This project consists of several studies in the area of labor economics: (1) the return to job seniority; (2) compensating wage differentials; (3) the cyclical behavior of unemployment durations; (4) arbitration and mediation; and (5) changes in the structure of wages. An important theme linking the first three projects is that the failure to account for the causes and effects of labor market mobility leads many conventional estimate of the determinants of earnings and employment to be at least difficult to interpret and probably biased. In the first project, a systematic empirical investigation of the transferability of the OLS return to tenure will be conducted. In contrast with the existing research, data from a variety of samples will be used. A distinction will be made between those workers displaced by layoffs and those displaced by plant closings. At least two theoretical models will be developed that emphasize different possible sources of transferable return. The theoretical and empirical work will be integrated by testing the predictions of the mover-stayer and match-quality models. For the second project, a sample of workers displaced by plant closings will be used to study compensating wage differentials. This will allow an approximate solution to the problem of endogenous job change in estimating differentials. The third project will involve two sets of tests of the hypothesis that the increase in temporary layoffs during a recession is responsible for the finding that an increase in the aggregate unemployment rate is associated with an increase in the escape rate from unemployment. These tests will involve both a sample of displaced workers and a sample from the Panel Survey on Income Dynamics. The fourth project will extend the existing literature on dispute resolution to incorporate mediation and allow the possibility that the mediator may be a self-interested agent. The theoretical part of the project will involve modeling the learning process with particular attention to the timing of mediation relative to other aspects of the dispute resolution mechanism and the potential for learning at various stages of the process. The empirical part of the project will involve investigating settlement rates and characteristics of agreements reached with and without mediation at different stages of the process. The final project will examine changes in the structure of wages in the U.S. and selected other OECD economies. One part will examine how the wage structure in the U.S. public sector has responded to changes in the wage structure in the private sector during the 1970s and 1980s. The second part will compare changes in wage differential by skill in the U.S. and other OECD countries.
