Creator: Schmitz, James Andrew Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 286 Abstract:
Great Lakes iron ore producers had faced no competition from foreign iron ore in the Great Lakes steel market for nearly a century as the 1970s closed. In the early 1980s, as a result of unprecedented developments in the world steel market, Brazilian producers were offering to deliver iron ore to Chicago (the heart of the Great Lakes market) at prices substantially below local iron ore prices. The U.S. and Canadian iron ore industries faced a major crisis that cast doubt on their future. In response to the crisis, these industries dramatically increased productivity. Labor productivity doubled in a few years (whereas it had changed little in the preceding decade). Materials productivity increased by more than half. Capital productivity increased as well. I show that most of the productivity gains were due to changes in work practices. Work practice changes reduced overstaffing and hence increased labor productivity. Changes in work practices, by increasing the fraction of time equipment was in operating mode, also significantly increased materials and capital productivity.
Keyword: Work Rules, Effort, Competition, and Labor Productivity Subject (JEL): J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, J50 - Labor-Management Relations, Trade Unions, and Collective Bargaining: General, O40 - Economic Growth and Aggregate Productivity: General, O35 - Social Innovation, and L70 - Industry Studies: Primary Products and Construction: General
Creator: Filson, Darren, 1969- and Franco, April Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 272 Abstract:
In high-tech industries, one important method of diffusion is through employee mobility: many of the entering firms are started by employees from incumbent firms using some of their former employers’ technological know-how. This paper explores the effect of incorporating this mechanism in a general industry framework by allowing employees to imitate their employers’ know-how. The equilibrium is Pareto optimal since the employees “pay” for the possibility of learning their employers’ know-how. The model’s implications are consistent with data from the rigid disk drive industry. These implications concern the effects of know-how on firm formation and survival.
Keyword: Research and Development, Rigid Disk Drive, Industry Dynamics, Innovation, Diffusion, Techonological Change, and Spinout Subject (JEL): O31 - Innovation and Invention: Processes and Incentives, J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, L63 - Microelectronics; Computers; Communications Equipment, and L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
Creator: İmrohoroglu, Ayşe Ökten, Merlo, Antonio, and Rupert, Peter Charles, 1952- Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 216 Abstract:
In this paper we propose a general equilibrium model where heterogeneous agents specialize either in legitimate market activities or in criminal activities and majority rule determines the share of income redistributed and the expenditures devoted to the apprehension of criminals. We calibrate our model to the U.S. economy in 1990, and we conduct simulation exercises to evaluate the effectiveness of expenditures on police protection and income redistribution at reducing crime. We find that while expenditures on police protection reduce crime, it is possible for the crime rate to increase with redistribution. We also show that economies that adopt relatively more generous redistribution policies may have either higher or lower crime rates than economies with relatively less generous redistribution policies, depending on the characteristics of their wage distribution and on the efficiency of their apprehension technology.
Subject (JEL): D58 - Computable and Other Applied General Equilibrium Models, J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, and K14 - Criminal Law
Creator: Kleiner, Morris and Soltas, Evan J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 590 Abstract:
We assess the welfare consequences of occupational licensing for workers and consumers. We estimate a model of labor market equilibrium in which licensing restricts labor supply but also affects labor demand via worker quality and selection. On the margin of occupations licensed differently between U.S. states, we find that licensing raises wages and hours but reduces employment. We estimate an average welfare loss of 12 percent of occupational surplus. Workers and consumers respectively bear 70 and 30 percent of the incidence. Higher willingness to pay offsets 80 percent of higher prices for consumers, and higher wages compensate workers for 60 percent of the cost of mandated investment in occupation-specific human capital.
Keyword: Labor supply, Welfare analysis, Human capital, and Occupational licensing Subject (JEL): D61 - Allocative Efficiency; Cost-Benefit Analysis, K31 - Labor Law, J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, J38 - Wages, Compensation, and Labor Costs: Public Policy, and J44 - Professional Labor Markets; Occupational Licensing
Creator: Guvenen, Fatih and Kuruscu, Burhanettin Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 427 Abstract:
In this paper, we construct a parsimonious overlapping-generations model of human capital accumulation and study its quantitative implications for the evolution of the U.S. wage distribution from 1970 to 2000. A key feature of the model is that individuals differ in their ability to accumulate human capital, which is the main source of wage inequality in this model. We examine the response of this model to skill-biased technical change (SBTC), which is modeled as an increase in the trend growth rate of the price of human capital starting in the early 1970s. The model displays behavior that is consistent with several important trends observed in the US data, including the rise in overall wage inequality; the fall and subsequent rise in the college premium, as well as the fact that this behavior was most pronounced for younger workers; the rise in within-group inequality; the stagnation in median wage growth; and the small rise in consumption inequality despite the large rise in wage inequality. We consider different scenarios regarding how individuals’ expectations evolve during SBTC. Specifically, we study the case where individuals immediately realize the advent of SBTC (perfect foresight), and the case where they initially underestimate the future growth of the price of human capital (pessimistic priors), but learn the truth in a Bayesian fashion over time. Lack of perfect foresight appears to have little effect on the main results of the paper. Overall, the model shows promise for explaining a diverse set of wage distribution trends observed since the 1970s in a unifying human capital framework.
Subject (JEL): J31 - Wage Level and Structure; Wage Differentials, E25 - Aggregate Factor Income Distribution, J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, and E21 - Macroeconomics: Consumption; Saving; Wealth