New Releases by Alan B. Krueger

This chapter examines the labor supply effects of social insurance programs. We argue that this topic deserves separate treatment from the rest of the labor supply literature because individuals may be imperfectly informed as to the rules of the programs and because key parameters are likely to differ for those who are eligible for social insurance programs, such as the disabled. Furthermore, differences in social insurance programs often provide natural experiments with exogenous changes in wages or incomes that can be used to estimate labor supply responses. Finally, social insurance often affects different margins of labor supply. For example, the labor supply literature deals mostly with adjustments in the number of hours worked, whereas the incentives of social insurance programs frequently affect the decision of whether to work at all. The empirical work on unemployment insurance (UI) and workers'' compensation (WC) insurance finds that the programs tend to increase the length of time employees spend out of work. Most of the estimates of the elasticities of lost work time that incorporate both the incidence and duration of claims are close to 1.0 for unemployment insurance and between 0.5 and 1.0 for workers'' compensation. These elasticities are substantially larger than the labor supply elasticities typically found for men in studies of the effects of wages or taxes on hours of work. The evidence on disability insurance and (especially) social security retirement suggests much smaller and less conclusively established labor supply effects. Part of the explanation for this difference probably lies in the fact that UI and WC lead to short-run variation in wages with mostly a substitution effect. Our review suggest that it would be misleading to apply a universal set of labor supply elasticities to these diverse problems and populations

The method of instrumental variables was first used in the 1920s to estimate supply and demand elasticities, and later used to correct for measurement error in single-equation models. Recently, instrumental variables have been widely used to reduce bias from omitted variables in estimates of causal relationships such as the effect of schooling on earnings. Intuitively, instrumental variables methods use only a portion of the variability in key variables to estimate the relationships of interest; if the instruments are valid, that portion is unrelated to the omitted variables. We discuss the mechanics of instrumental variables, and the qualities that make for a good instrument, devoting particular attention to instruments that are derived from ''natural experiments.'' A key feature of the natural experiments approach is the transparency and refutability of identifying assumptions. We also discuss the use of instrumental variables in randomized experiments.

A summary of economic research on education conducted by Krueger in the 1990s. The papers are divided into four major sections: estimating the payoff of completing more education; estimating the payoff of school quality; issues related to race and education; and changes in educational payoff over time, including technological change. A final two essays consider education and economic growth, with a focus on Sweden, and evaluate whether American schools are "broken." Krueger (economics and public affairs, Princeton U.) is also author of Education matters and served as the chief economist of the U.S. Labor Department of in 1994 and 1995. Annotation copyrighted by Book News Inc., Portland, OR

This paper considers the likely impact that European Union (EU) will have on the labor compact. It is argued that, despite increased economic integration in Europe, countries will still be able to maintain distinct labor practices if they are willing to bear the cost of those practices. The incidence of many social protections probably already falls on workers. In addition, it is argued that imperfect mobility of capital, labor, goods and services will limit the pressure that integration will place on the labor compact. Evidence is presented suggesting that labor mobility among EU countries has not increased after the elimination of remaining restrictions on intra-EU labor mobility in 1993. Moreover, immigration from non-EU countries, which is much larger than intra-EU migration, has declined since 1993. Evidence is also reviewed suggesting that the demand for social protection rises when countries are more open, and therefore subject to more severe external shocks. This finding suggests that increased economic integration and European Monetary Union could lead to greater demand for social protection. The U.S. experience with state workers'' compensation insurance programs is offered as an example of enduring differences in labor market protections in highly integrated regional economies with a common currency.

This paper tries to reconcile evidence from the microeconometric and empirical macro growth literatures on the effect of schooling on income and GDP growth. Much microeconometric evidence suggest that education is an important causal determinant of income for individuals within countries. At a national level, however, recent studies have found that increases in educational attainment are unrelated to economic growth. This finding appears to be a spurious result of the extremely high rate of measurement error in first-differenced cross-country education data. After accounting for measurement error, the effect of changes in educational attainment on income growth in cross-country data is at least as great as microeconometric estimates of the rate of return to years of schooling. Another finding of the macro growth literature - that economic growth depends positively on the initial stock of human capital - is shown to result from imposing linearity and constant-coefficient assumptions on the estimates. These restrictions are often rejected by the data, and once either assumption is relaxed the initial level of education has little effect on economic growth for the average country

This paper tries to reconcile evidence on the effect of schooling on income and on GDP growth from the microeconometric and empirical macro growth literatures. Much microeconometric evidence suggests that education is an important causal determinant of income for individuals within countries as diverse as Sweden and the United States. At a national level, however, recent studies have found that increases in educational attainment are unrelated to economic growth. This finding is shown to be a spurious result of the extremely high rate of measurement error in first-differenced cross-country education data. After accounting for measurement error, the effect of changes in educational attainment on income growth in cross-country data is at least as great as microeconometric estimates of the rate of return to years of schooling. We also investigate another finding of the macro growth literature -- that economic growth depends positively on the initial stock of human capital. We find that the effect of the initial level of education on growth is sensitive to the econometric assumptions that are imposed on the data (e.g., constant-coefficient assumption), as well as to the other covariates included in the model. Perhaps most importantly, we find that the initial level of education does not appear to have a significant effect on economic growth among OECD countries. The conclusion comments on policy implications for Sweden based on the human capital literature

This paper re-examines the effect of the 1992 New Jersey minimum wage increase on employment in the fast-food industry. We begin by analyzing employment trends using a comprehensive new data set derived from the Bureau of Labor Statistics''s (BLS''s) ES-202 data file. Both a longitudinal sample and a repeated-cross-section sample drawn from these data indicate similar or slightly faster employment growth in New Jersey relative to eastern Pennsylvania after the rise in New Jersey''s minimum wage, consistent with the main findings of our earlier survey. We also use the ES-202 data to measure the effects of the 1996 increase in the federal minimum wage, which raised the minimum wage in Pennsylvania but not in New Jersey. We find no indication of relative employment losses in Pennsylvania. In light of these findings, we re-examine employment trends in the sample of fast-food restaurants assembled by the Employment Policies Institute (EPI) and David Neumark and William Wascher. The differences between this sample and both the BLS data and our earlier sample are attributable to a small set of restaurants owned by a single franchisee who provided the original Pennsylvania data for the 1995 EPI study. We also find that employment trends in the EPI/Neumark-Wascher sample are strikingly different for firms that reported their data on a weekly, biweekly or monthly basis, possibly because of seasonal factors. Controlling for the systematic effects of the varying reporting intervals, the combined EPI/Neumark-Wascher sample shows no difference in hours growth between New Jersey and Pennsylvania

The most widely used measure of employer health care costs, the health insurance component of the Employment Cost Index, indicates that cost growth has decelerated since 1989. In recent years employer expenditures per hour worked have even declined in nominal dollars. This paper analyzes the components of changes in employers'' health care costs over the 1992-94 and 1987-93 periods. We find that employer costs have decreased primarily as a result of a steady decrease in the fraction of workers with coverage and a large decrease in the rate of growth of insurance premiums. We conclude that the shift to managed care does not appear to be directly responsible for significant cost savings because managed care premiums are almost as high as those for fee-for-service plans, on average. Finally, we note that there is a significant need for improved data collection in this area.