Edward P Lazear
Biographic Data
| ID | 223604 |
|---|---|
| NAME | Edward P Lazear |
| GIVEN NAMES | Edward P |
| FAMILY NAME | Lazear |
| SIGNATURE | LAZEAR E P |
| AFFILIATIONS | Stanford University |
| VERIFIED | No |
| TOTAL WORKS | 33 |
| TOTAL CITATIONS | 697 |
| AUTHOR COUNT | 33 |
| EDITOR COUNT | 0 |
| FIRST PUBLICATION YEAR | 1977 |
| LATEST PUBLICATION YEAR | 2021 |
| H-INDEX | 9 |
Why Are Some Immigrant Groups More Successful Than Others
The composition of immigrants depends not only on immigrant choice but also on immigration policy, because slots are rationed. Policy determines immigrant attainment, as evidenced by immigrants from Algeria having higher educational attainment than those from Israel or Japan. Theory predicts and evidence confirms that immigrant attainment is inversely related to the number admitted from a source country and positively related to population and ed…
Demographics and Entrepreneurship
Entrepreneurship requires energy and creativity as well as business acumen. Some factors that contribute to entrepreneurship may decline with age, but business skills increase with experience in high level positions. Having too many older workers in society slows entrepreneurship. Older workers do not possess the advantages of youth, but more significant is that when older workers occupy key positions they may block younger workers from acquiring…
Gary Becker Remembered
Compensation and Incentives in the Workplace
Labor is supplied because most of us must work to live. Indeed, it is called "work" in part because without compensation, the overwhelming majority of workers would not otherwise perform the tasks. The theme of this essay is that incentives affect behavior and that economics as a science has made good progress in specifying how compensation and its form influences worker effort. This is a broad topic, and the purpose here is not a comprehensive l…
Firm‐Specific Human Capital
The theory of human capital is agnostic on what constitutes firm-specific skills. The theory specifies that specific skills contribute to productivity only at the current firm. A broader approach lets all skills be general, but firms use them with different weights attached. For example, computer programming, economics, and accounting are general skills, but there may be only one firm that wants workers trained in all three. One implication is th…
Mexican Assimilation in the United States
By almost any measure, immigrants from Mexico have performed worse and become assimilated more slowly than immigrants from other countries. Still, Mexico is a huge country, with many high ability people who could fare very well in the United States. Why have Mexicans done so badly? The answer is primarily immigration policy. The US lets in far more immigrants from Mexico than from any other country. As a result, there are large Mexican enclaves i…
Personnel Economics
Personnel economics drills deeply into the firm to study human resource management practices like compensation, hiring practices, training, and teamwork. Why should pay vary across workers within firms-and how "compressed" should pay be within firms? Should firms pay workers for their performance on the job or for their skills or hours of work? How are pay and promotions structured across jobs to induce optimal effort from employees? Why do firms…
Balanced Skills and Entrepreneurship
Entrepreneurs are generalists who put together teams of people and assemble resources and capital. To do this effectively, they must have a general set of skills. Individuals may be endowed with a general set of skills, but endowments can be augmented by investment in human capital. It is shown that formal schooling is used to supplement the skill set of those who choose to become entrepreneurs.
The Peter Principle
Some have observed that individuals perform worse after being promoted. The Peter principle, which states that people are promoted to their level of incompetence, suggests that something is fundamentally misaligned in the promotion process. This view is unnecessary and inconsistent with the data. Below, it is argued that ability appears lower after promotion purely as a statistical matter. Being promoted is evidence that a standard has been met. …
Educational Production
Classroom education has public good aspects. The technology is such that when one student disrupts the class, learning is reduced for all other students. A disruption model of educational production is presented. It is shown that optimal class size is larger for better-behaved students, which helps explain why it is difficult to find class size effects in the data. Additionally, the role of discipline is analyzed and applied to differences in per…
Economic Imperialism
Economics is not only a social science, it is a genuine science. Like the physical sciences, economics uses a methodology that produces refutable implications and tests these implications using solid statistical techniques. In particular, economics stresses three factors that distinguish it from other social sciences. Economists use the construct of rational individuals who engage in maximizing behavior. Economic models adhere strictly to the imp…
The Future of Personnel Economics
Personnel economics has grown over the past 20 years to become a major branch of labour economics. Although much has been learned, many important questions remain. For example, are worker wage profiles dependent on individual attributes or is the firm more important in determining wage growth? Why are executives so highly paid and why does pay take the form that it does? How can cross‐country differences in pay patterns be explained? Does variabl…
Economic Imperialism
Economics is not only a social science, it is a genuine science. Like the physical sciences, economics uses a methodology that produces refutable implications and tests these implications using solid statistical techniques. In particular, economics stresses three factors that distinguish it from other social sciences. Economists use the construct of rational individuals who engage in maximizing behavior.
Globalisation and the Market for Team‐Mates
The globalisation of firms is explored at theoretical and empirical levels. The idea is that a global firm is a multi‐cultural team. The existence of a global firm is somewhat puzzling. Combining workers who have different cultures, legal systems, and languages imposes costs on the firm that would not be present were all workers to conform to one standard. In order to offset the costs of cross‐cultural dealing, there must be complementarities bet…
Personnel Economics
Personnel Economics
Contrary to popular opinion, human resources, in general, and personnel, in particular, are well-suited to economic analysis. Edward Lazear, who founded the subfield of personnel economics, provides a quick introduction for economists who have not studied the area. Contrary to popular opinion, human resources, in general, and personnel, in particular, are well-suited to economic analysis. Edward Lazear, who founded the subfield of personnel econo…
Bait and Switch
Sellers sometimes practice a form of false advertising known as bait and switch. A low-priced good is advertised but replaced by a different good at the showroom. The practice is surprising since advertising the wrong good discourages the appropriate buyers from shopping, attracting customers who will be disappointed when they see the good. Firms bait and switch to draw a greater number of shoppers. The cost is that some who would have bought the…
Peer Pressure and Partnerships
Partnerships and profit sharing are often claimed to motivate workers by giving them a share of the pie. But in organizations of any significant size, the free-rider effects would seem to choke off any motivational forces. This analysis explores how peer pressure operates and how factors such as profit sharing, shame, guilt, norms, mutual monitoring, and empathy interact to create incentives in the firm. The argument that Japanese firms enjoy tea…
Discrimination in Labor Markets
Managers tend to identify the
Labor Economics and the Psychology of Organizations
This essay is a discussion of how economists are attempting to understand institutions within the organizations of the labor market. The institutions and issues discussed include mandatory retirement; discontinuous jumps in wages; pay compression; rights of tenure; up-or-out hierarchies; timing of raises, promotions and evaluations; the existence of partnerships; the use of bonuses vs. penalties; and pay as a motivator
Job Security Provisions and Employment
European countries have enacted various job security provisions over the last 30 years. Employers are required to pay workers on separation or to give advance notice of termination. In anything less than a perfectly functioning market, there are effects of the provisions on employment. Incumbents are more likely to retain their jobs, but new workers are less likely to be hired. An examination of the European data suggests that severance pay requi…
Male-Female Wage Differentials in Job Ladders
Much of the male-female wage differential exists because men and women are assigned to different jobs. Within narrow job categories, there is no male-female differential. Only a tortured taste theory of discrimination can reconcile these facts. We argue that differential movement along job ladders entails comparative advantage, so the ability standard for promotion is higher for women. This implies that more able women will be passed over in favo…
Symposium on Women in the Labor Market
T his symposium contains four essays on the general topic of women in the labor market. The essays are varied, not only in focus, but also in philosophical outlook. The topic is of central importance today. Few economic trends have been more pronounced or sustained than the increased labor force participation of women. In 1948, the labor force participation rate of females was 32.7 percent. At the end of 1987, it stood at 56.4 percent. The growth…
Issues in Contemporary Retirement
Pay Equality and Industrial Politics
Personnel managers often argue that equitable pay treatment manifested as wage compression is useful because it reduces disharmony among workers. But it is far from obvious that a compressed salary structure is morale improving since better workers may feel disenchanted by this scheme. However, when workers' rewards are based on relative comparisons, salary compression reduces uncooperative behavior that is detrimental to the firm. Relative compa…
Rank-Order Tournaments as Optimum Labor Contracts
This paper analyzes compensation schemes which pay according to an individual's ordinal rank in an organization rather than his output level. When workers are risk neutral, it is shown that wages based upon rank induce the same efficient allocation of resources as an incentive reward scheme based on individual output levels. Under some circumstances, risk-averse workers actually prefer to be paid on the basis of rank. In addition, if workers are …
Peer Pressure and Partnerships
Partnerships and profit sharing are often claimed to motivate workers by giving them a share of the pie. But in organizations of any significant size, the free-rider effects would seem to choke off any motivational forces. This analysis explores how peer pressure operates and how factors such as profit sharing, shame, guilt, norms, mutual monitoring, and empathy interact to create incentives in the firm. The argument that Japanese firms enjoy tea…
Why Is There Mandatory Retirement
This paper offers an explanation of the use of mandatory-retirement clauses in labor contracts. It argues that the date of mandatory retirement is chosen to correspond to the date of voluntary retirement, but the nature of the optimal wage profile results in a discrepancy between spot wage and spot VMP (value of the worker's marginal product). This is because it is preferable to pay workers less than VMP when young and more than VMP when old. By …
Pay Equality and Industrial Politics
Personnel managers often argue that equitable pay treatment manifested as wage compression is useful because it reduces disharmony among workers. But it is far from obvious that a compressed salary structure is morale improving since better workers may feel disenchanted by this scheme. However, when workers' rewards are based on relative comparisons, salary compression reduces uncooperative behavior that is detrimental to the firm. Relative compa…
Globalisation and the Market for Team‐Mates
The globalisation of firms is explored at theoretical and empirical levels. The idea is that a global firm is a multi‐cultural team. The existence of a global firm is somewhat puzzling. Combining workers who have different cultures, legal systems, and languages imposes costs on the firm that would not be present were all workers to conform to one standard. In order to offset the costs of cross‐cultural dealing, there must be complementarities bet…
Firm‐Specific Human Capital
The theory of human capital is agnostic on what constitutes firm-specific skills. The theory specifies that specific skills contribute to productivity only at the current firm. A broader approach lets all skills be general, but firms use them with different weights attached. For example, computer programming, economics, and accounting are general skills, but there may be only one firm that wants workers trained in all three. One implication is th…
Personnel Economics
Personnel economics drills deeply into the firm to study human resource management practices like compensation, hiring practices, training, and teamwork. Why should pay vary across workers within firms-and how "compressed" should pay be within firms? Should firms pay workers for their performance on the job or for their skills or hours of work? How are pay and promotions structured across jobs to induce optimal effort from employees? Why do firms…
The Peter Principle
Some have observed that individuals perform worse after being promoted. The Peter principle, which states that people are promoted to their level of incompetence, suggests that something is fundamentally misaligned in the promotion process. This view is unnecessary and inconsistent with the data. Below, it is argued that ability appears lower after promotion purely as a statistical matter. Being promoted is evidence that a standard has been met. …
The Future of Personnel Economics
Personnel economics has grown over the past 20 years to become a major branch of labour economics. Although much has been learned, many important questions remain. For example, are worker wage profiles dependent on individual attributes or is the firm more important in determining wage growth? Why are executives so highly paid and why does pay take the form that it does? How can cross‐country differences in pay patterns be explained? Does variabl…
Labor Economics and the Psychology of Organizations
This essay is a discussion of how economists are attempting to understand institutions within the organizations of the labor market. The institutions and issues discussed include mandatory retirement; discontinuous jumps in wages; pay compression; rights of tenure; up-or-out hierarchies; timing of raises, promotions and evaluations; the existence of partnerships; the use of bonuses vs. penalties; and pay as a motivator
Compensation and Incentives in the Workplace
Labor is supplied because most of us must work to live. Indeed, it is called "work" in part because without compensation, the overwhelming majority of workers would not otherwise perform the tasks. The theme of this essay is that incentives affect behavior and that economics as a science has made good progress in specifying how compensation and its form influences worker effort. This is a broad topic, and the purpose here is not a comprehensive l…
Education
It can be claimed that education is simply a normal consumption good and that like all other normal goods, an increase in wealth will produce an increase in the amount of schooling purchased. Increased incomes are associated with higher schooling attainment as the simple result of an income effect. If this is so, schooling increases an individual's wealth only by the consumption value of the good, since it is a non-saleable asset. This paper will…
Demographics and Entrepreneurship
Entrepreneurship requires energy and creativity as well as business acumen. Some factors that contribute to entrepreneurship may decline with age, but business skills increase with experience in high level positions. Having too many older workers in society slows entrepreneurship. Older workers do not possess the advantages of youth, but more significant is that when older workers occupy key positions they may block younger workers from acquiring…
Bait and Switch
Sellers sometimes practice a form of false advertising known as bait and switch. A low-priced good is advertised but replaced by a different good at the showroom. The practice is surprising since advertising the wrong good discourages the appropriate buyers from shopping, attracting customers who will be disappointed when they see the good. Firms bait and switch to draw a greater number of shoppers. The cost is that some who would have bought the…
Gary Becker Remembered
Education
It can be claimed that education is simply a normal consumption good and that like all other normal goods, an increase in wealth will produce an increase in the amount of schooling purchased. Increased incomes are associated with higher schooling attainment as the simple result of an income effect. If this is so, schooling increases an individual's wealth only by the consumption value of the good, since it is a non-saleable asset. This paper will…
Why Is There Mandatory Retirement
This paper offers an explanation of the use of mandatory-retirement clauses in labor contracts. It argues that the date of mandatory retirement is chosen to correspond to the date of voluntary retirement, but the nature of the optimal wage profile results in a discrepancy between spot wage and spot VMP (value of the worker's marginal product). This is because it is preferable to pay workers less than VMP when young and more than VMP when old. By …
Family Background and Optimal Schooling Decisions
Rank-Order Tournaments as Optimum Labor Contracts
This paper analyzes compensation schemes which pay according to an individual's ordinal rank in an organization rather than his output level. When workers are risk neutral, it is shown that wages based upon rank induce the same efficient allocation of resources as an incentive reward scheme based on individual output levels. Under some circumstances, risk-averse workers actually prefer to be paid on the basis of rank. In addition, if workers are …
Salaries and Piece Rates
Compensation can take many forms. Remuneration can come as pecuniary payments, as fringes such as health and pension benefits, or as a nonpecuniary reward such as plush office furniture that costs the firm less than it benefits the worker. A significant literature has examined the trade-offs between pecuniary and nonpecuniary compensation, the modern work having been pioneered by Rosen (1974). More recently, another body of literature has examine…
Symposium on Public and Private Unionization
Understanding the source of the decline of private sector unions and concomitant rise of public sectors unions is essential. Without that knowledge, the welfare effects of the changes cannot be ascertained. The two essays that follow take us a long way down the road toward that understanding
Symposium on Women in the Labor Market
T his symposium contains four essays on the general topic of women in the labor market. The essays are varied, not only in focus, but also in philosophical outlook. The topic is of central importance today. Few economic trends have been more pronounced or sustained than the increased labor force participation of women. In 1948, the labor force participation rate of females was 32.7 percent. At the end of 1987, it stood at 56.4 percent. The growth…
Issues in Contemporary Retirement
Pay Equality and Industrial Politics
Personnel managers often argue that equitable pay treatment manifested as wage compression is useful because it reduces disharmony among workers. But it is far from obvious that a compressed salary structure is morale improving since better workers may feel disenchanted by this scheme. However, when workers' rewards are based on relative comparisons, salary compression reduces uncooperative behavior that is detrimental to the firm. Relative compa…
Allocation of Income Within the Household
Allocation of Income within the Household develops an important new economic model of income distribution within the family, one that attempts to determine which family characteristics affect spending patterns. Professors Lazear and Michael base their work on an analysis of the 1972-73 Consumer Expenditure Survey and test their conclusions against the 1960-61 survey to verify the persistence of the effects discovered. They find, for example, that…
Allocation of Income within the Household
Job Security Provisions and Employment
European countries have enacted various job security provisions over the last 30 years. Employers are required to pay workers on separation or to give advance notice of termination. In anything less than a perfectly functioning market, there are effects of the provisions on employment. Incumbents are more likely to retain their jobs, but new workers are less likely to be hired. An examination of the European data suggests that severance pay requi…
Male-Female Wage Differentials in Job Ladders
Much of the male-female wage differential exists because men and women are assigned to different jobs. Within narrow job categories, there is no male-female differential. Only a tortured taste theory of discrimination can reconcile these facts. We argue that differential movement along job ladders entails comparative advantage, so the ability standard for promotion is higher for women. This implies that more able women will be passed over in favo…
Discrimination in Labor Markets
Managers tend to identify the
Labor Economics and the Psychology of Organizations
This essay is a discussion of how economists are attempting to understand institutions within the organizations of the labor market. The institutions and issues discussed include mandatory retirement; discontinuous jumps in wages; pay compression; rights of tenure; up-or-out hierarchies; timing of raises, promotions and evaluations; the existence of partnerships; the use of bonuses vs. penalties; and pay as a motivator
Peer Pressure and Partnerships
Partnerships and profit sharing are often claimed to motivate workers by giving them a share of the pie. But in organizations of any significant size, the free-rider effects would seem to choke off any motivational forces. This analysis explores how peer pressure operates and how factors such as profit sharing, shame, guilt, norms, mutual monitoring, and empathy interact to create incentives in the firm. The argument that Japanese firms enjoy tea…
Personnel Economics
Contrary to popular opinion, human resources, in general, and personnel, in particular, are well-suited to economic analysis. Edward Lazear, who founded the subfield of personnel economics, provides a quick introduction for economists who have not studied the area. Contrary to popular opinion, human resources, in general, and personnel, in particular, are well-suited to economic analysis. Edward Lazear, who founded the subfield of personnel econo…
Bait and Switch
Sellers sometimes practice a form of false advertising known as bait and switch. A low-priced good is advertised but replaced by a different good at the showroom. The practice is surprising since advertising the wrong good discourages the appropriate buyers from shopping, attracting customers who will be disappointed when they see the good. Firms bait and switch to draw a greater number of shoppers. The cost is that some who would have bought the…
Personnel Economics
Economic Imperialism
Economics is not only a social science, it is a genuine science. Like the physical sciences, economics uses a methodology that produces refutable implications and tests these implications using solid statistical techniques. In particular, economics stresses three factors that distinguish it from other social sciences. Economists use the construct of rational individuals who engage in maximizing behavior.
Globalisation and the Market for Team‐Mates
The globalisation of firms is explored at theoretical and empirical levels. The idea is that a global firm is a multi‐cultural team. The existence of a global firm is somewhat puzzling. Combining workers who have different cultures, legal systems, and languages imposes costs on the firm that would not be present were all workers to conform to one standard. In order to offset the costs of cross‐cultural dealing, there must be complementarities bet…
Economic Imperialism
Economics is not only a social science, it is a genuine science. Like the physical sciences, economics uses a methodology that produces refutable implications and tests these implications using solid statistical techniques. In particular, economics stresses three factors that distinguish it from other social sciences. Economists use the construct of rational individuals who engage in maximizing behavior. Economic models adhere strictly to the imp…
The Future of Personnel Economics
Personnel economics has grown over the past 20 years to become a major branch of labour economics. Although much has been learned, many important questions remain. For example, are worker wage profiles dependent on individual attributes or is the firm more important in determining wage growth? Why are executives so highly paid and why does pay take the form that it does? How can cross‐country differences in pay patterns be explained? Does variabl…
Educational Production
Classroom education has public good aspects. The technology is such that when one student disrupts the class, learning is reduced for all other students. A disruption model of educational production is presented. It is shown that optimal class size is larger for better-behaved students, which helps explain why it is difficult to find class size effects in the data. Additionally, the role of discipline is analyzed and applied to differences in per…
Balanced Skills and Entrepreneurship
Entrepreneurs are generalists who put together teams of people and assemble resources and capital. To do this effectively, they must have a general set of skills. Individuals may be endowed with a general set of skills, but endowments can be augmented by investment in human capital. It is shown that formal schooling is used to supplement the skill set of those who choose to become entrepreneurs.
Economics (31 works) · Labour economics (17 works) · Business (13 works) · Labor market dynamics and wage inequality (11 works) · Political science (11 works) · Microeconomics (10 works) · Demographic economics (8 works) · Psychology (8 works) · Computer Science (7 works) · Economic Policies and Impacts (7 works)