wages and productivity growth in a dynamic monopoly abstract this paper studies the intertemporal problem of a monopolistic firm that engages in productivity enhancing innovations to reduce labor costs the optimal innovation policy is not monotone and the rate of productivity growth is the highest when the firm s size is in some intermediate range as long as its initial productivity is not too low the firm eventually reaches a steady state where the rate of productivity growth is identical to the rate of wage growth productivity dependent wage differentials do not affect productivity growth in the steady state they increase however the firm s long run equilibrium cost level

re examination of uniform commodity taxes under a non linear income tax system and its implication for production efficiency abstract this paper shows that the result of uniform commodity tax under nonlinear income taxation by atkinson and stiglitz 1976 no longer holds if the production side of an economy is taken into the consideration in particular imposing a non uniform commodity tax can pareto improve welfare even under nonlinear income taxation in addition the paper shows that if the government uses a nonlinear income tax system for income redistribution then the introduction of distortions in the public sector can pareto improve welfare contrary to the results in diamond and mirrlees 1971

energy distribution and economic growth an empirical test for china abstract in this paper we consider whether economic growth in china could be constrained by the physical development of the energy distribution network specifically we structurally test the network theory of electricity distribution of dalgaard and strulik 2011 using city level data for china in their paper they argue that the relationship between the size of the economy measured by capital per capita and electricity consumption per capita is governed by a simple power law with capital having an exponent bounded between and depending on the efficiency of the network we use data for 224 cities in china between 2002 and 2007 to observe whether structural estimates match those of dalgaard and strulik 2011 for 50 us states where they find the exponent in the power law connecting capital with electricity to be 2 3 our results provide an estimate of the power law component to a little higher than the 2 3 found for the us which provides broad support for the model when we look at different time periods we observe what appears to be a fall in the efficiency of the energy distribution network towards the end of our period

on optimal non linear taxation and public good provision in an overlapping generations economy abstract using the self selection approach to tax analysis within an olg framework the paper examines optimal non linear labour and capital income taxation and the provision of a durable public good under endogenous wages the marginal tax rules depend on the influence of the tax instruments on self selection and on the income earning abilities of the households in particular we found that production inefficiency occurs in the model justifying capital income taxation for the public good the paper derives a dynamic analogue of the second best samuelson rule encompassing both inter and intragenerational redistributive considerations furthermore the usual conditions guaranteeing the efficiency of the first best samuelson rule are not sufficient in the present model

taxes redistribution and the minimum wage a theoretical analysis this paper considers a simple general equilibrium model that contains two types of workers with differing levels of ability and a social welfare maximizing government the paper shows that social welfare can sometimes be increased by supplementing an optimal linear income tax with a minimum wage but that social welfare can never be increased by supplementing an optimal nonlinear income tax with a minimum wage

unionisation structures and innovation incentives this paper examines how dierent unionisation structures aect rms innovation incen tives and industry employment we distinguish three modes of unionisation with increasing degree of centralisation 1 decentralisation where wages are determined independently at the rm level 2 coordination where one industry union sets individual wages for all rms and 3 centralisation where an industry union sets a uniform wage rate for all rms while rms investment incentives are largest under centralisation investment in centives are non monotone in the degree of centralisation decentralisation carries higher investment incentives than coordination labour market policy can spur innovation by decentralising unionisation structures or through non discrimination rules

the tradeoff between wages and employment in trade union objectives this paper demonstrates that contrary to a widely held opinion the determination of the goals of unions is fully amenable to empirical analysis a characterization of the wage and employment setting process in unionized markets is adopted and its qualitative implications examined the first order condition for this model is fitted to time series data on the newspaper industry from ten cities the international typographical union s objective function reveals very restricted opportunities for substituting wages for employment in response to a change in the slope of the employer s labor demand function larger union locals place greater emphasis on wages versus employment than smaller union locals

trade unions and regional development abstract we focus on the role that labour unions play in the context of a two region dual economy we show that unskilled unions will increase the wage of unskilled workers and depress growth in both the backward and the advanced regions the growth effects will be felt more strongly in the relatively poor region if skilled workers are allowed to migrate and unions recognize that a more aggressive wage setting policy may foster migration unions will moderate their wage requests however regional unions would then have a strong incentive to coordinate their wage demands across regions this would further raise the unskilled wage and more so in the backward region we conclude that labour market policies designed to foster regional convergence should seek both to discourage centralized wage setting and favour skilled labour mobility

do unions reduce investment evidence from canada the authors test for a link between unionization and net investment rates in canadian manufacturing analysis of data on 18 industries for the years 1967 87 reveals a negative non linear relationship the presence of unions appears to have reduced investment when the percentage of firms in the industry that were unionized was between 0 and approximately 50 with a plateau or slight positive marginal effect above this level in an industry moving from no unions to the mean level of unionization net investment and gross investment are predicted to fall by 66 74 and 18 25 respectively

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

rational expectations and policy credibility following a change in regime we examine the dynamic path of an economy after a change in regime when neither the policy to be followed nor the reactions of the public are known the model is an application of kreps and wilson s reputation model to barro and gordon s macroeconomic policy game equilibrium is defined to be the dynamically consistent solution to a game between the government and the private sector it involves mixed strategies and bayesian learning by both sides until the uncertainty about government and public behaviour is resolved the absence of complete credibility of government policy and intransigence of private sector wage demands increase the output loss of disinflation the analysis also sheds light on the strategic nature of economic policymaking and the role of information in macroeconomics

second best pigouvian taxation a clarification this paper argues that the search for a purely environmental component of a tax on goods or factors of production that impact the environment separate from its redistributive and distortive effects is fraught with difficulties the quest is often impossible because of the interconnectedness between labor supply consumption decisions and the environmental quality the paper differentiates between two conceptualization for the pigouvian tax that have been employed in the literature and argues that each has tried to isolate the environmental component in its own way one conceptualization due to cremer et al j public econ 70 343 364 1998 does so by ruling out direct feedback from changes in environmental quality on the incentive effect of the tax in the second conceptualization due to bovenberg and ploeg s j public econ 55 349 390 1994 incentive effects are ruled out by making consumers valuation of environmental quality independent of the labor supply this is achieved by assuming separability between labor supply and other goods including environmental equality to convey its message the paper studies the properties of optimal polluting and non polluting non labor input taxes in a mirrleesian model with endogenously determined wages

on the role of the production and consumption assumptions for optimum taxation abstract the sensitivity of optimum tax rates to a variety of factors has sustained many different lines of enquiry this paper attempts to demonstrate by computational procedures the role of the production and consumption leisure assumptions in the light of recent research in particular the work of stern will be extended to provide an assessment of the allen analysis it will be shown that optimum negative marginal tax rates are no longer a curiousity and that our production and consumption leisure assumptions are of considerable importance for variable wage tax models

pay and employment determination in britain what are labour contracts really like the recent growth of unemployment in western economies has prompted new research on the workings of the labour market there has been much interest in particular in the questions what determines the level of real pay and why is it apparently so insensitive to changes in aggregate demand and unemployment european economists now find it hard to take seriously the notion still taught to many undergraduate that wages are determined by the intersection of demand and supply curves roughly half of all british employees belong to trade unions a much higher percentage have their pay fixed by some kind of collective bargain in this country it is negotiations not impersonal com petitive markets which decide what most of us will be paid the difficult problem is that of how to understand this process or to put it differently of how to think up the right model of the world

effects of financial development economic growth and trade on electricity consumption evidence from post fukushima japan abstract this study examines the long run and short run effects of financial development economic growth export imports and capital on the japanese energy predicaments as a result of the foregoing energy crisis in the country to ensure a robust outcome the study applied the extended cobb douglas production function and used time series data from 1970 to 2012 following to this structural break unit root test ardl bounds test approach to cointegration and the johansen cointegration test were applied in addition the vecm granger causality framework was used in determining the causal relationship between the variables the findings of the study establish that in the long run a 1 rise in financial development economic growth exports and imports in japan will exert a significant pressure on the japanese electricity consumption by 0 2429 0 5040 0 0921 and 0 2193 respectively however capital was found to decline energy consumption in all material respect in the short run the study discovered how a 1 rise in the dynamics of financial development economic growth exports and imports to add to the japanese electricity predicaments by 0 2210 0 5840 0 0521 and 0 2031 respectively the existence of the feedback relationship between most of the variables was discovered while economic growth exports imports and trade openness were found to granger cause electricity consumption the study advocates the adoption of massive but competitive renewable energy system in japan how it should be done and why it should be done are carefully set by this study

government policy real wage resistance and the resolution of conflict a theory of bargaining with k players is proposed to reconcile the multitude of conflicting interests in an econometric model this nash strategy corresponds to a non zero sum differential dynamic game and is established either by rational anticipation of finite conflict or pre play round table discussion the theory is illustrated with an analysis of conflict between government trade unions and entrepreneurs all results are calculated from a large scale multisectoral dynamic model of the u k economy developed by the cambridge growth project

the codetermined firm in oligopoly abstract a simple duopoly model is considered where firm owners bargain with employees representatives about employment but not about wages as is the case for codetermined firms in germany it turns out that for some range of the bargaining power a prisoner s dilemma exists bargaining is the dominant strategy although joint profits would be maximized with unrestricted profit maximization

trade unions investment and employment the implications of long term wage contracts and investment in capital on non cooperative wage bargaining between a firm and a union are analysed the union maximises a utilitarian utility function and the firm faces a neoclassical investment problem with internal adjustment costs the monopoly union outcomes with binding contracts is time inconsistent because the union has an incentive to renege on announced low wage strategies once the capital stock has been accumulated the monopoly union outcome without binding contracts leads to credible strategies which correspond to higher wages and lower levels of employment investment and the capital stock efficient contracts give rise to higher employment than monopoly union outcomes whether with or without long term wage contracts the results are illustrated with a numerical example finally when the game between the union and firm is repeated reputational equilibira provide a solution to the problem of time inconsistency

optimal linear income taxation with general equilibrium effects on wages abstract the paper argues that the endogeneity of wages may make a considerable difference to optimal linear tax rates in this case there is not only the usual direct redistribution via the fiscal system but also the general equilibrium redistribution due to the change in wages depending on the elasticity of substitution of the production function and the labour supply elasticities these may be reinforcing or opposing it is shown that the general equilibrium effect may plausibly outweigh the direct effect so that net redistribution to the lower paid involves a wage subsidy financed by a lump sum tax

progressive tax and inequality in a unionized economy in this paper we develop a heterogeneous agent endogenous growth model of a unionized economy with distinct progressive tax schedules on labor and capital income with time preference heterogeneity the effective labor force balanced growth and income inequality are endogenously determined and these interact with each other a reduction in the degree of progressive labor tax yields a double dividend in terms of reducing income inequality and boosting economic growth while capital income progressivity displays the usual growth inequality trade off particularly the double dividend effect becomes more pronounced when unionization is declined or trade unions become more wage oriented leading to the so called cheshire cat phenomenon

unemployment in britain male unemployment in britain has risen from around 2 per cent in the 1950s to around 17 per cent in 1985 see figure 1 the figures are for male unemployment because there is no consistent series for women 1 even more remarkably unemployment has fallen in only three years out of the last twenty 1973 1978 and 1979 to account for this we need a model that explains both changes in the natural or non accelerating inflation rate of unemployment nairu and deviations from it we use a three equation supply side model centred on the labour market this has two main features the first concerns the determination of employment in the short run the labour demand function that we use cuts through the fruitless debate now raging especially in europe as to whether current unemployment is classical or keynesian according to the classical view employment is too high because real wages are too high according to the keynesian view real wages are not binding and unemployment is high because the product market does not clear with prices too high relative to nominal demand the whole debate is set in the framework of perfect competition yet in perfect competition prices are set by impersonal forces and it is not clear what could possibly stop prices clearing the market it is much more reasonable to think of prices as being set by imperfectly competitive firms existing prices being the best they can think of given the demand they face in this context firms demand for labour will depend on both the real product wage and the level of real aggregate demand this is the demand function we estimate and it conforms both to common sense and to the data however this does not imply that employment can be made to grow without limit by pumping up real demand for in the medium term when price surprises are eliminated our model determines three variables employment real wages and real demand on the basis of three equations an employment equation a price equation and a wage equation thus in the medium term there is a natural level of employment and corresponding to this a natural level of real aggregate demand the second key feature of our model concerns the medium term determination of unemployment in the medium term the planned mark up of wages over prices in wage settlements must be consistent with the mark up of prices over wage costs in employers pricing behaviour for if wage setters try to set real product wages higher than is consistent with employers pricing behaviour this generates ever increasing inflation thus the key to understanding unemployment in the medium term is the behaviour of wage setters if events occur that push them towards too high real wages then unemployment has to rise to offset these influences we shall call these influences wage pressure variables or push factors and they are clearly crucial in understanding unemployment the variables here include the social security system employment protection

solow 1956 as a model of cross country growth dynamics despite the widespread popularity of the solow growth model much of the recent empirical work based on the classic framework misrepresents a crucial feature of the model namely the growth rate of technological progress assumed to be exogenous in the solow model is often identied as being constant across countries this simplication of the behavior of technological progess runs counter to the evidence and has had a number of signican t implications for the interpretation of the solow model one implication has been an overemphasis on the role of factor accumulation in explaining cross country income dieren tials in addition the commonly cited empirical result that the speed of conditional convergence is slower than predicted by the solow model is a function of this inaccurate assumption about technology rather than due to a failure of the model itself

a dynamic model of trade union behaviour this paper constructs a dynamic model of trade union behavior in which union membership is endogenous unemployed workers are assumed to leave their union as they seem to in reality and the union must therefore solve an intertemporal optim ization problem the results imply that conventional static models ov erstate the distortions caused by monopoly unionism and that the rece nt empirical mod els of union behavior may be misspecified the paper s analysis can be seen as an attempt to construct a model of the pos t entry closed shop copyright 1987 by the review of economic studies limited

estimation of the depreciation rate of physical and r d capital in the u s total manufacturing sector i introduction numerous studies on production and cost the sources of productivity and endogenous growth have recognized the pivotal role of the physical capital stock studies at various levels of aggregation over assets and industries have emphasized the crucial role of investment in plant and equipment in the growth of demand and productive capacity it is clearly recognized by economists and policymakers that knowledge capital approximated by rd 1986 to measure the depreciation rates of the stock of rd 1980 in the literature on dynamic demand models such an approach was first adopted by epstein and denny 1980 and more recently by kollintzas and choi 1985 for a single capital good and on a theoretical level in bernstein and nadiri 1987a 1987b the paper is organized as follows the specification of the model is presented in section ii section iii is devoted to a discussion of the data and to the presentation of the parameter estimates of the model in section iv we present the empirical results for the depreciation rates for physical and r d capital and compare them with those reported in the literature we compare the physical capital stock estimates generated by our model with the official capital stock estimates produced by u s department of commerce bureau of economic analysis in this section we also present our estimates of the decomposition of gross investment into replacement and expansion investment for both physical and r d capital these decompositions are important from the vantage point of public policy analysis

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

the optimal public employment policy abstract this paper studies optimal public employment in a model with two types of labor unskilled and skilled and a single consumption good a linear income tax is used to redistribute income it is shown that if the income tax and public employment levels are optimal then there is less unskilled labor and more skilled labor in public production than is necessary to minimize costs at the prevailing gross wage rates the robustness of this result is investigated by examining a second model

income taxation endogenous factor prices and production efficiency in an analysis of a two type income tax model with endogenous wages this paper shows that production efficiency is violated in the optimum with i non linear and ii linear income taxation if and only if a distortionary tax schedule is implemented these findings complement earlier results of the literature in passing it is also shown that optima with non linear redistributive income taxation cannot be identified with the redistributive regime if the assumption of endogenous wages is taken seriously

a dynamic multi stage data envelopment analysis model with application to energy consumption in the cotton industry abstract data envelopment analysis dea is a non parametric method for evaluating the relative efficiency of homogenous decision making units dmus with multiple inputs and outputs in this paper we present a dynamic multi stage dea dms dea approach to evaluate the efficiency of cotton production energy consumption in the proposed model the farms which consume resources i e fertilizers seeds and pesticides to produce cotton are assumed to be the dmus inputs not consumed during a planning period are carried over to the next period in the planning horizon initially a dms dea model is used to determine the overall efficiency of the dmus with dynamic inputs next the efficiency score of each dmu is calculated for each time period in the planning horizon we demonstrate the applicability of the proposed method and exhibit the efficacy of the procedures and algorithms with a real life case study of energy consumption in the cotton industry

macroeconomic stabilization policy and trade union behaviour as a repeated game lt is unquestionably true that the presence of trade unions in an economy affects its macroeconomic behaviour by attempting to maintain traditional patterns of relative wages among occupations and industries and by resisting cuts in real wages unions slow macroeconomic adjustment and structural change in response to macroeconomic shocks it is often argued that by insulating groups of workers from competitive pressures wage determination is less associated with market clearing than it otherwise would be overlapping contracts and resistance to relative wage changes thus give aggregate wage inflation mo mentum it would not otherwise have taylor 1980 jackman 1983 trade union bargaining may affect the position of the phillips curve jackman and layard 1982 nickell 1982 a popular argument for the increases in the nairu non acceleratinginflation rate of unemployment which have taken place between 1960 and 1980 in many industrialized countries where unions are strong is that trade unions have grown more militant and their bargaining behaviour has changed in some way this argument goes back at least as far as hines 1964

investment profit sharing and the degree of centralization abstract this paper examines monopoly unions which are strong enough to use two part tariffs i e basic wages plus profit shares it is shown that decentralization in bargaining increases the total pay per worker and lowers the levels of capital stock and income

an economic theory of the open shop trade union there has been significant interest recently both in the empirical investigation of the determinants of trade union membership in the u k and elsewhere and in the theoretical analysis of the economic effects of the closed shop trade union however there is little rigorous microeconomic explanation of union membership which is relevant for much of the u k and similar labour markets where the open shop union is prevalent this paper attempts to overcome the free rider problem of explaining union membership in the open shop we argue that both private pecuniary gains and social influences affect the individuals union membership decisions citing evidence in support of these basic assumptions we show that stable intermediate union density is a possible equilibrium outcome in a generalised social custom model we also analyse the simultaneous determination of wages and union membership deriving a number of comparative static results in particular we find that both wages and union density depend upon inter alia the level of strike pay the net cost of union membership and the individual s sensitivity to social custom and associated solidarity effects we argue that the approach is consistent with various stylised facts concerning both wage bargaining and union membership and is able to explain a number of otherwise puzzling features of union membership

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

steady state unemployment under profit sharing this paper demonstrates how asymmetric treatment of high seniority insider workers and non tenured outsiders gives rise to bad macroeconomic st eady states in a wage economy the framework uses a nash bargaining solution where workers may bargain over pay but firms control hiring profit sharing is then considered as an alternative payment mechanism having the automatically corrective incentive property that employers want to hire more outsiders given the assumptions of the model it is shown that widespread profit sharing results in lower unemployment and more output even though it is individually rational for insiders to prefer wages over profit shares copyright 1987 by royal economic society

does human capital matter for energy consumption in china this article investigates the dynamic relationship between human capital and energy consumption using chinese provincial data over the period 1990 2010 considering for cross sectional dependence and parameter heterogeneity across space and over time we identify a significant and negative human capital energy consumption relationship in china specifically we find that a 1 increase in human capital reduces energy consumption by a range between 0 18 and 0 45 furthermore this negative relationship can be attributed to stronger accumulation of post school human capital in eastern china this finding suggests that energy conservation in china could be achieved by improving post school human capital components such as on the job training experience and learning by doing

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

union wages temporary lay offs and seniority it is widely believed that the seniority system in conjunction with the collective bargaining process contributes significantly to the determination of the unemployment level in unionized sectors causa i empiricism suggests that real wage demands often remain buoyant in these sectors in the face of seemingly high rates of unemployment among union members james medoff 1979 p 380 convincingly documents the evidence that adjustment through lay offs is substantially greater in unionized firms than in comparable non unionized firms the usual but somewhat informal explanation is that the outcome of union voting is greatly influenced by senior workers who are fairly certain that they will not be laid off when normal shifts in the industry s demand for labour occur 2 these inframarginal workers are believed to vote for higher wage settlements than they would if their own jobs were not so secure

codetermination as a strategic advantage abstract a theoretical model of codetermination is considered where consistent with german institutions firm owners bargain with employees representatives about employment but not about wages a duopoly and a more general oligopolistic situation are analyzed for some range of bargaining power a prisoner s dilemma exists codetermination leads to increased profits if the other firm is a traditional profit maximizer bargaining is the dominant strategy although joint profits would be maximized with unrestricted profit maximization the theory is tested with data from 22 german firms who operate in the same markets over 23 years codetermined firms actually show a different behavior than other companies

labor policy and investment evidence from canada some critics of proposed legislative labor policy changes contend that laws favoring labor would adversely affect business investment research on labor policy however often assumes that investme

optimum taxation with errors in administration abstract the paper compares the welfare levels which can be achieved by two distinct tax regimes lump sum taxation where one attempts to identify individuals and allocate transfers or subsidies on the basis of characteristics and income taxation where characteristics are not observed but personal incomes are measured and taxed where there are no errors in classifying individuals lump sum taxation is superior but where mistakes are made in the allocation of lump sum grants or subsidies income taxation may be more attractive the level of errors where the regimes are equally desirable in terms of social welfare is computed in simple models following that of feldstein 1973 where there is strong aversion to inequality then income taxation becomes preferable at quite small errors in analysing income taxation it is shown that in the feldstein model with endogenous wages the marginal tax rate in optimum income taxation on the more skilled is negative and that on the less skilled is positive in contrast to the standard results see seade 1977 with exogenous wages

self selection and pareto efficient taxation abstract this paper analyses the set of pareto efficient tax structures the formulation of the problem as one of self selection not only shows more clearly the similarity between this problem and a number of other problems such as the optimal pricing of a monopolist which have recently been the subject of extensive research but also allows the derivation of a number of new results we establish i under fairly weak conditions randomization of tax structures is desirable ii if different individuals are not perfect substitutes for one another in production then the general equilibrium effects until now largely ignored in the literature of changes in the tax structure may be dominant in determining the optimal tax structure in particular if the relative wage of high ability and low ability individuals depends on the relative supplies of labor the optimal tax structure entails a negative marginal tax rate on the high ability individuals and a positive marginal tax rate on the low ability individuals the marnitude of which depends on the elasticity of substitution iii if individuals differ in their preferences pareto efficient taxation may entail negative marginal tax rates for high incomes while iv if wage income is stochastic the marginal tax rate at the upper end may be 100 our analysis thus makes clear that the main qualitative properties of the optimal tax structure to which earlier studies called attention are not robust to these attempts to make the theory more realistic