New Releases by Alan B. Krueger

This paper examines the effect of technological change and other factors on the relative demand for workers with different education levels and on the recent growth of U.S. educational wage differentials. A simple supply-demand framework is used to interpret changes in the relative quantities, wages, and wage bill shares of workers by education in the aggregate U.S. labor market in each decade since 1940 and from 1990 to 1995. The results suggest that the relative demand for college graduates grew more rapidly on average during the past 25 years (1970-95) than during the previous three decades (1940-70). The increased rate of growth of relative demand for college graduates beginning in the 1970s did not lead to an increase in the college/high school wage diffe- rential until the 1980s because the growth in the supply of college graduates increased even more sharply in the 1970s before returning to historical levels in the 1980s. The acceleration in demand shifts for more-skilled workers in the 1970s and 1980s relative to the 1960s is entirely accounted for by an increase in within-industry changes in skill utilization rather than between- industry employment shifts. Industries with large increases in the rate of skill upgrading in the 1970s and 1980s versus the 1960s are those with greater growth in employee computer usage, more computer capital per worker and larger investment as a share of total investment. The results suggest that the spread of computer technology may `explain'' as much as 30-50% of the increase in the rate of growth of the relative demand for more-skilled workers since 1970.

This paper reports the results of surveys of specialists in labor economics and public economics at 40 leading research universities in the United States. Respondents provided opinions of policy proposals; quantitative best estimates and 95% confidence intervals for economic parameters; answers to values questions regarding income redistribution, efficiency versus equity, and individual versus social responsibility; and their political party identification. We find considerable disagreement among economists about policy proposals. Their positions on policy are more closely related to their values than to their estimates of relevant economic parameters or to their political party identification. Average best estimates of the economic parameters agree well with the ranges summarized in surveys of relevant literature, but the individual best estimates are usually widely dispersed. Moreover, economists, like experts in many fields, appear more confident of their estimates than the substantial cross-respondent variation in estimates would warrant. Finally although the confidence intervals in general appear to be too narrow, respondents whose best estimates are farther from the median tend to give wider confidence intervals for those estimates.

This paper has three goals; first, to place U.S. job growth in international perspective by exploring cross-country differences in employment and population growth. This section finds that the U.S. has managed to absorb added workers -- especially female workers -- into employment at a greater rate than most countries. The leading explanation for this phenomenon is that the U.S. labor market has flexible wages and employment practices, whereas European labor markets are rigid. The second goal of the paper is to evaluate the labor market rigidities hypothesis. Although greater wage flexibility probably contributes to the U.S.''s comparative success in creating jobs for its population, the slow growth in employment in many European countries appears too uniform across skill groups to result from relative wage inflexibility alone. Furthermore, a great deal of labor market adjustment seems to take place at a constant real wage in the U.S. This leads to the third goal: to speculate on other explanations why the U.S. has managed to successfully absorb so many new entrants to the labor market. We conjecture that product market constraints contribute to the slow growth of employment in many countries

This paper presents an overview and interpretation of the literature relating school quality to students'' subsequent labor market success. We begin with a simple theoretical model that describes the determination of schooling and earnings with varying school quality. A key insight of the model is that changes in school quality may affect the characteristics of individuals who choose each level of schooling, imparting a potential selection bias to comparisons of earnings conditional on education. We then summarize the literature that relates school resources to students'' earnings and educational attainment. A variety of evidence suggests that students who were educated in schools with more resources tend to earn more and have higher schooling. We also discuss two important issues in the literature: the tradeoffs involved in using school-level versus more aggregated (district or state-level) quality measures; and the evidence on school quality effects for African Americans educated in the segregated school systems of the South.

This paper reviews the theoretical arguments for and against linking international labor standards to trade. Based on theory alone it is difficult to generalize about the effect of labor standards on efficiency and equity. Some economists have argued that international labor standards are merely disguised protectionism. An evaluation of determinants of support for legislation that would ban imports to the United States of goods made with child labor provides little support for the prevailing political economy view. In particular, members of Congress representing districts with relatively many unskilled workers, who are most likely to compete with child labor, are less likely to support a ban on imports made with child labor. Another finding is that the prevalence of child labor declines sharply with national income. Last, an analysis of compulsory schooling laws, which are often suggested as an alternative to prohibiting child labor, finds a tremendous amount of noncompliance in developing nations.

Germany has experienced a high and rising rate of anti-foreigner violence during the early 1990s. To analyze the determinants of crime against foreigners we assembled a new data set on the number and nature of such crimes at the county level based on newspaper reports. We find significant differences in the patterns of violence in the eastern and western parts of the country. The incidence of anti- foreigner crime is higher in the east and rises with distance from the former west German border. Economic variables like unemployment and wages matter little for the level of crime once location in the east is taken into account. The relative number of foreigners in a country has no relationship with the incidence of ethnic crimes in the west, whereas in the east it has a positive association with the number of crimes per resident and a negative association with the number of crimes per foreign resident.

A powerful new challenge to the conventional view that higher minimum wages reduce jobs for low-wage workers. Using data from recent minimum wage change results, economists David Card and Alan Krueger show that increases in the minimum wage lead to increases in pay, but no loss in jobs.

Two-stage-least-squares (2SLS) estimates are biased towards OLS estimates. This bias grows with the degree of over-identification and can generate highly misleading results. In this paper we propose two simple alternatives to 2SLS and limited-information-maximum-likelihood (LIML) estimators for models with more instruments than endogenous regressors. These estimators can be interpreted as instrumental variables procedures using an instrument that is independent of disturbances even in finite samples. Independence is achieved by using a `leave-one-out'' jackknife-type fitted value in place of the usual first-stage equation. The new estimators are first-order equivalent to 2SLS but with finite-sample properties superior to those of 2SLS and similar to LIML when there are many instruments. Moreover, the jackknife estimators appear to be less sensitive than LIML to deviations from the linear reduced form used in classical simultaneous equations models.

This paper reinvestigates the evidence on the impact of the minimum wage on employment in Puerto Rico. The strongest evidence that the minimum wage had a negative effect on employment comes from an aggregate time series analysis. The weakest evidence comes from cross-industry analyses. The main finding of the paper, however, is that the statistical evidence of a negative employment effect of the minimum wage in Puerto Rico is surprisingly fragile.

About 3% of GNP is spent on government labor market programs in Sweden, compared to 2 % in Germany and less than 0.5% in the U.S. In Sweden these programs include extensive job training, mobility bonuses and unemployment benefits. Reviews of previous literature suggest that job training programs have small effects on wages and re-employment in Sweden, but precise inferences are difficult because of small sample sizes. The authors also investigate alternative reasons for the stability of the Beveridge Curve in Sweden, and compare regional evolutions of employment and unemployment in Sweden and the U.S. Lastly a cross-country analysis is presented showing that the extent of a country''s active labor market program is positively associated with the national unemployment rate.

Using data assembled by the Global Environmental Monitoring System we examine the reduced-form relationship between various environmental indicators and the level of a country''s per capita income. Our study covers four types of indicators: concentrations of urban air pollution; measures of the state of the oxygen regime in river basins; concentrations of fecal contaminants in river basins; and concentrations of heavy metals in river basins. We find no evidence that environmental quality deteriorates steadily with economic growth. Rather, for most indicators, economic growth brings an initial phase of deterioration followed by a subsequent phase of improvement. The turning points for the different pollutants vary, but in most cases they come before a country reaches a per capita income of $8,000

This paper uses a new survey to contrast the wages of genetically identical twins with different schooling levels. Multiple measurements of schooling levels were also collected to assess the effect of reporting error on the estimated economic returns to schooling. The data indicate that omitted ability variables do not bias the estimated return to schooling upward, but that measurement error does bias it downward. Adjustment for measurement error indicates that an additional year of schooling increases wages by 16%, a higher estimate of the economic returns to schooling than has been previously found.

This paper presents evidence on the quality of schooling by race and ethnic origin in the United States. Although substantial racial segregation across schools exists, the average pupil-teacher ratio is approximately the same for black and white students. Hispanic students, however, on average have 10 percent more students per teacher. Relative to whites, blacks and Hispanics are less likely to use computers at school and at work. The implications of these differences in school quality for labor market outcomes are examined. We conclude by examining reasons for the increase in the black-white earnings gap since the mid-1970s.

We use a demand/supply framework to analyze 1) the decline in union membership since 1977 in the United States and 2) the difference in unionization rates between the United States and Canada. We extend earlier work on these problems by analyzing new data for 1991 from the General Social Survey and for 1992 from our own household survey on worker preferences for union representation. When combined with earlier data for 1977 from the Quality of Employment Survey and for 1984 from a survey conducted for the AFL-CIO, we are able to decompose changes in unionization into changes in demand and changes in supply. We also analyze data for 1990 from a survey conducted for the Canadian Federation of Labor on the preferences of Canadian workers for union representation. We find that virtually all of the decline in union membership in the United States between 1977 and 1991 is due to a decline in worker demand for union representation. There was almost no change over this period in the relative supply of union jobs. Additionally, very little of the decline in unionization in the U.S. can be accounted for by structural shifts in the composition of the labor force. Next, we find that all of the higher unionization rate in the U.S. public sector in 1984 can be accounted for by higher demand for unionization and that there is actually more frustrated demand for union representation in the public sector. Finally. we tentatively conclude that the difference in unionization rates between the U.S. and Canada is accounted for roughly in equal measure by differences in demand and in supply.

In 1988, the wage distribution in East Germany was much more compressed than in West Germany or the U.S. Since the collapse of Communism and unification with West Germany, however, the wage structure in eastern Germany has changed considerably. In particular, wage variation has increased, the payoff to education has decreased somewhat, industry differentials have expanded, and the white collar premium has increased. Although average wage growth has been remarkably high in eastern Germany, individual variation in wage growth is similar to typical western levels. The wage structure of former East Germans who work in western Germany resembles the wage structure of native West Germans in some respects, but their experience-earnings profile is flat.

Between 1970 and 1973 priority for military service was randomly assigned to draft-age men in a series of lotteries. Many men who were at risk of being drafted managed to avoid military service by enrolling in school and obtaining an educational deferment This paper uses the draft lottery as a natural experiment to estimate the return to education and the veteran premium. Estimates are based on special extracts of the Current Population Survey for 1979and 1981-85. The results suggest that an extra year of schooling acquired in response to the lottery is associated with6.6 percent higher weekly earnings. This figure is about 10 percent higher than the OLS estimate of the return to education in this sample, which suggests there is omitted-variable bias in conventional estimates of the return to education. Our findings are robust to a variety of assumptions about the effect of veteran status on earnings.

The average wage differential between black and white men fell from 40 percent in 1960 to 25 percent in 1980. Much of this convergence is attributable to a relative increase in the rate of return to schooling among black workers. It is widely argued that the growth in the relative return to black education reflects the dramatic improvements in the quality of black schooling over the past century. To test this hypothesis we have assembled data on three aspects of school quality -- pupil teacher ratios. annual teacher pay. and term length for black and white schools in 18 segregated states from 1915 to 1966. The school quality data are linked to estimated rates of return to education for Southern-born men from different cohorts and states. measured in 1960. 1970. and 1980. Improvements in the relative quality of black schools explain 20 percent of the narrowing of the black-white earnings gap between 1960 and 1980.

A reduction in trade barriers generally will affect the environment by expanding the scale of economic activity, by altering the composition of economic activity, and by bringing about a change in the techniques of production. We present empirical evidence to assess the relative magnitudes of these three effects as they apply to further trade liberalization in Mexico. In Section 1. we use comparable measures of three air pollutants in a cross-section of urban areas located in 42 countries to study the relationship between air quality and economic growth. We find for two pollutants (sulfur dioxide and "smoke") that concentrations increase with per capita GDP at low levels of national income, but decrease with GD? growth at higher levels of income. Section 2 studies the determinants of the industry pattern of U.S. imports from Mexico and of value added by Mexico''s maquiladora sector. We investigate whether the size of pollution abatement costs in the U.S. industry influences the pattern of international trade and investment. Finally, in Section 3, we use the results from a computable general equilibrium model to study the likely compositional effect of a NAFTA on pollution in Mexico

Workers'' compensation insurance provides cash payments and medical benefits to workers who incur a work-related injury or illness. Many features of the workers'' compensation program parallel features of proposed mandated employer-paid health insurance plans. This paper empirically examines the incidence of the workers'' compensation program to infer the likely consequences of mandated health insurance proposals. In certain industries, such as trucking and carpentry, workers'' compensation insurance costs are quite large, and vary tremendously within states over time, and across states at a moment in time. This variation is used to identify the incidence of the program. Empirical analysis of two data sets suggest that changes in employers'' costs of workers'' compensation insurance are largely shifted to employees in the form of lower wages. In addition, higher insurance costs are found to have a negative but statistically insignificant effect on employment. The implied elasticity of labor demand from our results is about -.50.