Unemployment Insurance, Duration of Unemployment, and Subsequent Wage Gain

[Excerpt] In order to evaluate what the optimal level of UI benefits is, one must therefore first estimate the magnitude of the relationships between UI benefits levels and unemployed workers\u27 durations of unemployment and post-unemployment wages. There have been several previous studies of the impact of UI benefits on duration of spells of unemployment, however none have been completely satisfactory methodologically. To our knowledge, there have been no previous studies of the system\u27s impact on subsequent wage rates. We attempt to fill these gaps, utilizing data from the National Longitudinal Survey (NLS) to estimate both relationships. The plan of our paper is as follows. First, we sketch the implications of theories of job search for our estimating equations. Next, we briefly discuss the NLS data. The following four sections summarize the empirical results we have obtained for four cohorts of data: older males, ages 45-59; women, ages 30-44; and younger males and females, ages 14-24. Finally, we consider the implications of our results for public policy. Due to space limitations our discussion here is necessarily brief and details of our research are found elsewhere

New Market Power Models and Sex Differences in Pay

In the context of certain general equilibrium search models, it is possible to infer the elasticity of labor supply to the firm from the elasticity of the quit rate with respect to the wage. We use this framework to estimate the elasticity of labor supply for men and women workers at a chain of grocery stores operating in the southwestern United States, identifying separation elasticities from differences in wages and separation rates across different job titles within the firm. We estimate elasticities of labor supply to the firm of about 2.7 for men and about 1.5 for women, suggesting significant wage-setting power for the firm. Since women have lower elasticities of labor supply to the firm, a Robinson-style monopsony model might explain lower relative pay of women in the grocery industry. The wage gaps we observe among workers in US retail grocery stores are close to what the monopsony model predicts for the elasticities we have estimated.monopsony papers, labor supply, grocery stores, elasticity

New Wine in Old Bottles: A Sequential Estimation Technique for the LPM

The conditions under which ordinary least squares (OLS) is an unbiased and consistent estimator of the linear probability model (LPM) are unlikely to hold in many instances. Yet the LPM still may be the correct model or, perhaps, justified for practical reasons. A sequential least squares (SLS) esti-mation procedure is introduced that may outperform OLS in terms of finite sample bias and yields a consistent estimator. Monte Carlo simulations reveal that SLS outperforms OLS, probit and logit in terms of mean squared error of the predicted probabilities. An empirical example is provided.Linear Probability Model, Sequential Least Squares, Consistency, Monte Carlo

Wage Differentials in the 1990s in Israel : Endowments, Discrimination, and Selectivity

The purpose of this paper is to investigate wage structures of professional workers in the Israeli labor market, using data from the most recent 1995 Census and correcting for selectivity at the stage of entrance into the occupation. The sample of professionals is decomposed into several subsamples: men and women and within each gender a distinction is made between Easterners (origination from Asian/African countries) and Westerners (from European/American countries of origin). Comparisons by gender and ethnicity can then be made. Characteristics (endowments) and wage structures of the four groups are presented. Wage equations include the Inverse of Mill's Ratio as a regressor to correct for selection into the professional occupations. Wage differences are then examined and decomposed into 3 components: Endowments (human capital), discrimination and selectivity. Following the methodology presented in Neuman and Oaxaca (2004), four alternative decompositions are suggested and discussed

Work experience as a source of specification error in earnings models: implications for gender wage decompositions

We address the bias from using potential vs. actual experience in earnings models. Statistical tests reject the classical errors-in-variable framework. The nature of the measurement error is best viewed as a model misspecification problem. We correct for this by modeling actual experience as a stochastic regressor and predicting experience using the NLSY79 and the PSID. Predicted experience measures are applied to the IPUMS. Our results suggest that potential experience biases the effects of schooling and the rates of return to labor market experience. Using such a measure in earnings models underestimates the explained portion of the male-female wage gap

Statistical discrimination in labor markets: an experimental analysis

Statistical discrimination occurs when distinctions between demographic groups are made on the basis of real or imagined statistical distinctions between the groups. While such discrimination is legal in some cases (e.g., insurance markets), it is illegal and/or controversial in others (e.g., racial profiling and gender-based labor market discrimination). First-moment statistical discrimination occurs when, for example, female workers are offered lower wages because females are perceived to be less productive, on average, than male workers. Second-moment discrimination would occur when risk-averse employers offer female workers lower wages based not on lower average productivity but on a higher variance in their productivity. This paper reports results from controlled laboratory experiments designed to study second-moment statistical discrimination in a labor market setting. Since decision-makers may not view risk in the same way as economists or statisticians (i.e., risk=variance of distribution), we also examine two possible alternative measures of risk: the support of the distribution, and the probability of earning less than the expected (maximum) profits for the employer. Our results indicate that individuals do respond to these alternative measures of risk, and employers made statistically discriminatory wage offers consistent with loss-aversio

The economics of dual job holding: a job portfolio model of labor supply

In this paper we develop a job portfolio model of dual job holding based on a Stone-Geary utility function. We derive the associated Slutsky equation components. Because the job portfolio model applies only to unconstrained dual jobholders, we separate individuals who moonlight because of an hours constraint from dual jobholders who work on two job for reasons different from an hours constraint. Income and wage elasticities are estimated for workers without hours constraints using data from the May 1991 supplement to the Current Population Survey. Our study finds that the income and compensated wage elasticities are much larger for labor supply to job 2 compared with job 1