CES-WP-10-01
The Closure Effect: Evidence from Workers Compensation Litigation
Henry Hyatt
January 01, 2010
Consideration of the “best interests” of Workers Compensation (WC) claimants often involves
the assumption that those who receive benefits in a “lump-sum” behave “too myopically” with
respect to labor supply. However, many attorneys argue that lump-sum settlements induce a
beneficial “sense of closure.” In this paper, I provide an empirical context for these ideas using a
unique set of linked administrative databases owned by the State of California. Upon receipt of a
court-approved lump-sum settlement, WC claimants immediately increase labor supply. No
such change is found for claimants who receive a court-approved settlement in which the insurer
provides benefits over time, suggesting that the method of litigation settlement is a determinant
of labor supply.
25 Pages 74433 Bytes
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CES-WP-09-25R
On Spatial Heterogeneity in Environmental Compliance Costs
Randy Becker
January 01, 2010
This paper examines the extent of variation in regulatory stringency below the state level, using establishment-level data from the U.S. Census Bureau’s Pollution Abatement Costs and Expenditures (PACE) survey to estimate a county-level index of environmental compliance costs (ECC). County-level variation is found to explain 11-18 times more of the variation in ECC than state-level variation alone, and the range of ECC within a state is often large. At least 34% of U.S. counties have ECC that are statistically different from their states’. Results suggest that important spatial variation is lost in state-level studies of environmental regulation.
36 Pages 341254 Bytes
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CES 10-02
Euler-Equation Estimation for Discrete Choice Models: A Capital Accumulation Application
Russell Cooper, John Haltiwanger, Jonathan Willis
January 01, 2010
This paper studies capital adjustment at the establishment level. Our goal is to characterize
capital adjustment costs, which are important for understanding both the dynamics of aggregate
investment and the impact of various policies on capital accumulation. Our estimation strategy
searches for parameters that minimize ex post errors in an Euler equation. This strategy is quite
common in models for which adjustment occurs in each period. Here, we extend that logic to the
estimation of parameters of dynamic optimization problems in which non-convexities lead to
extended periods of investment inactivity. In doing so, we create a method to take into account
censored observations stemming from intermittent investment. This methodology allows us to
take the structural model directly to the data, avoiding time-consuming simulation based
methods. To study the effectiveness of this methodology, we first undertake several Monte Carlo
exercises using data generated by the structural model. We then estimate capital adjustment costs
for U.S. manufacturing establishments in two sectors.
33 Pages 233006 Bytes
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CES-WP-09-44
Employee Capitalism or Corporate Socialism? Broad-Based Employee Stock Ownership
E. Han Kim, Paige Ouimet
December 01, 2009
How employee share ownership plans (ESOPs) affect employee compensation and shareholder
value depends on the size. Small ESOPs, defined as those controlling less than 5% of
outstanding shares, benefit both workers and shareholders, implying positive productivity gains.
However, the effects of large ESOPs on worker compensation and shareholder value are more or
less neutral, suggesting little productivity gains. These differential effects appear to be due to
two non-value-creating motives specific to large ESOPS: (1) To form management-worker
alliances ala Pagano and Volpin (2005), wherein management bribes workers to garner worker
support in thwarting hostile takeover threats and (2) To substitute wages with ESOP shares by
cash constrained firms. Worker compensation increases when firms under takeover threats adopt
large ESOPs, but only if the firm operates in a non-competitive industry. The effects on firm
valuation also depend on the strength of product market competition: When the competition is
strong (weak), most of the productivity gains accrue to employees (shareholders). Competitive
industry also implies greater job mobility within the industry, enabling workers to take a greater
portion of productivity gains.
53 Pages 522371 Bytes
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CES-WP-09-43
The Impact of Plant-Level Resource Reallocations and Technical Progress on U.S. Macroeconomic Growth
Amil Petrin, T. Kirk White, Jerome P. Reiter
December 01, 2009
We build up from the plant level an “aggregate(d) Solow residual" by estimating every U.S.
manufacturing plant's contribution to the change in aggregate final demand between 1976 and
1996. We decompose these contributions into plant-level resource reallocations and plant-level
technical efficiency changes. We allow for 459 different production technologies, one for each 4-
digit SIC code. Our framework uses the Petrin and Levinsohn (2008) definition of aggregate
productivity growth, which aggregates plant-level changes to changes in aggregate final demand
in the presence of imperfect competition and other distortions and frictions. On average, we find
that aggregate reallocation made a larger contribution than aggregate technical efficiency growth.
Our estimates of the contribution of reallocation range from 1.7% to 2.1% per year, while our
estimates of the average contribution of aggregate technical efficiency growth range from 0:2% to
0:6% per year. In terms of cyclicality, the aggregate technical efficiency component has a
standard deviation that is roughly 50% to 100% larger than that of aggregate total reallocation,
pointing to an important role for technical efficiency in macroeconomic fluctuations. Aggregate
reallocation is negative in only 3 of the 20 years of our sample, suggesting that the movement of
inputs to more highly valued activities on average plays a stabilizing role in manufacturing
growth.
69 Pages 295360 Bytes
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