Andrew J. Oswald

What Makes an Entrepreneur

This article uses various micro data sets to study entrepreneurship. Consistent with the existence of capital constraints on potential entrepreneurs, the estimates imply that the probability of self‐employment depends positively upon whether the individual ever received an inheritance or gift. When directly questioned in interview surveys, potential entrepreneurs say that raising capital is their principal problem. Consistent with our theoretical models predictions, the self‐employed report higher levels of job and life satisfaction than employees. Childhood psychological test scores, however, are not strongly correlated with later self‐employment.

The Economic Theory of Trade Unions: An Introductory Survey

This paper is an introductory survey of work on the economic theory of trade union behaviour. It concentrates on recent contributions to the literature, sets out a number of central results and ideas, and speculates on future topics for research.

Latent entrepreneurship across nations

The paper studies latent entrepreneurship across nations. There are three main findings. First, large numbers of people in the industrial countries say they would prefer to be self-employed. Top of the international ranking of entrepreneurial spirit come Poland (with 80% saying so), Portugal and the USA; bottom of the table come Norway (with 27% saying so), Denmark and Russia. Second, for individuals the probability of preferring to be self-employed is strongly decreasing with age, while the probability of being self-employed is strongly increasing with age. Third, we show that self-employed individuals have noticeably higher job satisfaction than the employed, so peoples expressed wish to run their business cannot easily be written off as mistaken. We speculate on why so much entrepreneurial spirit lies dormant.

Mortality and immortality: The Nobel Prize as an experiment into the effect of status upon longevity

It has been known for centuries that the rich and famous have longer lives than the poor and ordinary. Causality, however, remains trenchantly debated. The ideal experiment would be one in which extra status could somehow be dropped upon a sub-sample of individuals while those in a control group of comparable individuals received none. This paper attempts to formulate a test in that spirit. It collects 19th-century birth data on science Nobel Prize winners. Correcting for potential biases, we estimate that winning the Prize, compared to merely being nominated, is associated with between 1 and 2 years of extra longevity.

Wages, Profits, and Rent-Sharing

The paper uses CPS data from 1964 to 1985 to test for the existence of rent-sharing in US tabor markets, Using an unbalanced panel from the manufacturing sector, and random-effects and fixed-effects specifications, the paper finds that changes in wages are explained by movements in lagged levels of profitability and unemployment. The results appear to be consistent with rent-sharing theory (or a labor contract framework with risk-averse firms) and to be inconsistent with the competitive labor market model. The paper estimates the unemployment elasticity of pay at approximately -0.03, and the profit elasticity of pay at between 0.02 and 0.05.

Objective Confirmation of Subjective Measures of Human Well-Being: Evidence from the U.S.A.

The Best Things in Life Are Free? Does money buy happiness? Answers to this question differ, depending, in part, on whether one asks an economist or a psychologist. The former would point to correlations between higher incomes and greater self-reported well-being, whereas the latter would argue that happiness shows little correlation with absolute material goods and is instead dictated largely by an individuals so-called set-point. Another strand of research invokes a hedonic treadmill, whereby income matters until subsistence requirements are met, at which point comparisons with ones neighbors are what influence ones sense of life satisfaction. Oswald and Wu (p. 576, published online 17 December; see the Perspective by Layard) establish that the subjective responses from 1 million adults, collected within health surveys conducted by the U.S. Centers for Disease Control and Prevention, do indeed correlate with objective measures of quality of life. Subjective life-satisfaction scores agree with objective measures of well-being across 50 American states. A huge research literature, across the behavioral and social sciences, uses information on individuals’ subjective well-being. These are responses to questions—asked by survey interviewers or medical personnel—such as, “How happy do you feel on a scale from 1 to 4?” Yet there is little scientific evidence that such data are meaningful. This study examines a 2005–2008 Behavioral Risk Factor Surveillance System random sample of 1.3 million U.S. citizens. Life satisfaction in each U.S. state is measured. Across America, people’s answers trace out the same pattern of quality of life as previously estimated, from solely nonsubjective data, in one branch of economics (so-called “compensating differentials” neoclassical theory, originally from Adam Smith). There is a state-by-state match (r = 0.6, P < 0.001) between subjective and objective well-being. This result has some potential to help to unify disciplines.

Does wage rank affect employees' well-being?

What makes workers happy? Here we argue that pure ‘rank’ matters. It is currently believed that wellbeing is determined partly by an individual’s absolute wage (say, 30,000 dollars a year) and partly by the individual’s relative wage (say, 30,000 dollars compared to an average in the company or neighborhood of 25,000 dollars). Our evidence shows that this is inadequate. The paper demonstrates that range-frequency theory – a model developed independently within psychology and unknown to most economists – predicts that wellbeing is gained partly from the individual’s ranked position of a wage within a comparison set (say, whether the individual is number 4 or 14 in the wage hierarchy of the company). We report an experimental study and an analysis of a survey of 16,000 employees’ wage satisfaction ratings. We find evidence of rank-dependence in workers’ pay satisfaction.

Efficient contracts are on the labour demand curve: Theory and facts

Abstract The paper develops a seniority model of union behaviour that attempts to resolve a number of long-standing puzzles in the literature. The model predicts that (i) efficient contracts will lie on the labour demand curve, (ii) there will be negotiations over pay but not employment, (iii) unions will have no direct interest in the elasticity of labour demand, (iv) in certain circumstances there will be extreme wage rigidity, (v) exceptional recessions will produce concession bargaining, and (vi) there will be no ‘shrinking union’ problem. It is also shown that the introduction of layoffs by seniority into implicit contract theory eliminates its famous wage-rigidity theorem. The paper discusses the form of real labour contracts, documents the extent of layoffs by seniority, and reports the results of a survey of the largest British and US trade unions.

Real Wage Determination and Rent-Sharing in Collective Bargaining Agreements

The microeconomic forces that influence real wages are not fully understood. This paper studies pay determination using data on approximately 600 labour contracts. It finds that the real wage is an increasing function of past profitability in the employers industry, and a decreasing function of the level of unemployment in the employers region. These results are consistent with rent-sharing theories.

An Examination of the Reliability of Prestigious Scholarly Journals: Evidence and Implications for Decision-Makers

In universities all over the world, hiring and promotion committees regularly hear the argument: “this is important work because it is about to appear in prestigious journal X”. Moreover, those who allocate levels of research funding, such as in the multi-billion pound Research Assessment Exercise in UK universities, often come under pressure to assess research quality in a mechanical way by using journal prestige ratings. This paper’s results suggest that such tendencies are dangerous. It uses total citations over a quarter of a century as the criterion. The paper finds that it is far better to publish the best article in an issue of a medium-quality journal like the Oxford Bulletin of Economics and Statistics than to publish the worst article (or often the worst 4 articles) in an issue of a top journal like the American Economic Review. Implications are discussed.