credentials and wage discrimination the subject is wage discrimination among workers with differing privately known reservation wages and costs of obtaining credentials that can be observed by a monopsonist firm numerical examples are studied in which workers are equally productive and in the population their reservation wages and credentialing costs have a normal distribution with negative correlation according to these examples wage discrimination is unprofitable

efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

budget processes and commitment to fiscal discipline abstract we present a framework of investigation into the political economy of the budget process our model suggests that institutional rules governing the budget process can be found to limit the importance of fiscal illusion empirical evidence supports that proposition the choice of rules depends on the political environment as well as the dominant source of uncertainty in the budget process

a direct mechanism characterization of sequential bargaining with one sided incomplete information we characterize the sequential equilibria of a class of infinite horizon bargaining games with one sided incomplete information when the seller the uninformed party makes all the offers we prove a folk theorem every incentive compatible individually rational direct bargaining mechanism is implementable by sequential equilibria introducing buyer counteroffers eliminates outcomes which are unfavorable to that party as the proportion of buyer offers increases the set of implementable mechanisms shrinks continuously when the proportion reaches one only the single outcome most favorable to the buyer remains thus depending on the offer structure sequentiality may or may not impose restrictions beyond static incentive compatibility

unions and strikes with asymmetric information strikes seem to be a pareto inefficient outcome of bargaining between a union and a firm however this paper shows that strikes can be the outcome of rational behavior by both agents if the firm has more information than the union concerning the state of nature the union can use strikes as a way of gaining information the paper uses an asymmetric information model where the firm has information about the state i e profitability that the union does not know the schedule of wage offers by the union then depends on the probability that a given state will occur

redistribution policy and the expansion of the public sector abstract during the first part of this century life cycle and insurance type considerations seem to have dominated redistribution policy in particular when we look at the consequences for the expansion of public spending by contrast during recent decades fragmented horizontal redistributions between various minority groups have probably been the most important mechanisms the self interest of different groups of the electorate seems to have provided the most powerful motive behind these various policies although welfare altruism and what in this paper are called considerations of consequential externalities have probably been important motives behind redistribution in favor of the poor

the effects of public policy on strike duration hazard function estimates are utilized to analyze the effect of numerous public policy variables on strike duration based on 7 546 strikes in canada between 1967 and 1985 we find that only the mandatory strike vote substantially reduced conditional duration however the policy variables generally had a more favorable effect on reducing strike incidence so that on net they tended to reduce unconditional duration incidence times conditional duration specifically reduced unconditional duration was associated with the existence of conciliation and the requirement of a mandatory strike vote but the prohibition on replacement workers had a perverse effect

unforeseen contingencies and incomplete contracts we scrutinize the conceptual framework commonly used in the incomplete contract literature this literature usually assumes that contractual incompleteness is due to the transaction costs of describing or of even foreseeing the possible states of nature in advance we argue however that such transaction costs need not interfere with optimal contracting i e transaction costs need not be relevant provided that agents can probabilistically forecast their possible future payoffs even if other aspects of the state of the nature cannot be forecast in other words all that is required for optimality is that agents be able to perform dynamic programming an assumption always invoked by the incomplete contract literature the foregoing optimality result holds very generally provided that parties can commit themselves not to renegotiate moreover we point out that renegotiation may be hard to reconcile with a framework that otherwise presumes perfect rationality however even if renegotiation is allowed the result still remains valid provided that parties are risk averse

bargaining and strikes strikes are generally regarded as an important economic phenomenon and yet good theoretical explanations of them are hard to come by the difficulty is to understand why rational parties should resort to a wasteful mechanism as a way of distributing the gains from trade why could not both parties be made better off by moving to the final distribution of surplus immediately or if it is uncertain to its certainty equivalent and sharing the benefits from increased production

peacock and wiseman on the growth of public expenditure the late nineteenth century view of the growth of the public sector enuciated by adolph wagner 1890 now known as wagner s law accorded well with the doctrine of comparative advantage with the growth of the industrial economy a complementary demand was set up alongside industrial and manufacturing expansion for transport and communication services energy and waste disposal central and local governments were viewed as having a comparative advantage in providing such services justifying wagner s law that government expenditure would continuously increase as a percentage of gross domestic product in a growing economy in 1961 as part of their seminal study of the growth of public expenditure in the united kingdom alan t peacock and jack wiseman1 questioned the generality of wagner s law and introduced their now famous displacement effect hypothesis to explain the time path of the growth of government in democratic countries writing before the public choice research program was at all well established peacock and wiseman nevertheless rejected wagner s reliance upon the organic state and relied instead on political propositions that

an empirical study of the adverse selection model of strikes problems with existing empirical studies of the asymmetric information theory of strikes are 1 industry level data are used as proxies for firm level variables 2 studies using firm level data potentially suffer from simultaneity bias and 3 one of the key predictions of the theory is not tested the present paper addresses these issues while estimating a probit model of strike incidence using data comprising 2 459 contracts from canadian industry for 1964 85 that are merged with firm specific data under a number of alternative specifications results support the main predictions of the asymmetric information theory of strikes

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

can democracy induce development a constitutional perspective we examine the constitutional design required for democratic societies to overcome poverty traps restricting agenda setting by ensuring subsistence levels of consumption and applying simple majority voting as a decision rule will not enable a society to overcome poverty we show that a combination of suitable constitutional rules can however overcome poverty and induce economic well being besides majority voting these rules include rotating agenda setting agenda repetition and tax protection rules we thus highlight the crucial role of democratic institutions for economic development

strikes wages and private information private information models of strikes suggest that the strike is used as an information revealing device by the union in the presence of asymmetrical information a testable prediction of these models is that there is a negative relationship between strikes and the unpredicted component of the wage this paper finds evidence of such a relationship in a large sample of u s labor contracts the real wage falls by about 3 percent after a strike lasting one hundred days copyright 1989 by american economic association

new hampshire s tax base limits an example of the leviathan model this study views the lack of an income tax on wages and salaries and a general sales tax in new hampshire as tax base limits i use the leviathan model to analyze the differences between the fiscal system in new hampshire and the fiscal systems in vermont maine and massachusetts vermont maine and massachusetts do not have the tax base limits that new hampshire has from 1957 to 1989 new hampshire had lower state and local government tax and expenditure levels than the other three states more rapid population growth lower welfare expenditures but comparable levels of expenditures for several of the major public services and a more competitive structure of state and local government

the ricardian approach to budget deficits persistent budget deficits have increased economists interest in theories and evidence about fiscal policy this paper develops the ricardian approach and contrasts it with standard models the discussion considers from major theoretical objections to ricardian equivalence finite lifetimes imperfect capital markets uncertainty about future taxes and incomes and the distorting effects of taxation the paper then considers empirical evidence on interest rates consumption and saving and current account deficits the conclusion is that the ricardian approach is a useful first order approximation and that this approach will probably become the benchmark model for assessing fiscal policy this abstract was borrowed from another version of this item

political deadlocks and distributional information the value of the veil contractarian normative theory relies on the veil of ignorance construct to generate the political consensus required for its theories of justice by eliminating distributional information the veil is presumed to facilite consensus building by reducing conflict over the distributional effects of proposed constitutional rules or institutions this paper explores the extent to which excessive distributional information might also impede the ordinary day to day decision making of democratic institutions our analysis suggests that distributive information makes political deadlocks under majority rule more likely statistical evidence suggests that the efficacy of the u s congress has been reduced by the dramatic increase in distributional information made available to it over the past twenty five years

logit estimates of strike incidence from canadian contract data logit estimates of strike incidence are made based on a unique and comprehensive data set of 2 437 collective agreements the appropriate level of aggregation since that is where bargaining occurs the results are interpreted through a theoretical framework emphasizing that strikes are more likely when the joint costs of using the strike mechanism are low relative to the cost of alternative mechanisms for achieving the same purposes such functions of strikes are to generate information elicit truth telling establish reputations provide catharsis and solve intraorganizational conflict

planning to cheat eu fiscal policy in real time using real time data from europe s stability and convergence programs we explore how fiscal plans and their implementation in the eu are determined we find that 1 implemented budgetary adjustment falls systematically short of planned adjustment and this shortfall increases with the projection horizon 2 variability in the eventual fiscal outcomes is dominated by the implementation errors 3 there is a limited role for traditional political variables 4 stock flow adjustments are more important when plans are more ambitious and 5 most importantly both the ambition in fiscal plans and their implementation benefit from stronger national fiscal institutions we emphasize also the importance of credible plans for the eventual fiscal outcomes roel beetsma massimo giuliodori and peter wierts

bargaining with incomplete information an infinite horizon model with two sided uncertainty the resolution of any bargaining conflict depends crucially on the relative urgency of the agents to reach agreement and the information each agent has about the others preferences this paper explores within the context of an infinite horizon bargaining model with two sided uncertainty how timing and information affect the rational behaviour of agents when commitment is not possible since the bargainers are uncertain about whether trade is desirable they must communicate some of their private information before an agreement can be reached this need for learning due to incomplete information about preferences results in bargaining inefficiencies trade often occurs after costly delay thus the model provides an explanation for the inefficient bargaining behaviour that appears to occur often in practice

cyclical fluctuations in strike durations canadian data on strikes between 1946 and 1983 are used to estimate linear regression models for the logarithm of completed duration a thorough investigation of the influence of the business cycle reveals strong support for the hypothesis that strike durations are countercyclical the cyclical effect is shown to be robust to both the choice of cyclical variable and the econometric specification and the magnitude of the effect is quite substantial experimentation with different representations of the cycle reveals that it is difficult to improve on a simple formulation involving a single continuous variable

equilibria with communication in a job market example we study costless information transmission from a job applicant to an employer who must decide whether to hire him and if so which position to give him we construct equilibrium payoffs requiring at least two signaling steps or even that no deadline be imposed on the plain conversation the set of communication equilibrium payoffs achieved with the help of a communication device is larger than the set of equilibrium payoffs of the plain conversation game but coincides with the set of correlated equilibrium payoffs

the curious attraction of wagner s law wagner s law of increasing state activity has recently been subjected to intensive use of recondite econometric testing procedures an examination of the relevant articles reveals ignorance both of wagner s definition of state activity and of his insistence that he was not engaged in prediction consequently the omission of public enterprises contained in wagner s definition leads to a model misspecification and the object of testing his hypothesiss remains obscure

a theory of exit in duopoly we develop a duopoly model in which exit occurs because of the existence of fixed costs or opportunity costs each firm enters the market knowing its own cost but not that of its opponent as times goes on each firm becomes increasingly pessimistic about the cost of its remaining rival the time of exit is the only strategic variable so that our model is a war of attrition in contrast to the classic war of attrition however we assume that with positive probability each firm s costs may be low enough that staying in forever is a dominant strategy thus our model unlike the classic one has a unique equilibrium

over optimism in forecasts by official budget agencies and its implications the paper studies forecasts of real growth rates and budget balances made by official government agencies among 33 countries in general the forecasts are found i to have a positive average bias ii to be more biased in booms and iii to be even more biased at the 3 year horizon than at shorter horizons this over optimism in official forecasts can help explain excessive budget deficits especially the failure to run surpluses during periods of high output if a boom is forecasted to last indefinitely retrenchment is treated as unnecessary many believe that better fiscal policy can be obtained by means of rules such as ceilings for the deficit or better yet the structural deficit but we also find iv countries subject to a budget rule in the form of euroland s stability and growth pact sgp make official forecasts of growth and budget deficits that are even more biased and more correlated with booms than do other countries this effect may help explain frequent violations of the sgp the question becomes how to overcome governments tendency to satisfy fiscal targets by wishful thinking rather than by action chile in 2000 created structural budget institutions that may have solved the problem independent expert panels insulated from political pressures are responsible for estimating the long run trends that determine whether a given deficit is deemed structural or cyclical the result is that chile s official forecasts of growth and the budget have not been overly optimistic even in booms unlike many countries in the north chile took advantage of the 2002 7 expansion to run budget surpluses and so was able to ease in the 2008 9 recession

fiscal forecasts and political systems a legislative budgeting perspective which are the institutional and constitutional settings that best reduce the tendency to manipulate fiscal forecasts this paper addresses the question by examining the quality of fiscal forecasts at different stages of the budget process in 13 european union countries by using annual forecast vintages 1999 2013 from stability and convergence programmes both the role of political structures and the balance of power between the executive and the legislature are assessed as determinants of systematic forecasting errors the findings suggest that the forecasting bias is more effectively countered in presidential and semi presidential systems in parliamentary systems with strong bicameralism and when executive legislature relations are constrained by checks and balances confirmation of these results is also provided by linking our approach to the fiscal institutionalist approach based on the form of fiscal governance and the stringency of fiscal rules in terms of institutional capacity if fiscal rules and legislative organizational and research capacity counter the executive s monopoly of fiscal forecasting strengthening the legislature s formal powers negatively influences the fiscal forecast accuracy indeed strategic considerations may induce the executive to anticipate the legislature s amendment or rejection of the tabled budget by means of more favourable economic and fiscal assumptions the crisis and its urgencies crisis seem to have weakened the effect of institutional executive legislature relations on fiscal forecast accuracy

persistence in government spending fluctuations new evidence on the displacement effect in spite of peacock and wiseman s 1961 nber study demonstrating the displacement effect simplistic theoretical and empirical distinctions between temporary and permanent spending are common in this paper impulse response functions from arma models as well as cochrane s non parametric method support peacock and wiseman s conclusion by showing 1 government spending in the aggregate displays strong persistence to temporary shocks 2 simple decomposition methods intended to yield a temporary spending series have a weak statitistical foundation and 3 persistence in spending has increased during this century also as a basic fact of government spending behavior the displacement effect lends support to interest group and bureaucracy models of government spending growth

wage contract settlements in u s manufacturing a bstruactusing a large scale longitudinal micro data base this paper tests for the determinants of union wage settlements in manufacturing alternative specifications of wage change relationships were tested in data covering the years 1957 to 1980 among the most important determinants of union wage changes were the expected inflation rate inflationary surprises in indexed agreements incomes policy dummy variables and spillovers from key national agreements catch up effects from lagged inflationary surprises were not important in determining the size of new settlements

understanding the soft budget constraint we propose a clarification of the notion of a soft budget constraint a concept widely used in the analysis of socialist transitional and market economies our interpretation is broad enough to embrace most existing approaches to soft budget constraint phenomena and provides a classification of their causes and consequences in light of this interpretation we then review the theoretical literature on the subject and compare it with those on other dynamic commitment problems in economics

wagner s law versus displacement effect abstractthe public sector has grown dramatically over the past few centuries in many developed countries in this article we use wavelet methods to distinguish between two leading explanations for this growth wagner s law and the displacement effect in doing so we use the long term data of 10 oecd countries for a maximum time span of 1800 2009 we find that the validity of wagner s law is likely to vary strongly over time for each country a roughly similar feature in most of the countries is that the law is less valid in the earliest stage of economic development as well as in the advanced stages with the validity tending to follow an inverted u shaped pattern with economic development further our results indicate that the long run growth of government size cannot be adequately explained by wagner s law on the other hand the displacement effect appears to account for the bulk of the growth in most of the countries

rational ignorance rational voter expectations and public policy a discrete informational foundation for fiscal illusion this paper demonstrates that rational ignorance properly defined allows the possibility that fiscal illusion affects policies in a democracy the implications of rational ignorance are examined in a setting where voters are assumed to completely understand the fiscal environment and make perfect use of any information that they possess in this setting it is demonstrated that ignorance may be rational manipulated and generate biased expectations over fiscal parameters

complexity and renegotiation a foundation for incomplete contracts the paper considers a hold up model where only one of n future trading opportunities will prove to be efficient and where ex post renegotiation of the ex ante contract cannot be prevented as the environment becomes more complex n the outcome under any message contingent long term contract converges to that of the incomplete contracting model where trade is contractible ex post but not ex ante when trades are costly to describe both ex ante and ex post the incomplete contracting result is extended to a broader class of environments

multidimensional separating equilibria and moral hazard an empirical study of national football league contract negotiations this paper empirically tests for a multidimensional separating equilibrium in contract negotiations and tests for evidence of the moral hazard inherent in many contracts using contract and performance data on players drafted into the national football league from 1986 through 1991 we find evidence that players use delay to agreement and incentive clauses to reveal their private information during contract negotiations in addition our empirical tests of the moral hazard issue indicate that a player s effort level is influenced by the structure of his contract

reputation in repeated second price auctions abstract a model in which two bidders take part in a series of second price comon value auctions is examined the question of an optimal auction from an auctioneer s standpoint in a repeated auction setting is partially addressed it is shown that the results from single auction models do not carry over to repeated auctions when one of the bidders is endowed with a reputation for bidding aggressively second price auctions with two bidders are highly susceptible to manipulative behaviour by an aggressive bidder and yield much lower revenues to the auctioneer

the displacement effect in the growth of governments we analyze the displacement effect within a multivariaterevenue expenditure model of government growth based on along historical dataset for italy our long run analysisshows a permanent influence of domestic product on the growthof governments supporting wagner s law the short rundynamics are more complex and provide some evidence for thedisplacement effect in terms of a lower resistance againsttax financing of government spending in the post war inaddition government spending adjusts faster when deviationsfrom its equilibrium get larger

dynamic bargaining with action dependent valuations abstract an infinite horizon dynamic bargaining model is presented in which actions affect the expected future value of the buyer seller match because actions directly affect the future surplus to be bargained over the model is unlike other models that tie the dynamic process to nature alone focusing on a subset of weak markov equilibria several results come about that are not found in static bargaining models using similar bargaining protocols in particular optimal price demands can be lower higher than the buyer s lowest highest possible valuation and several empirical features concerning wage settlements and strike incidence from labor union contract negotiations can be explained

repeated bargaining with persistent private information the paper analyses repeated contract negotiations involving the same buyer and seller where the contracts are linked because the buyer has persistent but not fully permanent private information the size of the surplus being divided is specified as a two state markov chain with transitions that are synchronized with contract negotiation dates equilibrium involves information cycles triggered by the success or failure of aggressive demands made by the seller because there is persistence in the markov chain generating the surplus a successful demand induces the seller to make another aggressive demand in the next negotiation since the buyer s acceptance reveals that the current surplus is large rejection of an aggressive demand on the other hand leads the seller to be pessimistic about the size of the surplus in the next contract so the seller makes a soft offer that is sure to be accepted then after several such offers have been accepted the seller is optimistic enough to again make an aggressive demand creating an information cycle an interesting feature of this cycle is that the soft price is not constant but declines as the cycle continues so as to offset the buyer s option value of re starting the cycle when the current state is bad an explicit mapping is given for the relationship between the basic parameters and the equilibrium prices and quantities in particular there is a closed form solution for the threshold belief that makes the seller indifferent between hard and soft offers

an enlarged definition of cointegration abstract a broader definition of cointegration is presented allowing for different orders in the original process as a result different cointegration vectors may be generated from a given one however if the cointegrated process is stationary then the standard ideas and methods may still apply

economic performance through time prize lecture to the memory of alfred nobel december 9 1993 this abstract was borrowed from another version of this item

sticking to fiscal plans the role of institutions the rules based fiscal framework of the emu relies heavily on the development of medium term fiscal plans by the eu governments in this paper i present an empirical analysis of the deviations from the plans presented in the annual stability and convergence programs i focus on projections for real gdp growth and general government balances revenues and spending at different time horizons i show that deviations from the projections presented in these programs since 1999 can be explained by institutional factors i e the form of fiscal governance and the stringency of fiscal rules

a bargaining model with incomplete information about time preferences etude d un jeu de negociation strategique sequentiel avec information incomplete caracterisation d une classe d equilibres sequentiels appeles equilibres sequentiels de negociation et demonstration de l unicite de cet equilibre

bargaining power strike durations and wage outcomes an analysis of strikes in the 1880s strike outcomes in the 1880s had a winner take all character successful strikes ended with a discrete wage gain failed strikes ended with a return to work at the prestrike wage we present a theoretical interpretation of these outcomes based on a war of attrition model we fit an empirical model specifying the capitulation times of the two parties and the size of the wage gain in the event of a strike success the results show a systematic relation between the determinants of strike success and the determinants of the wage gain for a successful strike

difficult choices crossing the picket line during the 1987 national football league strike this study examines the difficult choice faced by members of a striking bargaining unit between withholding labor or crossing the picket line in violation of the prevailing behavioral norm using duration analysis we test a model of crossing behavior using data on individual football players during the 1987 national football league strike a notable finding is that nonwhite players are less willing to cross the picket line if their team union representative is also nonwhite willingness to cross the line is also influenced by teammate crossing and proxies for expected career length demand for current income and expected benefits from union demands

bargaining with common values this paper examines a bargaining model with asymmetric information in which the private valuations of the two bargaining agents are correlated it shows that equilibria in such models typically exhibit a significant probability of a significant delay to agreement the paper characterizes the unique perfect bayesian equilibrium to the game in which an uninformed buyer makes offers to a privately informed seller it also shows by example that in this framework bargainers may rationally break off negotiations even in the presence of commonly known gains from trade

improving fiscal policy in the eu the case for independent forecasts are official output forecasts biased we point out that official forecasts of output dynamics are crucial to the assessment of cyclically adjusted budget balances and provide evidence that in some euro area countries biased forecasts have played a thus far neglected role in generating excessive deficits we suggest that the forecast bias may be politically motivated and that forecasts produced by an independent authority would be better than in house ministry of finance forecasts for the purpose of monitoring budget formation and budget outcomes lars jonung and martin larch

strategic bargaining models and interpretation of strike data attrition screening and signalling models of strategic bargaining are characterized in terms of their predictions about the incidence mean duration and settlement rates of strikes and the terms of wage settlements these predictions are compared with the general features observed in empirical studies of strikes in canada and the united states conclusions are drawn about the types of models capable of generating these features and about the conformity of the models to the evidence methods are described for computing the numerical examples used to illustrate the models

an empirical test of an asymmetric information model of strikes recent developments in the theory of strategic bargaining demonstrate how informational asymmetries can lead to prolonged and costly bargaining these models can be applied to contract negotiations yielding an economic theory of strikes to date however few empirical tests of these models have been carried out in this paper a set of predictions concerning the incidence and unconditional duration of strikes is derived from a simple bargaining model in which the union is uncertain about the firm s future profitability these predictions are then tested on a micro data set of major u s contract negotiations that took place from 1973 to 1977

uncertainty and delay in bargaining this paper investigates the relationship between uncertainty and delay of agreement in the one sided offer bargaining model with two sided uncertainty where the seller makes offers we construct a weak stationary equilibrium in which different types of the seller charge different prices in every period we completely characterize the separating equilibrium by three regularity conditions and show that the time interval between offers converges to zero the seller s initial price offer in a separating equilibrium converges with probability 1 to the lowest valuation of the buyer if and only if the gain from trading is common knowledge we have witnessed a proliferation of sequential bargaining models that with a few remarkable exceptions fudenberg and tirole 1983 cramton 1984 and chatterjee and samuelson 1987 are based on models with one sided uncertainty the importance of studying bargaining models with one sided uncertainty is that despite their highly special informational structure we can derive valuable insights into the role of uncertainty in the delay in reaching an agreement while keeping the computational exercise tractable however the assumption of one sided uncertainty essentially excludes the situation where the buyer s actual reservation value is lower than the seller s actual reservation value though they are still engaged in the bargaining process the primary objective of this paper is to investigate the role of uncertainty about the gain from trading in a sequential bargaining model with two sided incomplete information in the models with one sided incomplete information important studies fudenberg levine and tirole 1985 and gul sonnenschein and wilson 1986 are often based on weak stationary equilibria where the equilibrium strategy of each player only depends upon the posterior conjecture about the other player and the previous period s offer although the importance of two sided uncertainty and the weak stationary equilibrium is well recognized previous research on sequential bargaining models has not combined the two features within the same framework studies on the models under two sided uncertainty have not focused on weak stationary equilibria for example cramton 1984 computes a specific sequential equilibrium with interesting properties in which the equilibrium strategies of both players depend upon histories in a rather complex fashion on the other hand it is only in models under one sided uncertainty that the weak stationary equilibrium has been extensively studied this paper computes and analyzes the weak stationary equilibria in a model under two sided uncertainty in order to investigate the effect of uncertainty on the delay in agreement we will extend the results from previous studies of one sided uncertainty models the computation of the equilibrium in models with two sided uncertainty is generally very complicated furthermore we must identify a sensible outcome if more than one equilibrium exists in the model to simplify the analysis we choose a standard bargaining

can strategic bargaining models explain collective bargaining data much effort has recently been devoted to the development of strategic models of bargaining with private information at the same time empirical analyses of data on collective bargaining in the labor market have generated an interesting list of facts to be explained in this paper we assess the prospective interactions between these theoretical and empirical developments the style here is expository detailed arguments have been ruthlessly suppressed a more complete treatment can be found in our 1989 article the theoretical models deal with conflicts between rational bargainers in situations where at least one of the bargainers has private information as in the case where an employer knows more about the value of labor s product than the workers do we start by explaining why private information is important in building models of strikes in a naive model of collective bargaining the union starts with a tough demand and

legislative organization and government spending cross country evidence abstract the law of 1 n posits that an increase in the number of elected representatives fuels excessive government spending despite its wide acceptance as a stylized fact the law of 1 n has received only limited empirical scrutiny and the existing evidence for the american states provides mixed support for the thesis this paper examines the law of 1 n in bicameral and unicameral legislative structures using a cross section of democratic countries the results indicate that legislative size matters under both legislature structures but bicameralism dampens the 1 n effect relative to unicameralism

studying the role of political competition in the evolution of government size over long horizons here we argue for the use of cointegration and error correction analysis to combine economic factors that are nonstationary with political factors that are stationary into an empirical model of the evolution of public policy over long periods the approach is applied to disentangle the contributions of economics and politics to the evolution of public expenditure by the government of canada over 130 years political competition emerges as the primary political factor affecting government size

how to make a dis entrepreneur of the schumpeterian entrepreneur the impact of institutional settings on growth fiscal and monetary institutions are conspicuously omitted in the conventional theory of long run economic growth moving from the schumpeterian entrepreneur who adopts new technology because its value according to tobin s q dominates the economic rents of existing capital we argue that the schumpeterian entrepreneur s incentives to innovate change when he is transplanted into the public economy we analyze two alternative institutional settings denoted as long chain and short chain through the long chain model we show that the schumpeterian entrepreneur is driven towards destructive creation of new capital thus becoming a political dis entrepreneur while the quasi contractual short chain model provides incentives to innovate

strikes and wages a test of an asymmetric information model this paper describes a simple model of labor disputes based on the hypothesis that unions use strikes to infer the profitability of the firm the model posits the existence of a negatively sloped resistance curve between wages and strike duration in addition it offer a series of predictions relating wage and strike outcomes to changes in the expected profitability of the firm and changes in the alternative opportunities of striking workers these implications are tested using data on wage outcomes strike probabilities and strike durations for a large sample of collective bargaining agreements

the behavior of us public debt a nonlinear perspective abstract this letter provides strong evidence of nonlinear mean reversion in the us debt gdp ratio using data since 1916 and shows that the difficulty to detect mean reversion encountered by a number of researchers may be due to the invalid maintained hypothesis of linearity which is common to the testing procedures employed in this context

longitudinal analysis of strike activity this article presents an empirical study of strike activity in a panel of contract negotiations for some 250 firm and union pairs evidence is presented on two sources of variation in dispute rates changes in the characteristics of the collective bargaining agreement that affect subsequent strike outcomes and the effects of lagged strikes on the incidence and duration of subsequent disputes strike probabilities are significantly affected by the duration and expiration month of the previous agreement dispute rates are also increased by the occurrence of a short strike during the previous negotiations and reduced by the occurrence of a long strike

market competition and strike activity we develop a model of wage bargaining with private information in a duopoly we investigate how product differentiation and market competition bertrand vs cournot competition affect wages and strikes if bargaining takes place at the industry level then both the wage outcome and the strike activity do not depend on the degree of product differentiation whatever the type of market competition however if bargaining takes place at the firm level then wages and strikes are increasing with the degree of product differentiation and the strike activity is smaller under bertrand than under cournot competition

an investigation into the determinants of u s strike activity this paper outlines the steps involved in constructing a new panel dataset of u s contract negotiations and strike activity this data set has a much broader coverage of firms and unions than micro data sets analyzed to date key findings include the discovery that the variability and not the level of firm profitability affects the probability of a strike personal characteristics of the union workforce also emerge as key determinants of strike activity finally strikes are found to be more likely when the local labor market is tight but less likely when the industry labor market is tight copyright 1986 by american economic association

repeated signalling games and dynamic trading relationships a seller of a nondurable good repeatedly faces a buyer who is privately informed about the position of his demand curve the seller offers a price in each period the buyer chooses a quantity given the price the quantity demanded reveals information about the buyer an equilibrium is characterized with the feature that buyer types separate completely in the first period this equilibrium uniquely satisfies a modified refinement of the cho kreps criterion despite the immediate separation the buyer distorts his behavior throughout the game the requirement to signal types can raise the utility of all types of informed players copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

a multistage model of bargaining this paper presents a simple multistage model of bargaining wherein a seller makes an offer that can be either accepted or refused if rejected the process continues how the seller s ability to make commitments affects bargaining outcomes is analysed by comparing the commitment equilibria to those arising when commitment is impossible the effects of increasing uncertainty about preferences and varying the length of the bargaining horizon are analysed the ways in which the bargaining environment can be changed to improve outcomes are discussed

sequential bargaining with incomplete information this paper describes a simple two person two period bargaining game and solves it using the concept of perfect bayesian equilibrium in which the actions of each player convey information which is used by his opponent the paper examines the effects of changes in bargaining costs the size of the contract zone and the length of the bargaining process on such aspects of the solution as the probability of impasse and the likelihood of concessions the combination of information transfer and the lack of pre commitment embodied in perfectness yields many surprising results common perceptions about the effects of parameter changes on bargaining processes are suspect and should be checked in the particular game being discussed

public finance and welfare from the ignorance of the veil to the veil of ignorance abstract present day welfare states may survive as long as bureaucracies and governments can create optimistic illusions among taxpayers voters this setting is destined to fail and indirectly to open up the pathway for a constitutional welfare state mazzola and wicksell first offered a constitutional view on both public choice and public goods but the intellectual godfathers of the genuine alternative to the present welfare state are buchanan and tullock in the early sixties and rawls a decade later the virtuous circuit obligations entitlements rights which the institutions of present welfare states helped to make crumble may be restored behind the veil of ignorance

on delay in bargaining with one sided uncertainty recently attention has been given to a model of two person bargaining in which the parties alternate making offers and there is uncertainty about the valuation of one party the purpose of the analysis has been to identify delay to agreement with a screening process where agents with relatively lower valuations distinguish themselves by waiting longer to settle we point out a fundamental difficulty with this program by demonstrating that the assumptions used in the literature allow for delay only in so far as the time between offers is significant

wage bargaining labor turnover and the business cycle a model with asymmetric information this paper presents a wage bargaining model in which the employer and employee are each uncertain about the other s reservation wage under specified circumstances the model s equilibrium is shown to involve unilateral wage setting and inefficient labor turnover in addition aggregate demand shocks affect the equilibrium in a way that produces procyclical quits and countercyclical layoffs these results are obtained without resorting to assumptions of nominal wage rigidity long term contracting or aggregate price misperceptions

a simple model of inefficient institutions this paper develops a simple model of economic and political institutions that lead to poor aggregate economic performance in the model economy groups with political power the elite choose policies to increase their income and to directly or indirectly transfer resources from the rest of society to themselves the resulting equilibrium is generally inefficient because of three distinct mechanisms 1 revenue extraction 2 factor price manipulation and 3 political consolidation in particular the elite may pursue inefficient policies to extract revenue from other groups they may do so to reduce the demand for factors coming from other groups in the economy thus indirectly benefiting from changes in factor prices finally they may try to impoverish other groups competing for political power the elite s preferences over inefficient policies translate into inefficient economic institutions the notable exception to this general picture emerges when long term investments are important thus creating a commitment holdup problem whereby equilibrium taxes and regulations are worse than the elite would like them to be from an ex ante point of view in this case economic institutions that provide additional security of property rights to other groups can be useful

strategic delay in bargaining this paper analyses a bargaining model with incomplete information in which the time between offers is an endogenous strategic variable we find equilibria involving a delay to agreement that is due to the use of strategic time delay by bargainers to signal their relative strength under some specifications of the parameters delay is present in the unique sequential equilibrium whose beliefs satisfy one intuitive restriction this delay does not vanish as the minimal time between offers becomes small