imprisonment and lowers rates of welfare benefits. These findings indicate that the two major dimensions of economic segmentation (industrial competition and labor market competition) oppositely affect levels of welfare benefits and rates of imprisonment.     

LOSING BY LESS? IMPORT COMPETITION,UNEMPLOYMENT INSURANCE GENEROSITY,AND CRIME

Increased import competition from China has brought about a host of negative consequences for the most exposed industries and labor markets. Do social programs attenuate these harmful effects? We examine changes in import competition between 1990 and 2007, taking crime as our outcome of interest and unemployment insurance as our mitigating program. We find strong evidence that counties with access to more generous unemployment insurance experienced relatively smaller increases in trade‐induced property crime. This highlights a new and important positive externality of unemployment insurance. (JEL H00, R10)     

EFFICIENCY WAGES AND SUBJECTIVE PERFORMANCE PAY

This paper studies optimal relational contracts in motivating workers in a market setting. We find that labor markets with higher turnover costs will use more subjective performance pay and less efficiency wages and that in those markets, the total wage payment is lower and the equilibrium employment level is higher. Surprisingly, under certain conditions, an increase in turnover costs leads to higher social welfare. Incorporating workers' search costs, we show that wages are procyclical in booms and are either rigid or countercyclical during recessions. The predictions of the model are consistent with some empirical evidence. ( JEL D82, J33, J41, J63)     

Monopsony and teachers’ salaries in Georgia

Does monopsony power in the labor market for teachers affect teachers’ salaries? Prior studies have found mixed evidence of monopsony effects in teacher labor markets. A major problem has been controlling for union wage effects, which potentially mask the wage-depressing effects of monopsony. We use data from the state of Georgia, one of the few states in the United States where no teacher bargaining takes place. We detect no evidence of lower average teacher salaries in less competitive labor markets. We also find limited evidence that salaries of beginning teachers may be about two percent lower in less competitive labor markets, but our findings are not robust with respect to our various measures of monopsony and labor market boundaries. We conclude that even in the absence of unions the effect of monopsony on teachers’ salaries appears to be very small.     

ENTITLEMENT EFFECTS, UNEMPLOYMENT INSURANCE AND EMPLOYMENT DECISIONS

Many studies have identified the work disincentive effects of unemployment insurance. This paper points out the entitlement effect of this and other social insurance programs on employment, as the risks of labor-market participation are reduced by the existence of unemployment benefits. This employment-increasing effect can offset the disincentive effect, with the net impact on employment becoming an empirical issue. Using data on a sample of married women for 1971, we find that on net there is a slight negative effect on employment of higher unemployment insurance benefits. The entitlement effect on employment is, though, generally positive and significant, suggesting that the provisions of social insurance induce increased labor-force participation among women who otherwise would remain out of the labor force.     

Sub‐Saharan African Cotton Policies in Retrospect

Calls for liberalising cash‐crop sectors in sub‐Saharan Africa have been voiced for decades, yet the impact of reforms remains elusive in empirical studies. This article offers new opportunities for solving this problem by creating precise and consistent market organisation indices for 25 African cotton markets from 1961 to 2008. The aggregation of scores reveals interesting trends: markets are no more competitive today than in the late 1990s, 50% of production still originates from markets with fixed prices and reforms are giving rise to a new type of regulated market in both East and West Africa.     

WORKER POWER, FIRM POWER, AND THE STRUCTURE OF LABOR MARKETS

The purpose of this article is to advance the conceptual development of structurally-oriented approaches to stratification by elaborating a behavioral model of the structure of labor markets that is based on power relations among both individual and collective actors. After reviewing the various approaches to the study of stratification and enumerating some of its shortcomings, a theory of the operation of labor markets that synthesizes a number of the elements in extant theories is presented. A labor market typology is developed based on the relative power of firms and workers and four distinct types of markets are delineated, i.e., worker-controlled, firm-internal, worker-firm negotiated, and competitive. In addition, the dynamics by which these labor markets are transformed is discussed. It is argued that this conceptual framework solves a number of problems inherent in extant theories of the operation of labor markets and the article concludes by suggesting areas for future research based on the theory.     

GEOGRAPHIC DIFFERENCES IN U.S. UNEMPLOYMENT RATES: A VARIANCE DECOMPOSITION APPROACH

This paper analyzes the determinants of the geographic dispersion of unemployment rates. The model presented here recognizes that structural labor market relationships differ across areas and that area unemployment rates and some of the explanatory variables are determined simultaneously. Most importantly, the methodology introduced here provides an estimate of the impact of each of the explanatory variables on the overall dispersion of unemployment rates, allowing comparison of several competing hypotheses that purport to explain why areas differ so widely in terms of their unemployment rates. The empirical results indicate that inter-area differences in product market demand and in sensitivity to changes in conditions in the product market are the most important factors accounting for geographic differences in unemployment rates. More generally, the results indicate that unemployment rates differ widely across areas not so much because areas differ in terms of the underlying characteristics that determine unemployment rates but because areas are so heterogeneous with respect to labor market structure.     

TWO TO TANGO? GENDER DIFFERENCES IN THE DECISIONS TO PUBLISH AND COAUTHOR

The existence of old boy networks has long been postulated as a possible explanation for the presence of gender differences in market outcomes but with little empirical support because of the difficulty of measuring network access. This article exploits the unique attributes of academic labor markets and detailed data on individuals and jobs for PhD economists over nearly four decades. The results suggest that networks impact the joint decision to publish and coauthor, that these network effects differ by gender, and that gender differences in network access change over time as women become more well represented in a profession. (JEL J44 , J77 , J24 )     

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.     

INDUSTRIAL DYNAMICS AND THE NEOCLASSICAL GROWTH MODEL

This paper studies industry-level dynamics and demonstrates the ability of a modified neoclassical growth model to capture a range of empirical facts. The paper begins by using U.S. data to document skilled and unskilled labor trends within industry sector classifications as well as industry sector output trends. Using Current Population Survey data from 1968 to 2004, it is shown that the ratio of skilled workers to unskilled workers employed has risen in all industries. The absolute increase in this ratio was larger in the more skilled industries, while the growth rate was larger in the less skilled industries. Furthermore, using national income account data, it is shown that relatively high-skilled industries have accounted for an increasing share of output over time. A version of the neoclassical growth model is then constructed to match these observations. One important feature of this model is a structure that introduces new goods into the economy at each moment of time. The model is able to capture a rich set of labor market movements between sectors and between skill levels as well as changes in the relative output shares across industries, yet preserves many nice features of the neoclassical growth model. ( JEL E13, J20, 030)     

The relative effect of unionization and interjurisdictional competition on municipal wages

This study analyzes the effect on municipal employee wages of interjurisdictional competition in municipal service markets. The impact of market conditions are analyzed utilizing a bureaucracy model of local governmental decision making. The study develops hypotheses concerning the degree of competition in this market, constructs empirical measures of competition, and investigates the relationship between competition and wage levels for three categories of municipal workers. The empirical results suggest that local market conditions may be as important a determinant of local wages as local labor market conditions, including union membership. Also, the wage effect of unionization appears to be greater in less competitive local government environments. Financial support from the Earhart Foundation is gratefully acknowledged. We would also like to thank Werner Hirsch, Roger Folsom, and Geoffrey Nunn for helpful comments.     

Obesity and sex ratios in the U.S.

This paper studies how rising male incarceration and its impact on marriage markets has affected female incentives to gain weight. Exogenous variation in marriage market conditions is obtained from differential trends in male incarceration rates across markets defined by race, location and age. We provide evidence that marriage market conditions do in fact affect the incidence of obesity. In particular, we find that increases in male imprisonment that reduced the male–female sex-ratio explain about 18 % of the increase in the female obesity rate for African-Americans in the United States over the 1990s. Results are particularly large for those in the younger age group (ages 18–23).     

Monopsony power in the market for teachers: Why teachers should support market-based education reform

Employers can exploit individuals with high moving costs when local labor markets are not competitive. Along with nurses and university faculty, teachers are sometimes in such a disadvantageous situation. Teachers’ price elasticity of supply may be quite low in many regions, and their geographic mobility may be low when they are their household's second wage earner. Their occupational mobility is often low because of the scarcity of alternate employers within commuting distance. Nearly 96 percent of Texas' teachers work in tax-financed school districts, and many regions have only one district. An econometric model developed from school district data from 48 South Texas and 48 North Texas counties supports the hypothesis that teachers are paid less in less competitive labor markets. In Texas, teachers’ salaries are not determined by collective bargaining between district officials and teacher unions. That relatively unique feature of Texas makes it especially well-suited to the task of disentangling monopsony effects from other labor market forces.     

Municipal residency laws: Effects on police employment,compensation, and productivity

This paper offers an alternative model of the effects of residency laws in municipal labor markets. Unlike previous studies, the model assumes that public employee labor markets are characterized by conditions of excess supply and that public services are produced under noncompetitive conditions. The model also implies that productivity improvements increase rather than reduce labor demand, yielding different results with respect to the wage and employment effects of residency requirements. The non-clearing market model is tested using data on municipal police officers. The results are more compatible with the disequilibrium model than with models based on a competitive equilibrium.     

Searching for Local Solutions: Making Welfare Policy on the Ground in Ontario

Over recent decades welfare dependency has played a powerful role in defining the welfare “problem” and in passing appropriate “solutions.” One result has been the proliferation of short-term, low-cost employment programs and training programs that have emerged as critical sites for challenging and reforming the attitudes and behaviors of welfare recipients. By exploring work-readiness programs in four communities in Ontario, Canada, we provide insight into how these programs relate to the lived realities of those compelled to attend them. The research shows how dependency discourse informs program rules and content, raising expectations about both the benefits and the immediacy of work. This focus risks individualizing blame and ignoring the structural realities of labor markets and the systemic forces that create poverty and unemployment. Although the particular empirical focus is on Ontario, the approaches used and their outcomes resonate with strategies that are evident wherever neoliberalism has made its mark.     

BEYOND KEYNESIANISM AND MONETARISM

Though there is consensus among economists about microeconomic theory, neither the Keynesian nor the Monetarist theory of macroeconomics has attracted a consensus, presumably because neither is compelling enough to persuade the skeptical. A new approach to the subject that combines insights from each of the familiar schools with considerations that both schools have overlooked is accordingly offered here. This argument accepts the evidence that involuntary unemployment and depressions sometimes occur and thus rejects the finding of the new classical or equilibrium macroeconomics, that markets always clear and that all individuals and firms are in equilibrium. It also rejects the Keynesian assumption of wages or prices arbitrarily fixed at disequilibrium levels, and insists that any adequate theory must show what interests are served by the existence of involuntary unemployment. The theory offered here shows that an institutional or organizational arrangement common in all societies which have experienced widespread unemployment and deep recessions entails that many firms and individuals will be in disequilibrium. This disequilibrium becomes more severe when there is unexpected deflation or disinflation. The disequilibrium is of precisely the type commonplace in recessions and entails involuntary unemployment. The theory also shows how groups of individuals and firms can gain from practices that entail involuntary unemployment and underutilization of resources for others.     

A THEORY OF DOWNWARD-RIGID WAGES AND CYCLICAL UNEMPLOYMENT

The theory presented below provides a rationale for downward wage rigidity and consequent cyclical unemployment by modifying the neoclassical assumption of behavioral independence. Such a modification permits an examination of important nonmarket relationships holding between the individual's wage and the wages paid to other people and between perceived equity in wages received and worker productivity—both linkages widely recognized by personnel managers but little explored by economists. The resulting model predicts a pattern of behavior that is consistent with the available evidence on the actual operation of labor markets.     

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.     

REGIONAL AND SECTORAL EVIDENCE OF THE MACROECONOMIC EFFECTS OF LABOR REALLOCATION: A PANEL DATA ANALYSIS

This article revisits the sectoral shifts hypothesis by examining unemployment fluctuations for 48 U.S. states over the period 1990:M01–2011:M12. We develop a panel approach that incorporates dynamics, parameter heterogeneity, aggregate factors, and cross‐sectional dependence (CSD). Our findings provide support for a positive and significant effect of the employment dispersion index on unemployment. This outcome is robust under alternative specifications and measures of employment dispersion. The empirical evidence corroborates the presence and relevance of CSD and heterogeneity among states. The results show that, once unobserved common factors and cross‐state heterogeneity are taken into account, labor reallocation has a significant effect on unemployment that is half the size of the estimate when cross‐sectional dependence is not taken into account. (JEL E24, E32, J21, R23, C23)