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Abstract:
Between 1995 and 1998, actual growth in compensation per hour (CPH) accelerated from approximately 2 percent to 5 percent. Yet as the labor market continued to tighten in 1999, CPH growth unexpectedly slowed. This article explores whether this aggregate wage puzzle can be explained by changes in the pay structure-specifically, by the increased use of employee stock options in the 1990s. The CPH measure captures these options on their exercise date, rather than on the date they are granted. By recalculating compensation per hour to reflect the options' value on the grant date, the authors find that the adjusted CPH measure accelerated in each year from 1995 to 1999.

employee stock options, compensation per hour, labor markets

Abstract:
This paper provides an empirical investigation into the relationship between ex ante U.S. labor contract durations and uncertainty over the period 1970 to 1995. We construct measures of inflation uncertainty as well as aggregate nominal and real uncertainty. The results not only corroborate previous findings of an inverse relationship between contract duration and inflation uncertainty, but document that this relationship extends to both measures of aggregate uncertainty. We also explore the robustness of this relationship to the various measures of inflation uncertainty that have appeared in the literature.

Abstract:
This paper provides an empirical investigation into the relationship between ex ante U.S. labor contract durations and uncertainty over the period 1970 to 1995. We construct measures of inflation uncertainty as well as aggregate nominal and real uncertainty. The results not only corroborate previous findings of an inverse relationship between contract durations and inflation uncertainty, but also document that this relationship extends to both measures of aggregate uncertainty. We also explore the robustness of this relationship to various measures of inflation uncertainty that have appeared in the literature.

Abstract:
The effects of exchange rate fluctuations across the population is an important issue for increasingly globalized economies. Previous studies using industry aggregate data have found differences across industries in the labor market implications of exchange rates, reporting that industry wages are significantly more responsive than industry employment. We offer an explanation for this paradoxical finding. Using Current Population Survey data for 1976 through 1998, we document that the main mechanism for exchange rate effects on wages occurs through job turnover and the strong consequences this has for the wages of workers undergoing such job transitions. By contrast, workers who remain with the same employer experience little if any wage impacts from exchange rate shocks. In addition, we find that the least educated workers who also have the most frequent job changes shoulder the largest adjustments to exchange rates.

Abstract:
Understanding the effects of exchange rate fluctuations across the population is important for increasingly globalized economies. Previous studies using industry aggregate data have found that industry wages are significantly more responsive than industry employment to exchange rate changes. We offer an explanation for this paradoxical finding. Using Current Population Survey data for 1976 through 1998, we document that the main mechanism for exchange rate effects on wages occurs through job turnover and the strong consequences this has for the wages of workers undergoing such job transitions. By contrast, workers who remain with the same employer experience little if any wage impacts from exchange rate shocks. In addition, we find that the least educated workers -who also have the most frequent job changes - shoulder the largest adjustments to exchange rates.

exchange rates, wage growth, job-turnover, job-churning

Abstract:
In this paper, the authors update the affordability debate using data from the 1990s. They follow Gyourko and Linneman (1993) in addressing the affordability issue by asking a simple question: Is a home of a given quality from ten or twenty years ago more or less affordable today to a household similarly situated to the type of household that occupied the home a decade or two ago? It is important to determine whether the prolonged economic expansion of the 1990s has significantly improved affordability for
households at the bottom of the income distribution. Real house prices at the lower end of the price distribution fell during the 1990s. However, the authors' concept of affordability also hinges on the trends in constant-quality house prices for which, heretofore, there have not been estimates for the current expansion.

income inequality

Abstract:
Using Canadian data on large, private-sector contract negotiations from January 1967 to March 1993, we find that strikes and wages are substantially influenced by labor policy. The data indicate that conciliation policies have largely been ineffective in reducing strike costs. In contrast, general contract reopener provisions appear to make both unions and employers better off by reducing negotiation costs without systematically affecting wage settlements. Legislation banning the use of replacement workers appears to lead to significantly higher negotiation costs and redistribution of quasi-rents from employers to unions.

Abstract:
Using Canadian data on large, private-sector contract negotiations from January 1967 to March 1993, we find that strikes and wages are substantially influenced by labor policy. The data indicate that conciliation policies have largely been ineffective in reducing strike costs. In contrast, general contract reopener provisions appear to make both unions and employers better off by reducing negotiation costs without systematically affecting wage settlements. Legislation banning the use of replacement workers appears to lead to significantly higher negotiation costs and redistribution of quasi-rents from employers to unions.

Abstract:
Recent research indicates that the marked increase in U.S. income inequality over the last twenty-five years has not been matched by a similar increase in consumption inequality. This paper examines the role of saving/dissaving in a house as a vehicle for consumption smoothing. Data from the American Housing Survey show that expenditures on home maintenance and repair are economically significant, amounting to roughly $1,750 per household each year. This figure is comparable to the labor literature estimates that put households' average annual transitory income variance at about $2,200. Our calculations show a significant elasticity of maintenance and repair expenditures to transitory income shocks. The elasticities are higher for less well educated households, which are more likely to be liquidity constrained than their better educated counterparts.

consumption smoothing, home maintenance, repeat-sale price indices

Abstract:
We study early default, defined as serious delinquency or foreclosure in the first year, among nonprime mortgages from the 2001 to 2007 vintages. After documenting a dramatic rise in such defaults and discussing their correlates, we examine two primary explanations: changes in underwriting standards that took place over this period and changes in the economic environment. We find that while credit standards were important in determining the probability of an early default, changes in the economy after 2004 - especially a sharp reversal in house price appreciation - were the more critical factor in the increase in default rates. A notable additional result is that despite our rich set of covariates, much of the increase remains unexplained, even in retrospect. Thus, the fact that the credit markets seemed surprised by the rate of early defaults in the 2006 and 2007 nonprime vintages becomes more understandable.

housing, mortgage default, subprime mortgages

Abstract:
The growing prominence of stocks as a household asset in the 1990s encouraged the view that the United States had become a nation of zealous investors alert to every market development and eager to acquire new stocks. Yet an analysis of the factors behind the rise in the household equity share suggests that exceptionally high returns on stocks - rather than aggressive investment behavior - accounted for much of the increased importance of stocks.

stock ownership, household assets, stock returns

Abstract:
We document the consequences of real exchange rate movements for the employment, hours, and hourly earnings of workers in manufacturing industries across individual states. Exchange rates have statistically significant wage and employment implications in these local labor markets. The importance and size of these dollar-induced effects vary considerably across industries and are more pronounced in some U.S. regions. In addition to the importance of exchange rate shocks, we confirm prior research results showing that relatively strong local conditions drive up wages in local industries, while anticipated future (positive) local shocks reduce current wages.

Abstract:
The rapid growth of the stock market since 1990 has encouraged the view that corporate equity holdings are becoming the primary asset for a broad spectrum of American households. A closer look at the evidence, however, reveals that real estate continues to eclipse stocks as a share of most households' portfolios.

real estate, corporate equity, household portfolios

Abstract:
This paper evaluates current strategies for the empirical modeling of forecast behavior. In particular, we focus on the reliability of using proxies from time series models of heteroskedasticity to describe changes in predictive confidence. We address this issue by examining the relationship between ex post forecast errors and ex ante measures of forecast uncertainty from data on inflation forecasts from the Survey of Professional Forecasters. The results provide little evidence of a strong link between observed heteroskedasticity in the consensus forecast errors and forecast uncertainty. Instead, the findings indicate a significant link between observed heteroskedasticity in the consensus forecast errors and forecast dispersion. We conclude that conventional model-based measures of uncertainty may be capturing not the degree of confidence that individuals attach to their forecasts but rather the degree of disagreement across individuals in their forecasts.

uncertainty, disagreement, conditional heteroskedasticity

Abstract:
By the early 1990s, employee stock ownership plans (ESOPs) had become as prevalent in unionized firms as in nonunionized firms. However, little research has been devoted to examining the implications of ESOPs for collective bargaining or, more generally, for cross ownership. In this paper, we extend the signaling model of Cramton and Tracy (1992) to allow partial ownership by the union. We demonstrate that ESOPs create incentives for unions to become weaker bargainers. As a result, the model predicts that ESOPs will lead to a reduction in strike incidence and in the fraction of labor disputes that involve a strike. We examine these predictions using U.S. bargaining data from 1970 to 1995. The data suggest that ESOPs do increase the efficiency of labor negotiations by shifting the composition of disputes away from costly strikes. Consistent with improved bargaining efficiency, we find that the announcement of a union ESOP leads to a 50 percent larger stock market reaction when compared with the announcement of a nonunion ESOP.

collective bargaining, ESOP, cross ownership, incomplete information, strikes, labor disputes

Abstract:
This paper examines matched point and density forecasts of inflation from the Survey of Professional Forecasters to analyze the relationship between expected inflation, disagreement, and uncertainty. We extend previous studies through our data construction and estimation methodology. Specifically, we derive measures of disagreement and uncertainty by using a decomposition proposed in earlier research by Wallis and by applying the concept of entropy from information theory. We also undertake the empirical analysis within a seemingly unrelated regression framework. Our results offer mixed support for the propositions that disagreement is a useful proxy for uncertainty and that increases in expected inflation are accompanied by heightened inflation uncertainty. However, we document a robust, quantitatively and statistically significant positive association between disagreement and expected inflation.

Survey of Professional Forecasters, density forecasts, point forecasts, inflation predictions, seemingly related regression

Abstract:
Some observers have argued that minority borrowers and neighborhoods were targeted for expensive credit in 2004-06, the peak period for subprime lending. To investigate this claim, we take advantage of a new data set that merges demographic information on subprime borrowers with information on the mortgages they took out. In a sample of more than 75,000 adjustable-rate mortgages, we find no evidence of adverse pricing by race, ethnicity, or gender in either the initial rate or the reset margin. Indeed, if any pricing differential exists, minority borrowers appear to pay slightly lower rates, as do those borrowers in Zip codes with a larger percentage of black or Hispanic residents or a higher unemployment rate. Mortgage rates are also lower in locations that previously had higher rates of house price appreciation. These results suggest some economies of scale in subprime lending. Yet there are important caveats: we are unable to measure points and fees at loan origination, and the data do not indicate whether borrowers might have qualified for less expensive conforming mortgages.

Subprime, Mortgages, HMDA

Abstract:
Between 1995 and 1998, actual growth in nominal compensation per hour (CPH) accelerated from approximately 2 percent to 5 percent. Yet as labor markets continued to tighten in 1999, the growth in CPH paradoxically slowed. In this article, we attempt to solve this aggregate wage puzzle by exploring whether changes in pay structure - specifically, the increased use of employee stock options - can account for the behavior of CPH in the late 1990s. CPH reflects employee stock options on the date they are realized rather than on the date they are granted. When we recalculate CPH growth to reflect the value of current stock options when they are granted - rather than their value when they are realized - we find that our adjusted CPH measure accelerated in each year from 1995 to 1999.

Abstract:
We present a new methodology for ranking business schools. Unlike previous rankings based on subjective survey responses (from CEOs, business school deans, recruiters, or graduates), our approach uses data derived from the labor market for new MBAs. We adjust programs' salaries for the quality of entering students in an attempt to distinguish value added from the quality of incoming students. We then rank programs according to value added. Our results are rather surprising. While four of our top five programs are also labelled as top programs in other rankings, ten of our top twenty are previously unranked. By emphasizing program value added, our procedure identifies several programs that have been overlooked by other rankings since they do not recruit the very top students. We explore the determinants of our value added and student quality measures and find that connections to the business community are positively related to value added, while academic research and high faculty salaries are more strongly associated with student quality. We also find that tuition is better explained by our measure of value added than raw salary, suggesting that programs charge according to value added.

Abstract:
This paper introduces a market based methodology for evaluating the performance of MBA programs. We seek to distinguish the quality of a program from the quality of its students. We judge a program's performance by its value added, measured by the graduates' salaries, after accounting for student characteristics and job attributes. While four of our top five programs have been highly ranked elsewhere, ten of our top twenty programs are elsewhere unranked. We explore the determinants of value added and find that programs with high faculty salaries and those relying heavily on the case method have significantly higher value added.

Abstract:
Using two decades of American Housing Survey data from 1985 to 2005, we estimate the influence of negative home equity and rising mortgage interest rates on household mobility. We find that both factors lead to lower, not higher, mobility rates over time. The effects are economically large -- mobility is almost 50 percent lower for owners with negative equity in their homes. This finding does not imply that current concerns over defaults and homeowners having to relocate are entirely misplaced. It does indicate that, in the past, the mortgage lock-in effects of these two factors were dominant over time. Policymakers may wish to begin considering the consequences of mortgage lock-in and reduced household mobility because they are quite different from the consequences associated with default and higher mobility.

household mobility, negative equity, mortgage lock-in

Abstract:
No abstract is available for this paper.

Abstract:
A summary of the floor discussion following the conference's second session.

New York City, New York City economy

Abstract:
No abstract is available for this paper.

Abstract:
The authors summarize the discussion that concluded the conference "Excellence in Education: Views on Improving American Education."

education, schools

Abstract:
In the current structure of the U.S. residential mortgage market, a fall in property values may make it very difficult for homeowners to refinance their mortgages to take advantage of falling interest rates. In this paper, we explain the institutional background for this effect and quantify its importance. We confirm that this form of collateral constraint has greatly reduced recent refinancing in states with depressed property markets. We also point to the many ways in which the reduction in refinancing may have inflicted additional damage in these already recession-hit states. Finally, we show that relatively minor institutional changes could have neutralized the damaging effects of the collateral constraints, and we discuss why the institutions have their current structure.

Abstract:
Using Canadian data on large, private-sector contract negotiations from January 1967 to March 1993, we find that wages and strikes are substantially influenced by labor policy. In particular, we find that prohibiting the use of replacement workers during strikes is associated with significantly higher wages, and more frequent and longer strikes. This is consistent with private information theories of bargaining. We estimate the welfare consequences of a ban on replacement workers, as well as other labor policies. Despite the higher dispute costs, union workers are better off with a ban on replacement workers. The higher wage more than compensates for the more frequent and longer strikes.

Abstract:
Although the dollar has been shown to influence the expected wages of workers, the analysis to date has focused on the male workforce. We show that exchange rate fluctuations also have important implications for women's wages. The dominant wage effects for women—like those for men—arise at times of job transition. Changes in the value of the dollar can cause the wage gap between women who change jobs and women who stay on in their jobs to expand or contract sharply, with the most pronounced effects occurring among the least educated women and women in highly competitive manufacturing industries. In addition, it appears that women who stay on in their jobs show greater wage sensitivity to currency movements than do their male counterparts.

exchange rate, wage, job, women, gender

Abstract:
No abstract is available for this paper.

Abstract:
No abstract is available for this paper.

Abstract:
No abstract is available for this paper.

Abstract:
This paper examines the optimality of several seniority provisions which are common to U.S. union contracts. The paper focuses on the attempts by the initial union members to maximize their return from organizing the union. An overlapping generations model is used in the analysis. Seniority wage increases are found to serve as implicit initiation fees and thus serve as one means of appropriating rents from future union members. Layoff rules are shown to be optimal only when the organizers are constrained in the types of contracts they can write. Without these constraints, the optimal contract provides full insurance making layoff rules unnecessary. The paper concludes with a plausible set of constraints which organizers may face and discusses the conditions necessary for seniority layoff rules to result.

Abstract:
The authors summarize the main findings of the conference "Excellence in Education: Views on Improving American Education."

education, schools

Abstract:
A new test of the compensating wage differential model is proposed. The logic behind Roback`s model showing how differences in nonproduced amenities may be reflected in intercity wage differentials is extended to the case of differences in local fiscal conditions, represented by tax rates and publicly produced services. Results show that differences in local tax rates and services provisions do generate compensating wage differentials across cities. The effects of a particularly large set of taxes and effective services output measures are examined.

Abstract:
We attempt a synthesis of the industrial relations market structure hypothesis with the modern asymmetric information theory of wage and strike outcomes The industrial relations literature contains a variety of arguments indicating that wage settlements should be positively related to the degree of product market sales concentration and the degree of product market coverage by the union. An asymmetric information bargaining model is specified that relates these same variables to strike probabilities as well as wage settlements. Our empirical analysis is conducted for :he periods from 1970-1380 (strikes) and 1976-1980 (wages). We find that the relation between trade-adjusted sales concentration and wage settlements is positive at low levels of concentration but negative at high levels of concentration. The relation is always negative for strike probabilities. We also find that the relation between the trade-adjusted percent of the product market covered by the same union and the percentage covered by other union are positively related to both wage settlements and strike probabilities. Our empirical analysis includes a rich set of controls including unrestricted time and industry effects, which do not affect the major conclusions.

Abstract:
Using two decades of American Housing Survey data from 1985-2005, we estimate the impact on household mobility of owners having negative equity in their homes and of rising mortgage interest rates. We find that both lead to lower, not higher, mobility rates over time. The impacts are economically large, with mobility being almost 50 percent lower for owners with negative equity in their homes. This does not imply that current worries about defaults and owners having to move from their homes are entirely misplaced. It does indicate that, in the past, the lock-in effects of these two factors were dominant over time. Our results cannot simply be extrapolated to the future, but policy makers should begin to consider the consequences of lock-in and reduced household mobility because they are quite different from those associated with default and higher mobility.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Abstract:
No abstract is available for this paper.

Abstract:
It is argued in many circles that a structural change occurred in U.S. collective bargaining in the 1980s. We investigate the extent to which the hiring of replacement workers can account for this change. For a sample of over 300 major strikes since 1980, we estimate the likelihood of replacements being hired. We find that the risk of replacement declines during tight labor markets, and is lower for bargaining units with more experienced workers. We use the predicted replacement risk as an explanatory variable in a model of the union's choice between the strike and holdout threat. We find that strike usage decreases significantly as the predicted replacement risk increases. We estimate that a ban on the use of replacement workers would have increased strike incidence from 1982-1989 by 3 percentage points, a 30 percent increase.

Abstract:
In the current structure of the U.S. residential mortgage market, a decrease in property values may make it very difficult for homeowners to refinance their mortgages to take advantage of declining interest rates. In this paper, we show that this form of collateral constraint has greatly reduced refinancing in states with depressed property markets. We outline the interaction between regional recessions and refinancing constraints.