wage norms and involuntary unemployment this paper and its sequel consist of a series of models or examples each trying to explain the possibility of non walrasian wage rates and involuntary unemployment equilibrium in recent years there have been many attempts to explain the possibility of equilibrium wages at non market clearing levels with involuntary unemployment there are the wage efficiency models yellen i984 contract models bargaining models e g shaked and sutton i984 to name but a few the common feature of these models and the ones i shall discuss is that involuntary unemployment for a certain range does not lead any agent to change his behaviour my models as in the works of lindbeck and snower i985 i986 are based on the distinction between insiders and outsiders in my models however workers and firms live for more than one period and as a result they may follow norms which are not in their short term interest but are rational in the longrun i shall model the labour market in a repeated game framework the literature on repeated games in recent years has shown that in general there are a large number of equilibria see fudenberg and maskin i986 a major application of repeated games has been to the industrial organisation literature where it has been shown that many types of behaviour on the part of firms e g collusion predatory pricing can be supported as equilibria of the game see fudenberg and tirole i984 my models which are applications of the repeated game to the problems of insiders and outsiders also contain many equilibria the walras ian outcome is one of the possible resulting equilibria there are also others the equilibria that i shall discuss however are those which may help us to understand some stylised facts and at the same time generate non walrasian outcomes i shall try to show that for some levels of unemployment each insider may rationally choose strategies which deter firms from trying to push the wages down and or deter unemployed from under cutting in this paper i shall define insider s as those who follow the norm if an insider deviates from the norm he loses his insider position the firm s agree s to pay higher wages than the market clearing rate because the insiders threaten to go on strike if the firm tries to force down the wages of any one of them and there are not enough unemployed workers to replace all insiders moreover the threat of each insider turns out to be credible because if he does not follow the norm he will lose his insider status and will not be protected by other insiders in the next period and thus will be at the mercy of the firm therefore in this paper the non walrasian outcomes are the result of the firm

effects of a hybrid price stock dependent demand on the optimal solutions of a deteriorating inventory system and trade credit policy on re manufactured product abstract this study contributes to formulate a deteriorating inventory model with a hybrid price stock dependent demand with credit for units in stock period in the presence of trade credit policy by using the discounted cash flow approach on re manufactured products in real life the demand function is not always constant or linear or nonlinear the demand rate of any items goes up and down in the real market due to the sum of two different types of demand this study observes that the demand is depending on price and stock of the product time value of money and trade credit policy the objective of this study is to find optimum cycle time optimum selling price and present profit of all future cash flows the model starts with mathematical formulating and thereafter studies the necessary and sufficient conditions for obtaining the unique optimal solution the theoretical solution procedure and case examples have studied for validation of this model moreover the sensitivity analysis is expressed out with respect to main parameters and managerial application is obtained this study uses the different demand functions of a simple pricing inventory system to find out the maximum profit on re manufactured products

nonstationarity in job search theory generally structural job search models are taken to be stationary in this paper models are examined in which every exogenous variable can cause nonstationarity for instance because its value is dependent on unemployment duration a general differential equation that describes the evolution of the reservation wage over time is derived as an empirical illustration a nonstationary structural model is estimated that focuses on the consequences of a downward shift in the level of benefits it appears that the elasticity of duration with respect to the level of benefits after the shift is much larger than the elasticity with respect to the level before the shift this paper examines the movement of a job seeking individual s reservation wage over time in a general nonstationary job search model also results concerning comparative dynamics of the reservation wage and the distribution of the duration of unemployment are derived as an empirical illustration a nonstationary structural model is estimated the nonstationarity originates from the decrease in the level of benefits when unemployment duration equals two years from the results some detailed policy recommendations can be deduced as one is able to distinguish the effect of a change in the level of benefits in the first two years of unemployment from the effect of a change in the level after that period recently the use of job search models for the analysis of unemployment duration has become widespread the reduced form approach in empirical studies see e g lancaster 1979 in which only the hazard of the duration distribution is estimated is gradually being replaced by a more structural approach the latter way of modelling is characterized by the explicit use in empirical analysis of the reservation wage equation as stated by the theory e g yoon 1981 lancaster and chesher 1983 lynch 1983 narendranathan and nickell 1985 and van den berg 1988 use the complete theoretical framework of job search theory to make inferences about search behaviour however the structural models used in these studies are stationary this implies that variables like unemployment benefits or the rate of arrival of job offers are assumed to be constant over the spell of unemployment which is often at variance with reality what is more various reduced form empirical studies indicate a significant durationdependence of the re employment probability which is generally interpreted as evidence in favour of the presence of nonstationarity see e g blau and robins 1986 kooreman and ridder 1983 lancaster 1979 and narendranathan nickell and stern 1985 consequently there is a need to model reservation wage movements over time based on a nonstationary theoretical framework

sources of intra industry wage dispersion how much do employers matter observed human capital explains less than half of wage variation in bls industry wage surveys establishment based wage differentials controlling for occupation account for 20 70 percent of intra industry wage variation this corresponds to a standard deviation in wages of 14 percent of the mean almost as large as interindustry wage variation investigation suggests that establishment wage differentials are not random variations or returns to usual measures of human capital

improving the labor market trade off between inflation and unemployment the work on the phillips curve has been predominantly empirical but policy intervention designed to decrease both inflation and unemployment requires a better theoretical understanding of the determinants of this relation this paper attempts to sketch out the basic labor market relationships that appear to the author to account largely for the phillips relation2 and then to consider the kinds of policy measures that this analysis suggests are relevant for moving the phillips curve the basic issue involved in the stability or instability of the phillips curve when the inflation rate is constant is explored with a simple model in the appendix the emphasis in this paper is on the atomistic operation of the labor market because it appears sufficient to generate the phillips relation but we do not deny that union bargaining and price dynamics may also be involved to some degree this paper concentrates on conceptual issues continuing research will be devoted to the statistical measurement of relationships

external shocks and the demand for adjustment finance when a country experiences a long term adverse external shock resulting in a balance of payments deficit unsustainable in the medium term how quickly should it adjust because time is required for movement of productive factors and consumptive patterns the short term effect of the shock will be a large increase in the value of foreign exchange it then pays to borrow abroad during the first years of the transition against those years when full resource and demand reallocations have taken place to allow this adjustment path the market exchange rate should follow the shadow exchange rate this article uses a simple traded nontraded sector model with lagged responses and optimal borrowing theory to derive a quantitative relationship between the magnitude of the shock and the optimal amount of borrowing the speed at which the original shortfall of foreign currency should be closed and the required currency depreciation during the borrowing and repayment period

implicit contracts moral hazard and unemployment this paper considers a firm whose marginal revenue product of labor is a random variable we derive the form of an optimal long term contract between workers and the firm under the assumption that labor s marginal product is observed by the firm but not by the workers we show that the existence of asymmetric information causes unemployment to be greater than in a situation where information about labor s marginal product is public or where employment is determined in spot markets in particular unemployment can occur when the marginal product of labor exceeds the reservation wage

an eoq model for perishable products with fixed shelf life under stochastic demand conditions abstract the paper presents a mathematical stochastic model for perishable open dating foods including shortage and outdating costs the demand fluctuations have been taken into account modeling them through a normal distribution and their impact on the storage time has been studied considering the stochastic nature of such a parameter in turn the quantification of perished products has been also addressed determining the probability for a product of remaining in stock beyond the end of its shelf life on the basis of such premises the optimal set of parameters that minimize the total unit cost has been determined a numerical application and a sensitivity analysis show the practical applicability of the proposed model in the context of warehouse management underlining managerial insights

what do unions maximise evidence from survey data highly formalised models of union behaviour have been developed and are widely used within neoclassical economics this approach is justified by the argument that most goals pursued by unions can be reduced to a wage or wage equivalent employment trade off however the strong assumptions made about union goals and preferences how these are determined and the range of issues over which a union will seek to bargain with a firm are not supported by extensive empirical evidence this paper explores these issues through a survey of union leaders to ascertain the range of union goals and their preferences and the types of issues over which unions bargain with employers the results of the survey present convincing evidence that standard neoclassical models do not adequately capture union bargaining behaviour or union goals and preferences the findings presented here also throw open but do not resolve the question of whether unions are rational maximisers the most inter esting result not widely found within the economics or industrial relations literature concerns the nature of union bargaining preferences union bargaining over employment appears to be asymmetric around current levels of employment in that unions appear to care more about the employment implications of their bargain ing strategies when they are likely to result in employment decreases

on monopolistic competition and involuntary unemployment in a simple temporary general equilibrium model it is shown that if the number of firms is small imperfect price competition in the markets for goods may be responsible for the existence of unemployment at any given positive wage in our examples involving two firms facing their true demand curves total monopolistic labor demand remains bounded as the wage rate goes to zero and unemployment prevails for a sufficiently large inelastic labor supply in the competitive case total labor demand would go to infinity and intersect labor supply at a positive wage

search theoretic models of the labor market a survey we survey the literature on search theoretic models of the labor market we show how this approach addresses many issues including the following why do workers sometimes choose to remain unemployed what determines the lengths of employment and unemployment spells how can there simultaneously exist unemployed workers and unfilled vacancies what determines aggregate unemployment and vacancies how can homogeneous workers earn different wages what are the tradeoffs firms face from different wages how do wages and turnover interact what determines efficient turnover we discuss various modeling choices concerning wage determination and the meeting process including recent models of directed search

wages and employment under trade unionism microeconomic models and macroeconomic applications the first part of this paper is a critical survey of microeconomic research into behavioural models of trade unionism although certain formulations of union objectives and models of wage and employment determination in unionized markets have found favor with economists unfortunately only a little is known about their empirical relevance the second part of this paper deals with the daunting problems of applying these models at the macroeconomic level one such model is estimated with data from sweden s mining and manufacturing sector from 1968 to 1982

a note on optimal replenishment policies for non instantaneous deteriorating items with price and stock sensitive demand under permissible delay in payment abstract soni 2013 int j prod econ 146 1 259 268 proposed optimal replenishment policies for non instantaneous deteriorating items i e the product starts deteriorating after a period of no deterioration with price and stock sensitive demand with a stock dependent demand it is desirable to have non zero ending inventory due to potential profit resulting from the increased demand however soni 2013 int j prod econ 146 1 259 268 treated those ending inventory as fresh stocks to go through another period of non deterioration again additionally he assumed for simplicity that the replenishment cycle time t must be longer than the period of non deterioration t d i e t t d in reality one should consider all possible replenishment cycle time to maximize the profit in this note we complement the shortcomings of his model by i selling those ending inventory as salvages and ii considering all possible replenishment cycle time which may be shorter than the period of non deterioration with these modifications the repeatability of the replenishment cycle is ensured and the applicability of soni s model is strengthened the numerical examples indicate that the global optimal solution is indeed possible in the case of t t d

union wage setting and unemployment in the netherlands 1965 1987 this paper presents an empirical model of union wage setting and employment the stackelberg equilibrium unemployment rate is shown to be a function of taxes the replacement ratio the gap between consumer and producer prices productivity effects and the rate of long term unemployment the model is estimated with aggregate data from the private sector in the netherlands 1965 1987 the results suggest that the equilibrium unemployment rate is pushed upwards by taxes the replacement ratio and by the gap between consumer and producer prices and is reduced by productivity effects insider outsider effects appear insignificant

policy responses to exogenous shocks in developing countries this essay will report on the results of research on the policy responses of developing countries to exogenous external shocks in the 1973 8 and 1978 83 periods it will further examine the economic performance of outward oriented and inward oriented developing countries in the light of the policies applied

the assessment productivity and competitiveness in british manufacturing this issue of the oxford review examines productivity and competitiveness in british manufac turing the simplest and most widely used measure of productivity is output per head from this definition sprout at once the horns of a dilemma for an economy facing unemployment on the present scale for a given rate of expansion of output the higher the rate of productivity growth the greater the decline in employment or at least the smaller its growth on the other hand in an economy open to international competition a high rate of productivity growth relative to that of other countries is the long term key to achieving the favourable international competitive po sition necessary to sustain growth and a low level of unemployment

wages and employment in a segmented labor market this paper analyzes the impact of business cycle fluctuations on a labor market segmented into a unionized primary sector and a competitive secondary sector either permanent or temporary changes in real aggregate demand are shown to widen the intersectoral wage differential in recession and under reasonable specifications of key parameters to cause greater fluctuations of primary sector employment than secondary sector employment this pattern agrees with the stylized facts of the u s economy

bibliography of robert m solow s publications 1950 1987 1952 6 an econometric model of interindustry flows with k j arrow and r shephard abstract econometrica july 1952 7 on the structure of linear models econometrica january 1952 8 review of w e deming some theory of sampling review of econometrics and statistics may 1952 9 review of r dorfman application of linear programming to the theory of the firm journal of american statistical association june 1952 10 review of t c koopmans ed activity analysis of production and allocation journal of american statistical association june 1952 11 review of r roy ed cahiers dii seminaire deconometrie no 1 journal of american statisticalassociation december 1952

do turnover costs protect insiders the ability of insiders to extract rents associated with exogenous turnover costs is addressed in a dynamic model the higher these rents the higher is the incentives for outsiders to obtain future insider status and thus to underbid current insiders as a consequence there is a lower limit to the number of insiders that can avoid entrance of outsiders and the insiders cannot in each period obtain a rent equal to the turnover costs the insider model never explains a lower but may result in a higher employment level than in the case where all workers are wage takers copyright 1994 by royal economic society

job search stigma effect and escape rate from unemployment this article formulates job search models incorporating certain types of the stigma effect of unemployment it is assumed that the probability of getting a job offer given the unemployment individual contacts the firm is influenced by the duration of unemployment and is justified in a signaling context the optimal search is analyzed for one sector as well as across several independent labor market segments it is shown that there are reasonably general conditions on the search environments for which both the individual reservation wage and escape rate are negative duration dependent a fact observed in empirical studies

on union preferences and labour market models insiders and outsiders this paper constructs a model of trade union behavior in which there is a distinction between insiders and outsiders this is used to examine one of the most troublesome issues in macroeconomic theory namely the extent to which a rise in aggregate demand might generate wage increases rather than growth in employment a generalization of the most widely used union utility function is presented the analysis reveals the conditions under which insiders will agree to let outsiders into employment derives two step wage preferences and proves a new result on wage rigidity copyright 1987 by royal economic society

optimal labour contracts under asymmetric information an introduction the review of economic studies has instituted a new series of lectures to be given annually by a younger british economist at the association of university teachers of economics meetings the choice of lecturer is determined by a panel whose members are currently professors hahn mirrlees and nobay this paper is a revised version of the first lecture in the series it was presented at the aute meeting held at the university of surrey in april 1982 and was refereed in the usual way mak

rent sharing in an equilibrium model of matching and turnover this article characterizes labor markets in which the heterogeneity of workers and firms results in thin markets and rents neoclassical marginal analysis and matching are blended into a computable general equilibrium model of trade in efficiency units of labor although workers bargaining problems are interrelated a simple wage contract generates wage flexibility and efficient matching in the model s equilibrium equilibrium wages are predicted to vary with the diversity of firms the scarcity of skills and the costliness of search the model is applied to superstar markets union bargaining in sports interindustry wage differentials and the relationship between pay and profit

an inventory system with demand dependent on both time and price assuming backlogged shortages abstract in this work we analyze an inventory model for items whose demand is a bivariate function of price and time it is supposed that the demand rate multiplicatively combines the effects of a time power function and a price logit function the aim is to maximize the profit per time unit assuming that the inventory cost per time unit is the sum of the holding shortage ordering and purchasing costs an algorithm is developed to find the optimal price the optimal lot size and the optimal replenishment cycle several numerical examples are introduced to illustrate the solution procedure

explanations of unemployment economists commonly distinguish between two sorts of unemployment roughly speak ing the involuntarily unemployed workers are unwillingly out of work i e they feel that they would be better off with jobs on the other hand the voluntarily unemployed workers prefer to be out of work for any of a wide variety of reasons e g because they are searching or training for a job or because they choose leisure over work

inventories and the structure of macro models the message of this paper can be summed up in two words inventories matter they matter empirically in the sense that inventory developments are of major importance in the propagation of business cycles and they matter theoretically in the sense that recognition of their existence changes the structure of a variety of theoretical macromodels in some fairly important ways this paper is mainly about the implications of inventories for the structure of theoretical macro models but i begin by demonstrating the empirical importance of inventories in business fluctuations this abstract was borrowed from another version of this item

macro economic aspects of the effectiveness of foreign aid on the two gap model home goods disequilibrium and real exchange rate misalignment we construct an open economy disequilibrium model to assess the welfare effects of aid in different macroeconomic regimes aid is shown to have different effects in different unemployment regimes because it increases the social costs of wage price rigidities in the classical regime but decreases them in the keynesian unemployment regime a link is made with the two gap model but we highlight the role of real exchange rate misalignment failure to clear the nt goods market

declining reservation wages and learning empirical studies of job search strongly suggest that the reservation wages of unemployed job seeking individuals decline with the length of their respective unemployment spells previous explanations of this behaviour based on age effects liquidity constraints and limited unemployment benefits are not adequate we provide a new answer to this question based on the reasonable assumption that workers do not have precise knowledge of the distribution of the prevailing wages an individual model of job search and learning is formulated it is shown that the declining trend of reservation wages naturally arises due to the selection process when search costs are not too small the example of a normal wage offer distribution is analysed and the implications are discussed

insiders and outsiders in wage determination a firm starts with a group of insiders or seasoned workers there is also a large pool of outsiders who are initially less productive but are transformed into insiders after one period of employment the firm gains from having a large pool of insiders some of whom may be laid off in bad years insiders gain from keeping their numbers small if the insiders set their wage unilaterally they will choose a path that in this extreme case prevents employment of outsiders even if future employment prospects are good if the wage path is set by bilateral bargaining the extra advantage to the firm permits employment of some outsiders in some situations

corporatism profit squeeze and investment this paper argues that the mainstream literature on corporatism focuses too narrowly on the relationship between corporatism and the labor market it adopts a broader political economy perspective to argue that corporatist arrangements impart macroeconomic stability through the resolution of distributional conflict and through greater investment stability results for nineteen oecd economies are presented that demonstrate that economies with strong corporatist institutions have enjoyed much greater success in forestalling the profit squeeze of the 1970s and early 1980s further results also demonstrate that investment in such economies is more stable and resilient to movements in profitability copyright 1991 by oxford university press

systematic and random search a synthesis this paper synthesizes two models of search in the labor market systematic and random we construct and test a theoretical model in which the searcher is endowed with information on some possibly zero or all individual firms in the labor market as well as the overall wage offer distribution we test the model using a special wave of the 1976 current population survey the major theoretical results of our model are as follows searchers with lower stocks of knowledge about individual firms higher discount rates or having lower coverage by unemployment insurance are more likely to engage in random search activities

unemployment and the efficiency wage hypothesis there has been much recent discussion of the reasons why prices in certain markets and in particular in labour markets may not adjust to eliminate excess supply the absence of speedy adjustment of prices is an essential feature of the recent models of disequilibrium macroeconomics but for the most part no explanation for this absence is provided from within those models one explanation that has been around in the literature for some time and has been receiving increasing attention recently is the efficiency wage hypothesis initially applied to developing economies see leibenstein i957 it has more recently been adapted to developed economies by weiss i 980 and used in the context of a keynesian macroeconomic model by hart i 980 similar concepts have been applied to the credit market by stiglitz and weiss i98i the purpose of the present paper is to explore further the conditions under which the notion of an efficiency wage is applicable and can provide an explanation of involuntary unemployment the essential feature of the efficiency wage hypothesis is that the productivity of a firm s employees increases as their wage is increased at least over an economically relevant part of its range if the wage paid by the firm is denoted by w the number of employees by l and the productivity of each employee by p w where p w o then the effective labour force of the firm e can be represented by

structural analysis of manufacturer pricing in the presence of a strategic retailer consumer goods manufacturers usually sell their brands to consumers through common independent retailers theoretical research on such channel structures has analyzed the optimal behavior of channel members under alternative assumptions of manufacturer retailer interaction vertical strategic interaction research in empirical industrial organization has focused on analyzing the competitive interactions between manufacturers horizontal strategic interaction decision support systems have made various assumptions about retailer pricing rules e g constant markup category profit maximization the appropriateness of such assumptions about strategic behavior for any specific market however is an empirical question this paper therefore empirically infers 1 the vertical strategic interaction vsi between manufacturers and retailer 2 the horizontal strategic interaction hsi between manufacturers simultaneously with the vsi and 3 the pricing rule used by a retailer the approach is particularly appealing because it can be used with widely available scanner data where there is no information on wholesale prices researchers usually have no access to wholesale prices even manufacturers who have access to their own wholesale prices usually have limited information on competitors wholesale prices in the absence of wholesale prices we derive formulae for wholesale prices using game theoretic solution techniques under the specific assumptions of vertical and horizontal strategic interaction and retailer pricing rules we then embed the formulae for wholesale prices into the estimation equations while our empirical illustration is using scanner data without wholesale prices the model itself can be applied when wholesale prices are available early research on the inference of hsi among manufacturers in setting wholesale prices using scanner data e g kadiyali et al 1996 1999 made the simplifying assumption that retailers charge a constant margin this assumption enabled them to infer wholesale prices and analyze competitive interactions between manufacturers in this paper we show that this model is econometrically identical to a model that measures retail price coordination across brands hence the inferred cooperation among manufacturers could be exaggerated by the coordinated pricing category management done by the retailer we find empirical support for this argument this highlights the need to properly model and infer vsi simultaneously to accurately estimate the hsi when using data at the retail level functional forms of demand have been evaluated in terms of the fit of the model to sales data but recent theoretical research on channels lee and staelin 1997 tyagi 1999 has shown that the functional form has serious implications for strategic behavior such as retail passthrough while the logit and linear model implies equilibrium passthrough of less than 100 lee and staelin call this vertical strategic substitute vss the multiplicative model implies optimal passthrough of greater than 100 vertical strategic complement vsc because passthrough rates on promotions have been found to be below or above 100 chevalier and curhan 1976 armstrong 1991 we empirically test the appropriateness of the logit vss and the multiplicative vsc functional form for the data we perform our analysis in the yogurt and peanut butter categories for the two biggest stores in a local market we found that the vss implications of the logit fit the data better than the multiplicative model we also find that for both categories the best fitting model is one in which 1 the retailer maximizes category profits 2 the vsi is manufacturer stackelberg and 3 manufacturer pricing hsi is tacitly collusive the fact that the retailer maximizes category profits is consistent with theoretical expectations the inference that the vsi is manufacturer stackelberg reflects the institutional reality of the timing of the game retailers set their retail prices after manufacturers set their wholesale prices note that in the stores and product categories that we analyze the two manufacturers own the dominant brands with combined market shares of about 82 in the yogurt market and 65 in the peanut butter market the result is also consistent with a balance of power argument in the literature the finding that manufacturer pricing is tacitly collusive is consistent with the argument that firms involved in long term competition in concentrated markets can achieve tacit collusion managers use decision support systems for promotion planning that routinely make assumptions about vsi hsi and the functional form the results from our analysis are of substantive import in judging the appropriateness of assumptions made in such decision support systems

interindustry wage differentials and efficiency wages some canadian evidence using the 1986 labour market activity survey as their major source of data the authors estimate interindustry wage differentials in canada at the one and two digit levels of industry aggregation for various types of workers the major findings are that substantial interindustry wage differentials exist and are relatively stable over time that the pattern of interindustry wage differentials is very similar for different kinds of workers and that these differentials cannot be explained easily by compensating factors the differentials seem to be consistent with the rent sharing explanations of the labor market such as those based on the notion of efficiency wages

trade unions wage formation and macroeconomic stability an introduction the process of wage formation is a crucial aspect of the current discussion about the causes of stagflation in fact differences between various policy prescriptions usually depend on differing assumptions about wage responses proposals to reduce unemployment through expansion of monetary demand are usually based on assumptions of rigid money wages in contrast recommendations of non intervention policies often rest on the opposite assumption of rigid real wages in which case monetary expansion will cause inflation but not affect employment

optimal ordering and pricing policy for demand functions that are separable into price and inventory age abstract we formulate and analyze two models for determining the optimal pricing order quantity and replenishment period for items whose demand function is separable into components of price and inventory age the first model assumes a multiplicative demand function we provide conditions which are satisfied by most common price dependent demand functions to reduce the three variable profit maximization problem into a single variable problem which can be solved using an efficient line search method next we show that a genuine additive model cannot exist and instead suggest and analyze a pseudo additive model however this model is more limited than the multiplicative model in its ability to incorporate various combinations of price and inventory age effects and reduction of the maximization problem into a single variable problem is more complicated except in the case of a linear price effect which is further analyzed for both models we show that the optimal solution satisfies the first order condition for equilibrium under a monopoly with a modification that includes inventory holding costs we solve numerical examples to illustrate the solution procedures

on the job search in a developing country an analysis based on indian data on migrants job search by those who are employed has received increasing attention in recent years in both the theoretical and the empirical literature on labor markets in developed countries much of the interest stems from the observation that job changes often take place without an intervening period of unemployment and that there is a close relationship between searching for a job and quitting the current job also on the job search affects the rate of unemployment during the period between jobs a major preoccupation of the empirical research has been to estimate the returns to on the job search and to test the determinants of job search the bulk of this work uses data for the united states and the united kingdom 2 job search theory has not been empirically tested in the context of a developing country on the job search particularly in the so called informal sector of the urban labor market is an important feature of probabilistic models of migration in developing countries in the vein of michael p todaro and of john r harris and todaro 3 such models hypothesize that individuals migrate to urban centers with the aim of obtaining employment in the formal sector and that informal sector employment is a transitional phase during which migrants are searching for formal sector jobs recent work by gary s fields has formalized the theoretical aspects of this job search process within the framework of a multisector model 4 thus it would be of interest to find out if there are significant differences between developed and developing countries with respect to the determinants of on the job search

an elasticity approach to the newsvendor with price sensitive demand we introduce a measure of elasticity of stochastic demand called the elasticity of the lost sales rate which offers a unifying perspective on the well known newsvendor with pricing problem this new concept provides a framework to characterize structural results for coordinated and uncoordinated pricing and inventory strategies concavity and submodularity of the profit function as well as sensitivity properties of the optimal inventory and price policies are characterized by monotonicity conditions or bounds on the elasticity of the lost sales rate these elasticity conditions are satisfied by most relevant demand models in the marketing and operations literature our results unify and complement previous work on price setting newsvendor models and provide a new tool for researchers modeling stochastic price sensitive demand in other contexts

on modelling the informal sector abstract a recent plea by robert hackenberg to develop new conceptual models in order to take full account of the new realities of the urban informal sector and rid the field from divergent connotations is questioned it seems that existing models easily lend themselves to analysis of the formal informal sector interactions and that divergent conditions necessarily lead to contradictions thus the existing arsenal of models cannot be held responsible for analysis paralysis new research on the informal sector rather than aiming at ultra generalizations should concentrate on issues such as identification of the determining factors of the urban production technologies and the nature of linkages and elasticity of substitution between formal and informal production

job security work incentives and unemployment this paper analyzes how firms can use job security as an incentive mechanism the author examines how macroeconomic job security measured by the reemployment probability may affect productivity differently from microeconomic job security measured by the probability of being retained the authors describe the circumstances under which job security stimulates work effort then incumbent workers insiders may have an opportunity to raise their wages above the market clearing level without being replaced by unemployed workers outsiders in this context involuntary unemployment can arise copyright 1988 by the editors of the scandinavian journal of economics

new evidence on whether unemployment and out of the labor force are distinct states this paper focuses on the question of whether people who are out of the labor force olf should be included in unemployment measures if people who are olf can obtain jobs as often as the people who are unemployed then there is no real distinction between the two states of nonemployment surprisingly there has been very little effort surrounding this issue in the past clark and summers 1982 conclude that for teenagers unemployment and olf are not distinct states while flinn and heckman 1982a find the opposite for white male high school graduates the methodology adopted in this paper enables one to use incomplete transition data on unemployment and olf and to obtain estimates of the full transition matrix between three labor force states that are not possible with standard methods new evidence for high school graduates is presented by gender and it is found that while for young women the two states are distinct for young men they are not

why capital hires labor a bargaining perspective organizational forms often serve as vehicles for the appropriation of quasi rent capitalist firms typically emerge when production requires noncontractible investments in specific physical assets because worker control would divert quasi rents away from ass et owners ex post conversely labor managed firms tend to emerge in niches requiring specialized human capital but general purpose physi cal assets a key result is that capitalist firms can persist in competitive markets even when labor managed firms would yield a larg er total surplus copyright 1993 by american economic association

imperfect information and labor market bias against small and medium sized enterprises a korean case we examine the labor market s bias against small and medium sized enterprises focusing on the seoul digital industrial complex case we adopt heckman s approach to control selection bias and use primary data from questionnaire surveys conducted at both firm and employee levels we find that conventional firm specific factors such as wages fringe benefits and weekly work hours primarily explain the labor market bias but imperfect information is also positively associated with the bias for example a firm s inadequate ability to identify a pool of potential employee candidates or to provide them comprehensive firm or job specific information tends to worsen labor shortages and an employee s ex ante incomplete knowledge of on the job training or education opportunities tends to increase ex post turnover intentions our results suggest that reducing the market bias requires improving imperfect information as well as conventional firm specific conditions

a model of imperfect competition with keynesian features the recent literature on the reappraisal of keynes has viewed keynesian equilibria as arising when prices are fixed and effective demands and supplies are equilibrated through the adjustment of quantities one problem with this approach is that it lacks a theory of price determination in particular of why prices are fixed in the present paper we show that a number of keynesian features arise in a model in which prices are fully flexible but where agents have some monopoly power one advantage of this approach is that it provides a theory of the determination of both prices and quantities

membership seniority and wage setting in democratic labour unions the dynamic behavior of a democratic monopoly labor union that allocates employment on a length of service basis is studied in the context of a simple model the author shows that a median voter equilibrium can exist in a union consisting of senority ranked workers when voting membership depends on past employment the closed form wage rule of such a union induces a unit root in the autoregressive representation of employment even if the underlying determinants of labor demand are strictly stationary on the other hand chesire cat or disappearing union phenomena are likely to be limited by the forward looking behavior of union members and the sensitivity of union membership to employment copyright 1990 by the london school of economics and political science

optimal policy for an inventory system with backlogging and all units discounts application to the composite lot size model this paper examines an inventory model with full backlogging and all units quantity discounts the practical scenario of a salesperson offering compensation to a client so as not to lose the sale is considered the cost of a backorder thus includes both a fixed cost and a further cost which is proportional to the length of time the said backorder exists a first algorithm is developed to determine the optimal policy while some extensions to this algorithm are obtained that include additional conditions on the model in particular the well known composite lot size model developed by tersine is solved incorporating a new stockout cost and a new all units discount numerical examples are provided to illustrate the application of the algorithms

optimal replenishment policies for non instantaneous deteriorating items with price and stock sensitive demand under permissible delay in payment abstract this study is motivated by the paper of chang et al international journal of production economics 123 2010 62 68 we extend their inventory model from two aspects 1 the demand rate as multivariate function of price and level of inventory 2 delay in payment is permissible under these assumptions we first formulated a mathematical model and then some useful theoretical results have been derived to characterize the optimal solutions for non zero and zero ending inventory system numerical examples are presented to illustrate the theoretical results the sensitivity analysis of a suitable example is performed and some managerial insights are proposed our analysis revels that it is more beneficial to keep higher inventory level hoping to stimulate more demand even if it results in non zero ending inventory

efficiency wage models of unemployment keynesian economists hold it to be self evident that business cycles are characterized by involuntary unemployment but construction of a model of the cycle with involuntary unemployment faces the obvious difficulty of explaining why the labor market does not clear involuntarily unemployed people by definition want to work at less than the going wage rate why don t firms cut wages thereby increasing profits

trade unions and seniority employment rules abstract some but not all trade union and insider outsider models assume that a seniority employment rule is used we investigate when firm and union members gain from such a rule and the consequences of their adopting one generally providing a seniority wage scale is also used they gain if union membership is not too large relative to demand and union bargaining power not too great moreover when outsiders are hired under a seniority employment rule employment is at the competitive level these results might explain why bargaining over employment is relatively uncommon and typically occurs only in industries with declining employment

approximating the effective protection coefficient without reference to technological data when proposals for reform of tariff or subsidy policies are made attempts to predict the effect on incentives are frequently hampered by the need for input output technical data this article develops and illustrates the use of a methodology for approximating effective protection coefficients epcs when such data are unavailable or outdated it derives the equations which approximate the epc from statistical analysis of a cross section of existing epc studies for four agricultural commodities corn cotton rice and wheat informational requirements for computing approximations include the nominal protection coefficients on output and tradable inputs and readily available macroeconomic data these approximation equations perform well in an out of sample test

real time search in the laboratory and the market the standard model of labor market search posits repeated infinite horizon search from a fixed distribution of wages in a stationary environment under these circumstances the optimal search policy has a reservation wage property i e the decision to accept an offer involves a comparison of the offer with a time invariant constant w which itself is a function of the parameters characterizing the search environment a wage offer greater than or equal to w is accepted while any other is rejected and search is continued some early empirical job search studies however accumulated evidence of a declining trend in reservation wages over the course of an unemployment spell 1 since then several theoretical explanations for the declining reservation wage profiles have emerged all of which relax the stationarity assumption of the standard model for example reuben gronau 1971 assumes searchers have finite lives kenneth burdett 1977 gerard j van den berg 1990 james albrecht and susan vroman 2005 and others model short term unemployment benefits albrecht pieter a gautier and vroman 2006 permit directed search to heterogeneous prospects 2 john p danforth 1979 and silvio rendon 2006 consider general liquidity con strained search and burdett and tara vishwanath 1988 model learning about the job offer distribution behavioral explanations for declining reservation wages have been suggested by braunstein and schotter 1981 schotter and braunstein 1982 and others in this paper we present the results of the first ever to our knowledge real time search laboratory experiment performed in an effort to investigate this falling res ervation wage phenomenon where field studies of unemployed search often rely on strong identifying assumptions to recover searchers unobservable reservation wages in the laboratory we are able to elicit subjects complete reservation wage profiles in an incentive compatible manner 3 further in the laboratory we are able to

increasing returns and the foundations of unemployment theory current approaches to macroeconomic theory divide roughly into two basic schools of thought one approach typically associated with rational expectations views the economy as basically at or near walrasian market clearing equilibrium in which case it becomes very difficult to explain away convincingly the undeniable persistence at times of involuntary unemployment another approach views the underemployed economy as being in a state of temporary fixed price disequilibrium in which case aside from having to repress suspicions that the essence of effective demand failure might not have to do with prices fixed at wrong values there is a lot of rationalising to be done about why profitable adjustments are so slow this paper argues that something like an internally consistent theory of steady state involuntary unemployment is possible and even plausible the cornerstone of this third approach is increasing returns to scale which blocks unemployed agents from breaking out of a low level equilibrium trap unless there is overall coordination or stimulation a simple model is presented which contains the basic ideas

a model of the natural rate of unemployment since the publication of edmund phelps volume the new macroeconomics has treated the labor market as a dynamic process of rational search by unemployed workers for available vacancies wages are viewed as at least potentially flexible though free contracting between workers and firms may lead to fixed wages in the short run imperfect information is a crucial element of the theory for it implies both a need for contracting and a need for rational search rather than simple market clearing in each period a positive rate of frictional unemployment may exist in equilibrium denoted as the natural rate this unemployment is due to the frictions in the search process and imperfections in information rather than to any deficiency in aggregate demand milton friedman defined the natural rate as the level that would be ground out by the walrasian system of general equilibrium equations provided there is embedded in them the actual structural characteristics of the labor and commodity markets including market imperfections stochastic variability in demands and supplies the cost of gathering information about job vacancies and labor availabilities the costs of mobility and so on p 8 this paper reexamines the micro foundations of the natural rate in a model of labor market equilibrium in which turnover flows and imperfect information are explicitly considered workers may quit their current jobs to enter the unemployment pool in order to search among available vacancies for a more preferred position firms economize on turnover by an appropriate wage policy

the assessment policy options for the uk previous issues of this review have generally considered particular problems or particular areas of policy the concern of this assessment is rather different to consider the broad range of policy options available to the united kingdom focussing on the main areas of disagreement where economic analysis should be helpful it draws where appropriate not only on the articles on microeconomic and macroeconomic policy included below but also on previous themes covered by the oxford review of economic policy the aim is to delineate the key questions which are or which should be on the policy agenda there is no doubt that the terms of the policy debate have shifted markedly in recent years some disagreements such as those between monetarists and keynesians seem much less important whilst others such as those about the nature and role of the market have sprung to prominance

unemployment in regional labor markets using structural theories to understand local jobless rates in west virginia the author uses a range of structural labor market models to understand differing regional jobless rates in a state affected by pockets of structural unemployment four theories of regional structural unemployment are presented and their hypotheses are statistically evaluated using west virginia county panel data the author then presents case study evidence to compare these statistical results with the realities of the county labor markets both types of empirical evidence suggest that a segmented non market clearing model in which structural unemployment stems from queuing for above market clearing wages in both a high wage primary sector and a lower wage secondary sector can shed the most light on regional unemployment rates in west virginia

insiders outsiders and nominal wage contracts while the consequences of nominal wage contracts have been rather thoroughly analyzed there is no generally accepted theory of why such contracts prevail in this paper i argue that the distinction between insiders and outsiders is important for understanding nominal wage contracts since most employment fluctuations take the form of fluctuations in hiring insiders are normally not affected by them since prices are primarily determined by costs demand shocks have small effects on real wages thus insiders have little incentive to change to more complicated contracts with rigid nominal wages nominal demand shocks have large effects on the employment opportunities of outsiders but outsiders have little influence on labor contracts

young workers and quit behaviour a model is set up to explain the quit behaviour of new entrants to the labour market it uses an incentive opportunity approach to integrate existing relevant arguments from search and information theory and human capital analysis it also provides for impetuous quits the model is tested by an examination of a disaggregated data set concerning a single cohort of 16 year old school leavers in the first year after gaining full time work the theory received strong support for example in the main model seven out of the ten coefficients were highly significant interestingly even in a time of deepening recession the existence of the job shopper seemed to be apparent

optimal sequential investment decisions under conditions of uncertainty this paper presents a mathematical model of sequential investment behavior under conditions of uncertainty the model addresses the problem of an investor with access to a limited pool of capital who makes sequential decisions on long lasting investments under uncertainty as to the timing or the quality of future opportunities we derive optimal investment strategies for the cases where the return from investment is a convex or concave function we present closed form solutions for commonly adopted return functions and we evaluate how the optimal investment behavior should change when changes occur in the environment or the underlying probability distributions in addition we analyze three modifications of the problem the results presented in this paper extend previous results on investment behavior for long lasting irreversible decisions in addition some results are in accordance with existing ones from portfolio theory and or search theory

unemployment disequilibrium and the short run phillips curve an econometric approach the paper specifies a disequilibrium model for the aggregate labour market consisting of demand and supply functions for labour an adjustment equation for wages as well as for prices a transactions equation and finally an equation that relates measured unemployment to vacancies and to excess demand the model has a more sophisticated treatment of dynamics than earlier disequilibrium models the parameter estimates and the goodness of fit are satisfactory and the model s implications for the behaviour of several important variables are sensible in particular excess demand estimates computed in various ways are reasonable

value of disruption information in an eoq environment abstract we consider an infinite horizon continuous review inventory model with deterministic stationary demand where supply is subject to disruption the supply process alternates between two states randomly one in which it functions normally on period and one in which it is disrupted off period in this setting we seek the value of disruption information which enables the buyer to place disruption orders at the beginning of off periods utilizing renewal theory we derive the total expected cost and characterize the optimal regular order up to level together with the order up to level for disruption orders we also conduct an extensive numerical analysis and compare the results with the model with no opportunity of disruption orders we observe that if the shortage cost is relatively high and the disruption risk is significant in terms of duration and or frequency placing a disruption order reduces the expected total cost significantly

an empirical study of age discrimination in norway and germany using a questionnaire and a sample of students and personnel managers we establish the existence of age discrimination in the hiring process in germany and norway as expected age discrimination is more prominent in germany where the hiring probability of equally qualified applicants is reduced by about 22 percentage points due to an age differential of 14 years as opposed to only 12 percentage points in norway within both countries the tendency to discriminate does not differ between students and personnel managers and does not depend on the age of the decision maker the phenomenon of unemployment among older workers is characterized less by the risk of becoming unemployed than by the problem of remaining unemployed and failing to find new work frerichs and naegele 1998 p 59

equilibrium wage distributions the observation that different firms charge different prices for what appears to be the same commodity or pay different wages for what appears to be equivalent labour has long been explained in economics by a reference to imperfect information this paper is concerned with characterising market equilibrium with imperfect information we do not present a general theory rather we develop in some detail an example of importance in its own right imperfect information in the labour market several properties of our example in particular the existence of equilibria with price wage dispersion unemployment excess supply of labour positive profits multiple equilibria and the nonoptimality or some of all of the equilibria are of more general validity other results may not be this paper is concerned with two kinds of imperfect information a individuals may not know the wage paid in any particular firm or whether there is a vacancy in any particular firm until they apply for a job 1 b there are several characteristics besides the wage rate associated with a job which are important to the individual some like the normal length of a work week become known when the individual applies for the job information about other characteristics e g personalities of colleagues is acquired only gradually there is one important difference between the two kinds of imperfect in