Program meeting on labor studies.

PositionSocial implications of worker segregation

Members of the NBER's Program on Labor Studies met in Cambridge on April 18 to discuss recent research. Organizers Richard B. Freeman and Lawrence F. Katz, both of the NBER and Harvard University, selected the following papers for discussion:

Steven D. Levitt, NBER and Harvard University, "Juvenile Crime and Punishment"

George Baker, NBER and Harvard Business School; Robert Gibbons, NBER and Cornell University; and Kevin J. Murphy, University of Southern California, "Implicit Contracts and the Theory of the Firm"

William T. Dickens, The Brookings Institution, "Neighborhoods and Networks"

Michael Kremer, NBER and MIT, "Should Taxes be Independent of Age?"

Alan B. Krueger, NBER and Princeton University, "Experimental Estimates of Education Production Functions"

Over the last two decades the punitiveness of the juvenile justice system has declined substantially relative to that of the adult courts. During that same time period, juvenile violent crime rates have grown almost twice as quickly as adult crime rates. Levitt finds that juvenile offenders are at least as responsive to criminal sanctions as adults are. Moreover, sharp changes in criminal involvement with the transition from the juvenile to the adult court suggest that deterrence plays an important role. Changes in relative punishment account for 60 percent of the differential growth rates in juvenile and adult violent crime between 1978 and 1993. There does not appear to be a strong relationship between the punitiveness of the juvenile justice system and the extent of criminal involvement later in life.

Baker, Gibbons, and Murphy analyze the role of "implicit contracts" (that is, informal agreements supported by reputation rather than law) both within firms, for example in employment relationships, and between them, for example as handin-glove supplier relationships. They find that the optimal organizational form is determined largely by what implicit contracts it facilitates. Among other things, they also show that vertical integration is an efficient response to widely varying supply prices. Finally, their model suggests why "management" (that is, the development and implementation of unwritten rules and codes of conduct) is essential in organizations.

Dickens presents a model of a labor market in which workers come from either a high rent or a low rent neighborhood. Employed people prefer to live in the high rent neighborhood, and can help unemployed people in their "network"...

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