Based on hourly wage rates from nearly all McDonald’s restaurants, and prices of the Big Mac sandwich, we find an elasticity of the wage with respect to the minimum wage of 0.7. This elasticity does not differ between affected and unaffected restaurants because many restaurants maintain a constant wage ‘premium’ above the minimum wage. Higher minimum wages are not associated with faster adoption of touch-screen ordering, and there is near-full price pass-through of minimum wages. Minimum wages lead to higher real wages (expressed in Big Macs per hour) that are one fifth lower than the corresponding increases in nominal wages.
Tradeoffs between monetary wealth and fatal safety risks are summarized in the value of a statistical life (VSL), a measure that is widely used for the evaluation of public policies in medicine, the environment, and transportation safety. This paper demonstrates the widespread use of this concept and summarizes the major issues, both theoretical and empirical, that must be confronted in order to provide a credible estimate of a VSL. The paper concludes with an application of these issues to a particular study of speed limits and highway safety.
In this paper we report the results of randomized trials designed to measure whether stricter
enforcement and verification of work search behavior alone decreases unemployment insurance (Ul)
claims and benefits. These experiments were designed to explicitly test claims based on
nonexperimental data, that a prime cause of overpayment is the failure of claimants to actively seek
work. Our results provide no support for the view that the failure to actively search for work has been a
cause of overpayment in the UI system.
In this paper we study the complete evolution of a final-offer arbitration system used in New
Jersey with data we have systematically collected over the 18-year life of the program. Covering
the wages of police officers and firefighters, this system provides virtually a laboratory setting for
the study of the evolution of strategic interaction. Our empirical analysis provides convincing
evidence that, left alone, the parties do not construct and present their offers as successfully as
when they retain expert agents to assist them. In principle, expert agents may be helpful to the
parties for two different reasons: (a) they may move the arbitrator to favor their position
independently of the facts, or (b) they may help eliminate inefficiencies in the conduct of strategic
behavior. In this paper we construct a model where the agent may influence outcomes
independent of the facts, but where the agent may also improve the outcomes of the process by
moderating any self-serving biases or over-confidence that may have led to impasse in the first
instance. Our data indicate that expert agents may well have had an important role in moderating
self-serving biases early in the history of the system, but that the parties have slowly evolved to a
non-cooperative equilibrium where the use of third-party agents has become nearly universal and
where agents are used primarily to move the fact finder’s decisions.
Throughout the post—war period, U.S. and Canadian unemployment rates
moved in tandem, but this historical link apparently ended in 1982.
During the past three years, Canadian unemployment rates have been some
three percentage points higher than their U.S. analogues, and this gap
shows no sign of diminishing. This paper is an empirical evaluation of
a variety of explanations for this new unemployment gap.
We first show that the demographic and industrial composition of
the two countries is remarkably similar, so that no simple mechanical
hypothesis explain the basic puzzle. It is also evident that the
increase in Canadian unemployment relative to U.S. unemployment cannot
be fully attributed to output movements. We find that the gap between
actual and predicted Canadian output, based on U.S. output, has fallen
dramatically since 1982 while the unemployment gap has widened. We also
find that unemployment in Canada was 2 to 3 percentage points higher in
1983 and 1984 than predicted by Canadian output.
We have investigated a variety of hypotheses to explain the slow
growth of employment in Canada after 1982. These hypotheses attribute
the slow growth of employment to rigidities in the labor market that
raise employers’ costs and restrict the flow of workers between
sectors. The evidence does not support the notion that the growth in
relative unemployment in Canada is due to differences in the regulation
of the labor market in the two countries. Minimum wage laws and
unemployment benefits are fairly similar in Canada and the U.S., and
neither has changed relative to the other in the last decade.
Unionization rates have increased in Canada relative to U.S. since
1970. Most of this divergence occurred before 1980, however, and does
not seem to have created an unemployment gap prior to 1980. Finally,
the hypothesis that differential real wage rates are a major determinant
of relative employment in the U.S. and Canada is soundly rejected by the
data. Real wage rates have been essentially uncorrelated with employ-
ment movements within each country and between the two countries.