Although economists acknowledge that various indicators of educational attainment (e.g., highest
grade completed, credentials earned) might serve as signals of a worker’s productivity, the practical
importance of education-based signaling is not clear. In this paper we estimate the signaling value
of a high school diploma, the most commonly held credential in the U.S. To do so, we compare the
earnings of workers that barely passed and barely failed high school exit exams, standardized tests
that, in some states, students must pass to earn a high school diploma. Since these groups should, on
average, look the same to firms (the only difference being that "barely passers" have a diploma while
"barely failers" do not), this earnings comparison should identify the signaling value of the diploma.
Using linked administrative data on earnings and education from two states that use high school exit
exams (Florida and Texas), we estimate that a diploma has little effect on earnings. For both states, we
can reject that individuals with a diploma earn eight percent more than otherwise-identical individuals
without one; combining the state-specific estimates, we can reject signaling values larger than five or six
percent. While these confidence intervals include economically important signaling values, they exclude
both the raw earnings difference between workers with and without a diploma and the regression-adjusted
estimates reported in the previous literature.
Although economists acknowledge that various indicators of educational attainment (e.g., highest
This paper studies the effect of labor relations on product quality. We consider whether a
long, contentious strike and the hiring of permanent replacement workers by
Bridgestone/Firestone in the mid-1990s contributed to the production of an excess
number of defective tires. Using several independent data sources we find that labor
strife in the Decatur plant closely coincided with lower product quality. Count data
regression models based on two data sets of tire failures by plant, year and age show
significantly higher failure rates for tires produced in Decatur during the labor dispute
than before or after the dispute, or than at other plants. Also, an analysis of internal
Firestone engineering tests indicates that P235 tires from Decatur performed less well if
they were manufactured during the labor dispute compared with those produced after the
dispute, or compared with those from other, non-striking plants. Monthly data suggest
that the production of defective tires was particularly high around the time wage
concessions were demanded by Firestone in early 1994 and when large numbers of
replacement workers and permanent workers worked side by side in 1996.
We estimate the effect of new unionization on firms’ equity value over the 1961-1999 period using a newly
assembled sample of National Labor Relations Board (NLRB) representation elections matched to stock market
data. Event-study estimates show an average union effect on the equity value of the firm eq uivalent to a cost of at
least $40,500 per unionized worker. At the same time, point estimates from a regression-discontinuity design –
comparing the stock market impact of close union election wins to close losses – are considerably smaller and close
to zero. We find a negative relationship between the cumulative abnormal returns and the vote share in support of
the union, allowing us to reconcile these seemingly contradictory findings. Using the magnitudes from the analysis,
we calibrate a structural “median voter” model of endogenous union determination in order to conduct
counterfactual policy simulations of policies that would marginally increase the ease of unionization.
This paper documents that rotation group bias — the tendency for labor force statistics to vary systematically by month in sample in labor force surveys — in the Current Population Survey (CPS) has worsened considerably over time. The estimated unemployment rate for earlier rotation groups has grown sharply relative to the unemployment rate for later rotation
groups; both should be nationally representative samples. The rise in rotation group bias is driven by a growing tendency for respondents to report job search in earlier rotations relative to later rotations. We investigate explanations for the change in bias. We find that rotation group bias increased discretely after the 1994 CPS redesign and that rising nonresponse is likely a significant contributor. Survey nonresponse increased after the redesign, and subsequently trended upward, mirroring the time pattern of rotation group bias. Consistent with this explanation, there is only a small increase in rotation group bias for households that responded in all eight interviews. An analysis of rotation group bias in
Canada and the U.K. reveal no rotation group bias in Canada and a modest and declining
bias in the U.K. There is not a “Heisenberg Principle” of rotation group bias, whereby the bias is an inherent feature of repeated interviewing. We explore alternative weightings of the unemployment rate by rotation group and find that, despite the rise in rotation group bias, the official unemployment does no worse than these other measures in predicting alternative measures of economic slack or fitting key macroeconomic relationships.
This paper asks whether disclosing wages to the public changes wage setting at the top of the public sector income distribution. I evaluate a 2010 California mandate that required cities to submit municipal salaries to the State, to be posted on a public website. City managers—typically the highest paid employees—in cities that had not previously disclosed salaries experienced average compensation declines of approximately 8 percent relative to cities where at the time of the mandate manager wages were already in the public domain. This decline was largely accomplished through nominal pay cuts. The wage cuts were not the result of relatively greater financial stress, as the overall wage bill did not diverge between these sets of cities. Wages were cut irrespective of whether or not they were out of line with (measured) fundamentals. Consequently, the residual variance of manager wages did not decline. Following new disclosure the city manager quit rate increased by 75 percent, suggesting that transparency pressured cities to lower the wages that were already close to reservation levels. The evidence is more consistent with a “populist” response to perceptions of excessive salaries than with the effects of increased accountability.
We estimate the effect of the reduction in credit supply that followed the 2008 financial crisis on the real economy. We predict county lending shocks using variation in pre-crisis bank market shares and estimated bank supply-shifts. Counties with negative predicted shocks experienced declines in small business loan originations, indicating that it is costly for these businesses to find new lenders. Using confidential microdata from the Longitudinal Business Database, we find that the 2007-2009 lending shocks accounted for statistically significant, but economically small, declines in both small firm and overall employment. Predicted lending shocks affected lending but not employment from 1997-2007.
We provide new evidence on the effect of the unemployment insurance (UI) weekly benefit
amount on unemployment insurance spells based on administrative data from the state of Missouri covering the period 2003-2013. Identification comes from a regression kink design that exploits the quasi-experimental variation around the kink in the UI benefit schedule. We find that UI durations are more responsive to benefit levels during the recession and its aftermath, with an elasticity between 0.65 and 0.9 as compared to about 0.35 pre-recession.
In this paper we examine how an unanticipated cut in potential unemployment insurance (UI) duration, which reduced maximum duration in Missouri by 16 weeks, affected the search behavior of UI recipients and the aggregate labor market. Using a regression discontinuity design (RDD), we estimate that a one-month reduction in maximum duration is associated with 15 fewer days of UI receipt and 8.6 fewer days of nonemployment. We use the RDD estimates to simulate the change in the time path of the unemployment rate assuming there are no market-level externalities. The simulated response closely approximates the estimated change in the unemployment rate following the benefit cut, suggesting that even in a period of high unemployment, the labor market was able to absorb this influx of workers without crowding out other jobseekers.
We examine whether the recent expansions in Medicaid from the Affordable Car Act reduced
“employment lock” among childless adults who were previously ineligible for public
coverage. We compare employment in states that chose to expand Medicaid versus those that
chose not to expand, before and after implementation. We find that although the expansion
increased Medicaid coverage by 3.0 percentage points among childless adults, there was no
significant impact on the employment.
We use a field experiment to study how workers value alternative work arrangements. During the
application process to staff a national call center we randomly offered applicants choices between traditional
M-F 9 am – 5 pm office positions and alternatives. These alternatives include flexible scheduling,
working from home, and positions that give the employer discretion over scheduling. We randomly
varied the wage difference between the traditional option and the alternative, allowing us to estimate
the entire distribution of willingness to pay (WTP) for these alternatives. We validate our results using
a nationally-representative survey. The great majority of workers are not willing to pay for flexible
scheduling relative to a traditional schedule: either the ability to choose the days and times of work or
the number of hours they work. However, the average worker is willing to give up 20% of wages to
avoid a schedule set by an employer on a week’s notice. This largely represents workers’ aversion to
evening and weekend work, not scheduling unpredictability. Traditional M-F 9 am – 5 pm schedules are
preferred by most jobseekers. Despite the fact that the average worker isn’t willing to pay for scheduling
flexibility, a tail of workers with high WTP allows for sizable compensating differentials. Of the worker friendly
options we test, workers are willing to pay the most (8% of wages) for the option of working
from home. Women, particularly those with young children, have higher WTP for work from home and
to avoid employer scheduling discretion. They are slightly more likely to be in jobs with these amenities,
but the differences are not large enough to explain any wage gaps.