Margaret Stevens

Wage-Tenure Contracts in a Frictional Labour Market: Firms¿ Strategies for Recruitment and Retention

A common assumption in equilibrium search and matching models of the labour market is that each firm posts a wage, to be paid to any worker hired. This paper considers the implications of firms posting contracts, in a random matching model with on-the-job search. More complex contracts enable firms to address both recruitment and retention problems by, for example, increasing the wage with tenure. The effect on the labour market is to reduce turnover, below the level required for efficient matching of workers to firms. Copyright 2004, Wiley-Blackwell.

An Investment Model for the Supply of Training by Employers

This paper explores the incentives faced by employers for supplying general training of the type given to craft apprentices. An investment model is developed in which the employers return takes the form of reduced recruitment costs for skilled labor. An empirical model is derived and fitted to apprentice recruitment data for the British engineering industry, 1966-88. The model succeeds in predicting the collapse of apprentice training in the 1980s; important explanatory variables are the real interest rate and an index of skill shortages. Copyright 1994 by Royal Economic Society.

Labour Contracts and Efficiency in On-the-Job Training

Two sources of inefficiency in the provision of on-the-job training are examined: an externality between firms which arises if there is imperfect competition between firms in the labor market, and allocation inefficiency due to asymmetry of information about the value of the trained worker. The second source of inefficiency may compound the first. Various contracts between the worker and the training firm are considered. Analysis of a simple example suggests that a contract in which the wage is chosen by the firm performs best, according to the criteria of reducing both types of inefficiency. Copyright 1994 by Royal Economic Society.

Are University Admissions Academically Fair

High-profile universities often face public criticism for undermining academic merit and promoting social elitism through their admissions-process. In this paper, we develop an empirical test for whether access to selective universities is meritocratic. If so, then the academic potential of marginal candidates -- the admission-threshold -- would be equated across demographic groups. But these thresholds are difficult to identify when admission-decisions are based on more characteristics than observed by the analyst. We assume that applicants who are better-qualified on standard observable indicators should on average, but not necessarily with certainty, appear academically stronger to admission-tutors based on characteristics observable to them but not us. This assumption can be used to reveal information about the sign and magnitude of differences in admission thresholds across demographic groups which are robust to omitted characteristics, thus enabling one to test whether different demographic groups face different academic standards for admission. An application to admissions-data at a highly selective British university shows that males and private school applicants face significantly higher admission-thresholds, although application success-rates are equal across gender and school-type. Our methods are potentially useful for testing outcomebased fairness of other binary treatment decisions, where eventual outcomes are observed for those who were treated.

Earnings Functions, Specific Human Capital, and Job Matching: Tenure Bias Is Negative

This article investigates the hypothesis that when measures of specific human capital (such as job tenure) are included in earnings functions, there may be a sample selection bias because of job‐matching effects—because workers with high unobserved match quality receive and accept high wage offers. We develop a model for wage offers in a labor market characterized by both specific human capital and job matching. The model provides a theoretical basis for empirical earnings functions containing specific capital, and it demonstrates that sample selection bias reduces the estimated return to specific human capital and tenure.

Unemployment and Market Size

Without strong empirical support, labour market matching models typically assume constant returns to scale in matching. We construct a tractable equilibrium random matching model with a general matching technology, introducing market size effects: the job‐finding rate varies with unemployment. Stable steady‐states may occur in regions of increasing or decreasing returns, and multiple equilibria are welfare‐ranked by market size. While the standard model relies on high‐frequency shocks to the steady state to explain the co‐movement of unemployment and job‐finding, locally decreasing returns in matching generate plausible adjustment dynamics and slower convergence. Lastly, an extension of the Hosios condition internalises search externalities.