|
|
|
|
The Flow Approach to Labor Markets: New Data Sources and Micro/Macro Links
Steven J. Davis, R. Jason Faberman and John Haltiwanger
New data sources and products developed by the Bureau of Labor Statistics and the Bureau of the Census highlight the fluid character of U.S. labor markets. Private sector job creation and destruction rates average nearly 8 percent of employment per quarter. Worker flows in the form of hires and separations are more than twice as large. The data also underscores the lumpy nature of micro-level employment adjustments. More than two-thirds of job destruction occurs at establishments that shrink by more than 10 percent within the quarter, and more than one-fifth occurs at those that shut down. Our study also uncovers highly nonlinear relationships of worker flows to employment growth and job flows at the micro level. These micro relations interact with movements over time in the cross-sectional density of establishment growth rates to produce recurring cyclical patterns in aggregate labor market flows. Cyclical movements in the layoffs?separations ratio, for example, and the propensity of separated workers to become unemployed reflect distinct micro relations for quits and layoffs. A dominant role for the job-finding rate in accounting for unemployment movements in mild downturns and a bigger role for the job-loss rate in severe downturns reflect distinct micro relations for hires and layoffs.
Changes in Labor Force Participation in the United States
Chinhui Juhn and Simon Potter
The labor force participation rate in the United States increased almost continuously for two-and-a-half decades after the mid-1960s, pausing only briefly during economic downturns. The pace of growth slowed considerably during the 1990s, however, and after reaching a record high of 67.3 percent in the first quarter of 2000, participation had declined by 1.5 percentage points by 2005. This paper reviews the social and demographic trends that contributed to the movements in the labor force participation rate in the second half of the twentieth century. It also examines the manner in which developments in the 2000s reflect a break from past trends and considers implications for the future.
Unemployment Insurance: Strengthening the Relationship between Theory and Policy
Walter Nicholson and Karen Needels
Ever since the U.S. federal?state system of unemployment insurance was founded in the 1930s, it has provided partial, temporary replacement of wages to eligible workers who lose jobs ?through no fault of their own? (as determined by state-level regulations). Unemployment insurance is one of the largest social insurance programs in the United States, with benefits paid totaling about $34 billion in 2004. Economic theory can help us understand the challenges this complex program is likely to face over the next few years. We begin by summarizing the salient characteristics of the unemployment insurance program and then examine the theoretical and econometric research. Much of this research revolves around the main goals of the program, which include: 1) sustaining consumption for workers and their families; 2) helping recipients to make efficient job choices during a period of financial stress; and 3) minimizing the adverse incentives that may accompany partial wage replacement. Of course, these goals can come into conflict?for example, if replacing wages for an unemployed worker also discourages that worker from aggressively searching for or accepting a new job?and our discussion will focus on these conflicts. In conclusion, we address the key policy issues that the unemployment insurance system is likely to face in upcoming years and ways policymakers may be able to use economic analysis to adjust the program so that it remains effective in addressing the needs of unemployed workers.
The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding
David H. Autor and Mark G. Duggan
The U.S. Social Security Disability Insurance (DI) program has grown dramatically over the last 20 years in size and expense. This growth poses significant risks to the finances of the DI program and the broader Social Security system, and raises troubling questions as to whether the program is being misused by claimants. This article first provides an overview of the Disability Insurance program, describing who qualifies for the program, how an individual applies for benefits and how the level of benefits is determined. Next, we summarize the factors responsible for the growth in the DI rolls and discuss how the characteristics of DI recipients have changed as a result. We then explore the extent of moral hazard in the DI program and the effectiveness of the screening process in distinguishing meritorious from nonmeritorious claims. Finally, we identify the challenges that the DI program creates for Social Security finances and Social Security reform, and discuss potential reforms to the DI program.
The Determinants of Mortality
David Cutler, Angus Deaton and Adriana Lleras-Muney
The pleasures of life are worth nothing if one is not alive to experience them. Through the twentieth century in the United States and other high-income countries, growth in real incomes was accompanied by a historically unprecedented decline in mortality rates that caused life expectancy at birth to grow by nearly 30 years. In the years just after World War II, life expectancy gaps between countries were falling across the world. Poor countries enjoyed rapid increases in life-expectancy through the 1970s, with the gains in some cases exceeding an additional year of life expectancy per year, though the HIV/AIDS epidemic and the transition in Russia and Eastern Europe have changed that situation. We investigate the determinants of the historical decline in mortality, of differences in mortality across countries, and of differences in mortality across groups within countries. A good theory of mortality should explain all of the facts we will outline. No such theory exists at present, but at the end of the paper we will sketch a tentative synthesis.
The Economics of HIV/AIDS in Low-Income Countries: The Case for Prevention
David Canning
There are two approaches to reducing the burden of sickness and death associated with the human immunodeficiency virus (HIV), which leads to acquired immunodeficiency syndrome (AIDS): treatment and prevention. Despite large international aid flows for HIV/AIDS, the needs for prevention and treatment in low- and middle-income countries outstrip the resources available. Thus, it becomes necessary to set priorities. With limited resources, should the focus of efforts to combat HIV/AIDS be on prevention or treatment? I discuss the range of prevention and treatment alternatives and examine their cost effectiveness. I consider various arguments that have been raised against the use of cost-effectiveness analysis in setting public policy priorities for the response to HIV/AIDS in developing countries. I conclude that promoting AIDS treatment using antiretrovirals in resource-constrained countries comes at a huge cost in terms of avoidable deaths that could be prevented through interventions that would substantially lower the scale of the epidemic.
Initial Labor Market Conditions and Long-Term Outcomes for Economists
Paul Oyer
Each year, graduate students entering the academic job market worry that they will suffer due to uncontrollable macroeconomic risk. Given the importance of general human capital and the relative ease of publicly observing productivity in academia, one might expect that long-term labor market outcomes for students graduating in unfavorable climates will resemble long-term outcomes for those graduating in favorable climates. In this paper, I analyze the relationship between macroeconomic conditions at graduation, initial job placement, and long-term outcomes for Ph.D. economists from seven programs. Using macroeconomic conditions as an instrument for initial placement, I show that a quality and type of initial job have a causal effect on long-term job characteristics. I also show that better initial placement increases research productivity, which helps to limit the set of economic models that can explain the effect of initial placement on long-term jobs.
Does the Academic Labor Market Initially Allocate New Graduates Efficiently?
Valérie Smeets, Frédéric Warzynski and Tom Coupé
It is not surprising that economics graduate students from elite and very good schools find better jobs after completion of their Ph.D. degree, on average, than do candidates from less prestigious universities. Yet the job market outcome for candidates from the same university varies quite a lot. While the top candidates from the elite schools are often able to find jobs in other elite universities, it is unclear how ?average? candidates from elite schools fare compared to the top students from relatively less prestigious schools and how the relative job market outcome relates to future success as a researcher. The objective of this paper is to investigate these issues. In this paper, we compare the career trajectories of candidates coming from three different types of schools: elite universities, ?very good? universities, and ?good? universities. We define three types of graduates within each group: those who placed best; those who had an average placement; and those who found jobs at lower levels. Then, for each of these nine groups, we look at initial and current affiliations and we compare publication patterns of the graduates more than a decade into their academic careers. Can we say that the initial allocation was efficient, in the sense that those who placed higher were also more productive in research terms? And to what extent does the labor market for economists adapt and allow economists to move between schools as the ability of individuals to publish their work manifests itself over time?
An Economic Evaluation of the Moneyball Hypothesis
Jahn K. Hakes and Raymond D. Sauer
Michael Lewis's book, Moneyball, describes how an innovative manager working for the Oakland Athletics successfully exploited an inefficiency in baseball's labor market over a prolonged period of time. We evaluate Lewis's claims by applying standard econometric procedures to data on player productivity and compensation from 1999 to 2004. These methods support Lewis's argument that certain baseball skills were valued inefficiently in the early part of this period, and that this inefficiency was profitably exploited by managers with the ability to generate and interpret statistical knowledge. Consistent with Lewis's story and economic reasoning, as knowledge of the inefficiency became increasingly dispersed across baseball teams the market corrected the original mispricing.
Retrospectives: The Coining of "Privatization" and Germany's National Socialist Party
Germá Bel
The concept of privatization attracted much attention in the late 1970s and early 1980s, as Margaret Thatcher's privatization policies were implemented in the United Kingdom. My goal here is not to comment on the merits of privatization as a policy, but rather to investigate the history of the term "privatization" in economics and to shed some light on the context in which the word was coined. Although the origin of the term is often attributed to a 1969 book by Peter Drucker, I will show that this attribution is incorrect, and that the terminology of privatization played an evolving role in German economic policy from the 1930s through the 1950s.
Markets: Continuity and Change in the International Diamond Market
Debora L. Spar
The international diamond cartel, which presides over the production side of the industry, may be the most successful and longest-lasting cartel in the world. The dominant company in the industry, DeBeers, has been around since 1880 and has been controlled by a single South African family, the Oppenheimers, since 1925. Eight countries produce the bulk of the world?s gem diamonds, and most of the producing entities within these countries conform to a set of rules. This conformity is the product of over a century of careful planning and negotiation, in which DeBeers has undertaken largely successful efforts to control the diamond trade and maximize its long-term prospects. The past decade has seen the end of apartheid in South Africa, the fall of communism in Russia, the opening of major mines in Canada, and the emergence of a worldwide movement against so-called ?blood? or ?conflict? diamonds. While, these developments have pummeled the diamond industry and forced its central players?most notably DeBeers?to change the nature of their trade, these changes have not affected the core dynamic of the global diamond market. It remains an industry dominated by a single firm and an industry in which, perhaps uniquely, all of the major players understand the extent to which their long-term livelihood depends on the fate and actions of the others.
Recommendations for Further Reading
Timothy Taylor
Notes