Should Workers Care About Firm Size?

The question of wage differentials by firm size has been studied for several decades with no commonly accepted explanations for why large firms pay more. In this paper, we reexamine the relationship between firm size and wage outcomes by estimating the returns to unmeasured ability between large and small firms. Our empirical methodology, based on non- linear instrumental variable estimations, allows us to directly estimate the returns to unmeasured ability by firm size and, therefore, to test the two main theories of wage determination proposed to explain the relationship between firm size and wages, namely ability sorting and job screening. We use data from the Survey of Labour and Income Dynamics (SLID), which provides longitudinal information on workers' and firms' characteristics, including establishment and firm size. We find significant differences in the returns to unmeasured ability across firm size. In particular, we find that the returns to unmeasured ability seem to follow a non-linear pattern. The returns to unmeasured ability are significantly higher in medium size (above 500, but below 1000 workers) firms relative to small firms. However, the returns to unmeasured ability are not significantly greater in large firms relative to medium or small firms. Overall, it seems that ability sorting dominates for moves from small to medium size firms in that ability is more productive and, therefore, more rewarded in the latter than the former. On the other hand, when firms become "too large," the monitoring costs hypothesis seems to dominate in that ability is not more rewarded than in smaller firms.Firm Size, Comparative Advantage, Self-selection, Job Screening, Ability Sorting

Age at Migration, Language and Fertility Patterns among Migrants to Canada

This paper explores the fertility decisions of Canadian immigrants using a 20 percent sample of the Canadian Census of Population for the years 1991 through 2006. We focus on those individuals that migrated as children and on their age at arrival to assess their process of assimilation in terms of fertility. Our analysis does not show any sharp discontinuity in fertility by age at migration as sometimes observed on education or labor market outcomes. Instead, there is an inverted U shape relationship between age of migration and immigrant fertility, with those migrating in their late teens having the highest fertility rates when compared to natives. This pattern appears among migrants from all origins – although their fertility levels differ. Results suggests that language acquisition is not a key mechanism through which age at immigration affects fertility – fertility behavior of immigrants with an official mother tongue also differs from that of natives. Rather fertility assimilation seems to be associated with education decisions. College graduates arriving to Canada anytime before adulthood behave as their native peers.age at migration, migration, fertility, language

Does the Market Help Workers Balance Work-Family Conflict?

We use data from the Canadian Workplace and Employee Survey (1999-2002) to assess the take-up of family-friendly benefits that are provided by employers. We distinguish between availability and actual use of benefits to account for worker selection into firms according to benefit availability. We find that selection is important for understanding the takeup of family-friendly benefits, although it does not differ much between genders. We also find that the provision of these benefits helps workers relatively little to manage the work-family conflict and benefits are often unavailable to those who need them most. Our findings suggest that the market fails to help employees balance their family-work conflict.work and family balance, family-friendly benefits, take up of employer benefits

Unemployment Insurance Savings Accounts in Latin America: Overview and Assessment

The unemployment protection systems that exist in most Latin American economies are generally considered inadequate in terms of providing insurance to workers. They may also encourage stratified labor markets and impose barriers to the employee’s mobility and the firm's adjustment to changing labor market conditions. In addition, some of these systems involve high administrative and monitoring costs and may create additional adverse effects that induce higher unemployment rates and longer duration of unemployment and promote informal labor markets. Recently, research effort and policy interest has turned to Unemployment Insurance Savings Accounts (UISAs) as an alternative to traditional systems of unemployment insurance. UISAs are schemes of individual mandatory savings. Therefore, they smooth income over an individual's life cycle rather than pooling unemployment risk over the total working population at a point in time. This form of unemployment insurance diminishes the moral hazard problems associated with traditional insurance methods. However, it presents problems of its own. First, it is questionable that these systems provide adequate protection against unemployment risk. Additionally, their effects on the promotion of informal labor markets and their administrative costs are yet to be determined. Finally, the effectiveness as a form of unemployment insurance depends critically upon the performance and credibility of the financial institutions managing the funds. This paper examines the experience of Latin American countries that use UISAs, with the hope of highlighting the problems of the system and identifying areas for future theoretical and empirical work. The overall effect of UISAs depends on a vast array of specific country characteristics and program parameters. The way the system is implemented, existing labor regulation, the extent of the informal economy and the scope for collusive behavior greatly influence the success of these programs. This calls for a more extensive research effort in the area.unemployment insurance, moral hazard, severance pay, Latin America, labor markets

The Returns to Flexible Postsecondary Education: The Effect of Delaying School

We investigate the returns to postsecondary education relaxing the standard assumption that it proceeds in a continuous manner. Using a unique survey that collects information on a representative cohort of graduates, we are able to estimate the effects of delaying school among successful graduates abstracting from specific macroeconomic conditions at the time of graduation. Our results show that graduates that delayed their education receive a premium relative to graduates that did not, even after considering other factors such as experience or labour market connections. These estimates are robust to the possibility of selection in the decision to return to school.Human Capital, Postsecondary Education, Flexible School Choice, School Delay

Long Term Consequences of Natural Resource Booms for Human Capital Accumulation

Tight labour markets driven by resource booms could increase the opportunity cost of schooling and crowd out human capital formation. For oil producing economies like the Province of Alberta, the OPEC oil shocks of 1973 to 1981 may have had an adverse long term effect on the productivity of the labor force if the oil boom resulted in workers reducing their ultimate investment in human capital rather than merely altering the timing of schooling. We analyze the effect of this decade long oil-boom on the long-term human capital investments and productivity for Alberta birth cohorts that were of normal schooling ages before, during and after the oil boom. Our findings suggest that resource booms may change the timing of schooling but they do not reduce the total accumulation of human capital.Resource booms, long term human capital accumulation, OPEC oil crisis

The Asset Market Game

This paper models asset markets as a game where assets pay according to an arbitrary payoff matrix,investors decide on fractions of wealth to allocate to each asset,and prices result from market clearing. The only pure-strategy Nash equilibrium is to split wealth proportionally to the assets´expected returns, which can be interpreted as investing according to the fundamentals. Further, the equilibrium is evolutionarily stable in the sense of Schaffer (1988). We also study the stability properties of the equilibrium in an evolutionary dynamics where wealth flows with higher probability into those strategies that obtain higher realized payoffs.

Unemployment insurance savings accounts in Latin America : overview and assessment

The unemployment protection systems that exist in most Latin American economies are generally considered inadequate in terms of providing insurance to workers and are prone to generate stratified labor markets. Recently, research effort and policy interest has turned to Unemployment Insurance Savings Accounts (UISAs) as an alternative to traditional systems of unemployment insurance. UISAs are schemes of individual mandatory savings that smooth income over an individual's life cycle time rather than pooling unemployment risk over the total working population at a point in time. Although this form of unemployment insurance diminishes the moral hazard problems associated with traditional insurance methods, it presents problems of its own. First, it is questionable that these systems provide adequate protectionagainst unemployment risk. Additionally, their effects on the promotion of informal labor markets and their administrative costs are yet to be determined. Finally, the effectiveness as a form of unemployment insurance depends critically upon the performance and credibility of the financial institutions managing the funds. This paper examines the experience of Latin American countries that use UISAs, with the hope of highlighting the problems of the system and identifying areas for future theoretical and empirical work. In conclusion, the overall effect of UISAs depends on a vast array of specific country characteristics and program parameters. The way the system is implemented, existing labor regulation, the extent of the informal economy and the scope for collusive behavior greatly influence the success of these programs. This calls for a more extensive research effort in the area.Labor Markets,,Labor Policies,Access to Finance,Banks&Banking Reform

The Evolutionary Logic of Feeling Small

In a (generalized symmetric aggregative game, payoffs depend only on individual strategy and an aggregate of all strategies. Players behaving as if they were negligible would optimize taking the aggregate as given. We provide evolutionary and dynamic foundations for such behavior when the game satisfies supermodularity conditions. The results obteined are also useful to characterize evolutionarily stable strategies in a finite population.