Alan B. Krueger

A Survey Method for Characterizing Daily Life Experience: The Day Reconstruction Method

The Day Reconstruction Method (DRM) assesses how people spend their time and how they experience the various activities and settings of their lives, combining features of time-budget measurement and experience sampling. Participants systematically reconstruct their activities and experiences of the preceding day with procedures designed to reduce recall biases. The DRMs utility is shown by documenting close correspondences between the DRM reports of 909 employed women and established results from experience sampling. An analysis of the hedonic treadmill shows the DRMs potential for well-being research.

EFFICIENCY WAGES AND THE INTER-INDUSTRY WAGE STRUCTURE

This paper uses cross-sectional and longitudinal data to examine differences in pay for equally-skilled workers in different ind ustries. The major finding is that there is substantial dispersion in wages across industries, even after allowing for measured and unmeas ured labor quality, working conditions, fringe benefits, transitory d emand shocks, the threat of union-ization, union bargaining power, fi rm size, and other factors. In addition, evidence is presented demons trating that turnover has a negative relationship with industry wage differentials. These findings suggest that workers in high-wage indus tries receive noncompetitive rents. Copyright 1988 by The Econometric Society.

Empirical Strategies in Labor Economics

This chapter provides an overview of the methodological and practical issues that arise when estimating causal relationships that are of interest to labor economists. The subject matter includes identification, data collection, and measurement problems. Four identification strategies are discussed, and five empirical examples -- the effects of schooling, unions, immigration, military service, and class size -- illustrate the methodological points. In discussing each example, we adopt an experimentalist perspective that emphasizes the distinction between variables that have causal effects, control variables, and outcome variables. The chapter also discusses secondary datasets, primary data collection strategies, and administrative data. The section on measurement issues focuses on recent empirical examples, presents a summary of empirical findings on the reliability of key labor market data, and briefly reviews the role of survey sampling weights and the allocation of missing values in empirical research.

How Computers Have Changed the Wage Structure: Evidence from Microdata, 1984-1989

This paper examines whether employees who use a computer at work earn a higher wage rate than otherwise similar workers who do not use a computer at work. The analysis primarily relies on data from the Current Population Survey and the High School and Beyond Survey. A variety of statistical models are estimated to try to correct for unobserved variables that might be correlated with both job-related computer use and earnings. The estimates suggest that workers who use computers on their job earn roughly a 10 to 15 percent higher wage rate. In addition, the estimates suggest that the expansion in computer use in the l980s can account for between one-third and one-half of the observed increase in the rate of return to education, Finally, occupations that experienced greater growth in computer use between 1984 and 1989 also experienced above average wage growth.

Education, Poverty and Terrorism: Is There a Causal Connection?

The paper investigates whether there is a connection between poverty or low education and terrorism. We review evidence on hate crimes, which are closely related to terrorism; the occurrence of hate crimes is largely independent of economic conditions. We analyze data on support for attacks against Israeli targets from public opinion polls conducted in the West Bank and Gaza Strip; support for violent attacks does not decrease among those with higher education and higher living standards. The core contribution of the paper is a statistical analysis of the determinants of participation in Hezbollah militant activities; having a living standard above the poverty line or a secondary or higher education is positively associated with participation in Hezbollah. We also find that Israeli Jewish settlers who attacked Palestinians in the West Bank in the early 1980s were overwhelmingly from high-paying occupations. Although our results are tentative and exploratory, they suggest that neither poverty nor education has a direct, causal impact on terrorism.

Would You Be Happier If You Were Richer? A Focusing Illusion

The belief that high income is associated with good mood is widespread but mostly illusory. People with above-average income are relatively satisfied with their lives but are barely happier than others in moment-to-moment experience, tend to be more tense, and do not spend more time in particularly enjoyable activities. Moreover, the effect of income on life satisfaction seems to be transient. We argue that people exaggerate the contribution of income to happiness because they focus, in part, on conventional achievements when evaluating their life or the lives of others.

The Extent of Measurement Error in Longitudinal Earnings Data: Do Two Wrongs Make a Right?

This article examines the properties and prevalence of measurement error in longitudinal earnings data. The analysis compares matched Current Population Survey data to administrative Social Security payroll tax records. In contrast to typically assumed properties of measurement error, the results indicate that errors are serially correlated over 2 years and negatively correlated with true earnings (i.e., mean reverting). In a cross section, the ratio of the variance of the signal to the total variance is .82 for men and .92 for women. These ratios fall to .65 and .81 when the data are specified in first differences. Longitudinal earnings data may be more reliable than previously believed.

School Quality and Black-White Relative Earnings: A Direct Assessment

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.

The Effect of the Minimum Wage on the Fast-Food Industry:

Using a longitudinal survey of fast-food restaurants in Texas, the authors examine the impact of recent increases in the federal minimum wage on a low-wage labor market. Less than 5% of fast-food restaurants were using the new youth subminimum wage in July/August 1991, even though the vast majority paid a starting wage below the new hourly minimum wage immediately before it became effective. Although some restaurants increased wages beyond the level needed to comply with higher minimum wages in both 1990 and 1991, those federal minimum wage increases greatly compressed the distribution of starting wages in the Texas fast-food industry. Two findings at variance with conventional predictions are that (1) employment increased more in those firms likely to have been most affected by the 1991 minimum wage increase than in other firms and (2) price changes were unrelated to mandated wage changes.

Toward National Well-Being Accounts

Economists have traditionally eschewed direct measures of well-being on methodological grounds: the private nature of experience and the discomfort of making interpersonal comparisons. Instead, income is often used as a proxy for opportunities and well-being. If people are not fully rational, however, their choices will not necessarily maximize their experienced utility, and increasing their opportunities will not necessarily make them better off (Kahneman, 1994; Cass R. Sunstein and Richard Thaler, 2004). Direct measures of experienced utility become particularly relevant in a context of bounded rationality. Furthermore, advances in psychology and neuroscience suggest that experienced utility and well-being can be measured with some accuracy (Kahneman et al., 1999). Robust and interpersonally consistent relationships have been observed between subjective measures of experience and both specific measures of brain function and health outcomes. In part because of these findings, economic research using subjective indicators of happiness and life satisfaction has proliferated in recent years (see Bruno Frey and Alois Stutzer [2002] for a survey). Most work on well-being uses a question on overall life satisfaction or happiness. We suggest an alternative route based on time budgets and affective ratings of experiences.