Robert M. Sauer

Immigration, Search and Loss of Skill

This article develops and estimates an on‐the‐job search model of the entry of highly skilled immigrants from the former Soviet Union into the Israeli labor market. The estimated parameters of the model, together with information on the wages of immigrants from earlier waves, imply that, on average, immigrants can expect lifetime earnings to fall short of the lifetime earnings of comparable natives by 57%. Of this figure, 14 percentage points reflect frictions associated with nonemployment and job distribution mismatch, and 43 percentage points reflect the gradual adaptation of imported schooling and experience to the local labor market.

Doctors Without Borders? Re-licensing Requirements and Negative Selection in the Market for Physicians

Relicensing requirements for professionals who move across borders are widespread. In this article, we measure the effects of occupational licensing by exploiting an immigrant physician retraining assignment rule. Instrumental variables and quantile treatment effects estimates indicate large returns to acquiring an occupational license and negative selection into licensing status. We also develop a model of optimal license acquisition that, together with the empirical results, suggests that stricter relicensing requirements may lead not only to practitioner rents but also to lower average quality of service in the market for physicians.

Job Mobility and the Market for Lawyers

This paper studies the life cycle career choices of law school graduates using unique data from the University of Michigan Law School. The model assumes that these graduates act according to the optimal solution of a dynamic optimization problem in which they sequentially choose among five employment sectors. The employment sectors are differentiated by pecuniary and nonpecuniary returns, promotion and dismissal probabilities, and the extent of transferability of human capital. the estimation of the model reveals a self‐selection mechanism, based on unobserved heterogeneity in abilities and expected future returns, which plays a critical role in reproducing the sector‐specific nonmonotonic separation hazards observed in the data. The underlying self‐selection mechanism also has implications for policy interventions in the market for lawyers, such as loan forgiveness programs.

Classification Error in Dynamic Discrete Choice Models: Implications for Female Labor Supply Behavior

Two key issues in the literature on female labor supply are (i) whether persistence in employment status is due to unobserved heterogeneity or state dependence, and (ii) whether fertility is exogenous to labor supply. Until recently, the consensus was that unobserved heterogeneity is very important and fertility is endogenous. Hyslop (1999) challenged this. Using a dynamic panel probit model of female labor supply including heterogeneity and state dependence, he found that adding autoregressive errors led to a substantial diminution in the importance of heterogeneity. This, in turn, meant he could not reject that fertility is exogenous. Here, we extend Hyslop (1999) to allow classification error in employment status, using an estimation procedure developed by Keane and Wolpin (2001) and Keane and Sauer (2005). We find that a fairly small amount of classification error is enough to overturn Hyslops conclusions, leading to overwhelming rejection of the hypothesis of exogenous fertility. Copyright 2009 The Econometric Society.

Educational Financing and Lifetime Earnings

This paper formulates and estimates a dynamic programming model of optimal educational financing decisions. The main purpose of the paper is to measure the effect of short-term parental cash transfers, received during school, on educational borrowing and in-school work decisions, and on post-graduation lifetime earnings. The estimated parameters of the model imply that parental cash transfers do not significantly influence post-graduation lifetime earnings. Long-term factors such as family background and prior human capital investments are more important. Parental cash transfers do, however, significantly determine the decision to borrow or work during school and the level of lifetime consumption. Copyright 2004, Wiley-Blackwell.

Does it Pay for Women to Volunteer

This paper estimates the economic and non-economic returns to volunteering for prime-aged women. A womans decision to engage in unpaid work, and to marry and have children, is formulated as a forward-looking discrete choice dynamic programming problem. Simulated maximum likelihood estimates of the model indicate that an extra year of volunteer experience increases wage offers in part-time work by 8.3% and wage offers in full-time work by 2.4%. The behavioral model also reveals an adverse selection mechanism which is consistent with the negative returns to volunteering found in reduced-form wage regressions. The negative selection is driven by differential unobserved market-productivity and heterogeneous marginal utilities of future consumption. The structural estimates also imply that the economic returns to volunteering are relatively more important than non-economic returns, and introduction of a tax-credit for volunteering-related childcare expenses would substantially increase volunteer labor supply and female lifetime earnings.

Is it possible to have cheaper drugs and preserve the incentive to innovate? The benefits of privatizing the drug approval process

In this paper, we argue that lower prices for pharmaceuticals can be achieved by fostering a new type of competition in the pharmaceutical industry. Lower drug development costs, and hence prices, can be brought about by abolishing national drug administrations and replacing them with private certification boards that compete on the basis of safety, efficiency and cost of their drug approval process. A major benefit of this type of privatization is that it would not necessitate limits on data exclusivity in order to achieve lower prices. Drug approval privatization could achieve the same positive results as generic competition, in terms of lower costs and prices, without the negative effects of intellectual property rights violation and the consequent discouragement of innovative activities.

Does it Pay to Work for Free? Negative Selection and the Wage Returns to Volunteer Experience

This paper offers the first instrumental variables estimates of the wage returns to volunteer experience. The returns are substantial and differ considerably by gender. The results imply that the unequal valuation of volunteer experience by gender is more important in explaining the gender earnings gap than is the unequal valuation of part-time paid work experience. The results also indicate negative selection into unpaid work. In a simple model of optimal volunteering, negative selection implies that a lower cost of volunteering would produce both an expanded and higher-skilled pool of volunteers, and greater societal benefits from volunteer work.

Economic Concentration in the Start‐Up Nation: Is Privatisation to Blame?

In this paper we examine the underlying sources of economic concentration in Israel, which is unusually high for a developed and innovative economy. After a brief review of Israels economic history since the start of the British Mandate, we describe the level of economic concentration, privatisation policy and other public policies that potentially contributed to the creation and persistence of the concentration problem. We argue that privatisation is not likely to be a causal factor, mainly because concentration was present and substantial at least two decades before modern privatisation policies were adopted. It is more plausible to argue that other economic policies, such as R&D subsidies, tax breaks for capital investment, export subsidies, tariffs, stringent regulations and barriers to competition played a major role in the emergence and persistence of economic concentration.