limit cycles in intertemporal adjustment models theory and applications this paper starts from well behaved i e concave one state variable optimal control models the crucial feature is that indigenous growth is present the replacement of the control by an adjustment process and presumably penalizing these adjustments may convert stable and only stable fixed point equilibria into limit cycles indeed given positive growth and proper externalities such that discounting exceeds growth one can generate stable limit cycles with ease e g for a separable framework examples from such diverse fields as renewable resources optimal saving and public choice highlight the economic applicability

post layoff earnings among semiconductor workers this study uses administrative data from california s unemployment insurance program to analyze the post layoff earnings of displaced and recalled workers in silicon valley s semiconductor industry

the impact of the national minimum wage on the pay distribution employment and training britain s first ever national minimum wage nmw came into force in april 1999 covering some 5 of workers between 1999 and 2002 the nmw rose in line with the growth in average earnings but for 2003 6 the nmw will be ratcheted up relative to median pay the evidence shows that between 1998 and 2002 the bottom decile of the pay distribution experienced above average pay rises with no spillover effects further up the distribution there was no overall employment effect but a small negative impact in the care home sector the nmw boosts the probability and intensity of training

the new institutional economics this outstanding book presents new original contributions from some of the world s leading economists including ronald coase douglass c north masahiko aoki oliver e williamson and harold demsetz it demonstrates the extent and depth of the new institutional economics research programme which is having a worldwide impact on the economics profession

threshold management in a coupled economic ecological system abstract economic analysis of optimal ecosystem management in the presence of a threshold has typically ignored the potential for induced behavioral responses this paper contributes to the literature on non convex ecosystem management by considering the implications of a particular behavioral response in a regional economy that of amenity led growth to changes in ecosystem services generated by a lake ecosystem subject to a eutrophication threshold the essential policy challenge is to achieve optimal levels of lake nutrients and urbanization given that improvements to water quality will induce additional migration and urbanization in the region with attendant ecological impacts we show that policies that ignore the recursive relationship between urbanization and water quality unintentionally exacerbate boom bust cycles of regional growth and decline and risk pushing the system towards long run economic decline in contrast the optimal policy accounts for the behavioral feedbacks to improved ecosystem services and balances regional growth and ecological degradation

the impossibility of a perfectly competitive labour market using the institutional theory of transaction costs i demonstrate that the assumptions of the competitive labour market model are internally contradictory and lead to the conclusion that on purely theoretical grounds a perfectly competitive labour market is a logical impossibility by extension the familiar diagram of wage determination by supply and demand is also a logical impossibility and the neoclassical labour demand curve is not a well defined construct the reason is that the perfectly competitive market model presumes zero transaction costs and with zero transaction costs all labour is hired as independent contractors implying that multi person firms the employment relationship and labour market disappear with positive transaction costs on the other hand employment contracts are incomplete and the labour supply curve to the firm is upward sloping again causing the labour demand curve to be ill defined as a result theory suggests that wage rates are always and everywhere an amalgam of an administered and bargained price

the minimum wage as a redistributive tool most analyses of the minimum wage focus on its unintended employment consequences the goal of a minimum wage is not of course to reduce employment but to redistribute earnings to low paid workers under what conditions can a minimum accomplish this are those conditions met in economies which otherwise rely extensively on markets to set wages such as the united states which in i994 rejected mandating health benefits that would have effectively raised the minimum or the united kingdom where in i995 the labour party promised a national minimum upon election who pays for the redistribution who benefits the redistributive effects of a minimum wage depend on the labour market and redistributive system in which it operates on the level of the minimum and on its enforcement at best an effective minimum wage will shift the earnings distribution in favour of the low paid and buttress the bottom tiers of the distribution from erosion at worst minimum wages reduce the share of earnings going to the low paid by displacing many from employment neither outcome is certain so that enacting a minimum is a risky but potentially profitable investment in redistribution it is the balancing of risk against gain that makes a minimum so controversial until the i980s i99os competitive labour markets in the united states and united kingdom produced rising real earnings for the low paid and falling earnings inequality so the risk of enacting a national minimum united kingdom or of raising substantially the national minimum united states seemed unnecessary why interfere with the competitive market when it produces socially desirable trends in earnings albeit a bit slower than one might accomplish with a legislated minimum two decades of falling real wages for lower decile workers in the united states and of rising earnings inequality in the united kingdom1 have however put the minimum back in play the job market is not doing much for lower paid workers in the united kingdom virtually all social groups accept the need for some redistribution though they differ on the best way to accomplish such in the united states pressures for tax cuts can be interpreted as a way for employees to gain real wage increases unavailable through the market the consensus favouring redistribution through the earned income tax credit disappeared in the midi 990s rush to reduce federal budget deficits this paper takes as its operating premise the goal of redistributing earnings

labour markets social justice and economic efficiency in conventional economic theory a trade off supposedly exists between social justice and economic efficiency in reality market and other economic institutions are dominated by power relations so that the sponsorship of social justice is a productive factor neo liberal economic policies by lifting the constraints on the exercise of unequal power increased injustice and triggered a downward economic and social spiral reversing this requires a revolution in economic theory and policy focused on full employment the working of labour markets the organisation of work and household organisation social provision and self sufficiency in conventional economic theory the initial resource endowments of individuals are taken as given and although these may be unequal they are essentially external to the market labour markets are assumed to be more or less competitive and within them real wages reflect the quality of workers resource endowments mainly human capital and their personal efficiency and energy that these result in a wide dispersion of labour market rewards some of which may be insufficient to sustain a reasonable standard of life is a demonstration it is argued of how widely dispersed are individual resource endowments and capabilities hirsch and addison 1986 from this perspective any idea of social justice designed to reduce income inequalities risks damaging incentives and lowering overall economic well being this is the basis of okun s 1975 thesis that there exists an inverse trade off between social equality and economic efficiency that greater social income equality can only be purchased at the cost of lowering economic efficiency the alternative perspective explored in this special issue recognises the central import ance of relative power in determining outcomes this focuses attention on the external and internal forces structuring markets and how these differentially affect the incomes and opportunities of individuals from this perspective social justice requires the removal of the obstacles that inhibit individuals and groups from developing their potential and from deploying their resources to full advantage thus contrary to the orthodox view increasing

land use dynamics and the environment we build a benchmark framework to study optimal land use encompassing land use activities and environmental degradation we focus on the spatial externalities of land use as drivers of spatial patterns even if land is immobile by nature location s actions affect the whole space through pollution which flows across locations resulting in both local and global damages in contrast to the previous literature on spatial dynamics we prove that the social optimum problem is well posed i e the solution exists and is unique taking advantage of this result we illustrate the richness of our model by means of a numerical analysis considering a global dynamic algorithm we find that our model reproduces a great variety of spatial patterns related to the interaction between land use activities and the environment in particular we identify the central role of abatement technology as pollution stabilizer allowing the economy to achieve stable steady states that are spatially heterogeneous

agglomeration as local instability of spatially uniform steady states humans exhibit a fundamental propensity to interact for social cultural technological and other reasons in this paper we seek to determine when the propensity to interact expressed in the form of a spatial externality becomes strong enough to induce agglomeration we design an abstract world where the only possible reason for agglomeration is the spatial externality in this world the uniform population distribution is a steady state then to ask under what circumstances does a spatial externality induce agglomeration is to ask under what circumstances does it induce an instability of the steady state anything other than a uniform steady state implies some agglomeration

pattern formation spatial externalities and regulation in coupled economic ecological systems abstract we study the management of ecosystems in which interacting state variables that are affected by management decisions diffuse in space we study pattern formation first in a setting where economic agents maximize myopic profits and ignore spillovers onto agents at other sites and second in the context of a social planner who internalizes these spillovers we compare patterns under these two institutions and study how the differences in the patterns generated by these two institutions impact the design of regulatory schemes to internalize the externalities at the same time we introduce new methods based on fourier series type decompositions that enable us to turn an intractable infinite dimensional optimal control problem into a countable number of finite dimensional optimal control problems as far as we know these methods are new to the economics literature our theory is applied to the management and regulation of a semi arid system

natural resource economics and conservation contributions of agricultural economics and agricultural economists research by agricultural economists on natural resources has been distinguished by an interdisciplinary emphasis and a dynamic perspective it has recognized technological and institutional constraints has been oriented toward solving concrete resource management and policy problems and has emphasized empirical and quantitative analysis agricultural economists have introduced methods for evaluating natural resource conservation efforts for predicting adoption of resource conservation technologies and for designing efficient and sustainable resource management policies they have identified ways of improving land management and preventing land degradation proposed reforms of institutions governing water allocation and water quality and introduced policies for balancing environmental and efficiency considerations in the management of pests biodiversity and livestock diseases their research has had substantial impacts on the formulation of resource conservation policies

diffusion induced instability and pattern formation in infinite horizon recursive optimal control this paper develops local stability analysis for deterministic optimal control theory for recursive infinite horizon intertemporal optimization problems where there is a continuum of spatial sites and the state variable can diffuse over these sites we identify sufficient conditions for a type of local instability which emerges from the interaction of the discount rate on the future the curvature of the hamiltonian and the spatial features of the problem we call this phenomenon optimal diffusion induced instability odi we illustrate our analytical methods with three stylized applications the first application is the optimal management of spatially connected human dominated ecosystems the second and third applications are harvesting of spatially interconnected renewable resources jel classification c6 q2

effort and comparison income experimental and survey evidence the authors test the hypothesis that individual effort on the job depends both on one s own income and on the individual s position in the relevant income distribution combining experimental evidence from a gift exchange game with multi country issp survey data they analyze the extent to which relative income affects an individual s effort finding that an individual s rank in the income distribution more strongly determines effort than does others average income which suggests that comparisons are more ordinal than cardinal their experiment also reveals that comparisons over time affect effort individuals who received higher income offers or enjoyed higher income rank in the past exerted lower levels of effort for a given current income and rank

the development of the neoclassical tradition in labor economics this essay on labor economics examines neoclassical theory s rise to ascendancy following the second world war with a secondary focus on the relative decline but continued influence of institutionalist economic theory the authors describe the evolution of institutional and neoclassical theory from the late nineteenth to mid twentieth centuries examine some early intellectual debates between the two camps briefly describe the work of neoclassical labor economics pioneers and look at major developments over the past 30 years they argue that neoclassical economists increasing intellectual breadth and influence in public policy have led them to pay closer attention to issues that have long been of concern to institutionalists and neoinstitutionalists

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

industry wage differentials and efficiency wages a dissenting view with south african evidence abstract does industry wage dispersion constitute evidence of either efficiency wages or rent sharing comparison of the industry wage premia of whites and africans in south africa casts doubt upon the rent extraction and the gift exchange explanations of the industry wage structure unions combined with union threats fail to explain the data other explanations unobserved ability compensating differentials and the shirking monitoring and turnover models are rejected here as they have been before remaining possibilities are expense preference theory and internal equity rules implications for future research are pointed out

ir theory built on the founders principles with empirical application to australia the authors identify 10 core principles of industrial relations ir theory and policy based on the writings of british ir founders beatrice webb and sidney webb and u s ir founder john commons these principles are then represented diagrammatically in an expanded ir version of the marshallian demand supply ds model the ds and ir models representing on one side the merits of abstraction and parsimony and on the other realism and complexity are applied to a case study an analysis and explanation of the reasons behind the formation of the australian ir system in the 1890s and its evolution to 2010 although the ds model captures important forces behind the shift from a centralized and unionized employment system in the early period to a significantly decentralized and deunionized system in the latter period the evidence indicates the extra structural and behavioral elements in the ir model are important for a full and accurate explanation

has the minimum wage policy been important for reducing poverty in brazil a decomposition analysis for the period from 2002 to 2013 abstract this study aims to analyze the contribution of the minimum wage valorization policy to the reduction in poverty that occurred in the first decade of the 21st century in brazil considering not only the incidence of poverty but also its intensity and severity a decomposition methodology was used to isolate the marginal contribution of the minimum wage in the observed changes taking into account the roles of setting the values of basic pension and social assistance benefits the beneficio de prestacao continuada or bpc in addition to setting the wage floor between 2002 and 2013 the minimum wage contributed to a 38 2 reduction in the proportion of impoverished people a 39 4 reduction in the intensity of poverty and 40 6 decrease in the severity of poverty our results also reveal geographic differences with the minimum wage being more important in the poorest regions

nepotism discrimination and the persistence of utility maximizing owner operated firms reply much debate in the discrimination literature surrounds whether employers with biased preferences can persist in the market 7 10 this issue is a natural extension of the broader literature on owner operated firms which focuses on the consistency of utility and profit maximization 12 13 14 18 26 27 theories of owner operated firms which have a long history in economics model the entrepreneur as both a producer and consumer of goods that determines the level of production and consumption jointly through utility maximization 2 9 16 22 31 this approach is applied in this paper to examine employer discrimination and nepotism our analysis provides necessary conditions for utility maximizing firms to persist in the market and shows how biased preferences can yield seemingly uneconomic input and output choices that are in fact rationally inefficient empirical results using data on family farms support the prediction that utility maximizing entrepreneurs trade profit for nonmarket goods and do not hire inputs to maximize profits competitive neoclassical theories of the labor market do not provide a clear theoretical resolution to the issue of persistence of employer nepotism and discrimination the employer discrimination model proposed by becker 4 5 and extended by arrow 1 postulates that entrepreneurs maximize utility that increases with profit but decreases with a nonmarket attribute of some workers e g race ethnicity or gender these models predict that white male workers may initially have better market opportunities than comparable minority or female workers however entrepreneurs who hire based on nonproductive attributes are also predicted to earn less than a normal rate of return and because they derive disutility from an aspect of owning and operating a firm can improve their welfare by leaving the industry and converting firm assets to those that do not require employment decisions e g stocks and bonds this result has the important policy implication that market intervention may not be necessary to improve the relative pay and employment of disadvantaged groups when employers are the source of the discrimination alternatively goldberg 15 uses the arrow 1 framework but postulates that employers

the theoretical foundation of industrial relations and its implications for labor economics and human resource management the author identifies the core principle that forms the theoretical and policy foundation for the field of industrial relations labor is embodied in human beings and is not a commodity and argues that the field s two central dependent variables are labor problems and the employment relationship next he uses this core principle along with complementary ideas from institutional economics to develop a theoretical framework that not only explains the nature of the employment relationship and labor problems but also reveals shortcomings in related theories from labor economics and human resource management finally this framework is used to derive the fundamental theorem of industrial relations demonstrate that optimal economic performance occurs in a mixed economy of imperfect labor markets and organizations and show that a certain amount of labor protectionism promotes economic efficiency and human welfare

spatial agglomeration dynamics this paper develops a model of economic growth and activity locating endogenously on a 3 dimensional featureless global geography the same economic forces influence simultaneously growth convergence and spatial agglomeration and clustering economic activity is not concentrated on discrete isolated points but instead a dynamically fluctuating smooth spatial distribution spatial inequality is a cass koopmans saddlepath and the global distribution of economic activity converges towards egalitarian growth equality is stable but spatial inequality is needed to attain it

optimal harvesting of stochastic spatial resources abstract we characterize the optimal harvest of a renewable resource in a generalized stochastic spatially explicit model despite the complexity of the model we are able to obtain sharp analytical results we find that the optimal harvest rule in general depends upon dispersal patterns of the resource across space and only in special circumstances do we find a modified golden rule of growth that is independent of dispersal patterns we also find that the optimal harvest rule may include closure of some areas to harvest either on a temporary or permanent basis biological reserves reserves alone cannot correct open access but may under sufficient spatial heterogeneity and connectivity increase profits if appropriate harvest controls are in place outside of reserves

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

inequality and attainment in a dual labor market models of wage determination and sector attainment are estimated for a cohort of young men in a dual labor market neoclassical economic vs dual labor market views on market equilibrium are contrasted although schooling is rewarded similarly in the primary and secondary sectors other results support the dual labor market view that employment in the primary sector is rationed via a queuing mechanism

the impact of the minimum wage if workers can adjust effort abstract in traditional models a binding minimum wage creates a excess supply of low skilled workers for minimum wage jobs employment falls and some jobs are reallocated from high to low rent workers this disequilibrium cannot persist competition to secure the property rights to now scarce jobs undoes most of the effects of the minimum wage workers who attach the highest value to the jobs are willing to work harder to keep them marginal workers are squeezed out of the market as high rent workers ratchet up effort level this process erodes the rent conferred by the minimum wage but also increases the value of marginal product which reduces the size of the employment effect the minimum wage confers more money income on low skilled workers and creates some distortion in the optimum combination of wage rate and effort level under plausible conditions the minimum wage has little effect on rent employment output and profits

unemployment insurance and short time compensation the effects on layoffs hours per worker and wages we analyze two unemployment insurance systems in one unemployed workers receive benefits while those on reduced hours do not as in north america at least until recently in the other short time compensation is paid to workers on reduced hours as in europe the first system causes inefficient temporary layoffs for some parameters the latter does not but implies inefficient hours per worker some evidence is presented regarding these effects despite policymakers recent enthusiasm for short time compensation the clear implication of this project is that changes should come on the tax not benefit side of the system

wage structure and gender earnings differentials an international comparison using microdata to analyse the gender pay gap in ten industrialized nations we focus on the role of wage structure the prices of labour market skills in influencing the gender gap we find wage structure enormously important in explaining why the us gender gap is higher than that in most other countries we conclude that the us gap would be similar to that in sweden and australia the countries with the smallest gaps if the united states had their levels of wage inequality this finding reflects the larger penalty in the united states for those with low skill levels or employed in low wage sectors 650 o 75 the united states was amoung the countries with the largest differ entials oecd ilo usbls this paper uses microdata to analyse inter national differences in the gender pay gap among a sample of ten industrialized nations we focus particularly on explaining the surprisingly low ranking of the united states in comparison with other industrialized countries an advan tage of an international perspective is that countries vary considerably with respect to governmental policies women s relative labour market qualifications and wage setting institutions such variability allows one to infer reasons for differences in the pay gap and by implication the impact of alternative govern ment policies empirical research on gender pay gaps has traditionally focused on the role of gender differences in qualifications and on differences in the treatment of otherwise equally qualified male and female workers i e labour market dis crimination analyses of trends over time in the gender differential within countries as well as inter country comparisons of gender earnings ratios have tended to emphasize these types of gender specific factors an innovative feature of our study is to focus on the role of wage structure as an additional factor influencing the gender gap to analyse the impact of wage structure we adapt a framework developed by juhn et al 1991 to analyse trends over time in race differentials in the united states our findings suggest that labour market institutions that affect overall wage inequality have an extremely impor tant effect on the gender earnings gap wage structure describes the array of prices set for various labour market skills measured and unmeasured and rents received for employment in par

economic impacts of marine reserves the importance of spatial behavior abstract marine biologists have shown virtually unqualified support for managing fisheries with marine reserves signifying a new resource management paradigm that recognizes the importance of spatial processes in exploited systems most modeling of reserves employs simplifying assumptions about the behavior of fishermen in response to spatial closures we show that a realistic depiction of fishermen behavior dramatically alters the conclusions about reserves we develop estimate and calibrate an integrated bioeconomic model of the sea urchin fishery in northern california and use it to simulate reserve policies our behavioral model shows how economic incentives determine both participation and location choices of fishermen we compare simulations with behavioral response to biological modeling that presumes that effort is spatially uniform and unresponsive to economic incentives we demonstrate that optimistic conclusions about reserves may be an artifact of simplifying assumptions that ignore economic behavior

expanding the behavioral foundations of labor economics the author examines critiques and suggests modifications to the psychological assumptions of the rational choice model of the human agent that underlies much of the theoretical work in modern neoclassical labor economics he analyzes the rational choice model in terms of three psychological constructs motivation cognition and emotion in the context of a five step model of the human behavioral process examples from the empirical and theoretical labor economics literature illustrate both problems with the current theory and new or improved insights and predictions that can be gained by incorporating additional psychological theories and concepts in economic analysis the author concludes that although the rational choice model is a powerful and productive conceptual device in many cases it cannot adequately explain behavior in the world of work and labor economic theory would be improved by a more interdisciplinary approach that integrates conceptual and empirical research from the behavioral sciences abstract courtesy jstor

segmentation or competition in china s urban labour market in china urban residents have traditionally been protected against labour marketcompetition from rural urban migrants over the period of urban economic reform rural urban migration was allowed to increase in order to ll the employment gap asgrowth of labour demand outstripped that of the resident labour force in urbanareas however as reforms gained pace and controls were lifted it is plausible thatcompetition for work between migrants and urban residents would have increased the paper examines whether the relationship is one of segmentation or competitionin the labour market it uses attitudinal responses from two urban surveys theurban workers who perceive competition from migrants are those who are mostvulnerable the ndings are consistent with the presence of continued labourmarket segmentation but suggest also that competition between the two groups isincreasing key words labour markets wages migration labour market segmentation chinajel classi cations j30 j40

optimal harvesting of a spatial renewable resource abstract in this paper we investigate the optimal harvesting of a renewable natural resource while in most standard approaches the resource is located at a single point we allow the resource to be distributed spatially consequently an agent who exploits the resource has to travel from one location to another for a fixed planning horizon we investigate the speed and the path of harvesting chosen by the agent we show that the agent adjusts this speed so as to visit each location only once even in the absence of travelling cost since the agent does not return to any location for a second harvest it is optimal to fully deplete the resource upon arrival a similar type of bang bang solution results when we drop the assumption of a constant harvesting rate allowing for a variable harvesting rate the agent chooses to fully exploit the resource either in the last or in the first travelling period a society interested in conserving some of the resource thus has to take measures to limit the exploitative behaviour of the agent

wage theory new deal labor policy and the great depression were government and unions to blame a growing number of economists blame the length and severity of the great depression on factors that rigidified wage rates raised production costs and interfered with the market allocation of labor the target of their critique is president franklin roosevelt s new deal labor program which they portray as creating a series of large negative supply shocks through encouragement of unions minimum wages unemployment insurance and other anticompetitive industrial relations practices the author uses a combination of institutional and keynesian theory to present the other side of the story drawing principally from the works of j r commons and j m keynes he develops both a spending and productivity rationale for stable wages during the great depression and demonstrates that the new deal s interventionist labor program was on balance necessary and beneficial he also highlights the neglected macroeconomic dimension of industrial relations theory and policy

a generalised model of monopsony this article presents a general but very simple model in which the supply of labour to an individual employer is not infinitely elastic but the employer can also raise employment by increasing expenditure on recruitment using this it is shown how that division between perfect competition and monopsony is whether there are diseconomies of scale in recruitment using a unique british data set containing information on both labour turnover costs and the number of recruits we present estimates that do suggest that there is an increasing marginal cost of recruitment debates about the desirability and consequences of labour market interventions like minimum wages trade unions welfare benefits hours restrictions and firing costs continue to be at the heart of debates about the way in which modern industrialised economies should be run is it best to have a relatively de regulated labour market the us being held up as a model by proponents of this view or can some regulation lead to better labour market outcomes with some northern european countries being held up as a model by this group debate about the merits of intervention is most commonly put in terms of a trade off between efficiency and equality with those economists favouring a more interventionist approach tending to be those who have a welfare function that puts greater weight on equality and or those who believe the efficiency cost of equality is relatively low

the dynamics of spatial pollution the case of phosphorus runoff from agricultural land abstract the paper analyzes based on a land classification system the optimal management of negative production externalities while taking into account the intertemporal and spatial aspects of the problem to incorporate both aspects simultaneously a two stage modeling approach is proposed where the solution of the spatial problem first stage is optimized over time second stage as a result it is possible to relate long run and short run supply and input demand functions attention is given to runoffs from agricultural land leading to the contamination of a water body in particular the one of phosphorus and the eutrophication of lakes the employment of a land classification system supports a full information approach and allows to address the optimal management of mineral fertilizer and manure based on zonal taxes zonal permits and zonal standards which all vary over time

kinship ties social networks and segmented labor markets evidence from the construction sector in egypt abstract this paper tests for rationing of entry into craft occupations in the construction labor market in egypt and investigates whether entry is rationed according to regional origin and access to kinship and other social networks i use a modified version of roy s model of occupational choice which allows for the existence of costs of entry into craft occupations data from a 1988 survey of construction workers are used to estimate the model and test for rationing the results confirm the existence of rationing according to a worker s regional background but are inconclusive with respect to kinship ties and social networks

assimilation changes in cohort quality and the earnings of immigrants this paper reexamines the empirical basis for two facts that seem to be found in most cross section studies of immigrant earnings 1 the earnings of immigrants grow rapidly as they assimilate into the united states and 2 this rapid growth leads to many immigrants overtaking the earnings of the natives within 10 15 years after immigration using the 1970 and 1980 u s censuses this paper studies the earnings growth experienced by specific immigrant cohorts during the period 1970 80 it is found that within cohort growth is significantly smaller than the growth predicted by cross section regressions for most immigrant groups this differential is consistent with the hypothesis that there has been a secular decline in the quality of immigrants admitted to the united states

spatial heterogeneity and the choice of instruments to control nonpoint pollution because it is difficult to monitor emissions and to implement differentialtaxes and standards uniform taxes and standards on agricultural chemicaluse are often proposed and used to control nonpoint source pollution thisarticle analyzes the relative efficiency of these uniform instruments in thepresence of spatial heterogeneity we show that the relative slopes of themarginal pollution cost and marginal profit of chemical use are only one ofthe factors that affect the relative efficiency other factors includecorrelation between marginal pollution costs and marginal profits and theslope and variability of marginal profits in addition a uniform tax mayresult in some farmers not using the chemical and a uniform standard mayhave no effect on low input land we show empirically that the presence ofcorner solutions can reverse a conventional finding of tax or standardsuperiority based on the relative slop rule

intertemporal substitution in labor supply evidence from micro data the sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics the analysis of social security and pensions and the study of life cycle patterns of work this paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature the first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation the second approach is to estimate a first difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations the results indicate that intertemporal substitution elasticity for married men is positive but small

is equality stable economic inequality is of interest not only at some intrinsic level but also for its close connections to diverse variables ranging from economic indicators such as growth rates to sociopolitical outcomes such as collective action and conflict it is only natural then to study the evolution of inequality in an economic system it is fair to say that the dominant view on this topic is that inequality is the outcome of a constant battle between convergence and luck gary becker and nigel tomes 1979 current asset inequalities may echo into the future but their natural tendency is to die out owing to a convex investment technology disparities are only sustained through ongoing stochastic shocks see also david champernowne 1953 glenn loury 1981 a second approach emphasizes that initial conditions determine final outcomes owing principally to a nonconvex investment technology see e g mukul majumdar and tapan mitra 1982 abhijit banerjee and andrew newman 1993 oded galor and joseph zeira 1993 ray and peter streufert 1993 historical disparities may persist and magnify if such differences straddle some bifurcation threshold inequality is not inevitable in this view stable steady states with inequality coexist with others that involve perfect equality in this paper we examine a third view which emphasizes an intrinsic tendency of the market mechanism to create inequality in this approach economic inequality appears as an inevitable outcome even if all agents are identical to begin with and even if there is no uncertainty or technological nonconvexity this view has received attention in ray 1990 debasis bandyopadhyay 1993 lars ljungqvist 1993 scott freeman 1996 kiminori matsuyama 2001 and mookherjee and ray 2001 the basic argument is as follows suppose that an economy is populated by several dynasties each of which allocates resources to current consumption and bequests to descendants assume for the moment that the latter consists entirely of educational expenditures preparing children for their chosen professions of course the returns to such professions are endogenous they depend on the distribution of individuals across different professions now if several professional categories are necessary wages must adjust so as to force separation in choices even if all individuals are ex ante identical to be sure this broken symmetry matsuyama 2002 has no payoff implications for the generation alive today identical individuals must receive identical payoffs starting with the next generation however there must be inequality not just in wages but in payoffs there must be individuals in lowpaying professions that involve low training costs whose parents invested little and there must be others in high paying high trainingcost professions whose parents invested a lot once such inequality sets in it may well magnify richer offspring will find it easier to invest in better paying professions for their children two ingredients are used in this argument first credit markets must be missing or imperfect otherwise the necessary finances may be borrowed and wages net of costs must be equalized over all professions however the assumption that parents cannot borrow against their children s future earnings seems innocuous enough second parents cannot make financial bequests to supplement or substitute for educational expenditures such bequests could conceivably neutralize earnings inequality this motivates the question when might financial bequests compensate for earnings inequality in steady state moreover starting from perfect equality will equality be preserved thereafter or will inequality emerge and persist we discuss an extended example from an ongoing research project mookherjee department of economics boston university 270 bay state road boston ma 02215 ray department of economics new york university 269 mercer street new york ny 10003 and instituto de analisis economico csic barcelona spain we thank kiminori matsuyama who encouraged us to write this paper

a theory of dual labor markets with application to industrial policy discrimination and keynesian unemployment this paper develops a model of dual labor markets based on employers need to motivate workers in order to elicit effort from their workers employers may find it optimal to pay more than the going wage this changes fundamentally the character of labor markets the model is applied to a wide range of labor market phenomena it provides a coherent framework for understanding the claims of industrial policy advocates it also can provide the basis for a theory of occupational segregation and discrimination that will not be eroded by market forces finally the model provides the basis for a theory of involuntary unemployment

do minimum wages fight poverty i introduction one of the most compelling rationales for a national minimum wage floor is to raise the incomes of poor or near poor families with members in the workforce this general point however is often missed in the debates over the merits of a higher minimum wage in contrast to these oft stated distributional goals much of the focus in such debates has been on the employment effects of minimum wages especially among the teenage population in large part this focus is probably attributable to the extensive body of economic research on the effects of minimum wages on employment of low skilled workers however although negative employment effects represent a cost of minimum wages such costs do not necessarily imply that minimum wages constitute bad social policy in particular the employment losses associated with a higher minimum wage may be more than offset by positive effects on low income families especially if minimum wages are a significant factor in helping move families out of poverty 1 this is not to argue that research on employment effects of minimum wages is irrelevant but such research may be more important as a test of the theory of labor demand and as a method of learning how employers and individuals adjust to exogenous wage increases than as a method of assessing the wisdom of the policy in addition we do not mean to suggest that the short run effects of minimum wages on the incomes of poor families should be the sole criterion for evaluating such policies other studies have found evidence suggesting for example that minimum wage increases reduce school enrollment rates and training neumark and wascher 1996a hashimoto 1982 factors that may affect longer run earnings or earnings growth these deleterious longer run effects might offset the benefits of shorter run effects of minimum wages on family incomes nonetheless our perception is that potential increases in the incomes of poor families provide the main motivation for raising the minimum wage making it important to assess the evidence on whether minimum wage increases achieve this goal in this regard there are two questions that pertain to the influence of minimum wages on family incomes generally and on poverty in particular first there is the question of the effects of minimum wages on low wage workers that is do the wage gains received by employed workers more than offset the lost earnings suffered by those who lose or cannot find jobs 2 second there is the question of how minimum wages affect workers in different parts of the family income distribution because many roughly speaking a large minority of minimum wage workers are in relatively affluent families gramlich 1976 card and krueger 1995 burkhauser et al 1996 which workers gain and which lose will have an important influence on the effects of minimum wages on the distribution of family incomes in this article we present evidence on the effects of minimum wages on family incomes focusing in particular but not solely on the effectiveness of minimum wages in reducing poverty using matched march current population surveys cpss we estimate the effects of minimum wages on the probabilities of various transitions in the family income distribution such as transitions into and out of poverty given that federal changes in minimum wages may be confounded with other aggregate level shocks influencing family income we rely heavily on state level changes in minimum wages to identify minimum wage effects in a nutshell our empirical strategy is to compare rates of transition through the family income distribution in states in which minimum wages do and do not increase for example if poor families are more likely to escape from poverty when minimum wages increase in their states of residence we would infer that minimum wage hikes help families move out of poverty on the other hand if transitions in to poverty are more common when minimum wages increase we would infer that the disemployment effects of minimum wages play a dominant role among the low income population

club convergence and inter regional inequality in mexico 1940 2015 in this paper we analyse the convergence patterns in inter regional inequality and income per capita for the mexican states over the period 1940 2015 to that end we apply a time series approach

a test of dual labor market theory despite substantial differences in their views of the appropriate policy response to the existence of poverty neither the proponents of dual market theory nor its critics have proposed potentially conclusive tests of the dual market hypothesis this paper presents a test of the two central propositions of dual market theory 1 the existence of two distinct labor markets with different wage setting mechanisms and 2 the existence of barriers to mobility between the labor markets we find considerable support for both hypothesis estimation of a switching model of wage determination with unknown regimes yields two distinct wage equations the one which most workers are associated with closely resembles the standard human capital regression with significant returns to education and experience the other equation is flat with no returns to human capital these two equations resemble the predictions of dual market theory for the primary and secondary markets respectively further we present evidence that at least some non white workers are involuntarily confined to the secondary market this crowding of minority workers into the low wage labor market accounts for a substantial portion of white non white wage differences we interpret these results as providing empirical support for the dual market hypothesis and for recent theoretical work on efficiency wagemodels in addition combining the efficiency wage argument with the observation that much of the white non white wage difference is explained by the exclusion of non whites from the primary sector suggests an explanation for the persistance of wage differences this abstract was borrowed from another version of this item

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

bioeconomics of spatial exploitation in a patchy environment abstract this paper presents a model of renewable resource exploitation that incorporates both intertemporal dynamics and spatial movement the model combines the h s gordon vernon smith hypothesis of a rent dissipation process with ricardian notions that resources are exploited across space in a pattern dependent upon relative profitabilities the population structure is characterized in a manner consistent with modern biological ideas that stress patchiness heterogeneity and interconnections among and between patches generally we find the equilibrium patterns of biomass and effort across the system to be dependent upon bioeconomic conditions within each patch and the nature of the biological dispersal mechanism between patches we use simple examples to illustrate how the distribution of effort throughout the system reflects the heterogeneity and the spatial biological linkages

emotional arousal as a source of bounded rationality abstract this paper proposes an alternative psychological explanation for bounded rationality according to herbert simon bounded rationality arises from human cognitive limitations following the suggestion of institutional economist john r commons i argue that extremes in emotional arousal also contribute to bounded rationality this idea is formalized and developed using the yerkes dodson law from psychology examples from the popular press and the academic literatures of law management and economics are presented to illustrate the impact of this type of bounded rationality on human behavior

is unemployment insurance addictive evidence from the benefit durations of repeat users the author finds evidence that the past occurrence of a spell of insured unemployment lengthens the duration of future spells descriptive statistics from canadian administrative data covering mid 1971 to early 1990 suggest that unemployment insurance ui claimants tend to spend a longer and longer time collecting benefits with each additional claim they make this finding contradicts the implication of static neoclassical models that successive ui spells should be of the same length the author hypothesizes that the stigma attached to receiving unemployment benefits erodes with each new ui claim an individual files

economists as public policy advisers as a member of the joint economic committee for over 15 years i have had ample occasion to observe economists testifying when i was chairman of the committee in the last congress for example we held over 100 hearings and heard from at least that many different economists from this experience i have developed some views about how economists can be effective witnesses and more generally how they can make a useful contribution to economic policy for me the most important quality for economists to have when they are testifying or advising policymakers is the ability to express their ideas on important policy issues clearly and simply without jargon there is an art to telling policymakers what they need to know but don t want to hear an economist who wants to contribute to the policy making process needs to be a good salesman but not a snake oil salesman i encourage more economists to take an active interest in public policy and to contribute to the debate on the economic issues

explaining diversity symmetry breaking in complementarity games strategic complementarity games have found applications in many fields including macroeconomics development and labor economics they provide a useful framework within which to address questions like what generates the disparity across regions and countries why are there booms and recessions and what causes gender and race discrimination in the labor market in short they help us think about the diversity and variations across space time and groups the literature on complementarity games has emphasized coordination failures as the key notion to understand these questions this paper argues that such emphasis is misplaced the key to understand the diversity is symmetrybreaking the notion of coordination failures is not only irrelevant but also misleading when thinking about the diversity

the reemergence of segmented labor market theory according to dual labor market theory the labor market can be usefully described as consisting of two sectors a high wage primary sector with good working conditions stable employment and substantial returns to human capital variables such as education and experience and a low wage secondary sector with the opposite characteristics moreover primary jobs are rationed that is not all workers who are qualified for primary sector jobs and desire one can obtain one finally the sector of the labor market in which an individual is employed directly influences his or her tastes behavior patterns and cognitive abilities thus the dual labor market model or more generally segmented labor market models is simultaneously a description of the income distribution a claim about the absence of market clearing and a radical departure from the standard neoclassical assumption of fully rational actors and exogenously determined preferences while this last element is potentially the most interesting even its proponents fail to give it the attention it deserves and related work has not been incorporated into the segmented labor market model in this paper we therefore concentrate on the first two elements of the model segmented labor market theory was sufficiently popular in the late 1960 s and early 1970 s to be taken seriously by prominent mainstream labor economists however two influential and largely negative reviews glenn cain 1976 michael wachter 1974 portrayed the segmented labor market hypothesis as largely atheoretical and based at best on questionable statistical analysis it seems fair to say that even sympathetic mainstream critics felt that key insights from the segmented labor model could be incorporated into neoclassical analysis and that the remaining elements of the model did not form a sufficiently coherent theory to pose a challenge to the neoclassical model whatever the merits of this perception it is clear that advocates of the segmented labor market approach did not develop a formal theory which conformed to the standards of mainstream economists with some notable exceptions michael piore 1975 david gordon 1972 the work was atheoretical moreover the empirical methods used tended to fall outside the norm for example interviews observational studies and historical and institutional analysis advocates of the segmented labor market perspective mostly radical political economists chose instead to develop their own research program outside the mainstream the reemergence of segmented labor market theory is linked with the reversal of these two tendencies the theory has been pursued by economists using modern tools of imperfect information theory and state of the art econometrics as a result the approach has again attracted the attention of the mainstream even a few years ago it would have been a clairvoyant observer who predicted that lawrence summers would be working on a theoretical model of labor market duality with jeremy bulow 1986 that robert solow would count among his recent work a dual market model with ian mcdonald 1985 and that james heckman would publish an article in which he undertook an empirical test of a dual market model failed to reject the model and then devoted much of the rest of the article to attacking his and other tests of the dual labor market view see his article with v joseph hotz 1986 since the theoretical developments are largely associated with efficiency wage and departments of economics university of california berkeley ca 94720 and nber and boston university 270 bay state road boston ma 02215 and nber respectively this study was supported in part by nsf grant no ses 8606139 lang acknowledges support from a sloan faculty research fellowship dickens acknowledges support from the institute of industrial relations at berkeley

theory and evidence on the political economy of the minimum wage this paper examines how closely the minimum wage has been set to the most popularly stated goals of minimun wage policy i first estimate these goals the minimum wage rate at which the relevant labor demand is unitary elastic maximizing the total earnings of minimum wage workers about 5 35 and the level that would lift a typical minimum wage worker s family out of poverty about 5 17 i can reject that the actual minimum wage policy has been driven by desire to achieve these goals and find that a simple interest group model best explains the historical path of the minimum wage rate

an investigation of the labor market earnings of panamanian males evaluating sources of inequality this paper presents empirical evidence on the determinants of labor market earnings and inequality for males in panama using newly available microdata we estimate earnings equations based on the measurement framework of mincer 1974 and compare them with those for other countries at various stages of economic development we present evidence on two aspects of inequality in less developed economies labor market segmentation and social stratification we present tests of the segmentation hypothesis including several of the dual labor market hypotheses and discuss their inherent ambiguity we also present evidence on the importance of family background for earnings determination and educational attainment

spatial externalities and agglomeration in a competitive industry abstract we introduce spatial spillovers as an externality in the production function of competitive firms operating within a finite spatial domain under adjustment costs spillovers may attenuate with distance and the overall externality could contain positive and negative components with the overall effect being positive we show that when the spatial externality is not internalized by firms spatial agglomerations may emerge endogenously in a competitive equilibrium the result does not require increasing returns at the private or the social level increasing marginal productivity of private capital with respect to the externality or location advantages in fact agglomerations may emerge with decreasing returns to scale declining marginal productivity of private capital with respect to the externality and no location advantage the result depends on the interactions between the structures of production technology and spatial effects as shown in the paper no agglomerations emerge at the social optimum when spillovers are internalized and diminishing returns both from the private and the social point of view prevail numerical experiments with cobb douglas and ces technologies and an isoelastic demand confirm our theoretical predictions

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

the approach of institutional economics this paper assesses the old institutional economics it emphasizes the importance of key old institutionalist themes concerning the necessity of habits and rules and the role of institutions a problem in the alternative theoretical program of the new institutionalism is the untenability of its assumption of an original institution free market or state of nature even optimizing behavior requires the prior existence of habits and rules although it still lacks a complete and systematic theory the evolutionary approach of the old institutionalists tackles the problem of the interactive relationship of actor to structure without analytical reduction to one or the other

a theory of wage dispersion and job market segmentation job market segmentation refers to the idea that there tends to be a correlation among high wages high productivity high capital intensity high value added few quits relative to layoffs and low labor turnover this paper develops a model of wage dispersion and job market segmentation based on the very sparse assumption that the only departure from a strictly orthodox neoclassical world consists of wages being sticky in the short run implications of the model are explored and discussed

on socioeconomic causes of wait unemployment abstract this paper discusses implications of wait unemployment in a two sector model with a dual labour market primary sector firms pay efficiency wages the wage rate in the secondary sector is determined by labour supply and demand most queueing models assume that workers for the primary sector are only recruited from the pool of unemployed instead this paper explains wait unemployment by assuming that people care about their relative status in society the model is presented in general terms and a closed form solution is obtained by specifying functional forms the results emphasize the need for proper manpower policies to reduce structural unemployment

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

economics of controlling invasive species a stochastic optimization model for a spatial dynamic process we analyze the dynamic process of invasive species control in a spatially explicit and stochastic setting an integer optimization model is applied to identify optimal strategies to deal with invasive species at a steady state optimal strategies depend on the spatial location of invasion as well as on stochastic characteristics of spread and control previous studies of invasive species control have been stochastic or spatial but not both we model a landscape as consisting of multiple cells each of which may be subject to border control or eradication within the cell optimal strategies from the model are characterized as eradication containment or abandonment of control representing the rate of species spread as stochastic rather than deterministic results in less intensive control becoming optimal at equilibrium the optimal strategy may switch from eradication to containment or from containment to abandonment if an infestation occurs at the boundary of the region within which it may spread it is more likely to be optimal to eradicate or contain the species compared to an infestation in the interior of the region if the effectiveness of border control is stochastic then containment is not feasible in the long term but it is still optimal as a temporary measure in some scenarios

institutional economics and the minimum wage broadening the theoretical and policy debate debate among labor economists on the pros and cons of a minimum wage law has come to focus on whether labor markets are competitive or monopsonistic using principles and concepts of institutional economics the author argues that this perspective on minimum wages is too narrow in particular he uses institutional theory to develop four theoretical rationales for minimum wage legislation setting a floor on wages to offset imperfect competition and inequality of bargaining power promote macroeconomic stabilization and full employment contribute to long term efficiency and growth and incorporate labor market externalities and social costs of labor one revisionist implication is that a minimum wage under plausible conditions may increase economic efficiency even in a purely competitive labor market

financial contagion and economic development an epidemiological approach abstract we develop an epidemiological approach to analyze how financial contagion may affect and be affected by economic activity we show that according to specific parameter values the economy may converge either to a non speculative or to a speculative equilibrium in the former situation the level of per capita income is maximal while in the latter it is reduced by financial contagion the presence of economic and financial feedback effects may also give rise to macroeconomic fluctuations during the transitional path clearly showing that such economic and financial links are an important driver of the short run macroeconomic performance by extending the analysis to a spatial dimension we also show that financial contagion in some specific region may propagate quickly also in regions far away from those in which the contagion initially occurs highlighting the role of regional policy coordination to avoid interregional contagion

ronald coase and methodology ronald coase wrote two great theoretical articles that earned him the nobel prize the nature of the firm in 1937 and the problem of social cost in 1960 he also wrote many articles dealing with the methodology of economics often in the setting of a discussion of a particular economist such as adam smith or alfred marshall the methodological articles will be my particular focus here

segmented labour markets in australia the concept and measurement of segmented labour markets has received little attention in australia here a method for establishing a taxonomy of occupaions according to characteristics associated with the segmented labour market hypothesis is presented using this taxonomy the distribution of workers in australia according to gender migrant status and trade union membershipis examined

swimming upstream trends in the gender wage differential in the 1980s using michigan panel study of income dynamics data for 1979 and 1988 we analyze how a falling gender wage gap occurred despite changes in wage structure unfavorable to low wage workers the decrease is traced to gender specific factors which more than counterbalanced changes in measured and unmeasured prices working against women supply shifts net of demand were unfavorable for women generally and hurt high skilled more than middle and low skilled women by analyzing wages we find support for the notion of a gender twist in supply and demand having its largest negative effect on high skilled women