This paper provides a simple economic rationale for two elements that often appear - implicitly or explicitly - in firms' personnel policies. When firms reduce their labor input they often (i) lay off a few individuals rather than adjust work hours, and (ii) make retention decisions on the basis...

In his classic work on the economics of fertility, Becker (1960) suggests that children are likely “normal.” We examine this contention. Our first step is documenting an empirical regularity about the cross section of white married couples in the U.S.: when we restrict comparisons to...

In this paper we study whether location-specific price variation likely affects statistical inference and theoretical interpretation in the empirical implementation of human capital earnings functions. We demonstrate, in a model of local labor markets, that the ?return to schooling" is a...

A standard object of empirical analysis in labor economics is a modified Mincer wage function in which an individual's log wage is specified to be a function of education, experience, and an indicator variable identifying race. Researchers hope that estimates from this exercise can be...

Workers, being human beings, present employers with a range of tricky problems. Humans, unlike filing cabinets, can be crooked, subversive, surly, or indolent, even if they are paid on time. In this article we explore economists' main models of how compensation is used to address employee...

Little attention has been given to the link between variation in a firm's circumstances and the resolution of agency problems that pervade the relationship between a firm and its employees. We construct stochastic versions of standard efficiency-wage and performance-bonding models and find that...

We study low-powered incentives in a model that captures important features of workplaces in which incentive-pay approaches are minimally relevant. Our motivation is that incentive pay, while not rare, is clearly far less common than are agency problems: many firms with agency problems...

In standard economic theory, labor supply decisions depend on the complete set of prices: the wage and the prices of relevant consumption goods. Nonetheless, most of theoretical and empirical work ignores prices other than wages when studying labor supply. The question we address in this paper...

How significant was the economic progress of African-Americans in the U.S. between 1970 and 2000? In this paper we examine this issue for black men 25-55 years old who live in 14 large U.S. metropolitan areas. We present the evidence that significant racial disparities remain in education and...

Using Census Public Use Micro Sample (PUMS) data for 1980, 1990 and 2000, this paper documents a little-noticed feature of U.S. labor markets that there is wide variation in the labor market participation rates and annual work hours of white married women across urban areas. This variation is...