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By exploiting a commuting policy that led to a sharp and unexpected inflow of Czech workers to areas along the German-Czech border, we examine the impact of an exogenous immigration-induced labor supply shock on local wages and employment of natives. On average, the supply shock leads to a moderate decline in local native wages and a sharp decline in local native employment. These average effects mask considerable heterogeneity across groups: while younger natives experience larger wage effects, employment responses are particularly pronounced for older natives. This pattern is inconsistent with standardmodels of immigration but can be accounted for by a model that allows for a larger labor supply elasticity or a higher degree of wage rigidity for older than for young workers. We further show that the employment response is almost entirely driven by diminished inflows of natives into work rather than outflows into other areas or nonemployment, suggesting that “outsiders” shield “insiders” from the increased competition.

We classify the empirical literature on the wage impact of immigration into three groups, where studies in the first two groups estimate different relative effects, and studies in the third group estimate the total effect of immigration on wages. We interpret the estimates obtained from the different approaches through the lens of the canonical model to demonstrate that they are not comparable. We then relax two key assumptions in this literature, allowing for inelastic and heterogeneous labor supply elasticities of natives and the \"downgrading\" of immigrants. “Downgrading” occurs when the position of immigrants in the labor market is systematically lower than the position of natives with the same observed education and experience levels. Downgrading means that immigrants receive lower returns to the same measured skills than natives when these skills are acquired in their country of origin. We show that heterogeneous labor supply elasticities, if ignored, may complicate the interpretation of wage estimates, and particularly the interpretation of relative wage effects. Moreover, downgrading may lead to biased estimates in those approaches that estimate relative effects of immigration, but not in approaches that estimate total effects. We conclude that empirical models that estimate total effects not only answer important policy questions, but are also more robust to alternative assumptions than models that estimate relative effects.

We show that the effects of taxes on labor supply are shaped by interactions between adjustment costs for workers and hours constraints set by firms. We develop a model in which firms post job offers characterized by an hours requirement and workers pay search costs to find jobs. We present evidence supporting three predictions of this model by analyzing bunching at kinks using Danish tax records. First, larger kinks generate larger taxable income elasticities. Second, kinks that apply to a larger group of workers generate larger elasticities. Third, the distribution of job offers is tailored to match workers' aggregate tax preferences in equilibrium. Our results suggest that macro elasticities may be substantially larger than the estimates obtained using standard microeconometric methods.

Good Jobs, Bad Jobs provides an insightful analysis of how and why precarious employment is gaining ground in the labor market and the role these developments have played in the decline of the middle class. Kalleberg shows that by the 1970s, government deregulation, global competition, and the rise of the service sector gained traction, while institutional protections for workers—such as unions and minimum-wage legislation—weakened. Together, these forces marked the end of postwar security for American workers. The composition of the labor force also changed significantly; the number of dual-earner families increased, as did the share of the workforce comprised of women, non-white, and immigrant workers. Of these groups, blacks, Latinos, and immigrants remain concentrated in the most precarious and low-quality jobs, with educational attainment being the leading indicator of who will earn the highest wages and experience the most job security and highest levels of autonomy and control over their jobs and schedules. Kalleberg demonstrates, however, that building a better safety net—increasing government responsibility for worker health care and retirement, as well as strengthening unions—can go a long way toward redressing the effects of today’s volatile labor market. There is every reason to expect that the growth of precarious jobs—which already make up a significant share of the American job market—will continue. Good Jobs, Bad Jobs deftly shows that the decline in U.S. job quality is not the result of fluctuations in the business cycle, but rather the result of economic restructuring and the disappearance of institutional protections for workers. Only government, employers and labor working together on long-term strategies—including an expanded safety net, strengthened legal protections, and better training opportunities—can help reverse this trend.

As the current recession ends, many workers will not be returning to the jobs they once held--those jobs are gone. InThe New Division of Labor, Frank Levy and Richard Murnane show how computers are changing the employment landscape and how the right kinds of education can ease the transition to the new job market. The book tells stories of people at work--a high-end financial advisor, a customer service representative, a pair of successful chefs, a cardiologist, an automotive mechanic, the author Victor Hugo, floor traders in a London financial exchange. The authors merge these stories with insights from cognitive science, computer science, and economics to show how computers are enhancing productivity in many jobs even as they eliminate other jobs--both directly and by sending work offshore. At greatest risk are jobs that can be expressed in programmable rules--blue collar, clerical, and similar work that requires moderate skills and used to pay middle-class wages. The loss of these jobs leaves a growing division between those who can and cannot earn a good living in the computerized economy. Left unchecked, the division threatens the nation's democratic institutions. The nation's challenge is to recognize this division and to prepare the population for the high-wage/high-skilled jobs that are rapidly growing in number--jobs involving extensive problem solving and interpersonal communication. Using detailed examples--a second grade classroom, an IBM managerial training program, Cisco Networking Academies--the authors describe how these skills can be taught and how our adjustment to the computerized workplace can begin in earnest.

In 1990, the US had the sixth highest female labor participation rate among 22 OECD countries. By 2010 its rank had fallen to seventeenth. We find that the expansion of “family-friendly” policies, including parental leave and part-time work entitlements in other OECD countries, explains 29 percent of the decrease in US women's labor force participation relative to these other countries. However, these policies also appear to encourage part-time work and employment in lower level positions: US women are more likely than women in other countries to have full time jobs and to work as managers or professionals.

We present the first causal estimates of the effect of Social Security Disability Insurance benefit receipt on labor supply using all program applicants. We use administrative data to match applications to disability examiners and exploit variation in examiners' allowance rates as an instrument for benefit receipt. We find that among the estimated 23 percent of applicants on the margin of program entry, employment would have been 28 percentage points higher had they not received benefits. The effect is heterogeneous, ranging from no effect for those with more severe impairments to 50 percentage points for entrants with relatively less severe impairments.

How can price elasticities be identified when agents face optimization frictions such as adjustment costs or inattention? I derive bounds on structural price elasticities that are a function of the observed effect of a price change on demand, the size of the price change, and the degree of frictions. The degree of frictions is measured by the utility losses agents tolerate to deviate from the frictionless optimum. The bounds imply that frictions affect intensive margin elasticities much more than extensive margin elasticities. I apply these bounds to the literature on labor supply. The utility costs of ignoring the tax changes used to identify intensive margin labor supply elasticities are typically less than 1% of earnings. As a result, small frictions can explain the differences between micro and macro elasticities, extensive and intensive margin elasticities, and other disparate findings. Pooling estimates from existing studies, I estimate a Hicksian labor supply elasticity of 0.33 on the intensive margin and 0.25 on the extensive margin after accounting for frictions.

I replicate and extend the seminal work of Camerer et al. (“Labor Supply of New York City Cabdrivers: One Day at a Time,” Quarterly Journal of Economics, 112 [1997], 407–441), who find that the wage elasticity of daily hours of work for New York City taxi drivers is negative and conclude that their labor supply behavior is consistent with reference dependence. In contrast, my analysis of the complete record of all trips taken in NYC taxi cabs from 2009 to 2013 shows that drivers tend to respond positively to unanticipated as well as anticipated increases in earnings opportunities. Additionally, using a discrete choice stopping model, the probability of a shift ending is strongly positively related to hours worked but at best weakly related to income earned. I find substantial heterogeneity across drivers in their elasticities, but the estimated elasticities are generally positive and rarely substantially negative. I find that new drivers with smaller elasticities are more likely to exit the industry, whereas drivers who remain quickly learn to be better optimizers (have positive labor supply elasticities that grow with experience). These results are consistent with the neoclassical optimizing model of labor supply and suggest that consideration of gain-loss utility and income reference dependence is not an important factor in the daily labor supply decisions of taxi drivers.

I survey the male and female labor supply literatures, focusing on implications for effects of wages and taxes. For males, I describe and contrast results from three basic types of model: static models (especially those that account for nonlinear taxes), life-cycle models with savings, and life-cycle models with both savings and human capital. For women, more important distinctions are whether models include fixed costs of work, and whether they treat demographics like fertility and marriage (and human capital) as exogenous or endogenous. The literature is characterized by considerable controversy over the responsiveness of labor supply to changes in wages and taxes. At least for males, it is fair to say that most economists believe labor supply elasticities are small. But a sizable minority of studies that I examine obtain large values. Hence, there is no clear consensus on this point. In fact, a simple average of Hicks elasticities across all the studies I examine is 0.31. Several simulation studies have shown that such a value is large enough to generate large efficiency costs of income taxation. For males, I conclude that two factors drive many of the differences in results across studies. One factor is use of direct versus ratio wage measures, with studies that use the former tending to find larger elasticities. Another factor is the failure of most studies to account for human capital returns to work experience. I argue that this may lead to downward bias in elasticity estimates. In a model that includes human capital, I show how even modest elasticities—as conventionally measured—can be consistent with large efficiency costs of taxation. Fow women, in contrast, it is fair to say that most studies find large labor supply elasticities, especially on the participation margin. In particular, I find that estimates of \"long-run\" labor supply elasticities—by which I mean estimates that allow for dynamic effects of wages on fertility, marriage, education and work experience—are generally quite large.