Lazear and Co-authors' Study on Employment Rents and Productivity During a Recession
A study by economist Edward Lazear and his co-authors provides a practical example of the incentive power of employment rents, often highlighted as a case study for how economists learn from empirical facts. Lazear, a former economic adviser to US President George W. Bush, and his team researched a single technology services firm across 12 US states from 2006 to 2010. The study aimed to understand how the 2008 global financial crisis affected the firm's labor productivity and the behavior of its employees and managers during this severe recession. The findings from this research are frequently used as a basis for analyzing related economic questions.
0
1
Tags
Library Science
Economics
Economy
Social Science
Empirical Science
Science
CORE Econ
Introduction to Microeconomics Course
Ch.6 The firm and its employees - The Economy 2.0 Microeconomics @ CORE Econ
Related
Lazear and Co-authors' Study on Employment Rents and Productivity During a Recession
A technology firm pays its salaried software developers a wage that is substantially higher than the industry average. The nature of their collaborative work makes it difficult to measure individual output. Recently, the government significantly increased the value and duration of unemployment benefits available to all citizens. How will this change in government policy most likely impact the developers' motivation to work hard, based on the incentive structure in place?
Calculating Employee Motivation
Deconstructing the Incentive to Work
Designing an Incentive Scheme for a Creative Agency
Match each economic scenario to the description that best explains its effect on a worker's employment rent (the net value of their job compared to their next best alternative).
A company that pays its workers a wage significantly above the market rate, thereby creating a large employment rent, will always successfully motivate its employees to exert high effort, regardless of its other employment policies.
The net value a worker gains from their job, which acts as an incentive to perform well, is determined by the wage received minus two key factors: the disutility of effort and the worker's ______. This second factor represents the value of their next best option (e.g., unemployment).
A company decides to pay its workers a wage that is higher than their next best alternative to motivate them to work hard. Arrange the following statements into the correct logical sequence that explains how this higher wage translates into increased employee effort.
Evaluating Competing Incentive Strategies
Analyzing the Failure of an Incentive Strategy
Using Firm Closures as Natural Experiments to Estimate Job Loss Costs
Lazear and Co-authors' Study on Employment Rents and Productivity During a Recession
Unexpected Inheritance as a Natural Experiment for Credit Constraints
Credit Card Limit Increases as a Natural Experiment for Credit Constraints
A city government decides to boost local economies by offering a one-time subsidy to all restaurants located in a specific district that has historically experienced low foot traffic. An economist compares the revenue of restaurants inside this district to the revenue of restaurants in an adjacent district one year after the subsidy was provided. Why is this research design a potentially flawed application of the natural experiment method to determine the causal effect of the subsidy?
Evaluating a Research Design
Identifying the Components of a Natural Experiment
A government unexpectedly bans the use of a highly efficient, but environmentally damaging, type of fishing net in one of two adjacent coastal regions. Both regions have similar fish populations and market conditions. An economist plans to study the impact of this ban on fishermen's average income by comparing the income in the region with the ban to the income in the region without it. Which of the following statements provides the strongest justification for why this scenario constitutes a valid natural experiment?
An economist observes that after a state unexpectedly passes a law increasing the minimum wage, employment in low-wage sectors falls more in that state compared to a neighboring state with no change in its minimum wage law. The economist concludes that the minimum wage increase caused the job losses. Which of the following, if true, would most seriously weaken the economist's conclusion drawn from this natural experiment?
Analyze the following research scenarios. Match each scenario with the statement that best describes its validity as a natural experiment for isolating a specific causal effect.
An economist wants to measure the causal impact of improved public transportation on local property values. They identify a neighborhood where a new subway station was recently built and compare the change in property values in that neighborhood over five years to the change in a similar neighborhood that did not receive a new station. The economist claims this setup constitutes a valid natural experiment. Which of the following statements identifies the most critical flaw in this research design?
An economist wants to isolate the causal effect of an increase in family size on household savings. Which of the following scenarios provides the most valid natural experiment to study this effect?
Designing a Natural Experiment for Policy Analysis
A large corporation introduces a voluntary, company-funded financial wellness program. To measure its effectiveness, an economist compares the average savings rate of employees who chose to participate in the program with the average savings rate of those who did not. This research design is a valid example of a natural experiment.
Learn After
Increased Employment Rent During a Recession Motivates Greater Worker Effort
Firm Reluctance to Cut Wages During Recessions
Activity: Diagrammatic Analysis of a Firm During a Recession with Fixed Wages
Publication of the Lazear, Shaw, and Stanton (2016) Study on Recessions
A study examined worker productivity at a U.S. technology services firm between 2006 and 2010, a period encompassing a major economic recession. The research found that the productivity of individual employees increased significantly during the recession, even though the firm did not change its wage rates or official internal incentive systems. Which of the following provides the most robust economic explanation for this observed change?
Productivity and the Economic Cycle
Evaluating the Methodology of an Economic Study
A landmark study of a U.S. firm during the 2006-2010 period found that worker productivity rose during the severe economic downturn. Based on the economic principles underlying this finding, it is logical to conclude that a significant, government-led increase in unemployment insurance benefits would likely cause a decrease in worker productivity, assuming the firm makes no changes to its wages.
Analyzing Worker Motivation in Economic Downturns
A notable study analyzed a firm from 2006 to 2010, a period including a major economic recession. Match each component of the situation with the economic principle or description it best represents.
Generalizability of Economic Findings
Evaluating Explanations for Productivity Changes
Applying Economic Research to Business Strategy
An economic study of a single technology firm during a severe recession found that employee productivity increased significantly. Researchers concluded this was because the high unemployment rate in the wider economy made it very difficult for workers to find a new job, thus increasing their incentive to work hard to avoid being laid off. In which of the following scenarios would this specific incentive effect on productivity be LEAST likely to occur?