Capabilities, Allocation and Earnings

1 INTRODUCTION The final chapter of my Personal Income Distribution, a Hulticapability Theory (Hartog, 1981a) carried as its motto: 'Oh richness of the unfinished'. It concluded a book in which labor services were decomposed into services arising from different capabilities. Individuals were supposed to command stocks of capabilities and to decide on the utilization rates of these capabilities, by balanc ing efforts and rewards. The optimal capability bundle they so defined was to be realized by picking the job that just required this bundle. To derive analytical implications on the structure of the labor market and on the distribution of labor earnings, the key assumption was made that arbitrage in capability supply was possible, i. e. , that effectively capabilities could be sold separ ately and carried a uniform unit price throughout the labor market. While many interesting analytical and empirical results followed, there was also an indication from empirical testing that an earnings function linear in capabilities could be outperformed by a non-linear func- 2 CAPABILITIES, ALLOCATION AND EARNINGS tion, and that the arbitrage assumption might be un tenable. This book attempts to harvest a little from the richness of the unfinished that was left. It returns to some of the old topics and adds some new ones, in a more general model that no longer imposes the assumption that capabilities can be treated as if they can be unbundled. It also draws on new datasets to explore the issues empirically.

Klappentext

The basic message of this book is that the labor market can be usefully interpreted as a confrontation of workers who have heterogeneous capabilities and tastes with jobs that are heterogeneous in the potential productivity of given individual capability endowments. On the demand side the model is used to analyze division of labor, while on the supply side it is used to study schooling decisions and the effects of schools on the resulting structure of the labor force. Equilibrium is characterized and some optimimum properties are studied before the empirical work is presented. The empirical work consists of models for the allocation of individuals to jobs and of earnings functions. The relation between the two is studied and some underlying characteristics of the functioning of labor markets are demonstrated.

Inhalt
1 Introduction.- 1.1 Introduction.- 1.2 Key concepts used.- 1.3 Organization of the book.- 2 Labor Demand.- 2.1 Introduction.- 2.2 The long run: designing the job structure.- 2.3 The ABC of labor division: Adam Smith, Charles Babbage and John Commons.- 2.4 Working conditions.- 2.5 Labor demand in the short run.- 2.6 Concluding remarks.- 3 Schooling and Supply.- 3.1 Introduction.- 3.2 Short run labor supply.- 3.3 Schooling in the smooth labor market.- 3.4 Schooling with constraints.- 3.5 Utility maximization.- 3.6 Conclusions.- 4 Equilibrium and Optimum.- 4.1 Introduction.- 4.2 The Lucas-Rosen model.- 4.3 The Tinbergen model.- 4.4 Comparative advantage.- 4.5 Optimal provision of job characteristics.- 4.6 Optimal schooling provisions.- 4.7 Conclusions.- Appendix 4.1.: Derivatives of the Tinbergen model.- 5 Implications for Empirical Work.- 5.1 Introduction.- 5.2 Implications and predictions.- 5.3 Econometric models of selfselection.- 5.4 Estimating structural models.- 5.5 The Datasets.- 5.6 Concluding remarks.- Appendix 5.1 The Brabant data.- Appendix 5.2 The ARBI job level scale.- Appendix 5.3 The CBS job level scale.- 6 Allocation.- 6.1 Introduction.- 6.2 Multinomial logit models for allocation.- 6.3 An ordered response model for allocation.- 6.4 Concluding remarks.- 7 Earnings.- 7.1 Introduction.- 7.2 Education and job level.- 7.3 Earnings functions by job level.- 7.4 Allocation and the nature of the earnings function.- 7.5 Overeducation and underutilization.- 7.6 Conclusions.- Appendix 7.1 Hay's model.- 8 Applications, Conclusions, Extensions.- 8.1 Introduction.- 8.2 Young Mediterraneans in the Dutch labor market.- 8.3 Self-selection in educational choice.- 8.4 An overview of results.- 8.5 To be continued.- Appendix: Symbols Used.- Notes.- Name Index.