the other margin do minimum wages cause working hours adjustments for low wage workers this paper estimates the impact of the introduction of the uk minimum wage on the working hours of low wage employees using difference in differences estimators the estimates using the employer based new earnings surveys indicate that the introduction of the minimum wage reduced the basic hours of low wage workers by between one and two hours per week the effects on total paid hours are similar indicating negligible effects on paid overtime and lagged effects dominate the smaller and less significant initial effects within this estimates using the employee based labour force surveys are typically less significant

effects of the minimum wage on the employment status of youths an update the large decline in the relative value of the minimum wage during the 1980s makes that period a valuable one for identifying the impact of variation in the minimum wage on youth employment this study produces the robust finding that when the experience of the 1980s is included a 10 percent increase in the minimum wage is estimated to reduce teen employment by less than 1 percent the lower end of the range of previous estimates because this small employment effect is offset by a labor force withdrawal effect the study finds no discernible effect on measured unemployment the study also finds no apparent effect of the minimum wage on the employment of young adults aged 20 24

the gains from trade for a monetary economy once again the authors examine the effects of free trade on a small open economy within a dynamic generalized cash in advance model they provide a complete characterization for the possibility of harmful trade and suggest alternative economic policies that can convert the loss associated with free trade into a gain they authors also find contrary to standard results that there exists an optimal tariff for a small open economy and they use calibration methods to assess its value

hedonic wages and labor market search this article investigates the consequences of labor market search for the theory of hedonic wages we find that the introduction of search has surprising consequences for the theory of hedonic wages in particular we demonstrate that the equilibrium distribution of wage and nonwage amenity bundles generally bears little resemblance to workers underlying preferences a consequence of this analysis is that estimates of workers marginal willingness to pay derived from the conventional hedonic wage methodology are biased in addition we demonstrate that search generates differences between firm level and employee level data that can cause substantial deviations in the estimates of hedonic wage equations

hyperbolic discounting and the phillips curve using a standard dynamic general equilibrium model we show that the interaction of staggered nominal contracts with hyperbolic discounting leads to inflation having significant long run effects on real variables

the effects of import quotas on national welfare does money matter recent evidence shows that there is an increasing use of non tariff barriers to trade ntbs and especially of quantitative restrictions such as import quotas in the world economy to protect import competing industries see table i 1 international trade theory however has traditionally focused on the welfare effects of tariffs as well as on the equivalence between tariffs and quotas with little attention paid to the welfare implications of quotas the latter have basically been restricted within the traditional heckscher ohlin trade model where for the case of a small open economy import quotas always reduce welfare a few recent studies have attempted to fill in this gap in the literature for instance young 19 compares optimal tariffs and quotas for a large country in a stochastic environment neary 14 on the other hand investigates the welfare implications of tariffs quotas and voluntary export restraints under different assumptions on capital mobility finally chao hwang and yu 3 4 examine the welfare effects of import quotas under variable returns to scale although the existing literature has generated important policy implications most of the analysis has been conducted within a barter exchange framework it is well known however that the introduction of money can alter results obtained within a non monetary environment 2 accordingly this paper attempts to re examine the welfare effects of import quotas for a small monetary economy we develop a two sector trade model in which money enters the economy

the optimum quantity of money rule in the theory of public finance this paper examines optimal tax policy in a monetary economy in which money serves as an intermediate good that helps facilitate the conversion of scarce resources into tinal consumption goods by enabling consumers to economize on the costs of transacting it is shown that in such an environment even though distorting taxes must be levied for revenue purposes the optimal tax structure calls for abstaining from inflationary finance and adopting the optimum quantity of money rule

the interaction between indexation contract duration and non contingent wage adjustment a model of the elasticity of indexation contract duration and non contingent wage adjustment is estimated using canadian wage agreements results suggest that the degree of indexation and contract duration are interdependent and are affected by their past values labour market conditions and inflation uncertainty the correlation between the industry product prices and the cpi affects the degree of indexation non contingent wage adjustment depends on expected inflation uncompensated past inflation duration and indexation values past and present and labour market conditions this model explains total wage adjustment as well as more aggregative models designed solely for that purpose

the rate of time preference and dynamic economic analysis strong restrictions on the structure of preferences are a central feature in the received theory of intertemporal allocation in fact most of the modern literature concerned with capital theoretic problems represents preferences by a functional in which an additive utility function is discounted by a constant rate of time preference this specification is attractive because it is analytically tractable in dynamic models and it clearly delineates how tastes and opportunities interact to determine an economy s household s paths of consumption and capital formation however its rigid structure constancy of time preference severely limits the conclusions and explanatory power of the corresponding models this paper considers a class of utility functionals in continuous time which have the appealing feature that the rate of time preference depends systematically on an index of aggregate future consumption the more flexible structure embodied in these functionals leads to important generalizations and

dealing with monopsony power employment subsidies vs minimum wages abstract we show in a monopsony model that accounting for changes in hours a minimum wage has ambiguous effects on employment and welfare when all workers have the same preference ordering over leisure and consumption employment subsidies unambiguously improve welfare many countries have minimum wages and also tax minimum wage workers

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

the effect of the minimum wage on the fast food industry using a longitudinal survey of fast food restaurants in texas the authors examine the impact of recent increases in the federal minimum wage on a low wage labor market less than 5 of fast food restaurants were using the new youth subminimum wage in july august 1991 even though the vast majority paid a starting wage below the new hourly minimum wage immediately before it became effective although some restaurants increased wages beyond the level needed to comply with higher minimum wages in both 1990 and 1991 those federal minimum wage increases greatly compressed the distribution of starting wages in the texas fast food industry two findings at variance with conventional predictions are that 1 employment increased more in those firms likely to have been most affected by the 1991 minimum wage increase than in other firms and 2 price changes were unrelated to mandated wage changes

cost of living escalators and price wage linkages in the u s economy 1968 1980 this paper examines the importance of cost of living escalator clauses as a link between price changes and money wage changes it surveys the possible kinds of price wage linkages and estimates the importance of colas in overall wage changes in the economy the author concludes that despite growth in the coverage and yields of escalator clauses since the mid 1960s they still accounted in 1980 for less than 10 percent of total money wage changes in the u s economy and are therefore not a major cause of inflation

minimum wages for ronald mcdonald monopsonies a theory of monopsonistic competition recent empirical work on the effects of minimum wages has called into question the conventional wisdom that minimum wages invariably reduce employment we develop a model of monopsonistic competition with free entry to analyse the effects of minimum wages and our predictions fit the empirical results closely under monopsonistic competition we find that a rise in the minimum wage raises employment per firm causes firm exit and may increase or reduce industry employment minimum wages increase welfare if they raise industry employment but welfare effects are ambiguous if employment falls

ricardian equivalence in the presence of capital market imperfections abstract it is a common claim that ricardian equivalence fails if capital markets are imperfect the validity of this claim is examined for the case of informationally imperfect capital markets we present three alternative models of adverse selection and analyze the effects of debt finance in these models it is shown that a debt financed tax cut can lead to pareto improvement in some cases in the theoretically most preferable model however ricardian equivalence survives in spite of genuine imperfections in the capital market the results point to the importance of specifying the exact nature of imperfection

seniority and monopsony in the academic labor market workers with high seniority usually have higher wages than workers with low seniority and the same total labor marke t experience in contrast the results of this paper indicate that higher seniority is associated with lower salaries for university professors the author documents this finding for national surveys a nd individual institutions and explains it as due to monopsonistic discrimination by employers copyright 1993 by american economic association

the degree of indexation in major u s union contracts the authors propose that the most appropriate measure of the degree of indexation in a union contract is the marginal elasticity of the average expected wage during the life of the contract with respect to unanticipated changes in the price level they present estimates of this elasticity for 68 u s contracts negotiated between 1971 and 1983 with cost of living escalators the average degree of indexation in the sample 48 is considerably smaller than previous estimates of similar marginal elasticities because the estimation method more accurately incorporates caps minimum colas and the exact specification of the cola clauses

monopsony in the labor market this paper surveys recent theoretical and empirical research on monopsony in labor markets broadly defined as upward sloping labor supply to an employer we compare older monopsony models based on small numbers of employers with newer models based on labor market frictions such as moving costs and search we also compare older econometric approaches that focus on static wage concentration relationships with newer approaches that focus on dynamics our review of empirical estimates suggests that monopsony power based on small numbers of employers is probably rare but occasionally large while monopsony power based on frictions is probably widespread but small on average

the impact of the minimum wage on other wages in this paper i explore how changes in the minimum wage affect various occupational wages i postulate that other wages increase for two reasons first firms try to mitigate the deterioration in a worker s relative wage which would cause him to reduce his work effort and second there is an increase in the demand for nonminimum wage workers wage adjustment patterns are examined to ascertain whether wage comparisons play a role in the adjustment process the empirical work shows a short run wage compression among white collar occupations which is consistent with the wage comparison model however large standard errors make inferences weak

wage differentials employer size and unemployment the unique equilibrium solution to a game in which a continuum of individual employers choose permanent wage offers and a continuum of workers search by sequentially sampling from the set of offers is characterized wage dispersion is a robust outcome provided that workers search while employed as well as when unemployed the unique nondegenerate equilibrium distribution of wage offers is constructed for three cases 1 identical workers and employers 2 identical employers and an atomless distribution of worker supply prices and 3 identical workers and an atomless distribution of job productivities copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the response of hours of work to increases in the minimum wage this paper examines the effect of minimum wage increases on the hours of work of teenagers ages 16 to 19 using monthly data from the current population survey our findings are consistent with the prediction from neoclassical theory that minimum wage increases have a negative effect on labor demand however the estimates we provide here for the elasticity of hours of teen labor demanded with respect to the minimum wage suggest that alternative estimates based on aggregate employment consistently understate the total impact of minimum wage increases on teenage labor utilization

the returns to labour services in west german manufacturing industry production functions distinguishing between the stock and utilisation dimensions of factor labour and capital inputs are critically surveyed an extension to the existing literature is suggested whereby normal and overtime hours are separated within an appropriate non linear functional specification the econometric performance of this model is then compared with the main alternatives from the existing literature the empirical work is based on pooled cross section time series data which refer to west german manufacturing industries 1968 1978 estimates of the returns to labour services are also discussed in the light of related theoretical aspects of factor demand functions

the effects of import quotas on national welfare reply gokcekus and tower 1997 argue that applying the friedman rule friedman 1969 instead of a consumption tax in our framework palivos and yip 1997a can also support the pareto optimal allocation for variants of the model the friedman rule is administratively simpler and may be welfare superior in this reply we argue that indeed in a dynamic version of our model the friedman rule is equivalent to a consumption tax for some variants of the model however the friedman rule is not administratively simple and may not result in pareto optimality