ARTICLES (slated for January 2010, 64:2)

The Long-Term Effects of Unemployment Insurance: Evidence from New Brunswick and Maine, 1940-1991.   Chris Riddell and Peter J. Kuhn

Using data spanning half a century for adjacent jurisdictions in the United States and Canada, the authors study the long-term effects of a generous unemployment insurance (UI) program on the distribution of weeks worked.They find substantial effects. For example, in 1990, about 12.6% of working-age men in Maine's northernmost counties worked between 1 and 39 weeks; just across the border in New Brunswick, the figure was 25.6%. According to the estimates, New Brunswick's much more generous UI system accounts for over three-fourths of this differential. In part because part-year workers are drawn from both ends of the distribution of annual weeks worked (0 weeks and 40–52 weeks), the generosity of New Brunswick's program had only modest estimated effects on total labor supply, even as it substantially increased UI program participation and expenditures.

How’s the Job? Well-Being and Social Capital in the Workplace.   John F Helliwell and Haifang Huang

The authors first investigate how income and job characteristics affect life satisfaction, then estimate compensating differentials for non-financial job characteristics. To address potential problems with using life satisfaction data as dependent variables, they draw on three Canadian surveys (conducted in the years 2002–2003) with different samples and questions, and they use individual personality measures, various robustness checks, and cross-testing with measures of domain satisfaction. The life satisfaction results show strikingly large values for non-financial job characteristics, especially workplace trust. For example, a one-third-standard-deviation increase in trust in management is equivalent to an income increase of more than one-third.These results, if confirmed by further research in other settings, suggest either that it is very costly to build and maintain workplace trust or that there are opportunities to improve workplace environments so as to increase both life satisfaction and workplace efficiency.

German Works Councils and the Anatomy of Wages.  John T. Addison, Paulino Teixeira, and Thomas Zwick

Using matched employer-employee data from the German LIAB for 2001, the authors find that German works councils are associated with higher earnings, even after accounting for establishment- and worker heterogeneity. At the plant level, the works council premium exceeds the collective bargaining mark-up and is higher in the presence of collective bargaining once worker selection into the two institutions is accounted for. Works councils appear, in fact, to benefit women relative to men and to build on collective bargaining; moreover, they seem to favor foreign, east-German, and service-sector workers although the rewards of collective bargaining are not always obvious. The evidence from quantile regressions suggests that only in conjunction with collective bargaining is the narrowing influence of works councils on wages really clear-cut.

Does Outsourcing Reduce Wages in the Low-Wage Service Occupations? Evidence from Janitors and Guards.  Arindrajit Dube and Ethan Daniel Kaplan

Outsourcing of labor services grew substantially during the 1980s and 1990s and was associated with lower wages, fewer benefits, and lower rates of unionization. The authors focus on two occupations for which they can identify outsourcing in those two decades using industry and occupation codes: janitors and guards. Across a wide array of specifications, they find that the outsourcing wage penalty ranged from 4% to 7% for janitors and from 8% to 24% for guards. Their findings on health benefits mirror those on wages. Evidence suggests that the outsourcing penalty was not due to compensating differentials for higher benefits or lower hours, skill differences, or the types of industries that outsourced. Rather, outsourcing seems to have reduced labor market rents for workers, especially for those in the upper half of the occupational wage distribution. Industries with higher historical wage premia were more likely to outsource service work.

Changes in Returns to Education in Latin America: The Role of Demand and Supply of Skills.  Marco Manacorda, Carolina Sánchez-Páramo, and Norbert Schady

Using micro data for the urban areas of Argentina, Brazil, Chile, Colombia, and Mexico , the authors document trends in men’s returns to education during the 1980s and the 1990s and estimate the role of supply and demand factors in explaining the changes in skill premia. They propose a model of demand for skills with three production inputs, corresponding to workers with primary–, secondary–, and university-level education. Further, the authors demonstrate that an unprecedented rise in the supply of workers having completed secondary-level education depressed their wages relative to workers with primary-level education throughout Latin America . This supply shift was compounded by a generalized shift in the demand for workers with tertiary education.

Firms’ Innovation Activity and Numerical Flexibility.  Felipe Serrano and Amaia Altuzarra

This study investigates the relationship between manufacturing firms'innovation activity (measured by product innovation, process innovation, and R&D activities) and their numerical flexibility (proxied by the rate of fixed-term contracts). Estimates using data from Spain's Survey on Firms' Strategies (EESE) for the years 2000–2002 reveal a non-monotonic relationship: a firm's probability of innovating and carrying out R&D increased as the rate of use of temporary and other non-core workers increased, but only up to a threshold, beyond which this probability decreased.

Workers’ Compensation:  Recent Developments in Moral Hazard and Benefit Payments.  Xuguang (Steve) Guo and John F. Burton, Jr.

Studies using pre-1990 data generally found benefit and frequency elasticities for workers' compensation cash benefits that exceeded, respectively, 1.0 and 0: an increase in expected benefits apparently induced (a) an even greater increase in benefit payments and (b) an increase in claim frequency. Researchers previously hypothesized that incentive effects for workers dominated those for employers. The authors of this study reevaluate benefit and frequency elasticities for 1975–89, using data with some advantages over those used by previous studies, and also investigate whether the elasticities changed during the years 1990–1999, when insurance policies with large deductibles increased employers’ incentives to limit benefits and many states restricted benefit eligibility. For both periods, they find benefit elasticities significantly under 1.0 and frequency elasticities of about 0. They also find that much of the substantial decline in actual benefits in the 1990s was due to changes in state compensability rules and administrative stringency.

BOOK REVIEWS

The Oxford Handbook of Sociology and Organization Studies: Classical Foundations. Edited by Paul S. Adler. Oxford, UK: Oxford University Press, 2009. 752 pp. ISBN: 978-0-1995-3523-1, $150.00 (hardback). Reviewed by W. Richard Scott

Illegal People: How Globalization Creates Migration and Criminalizes Immigrants. By David Bacon. Boston: Beacon Press, 2008. 272 pp. ISBN: 978-0-8070-4226-7, $25.95, (cloth).  Reviewed by Keith Cunningham-Parmeter

Why the Garden Club Couldn’t Save Youngstown: The Transformation of the Rust Belt.  By Sean Safford. Cambridge, MA: Harvard University Press, 2009. 212 pp. ISBN: 978-0-674-03176-0, $29.95 (cloth). Reviewed by Alex Colvin

Social Policies, Labour Markets and Motherhood: A Comparative Analysis of European Countries. Edited by Daniela Del Boca and Cécile Wetzels. Cambridge: Cambridge University Press, 2008. 313 pp. ISBN: 978-0-521-87741-1, $99.00, (cloth). Reviewed by Anne Winkler

Market, Class and Employment. By Patrick McGovern, Stephen Hill, Colin Mills, and Michael White. New York and Oxford, U.K.: Oxford University Press, 2008. 344 pp. ISBN: 9-7801-9921-337-5, $150.00 (hardback). Reviewed by Melanie Simms

Updated 9/25/09