John M. Barron

Employer Size: The Implications for Search, Training, Capital Investment, Starting Wages, and Wage Growth

An employer must choose a procedure for screening job applicants, a rate of hire, a training program for new employees, a criterion for the retention of new employees after observing their on-the-job performance, a compensation package, and a rate of capital investment so as to minimize production costs across time. This paper examines the effects of employer size on these hiring and training decisions when larger employers have greater monitoring costs. A unique data set is employed to estimate the empirical relation among employer size and employer search, training, capital investment, and wages.

Do Workers Pay for On-The-Job Training?

We examine the relationships among on-the-job training, starting wages, wage growth, and productivity growth. Our models suggest that training lowers starting wages, but the estimated magnitudes are small. When firms are asked directly, we find that they pay higher starting wages to workers requiring less training than is typical, but do not pay lower starting wages to workers who require more training than is typical. In contrast to the results for wage growth, we find a large, robust impact of training on productivity growth, suggesting that firms pay most of the cost and reap most of the returns to training.

Employer Search: The Interviewing and Hiring of New Employees

The purpose of this paper is to present new evidence on employer search to fill a position. The study is based on data for recent hires collected in the 1980 Employer Opportunity Pilot Project (EOPP) survey of employers. The paper investigates the effect of factors such as training, employer size, and labor market conditions on employer search. Employer search is measured by the number of applicants interviewed prior to an employment offer and the average number of hours spent by an employer recruiting, screening, and interviewing per applicant interviewed. The paper also documents the relationship between employer search and wages.

The Effects Of High School Athletic Participation On Education And Labor Market Outcomes

We introduce a simple allocation-of-time model to explain the high school athletic participation choice and the implications of this choice for educational and labor market outcomes. Four different factors that could explain athletic participation are identified in the context of this model. A variety of tests of the model are provided using two data sets: the National Longitudinal Survey of Youth and the National Longitudinal Study of the High School Class of 1972. We find some evidence that athletic participation directly affects wages and educational attainment. However, much of the effect of athletic participation on wages and educational attainment appears to reflect differences across individuals in ability or value of leisure.

Gender Differences in Training, Capital, and Wages

This paper constructs an equilibrium job-matching model where workers differ in their attachment to the labor force. The model predicts that workers with weaker attachment to the labor market will receive lower starting wages and lower post-training wages, and will be placed in jobs that offer less training and use less capital. The implications of the model for gender differences in pay and job assignment are tested with the EOPP data set. Our findings suggest that while training intensity during the first three months of employment is similar in positions filled by males and females, females are employed in positions that have a shorter duration of on-the-job training and that use less capital. These differences in on-the-job training and capital in positions filled by men and women, as well as a lower market value for womens prior labor market experience, account for a substantial part of the gap in wages between males and females.

How Well Do We Measure Training

This article compares various measures of on‐the‐job training, from a new source that matches establishments and workers, allowing us to compare the responses of employers and employees to identical training questions. Establishments report 25% more hours of training than do workers, although workers and establishments report similar incidence rates of training. Both establishment and worker measures agree that there is much more informal training than formal training. Further, informal training is measured about as accurately as formal training. Finally, we show that measurement error reduces substantially the observed effect of training, in particular the effect of training on productivity growth.

Peer Pressure in an Agency Relationship

We investigate the role of peer pressure in influencing the optimal incentive scheme offered to workers engaged in team production. We develop an agency model of peer policing to identify factors that affect the extent of mutual monitoring. As the principal must compensate workers for their monitoring efforts and the costs that peer pressure imposes on workers, introducing peer pressure alters the optimal compensation package. We establish conditions under which the principal reduces the marginal compensation rule to reduce monitoring efforts. As such, peer pressure provides a rationale for a reduced link between compensation and output in a team setting.

Search Effort in the Labor Market

This paper develops a theory of the unemployed individuals choice of how much effort to devote to search. The term effort involves two choice variables, time and money. Specific attention is given to the role of unemployment contingent income and the probability of obtaining employment without search. The theory is tested using data from a supplement to the May 1976 Current Population Survey. The empirical findings suggest search theory is important in explaining the behavior of the unemployed: unemployment insurance benefits decrease search time per period, and search time is lower for individuals on layoff-a group that has a positive probability of employment without search effort.

The Effects of Different Contractual Arrangements: The Case of Retail Gasoline Markets

The change in the contractual arrangement at a gasoline station from a refiner-controlled to a franchise operation implies different incentives for the individual who sets prices and determines hours, but reflects no change in the product nor the market environment. The outcome can lead to higher prices and reduced hours at the station affected. The divorcement experience in Maryland illustrates how change can be imposed by the legal system. Average self-service and full-serve prices rose, and hours of operation fell relative to those of competitors even though refiner operations that were forced to franchise had previously had prices below the competition. The evidence of an effect on the prices and hours of competitors is less convincing. 16 references, 2 tables.

Executive rank, pay and project selection

This paper extends the literature on CEO compensation by developing and testing a principal-agent model of executive compensation in the context of project selection. The models focus on executive project selection decisions highlights the multi-dimensional nature of executive choices that affect the value of the firm. An executive not only makes an effort choice that determines the quality of information on which to base a decision, but also sets the decision criteria for selecting projects. A project selection framework is also shown to introduce endogenous uncertainty into compensation that can influence the executives effort choice. Using an extensive dataset, our empirical work supports the main hypotheses of the model, including the significance of executive rank in determining the extent of use of incentive pay in general, and equity-based incentive pay in particular.