Labor Markets

This paper revists two basic questions that are critical for understanding and controlling DB pension risk: How should the value of DB pension liabilities be computed; and how should pension assets be allocated? In particular, we reexamine the role of stocks in valuing and hedging pension obligations. Our approach differs from others in the literature in at least two ways. First, it is one of the few that focuses on market value, and does so by using a derivative approach.

Time preference is a key determinant of occupational choice and investments in human capital. Since careers are characterized by different wage growth prospects, individual discount rates play an important role in the relative valuation of jobs or occupations. We predict that individuals with lower discount rates are more likely to select into jobs or occupations with steeper wage profiles. To test this hypothesis we use smoking as an instrument for time preference.

Although agency theory suggests that firms should index executive compensation to remove market-wide effects (i.e., RPE), there is little evidence to support this theory. Oyer (2004, Journal of Finance 59, 1619–1649) posits that an absence of RPE is optimal if the CEO's reservation wages from outside employment opportunities vary with the economy's fortunes. We directly test and find support for Oyer's (2004) theory. We argue that the CEO's outside opportunities depend on his talent, as proxied by the CEO's financial press visibility and his firm's industry-adjusted ROA.

Objective: The objective of this work was the investigation of the extent to which the introduction of new drugs has increased society's ability to produce goods and services by increasing the number of hours worked per member of the working-age population. Methods: Econometric models of ability-to-work measures from data on approximately 200,000 individuals with 47 major chronic conditions observed throughout a 15-year period (1982-1996) were estimated.

The recent media and political attention on service outsourcing from developed to developing countries gives the impression that outsourcing is exploding. As a result, workers in industrial countries are anxious about job losses. This paper aims to establish what are the hypes and what are the facts. The results show that although service outsourcing has been steadily increasing it is still very low, and that in the United States and many other industrial countries "insourcing" of services is greater than outsourcing.

We hypothesize that pharmaceutical-embodied technical progress increases per capita output via its effect on labor supply (the employment rate and hours worked per employed person). We examine the effect of changes in both the average quantity and average vintage (FDA approval year) of drugs consumed on labor supply, using longitudinal, condition-level data. The estimates indicate that conditions for which there were above-average increases in utilization of prescriptions during 1996-1998 tended to have above-average reductions in the probability of missed work days.

While recent research has emphasized the desirability of studying effects of changes in marginal tax rates on taxable income, broadly defined, there has been comparatively little analysis of effects of marginal tax rate changes on entrepreneurial entry. This margin is likely to be important both because of the likely greater elasticity of entrepreneurial decisions with respect to tax changes (relative to decisions about hours worked) and because of recent research linking entrepreneurship, mobility, and household wealth accumulation.

Teacher quality is widely believed to be important for education, depsite substantial but inconsistent evidence that teachers' credentials matter for student achievement. To accurately measure variation in achievement due to teachers' characteristics—both observable and unobservable—it is essential to identify teacher fixed effects while controlling for fixed student characteristics and classroom specific variables.

It is not easy to summarize Ned Phelps's monumental contribution to economics.