Christopher McKenna

Truth or consequences: Enforcing pollution standards with self-reporting

Abstract Evidence suggests that a surprisingly large fraction of firms comply with pollution emission standards even though expected penalties for noncompliance are low. We offer an explanation of this puzzle by extending the standard model of enforcement to include a self-reporting requirement and enforcement power. These extensions are enough to challenge the conventional result that higher fines lead to higher compliance rates. We find that under plausible conditions, higher compliance rates are achieved with lower fines for noncompliance and the cost of enforcing a given level of aggregate pollution is minimized by setting the fine for noncompliance equal to zero.

Education and the distribution of unemployment

Abstract This paper presents a two-sector model of job matching in which jobs are of two types distinguished by their accessibility to uneducated workers and by their productivity. Education confers two related benefits to workers: broader access to jobs, and higher lifetime earnings. The model determines the aggregate level of education in the economy, the aggregate human capital requirements of industry and the distribution of unemployment between educated and uneducated workers. The paper then addresses the issues of equilibrium unemployment and the incidence of unemployment in the steady-state.

A Dynamic Model of Union Membership and Employment

This paper incorporates the ideas that a union maximizes an intertemporal objective function, that it recognizes some link between present wage and employment levels and future membership, and that it has an interest in the level of membership attained. The authors model membership decisions with stochastic demand and a differential layoff rate for union and nonunion workers. Membership dynamics are behavioral in that membership increases when the utility of being a member exceeds the utility of not being a member. The model permits a variety of possible relationships between employment and membership in the adjustment to steady state. Copyright 1994 by The London School of Economics and Political Science.

Unemployment insurance and moral hazard in employment

Abstract Using the 1988–1990 LMAS, we examine whether the Variable Entrance Requirement (VER) that claimants must work for a minimum number of weeks conditions job durations. Estimated employment hazards contain a large, significant, spike at the VER.

Employment Flows and Job Tenure in Canada

Data from Canadas 1986-87 Labour Market Activity Survey (LMAS) are used to study the pattern of employment flows, and to construct various estimates of average job duration. A subsample of 58,458 observed jobs are classified according to their start dates and their termination date, if any. Thus our sample consists of both completed and censored employment spells. In the case of terminations, data are available on the reason for employment ending. The distribution of completed spell lengths, which indicates the steady-state flow of new jobs, is highly skewed, with a mode around 10 weeks. Using the Akerlof and Main (1981) termination-weighted measure of job expectancy in the stock of jobs we find this to be around eight years. Our findings on job durations are comparable with those for the United States and Great Britain. In addition, average durations vary systematically with age, sex, industry, occupation, education, province, firm-size and unionization.

The effect of outsiders on union contracts

Abstract A recent proposal for incorporating the insider-outsider distinction into the static monopoly union model results in implausible comparative-static properties. This paper presents an alternative formulation that rehabilitates the monopoly union model.

Labour Market Participation in Matching Equilibrium

This paper uses ideas developed recently in models of equilibrium search to consider the participation decision of workers who have different preferences for leisure. The matching process is random, the production process deterministic, and wages are determined by a Nash bargain among participants. In steady-state equilibrium, the number of participants is inefficient due to externalities resulting from private decisions. A condition for efficient worker participation is derived which turns out also to be the condition for efficient firm entry. Copyright 1987 by The Review of Economic Studies Limited.

Unemployment Insurance and Employment Patterns in Canada

Recent public concern with the features and cost of the social safety network generally and Unemployment Insurance in particular has led a number of agencies to encourage research in these important policy areas.1 In this report, we summarise the results from our recent research that were presented at one of the Calgary CEA sessions on UI and attempt to place them in the context of our broader work and findings to this point.2 Until recently, most work on the effects of UI on labour market outcomes has been directed at the transition from unemployment to employment and, to a lesser extent, at the transition from non-participation to participation.3 Thus, the effect of the generosity and length of benefits on the propensity to search for and accept a job has been examined. There has also been some concern about the possibility that UI might encourage individuals who would otherwise be non-participants to declare themselves unemployed and hence in the labour force. Less attention has been devoted to considering the possible effects of the Variable Entrance Requirement (VER) on employment durations. Until recently, individuals quitting their jobs, though possibly penalized somewhat,4 were not disqualified. It is also still the case that firm UI premia are not experience-rated so that if production technologies and local labour market conditions permit, firms might find it preferable to offer jobs which just meet the VER and qualify workers for UI benefits. Until 1990, the Regional Extended Benefits in the UI program made it possible for individuals in high unemployment areas who have worked for ten weeks to qualify for forty-two weeks of benefits. The generosity of this provision may have encouraged behaviour such as that alluded to above and it is our intent to see whether this moral hazard is present in the data. The thrust of our work is, therefore, to examine the possible effects of UI on transitions

Counter-offers in the theory of individual job search

Abstract We present a simple job search model which assumes, as usual, that firms post wages but which, additionally, permits (limited) opportunities for counter-offers by workers. The optimal search strategy is derived and its properties explored.