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The Long-Term Effects of Job Mobility on the Adult Earnings of Young Men: Evidence from Integrated Employer-Employee Data
June 2005
Working Paper Number:
CES-05-05
The paper follows a population of 18-year-old men to examine the impact that early job mobility has on their earnings prospects as young adults. Longitudinal employer-employee data from the state of Maryland allow me to take into consideration the endogenous determination of mobility in response to unobserved worker as well as firm characteristics, which may lead to spurious results. The descriptive portion of the paper shows that mobility patterns of young workers differ considerably with the characteristics of the firm; however, growth patterns are not significantly different on average. Workers employed in high-turnover firms (such as those in retail and services) experience more job turnover but similar rates of wage growth compared to workers employed in low turnover firms (such as those in manufacturing); however, their wage levels remain below and the wage gap actually increases over time. Regression results controlling for unobservable show that employers in the low-turnover sector discount earnings of workers who displayed early market mobility. By contrast, I find no evidence that mobility has negative effects for workers that remain employed in the high turnover sector.
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Prices, Spatial Competition, and Heterogeneous Producers: An Empirical Test
August 2004
Working Paper Number:
CES-04-16
In markets where spatial competition is important, many models predict that average prices are lower in denser markets (i.e., those with more producers per unit area). Homogeneous-producer models attribute this effect solely to lower optimal markups. However, when producers instead differ in their production costs, a second mechanism also acts to lower equilibrium prices: competition-driven selection on costs. Consumers' greater substitution possibilities in denser markets make it more difficult for high-cost firms to profitably operate, truncating the equilibrium cost (and price) distributions from above. This selection process can be empirically distinguished from the homogenous-producer case because it implies that not only do average prices fall as density rises, but that upper-bound prices and price dispersion should also decline as well. I find empirical support for this process using a rich set of price data from U.S. ready-mixed concrete plants. Features of the industry offer an arguably exogenous source of producer density variation with which to identify these effects. I also show that the findings do not simply result from lower factor prices in dense markets, but rather because dense-market producers are low-cost because they are more efficient.
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Production Function and Wage Equation Estimation with Heterogenous Labor: Evidence from a New Matched Employer-Employee Dataset
April 2004
Working Paper Number:
CES-04-05
In this paper, we first describe the 1990 DEED, the most recently constructed matched employeremployee data set for the United States that contains detailed demographic information on workers (most notably, information on education). We then use the data from manufacturing establishments in the 1990 DEED to update and expand on previous findings, using a more limited data set, regarding the measurement of the labor input and theories of wage determination (Hellerstein, et al., 1999). We find that the productivity of women is less than that of men, but not by enough to fully explain the gap in wages, a result that is consistent with wage discrimination against women. In contrast, we find no evidence of wage discrimination against blacks. We estimate that both the wage and productivity profiles are rising but concave to the origin (consistent with profiles quadratic in age), but the estimated relative wage profile is steeper than the relative productivity profile, consistent with models of deferred wages. We find a productivity premium for marriage equal to that of the wage premium, and a productivity premium for education that somewhat exceeds the wage premium. Exploring the sensitivity of these results, we also find that different specifications of production functions do not have any qualitative effects on the these results. Finally, the results indicate that the returns to productive inputs (capital, materials, labor quality) as well as the residual variance are virtually unaffected by the choice of the construction of the labor quality input.
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Transitions in Welfare Participation and Female Headship
February 2004
Working Paper Number:
CES-04-01
This study uses data from the 1990, 1992, 1993, and 1996 panels of the Survey of Income and Program Participation to examine how welfare policies and local economic conditions contribute to women's transitions into and out of female headship and into and out of welfare participation. It also examines whether welfare participation is directly associated with longer spells of headship. The study employs a simultaneous hazards approach that accounts for unobserved heterogeneity in all of its transition models and for the endogeneity of welfare participation in its headship model. The estimation results indicate that welfare participation significantly reduces the chances of leaving female headship. The estimates also reveal that more generous welfare benefits contribute indirectly to headship by increasing the chances that mothers will enter welfare. More generous Earned Income Tax Credit benefits are associated with longer spells of headship, nonheadship, and welfare participation and nonparticipation. Other measures of welfare policies, including indicators for the adoption of welfare waivers and the implementation of Temporary Assistance for Needy Families programs, are generally not significantly associated with headship or welfare receipt. Better economic opportunities are estimated to increase headship but reduce welfare participation among unmarried mothers.
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The Relation among Human Capital, Productivity and Market Value: Building Up from Micro Evidence
December 2002
Working Paper Number:
tp-2002-14
This paper investigates and evaluates the direct and indirect contribution of human capital
to business productivity and shareholder value. The impact of human capital may occur in two ways:
the specific knowledge of workers at businesses may directly increase business
performance, or a skilled workforce may also indirectly act as a complement to improved
technologies, business models or organizational practices. We use newly created firm-level
measures of workforce human capital and productivity to examine links between those measures
and the market value of the employing firm. The new human capital measures come from an
integrated employer-employee data base under development at the US Census Bureau. We link
these data to financial information from Compustat at the firm level, which provides measures of
market value and tangible assets. The combination of these two sources permits examination of
the link between human capital, productivity, and market value. There is a substantial positive
relation between human capital and market value that is primarily related to the unmeasured
personal characteristics of the employees, which are captured by the new measures.
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Displaced workers, early leavers, and re-employment wages
November 2002
Working Paper Number:
tp-2002-18
In this paper, we lay out a search model that takes explicitly into account the
information flow prior to a mass layoff. Using universal wage data files that allow
us to identify individuals working with healthy and displacing firms both at
the time of displacement as well as any other time period, we test the predictions
of the model on re-employment wage differentials. Workers leaving a "distressed"
firm have higher re-employment wages than workers who stay with the
distressed firm until displacement. This result is robust to the inclusion of controls
for worker quality and unobservable firm characteristics.
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The Demand for Human Capital: A Microeconomic Approach
December 2001
Working Paper Number:
CES-01-16
We propose a model for explaining the demand for human capital based on a CES production function with human capital as an explicit argument in the function. The resulting factor demand model is tested with data on roughly 6,000 plants from the Census Bureau's Longitudinal Research Database. The results show strong complementarity between physical and human capital. Moreover, the complementarity is greater in high than in low technology industries. The results also show that physical capital of more recent vintage is associated with a higher demand for human capital. While the age of a plant as a reflection of learning-by-doing is positively related to the accumulation of human capital, this relation is more pronounced in low technology industries.
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Market Structure and Productivity: A Concrete Example
June 2001
Working Paper Number:
CES-01-06
This paper shows that imperfect output substitutability explains part of the observed persistent plant-level productivity dispersion. Specifically, as substitutability in a market increases, the market's productivity distribution exhibits falling dispersion and higher central tendency. The proposed mechanism behind this result is truncation of the distribution from below as increased substitutability shifts demand to lower-cost plants and drives inefficient plants out of business. In a case study of the ready-mixed concrete industry, I examine the impact of one manifestation of this effect, driven by geographic market segmentation resulting from transport costs. A theoretical foundation is presented characterizing how differences in the density of local demand impact the number of producers and the ability of customers to choose between suppliers, and through this, the equilibrium productivity and output levels across regions. I also introduce a new method of obtaining plant-level productivity estimates that is well suited to this application and avoids potential shortfalls of commonly used procedures. I use these estimates to empirically test the presented theory, and the results support the predictions of the model. Local demand density has a significant influence on the shape of plant-level productivity distributions, and accounts for part of the observed intra-industry variation in productivity, both between and within given market areas.
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Who Dies? International Trade, Market Structure, and Industrial Restructuring
June 2001
Working Paper Number:
CES-01-04
This paper examines the role of changing factor endowments in the growth and decline of industries and regions. The implications of an endowment-based Heckscher-Ohlin trade model for plant entry and exit are tested on 20 years of data for the entire US manufacturing sector. The trade model provides predictions for which industries will see growth through the positive net entry of plants. A multi-region version of the same model has predictions for which regions will see high turnover and net entry of plants. In a country such as the U.S. that is augmenting both its physical and human capital, the least capital-intensive, least skill-intensive industries are correctly predicted to have the lowest rate of net entry. In addition, increases in regional capital and skill intensity are associated with higher probabilities of shutdown, especially for plants in industries with low initial capital and skill intensities.
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The Impact of Ownership Changes: A View from Labor Markets
March 2000
Working Paper Number:
CES-00-02
Previous studies of mergers and acquisition often focus on firms' performance such as profits, productivity and market shares. However, from a broad competition policy perspective, the impacts on labor and wages are crucial. In this study, we use plant-level data for the entire U.S. manufacturing for the period 1977-87 to examine the effects of ownership changes on employment, wages and plant closing. Our principal findings are that ownership changes are not a primary vehicle for cuts in employment and wages, or closing plants. Instead, the typical ownership change appear to increase jobs and their quality as measured by wages. However, some ownership changes, particularly those in bigger plants, are associated with job loss, and the typical worker fares much worse than the typical plant. Finally, we find that plants that changed owners have a higher probability of survival than those that did not. Overall, the impact of ownership changes on labor markets are positive.
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