income dispersion and counter cyclical markups recent advances in measuring cyclical changes in the income distribution raise new questions how might these distributional changes affect the business cycle itself we show how counter cyclical income dispersion can generate counter cyclical markups in the goods market without any preference shocks or price setting frictions in recessions idiosyncratic labor productivity shocks raise income dispersion lower the price elasticity of demand and increase imperfectly competitive firms optimal markups the calibrated model explains not only many cyclical features of markups but also cyclical and long run patterns of standard business cycle aggregates

unionization and input flexibility in u s manufacturing 1973 1996 input flexibility as measured by the ability of firms to vary input demand in the face of changes in input prices is an important dimension of labor market flexibility using a new dataset the authors analyze the impact of unionization on input flexibility in u s manufacturing from 1973 to 1996 a period in which production was arguably becoming more flexible due to deep changes in the u s industrial relations system and in the broad macroeconomic environment the authors quantify the effects of unionization on input flexibility by estimating elasticities of substitution between a broad range of labor and non labor inputs controlling for unionization the pattern that emerges is more complex than that suggested by other research in particular low unionization apparently is associated with greater flexibility in the use of labor inputs but less flexibility in the use of non labor inputs

what do we know about macroeconomics that fisher and wicksell did not the answer to the question in the title is a lot in this essay i argue that the history of macroeconomics during the 20th century can be divided into three epochs

markups aggregation and inventory adjustment in this paper i suggest a unified explanation for two puzzles in the inventory literature first estimates of inventory speeds of adjustment in aggregate data are very small relative to the apparent rapid reaction of stocks to unanticipated variations in sales second estimates of inventory speeds of adjustment in firm level data are significantly higher than in aggregate data the paper develops a multisector model where inventories are held to avoid stockouts and price markups vary along the business cycle the omission of countercyclical markup variations from inventory targets introduces a downward bias in estimates of adjustment speeds obtained from partial adjustment models when the cyclicality of markups differs across sectors this downward bias is shown to be more severe with aggregate rather than firm level data similar results apply not only to inventories but also to labor and prices montercarlo simulations of a calibrated version of the model suggest that these biases are quantitatively significant

overtime labor employment frictions and the new keynesian phillips curve abstract this paper presents a new keynesian nk model that is extended to differentiate between straight time and overtime work the model proposes that the new keynesian phillips curve nkpc should be estimated with marginal cost measured in terms of overtime labor the resulting coefficient estimates are in accordance with theory and statistically significant for the hybrid nkpc which allows for backward looking price setters but not for the purely forward looking nkpc in the hybrid model backward looking behavior is found to be predominant the paper also shows that the incorporation of employment frictions predetermined employment and convex adjustment costs in nk models helps reconcile the frequent price changes found in the microdata with the degree of sluggishness in inflation adjustment to output changes at the macro level

the effects of work sharing on employment and overtime in finnish manufacturing 1960 87 comparison of three alternative models the purpose of this paper is to develop a model of the determination of hours and employment is developed and compared with the models of brunello 1989 and hart and wilson 1988 the models are estimated by using annual and quarterly data from the finnish manufacturing sector according to the results the actual hours closely follow the standard hours this implies that the interior solutions in hours determination suggested by compared models are not relevant instead firms try to avoid overtime as a consequence work sharing through shorter hours will be effective

the structure of labor costs with overtime work in u s jobs the author analyzes employment contract and labor demand models of the fair labor standards act overtime pay regulation to determine their effects on employers labor costs using national compensation survey data to obtain a representative sample of u s private industry jobs he assesses each model s ability to predict either the adjustment of wage rates if overtime is warranted the employment contract model or the probability of using overtime to meet labor demands the labor demand model using quasi fixed employment costs as independent variables allows for a better accounting of labor demand he finds that lower wages go hand in hand with jobs requiring more overtime work which indicates that overtime pay regulation influences the structure of compensation

is addiction rational theory and evidence this paper makes two contributions to the modeling of addiction first we provide new and convincing evidence that smokers are forward looking in their smoking decisions using state excise tax increases that have been legislatively enacted but are not yet effective and monthly data on consumption second we recognize the strong evidence that preferences with respect to smoking are time inconsistent with individuals both not recognizing the true dife culty of quitting and searching for self control devices to help them quit we develop a new model of addictive behavior that takes as its starting point the standard rational addiction model but incorporates time inconsistent preferences this model also exhibits forward looking behavior but it has strikingly different normative implications in this case optimal government policy should depend not only on the externalities that smokers impose on others but also on the internalities imposed by smokers on themselves we estimate that the optimal tax per pack of cigarettes should be at least one dollar higher under our formulation than in the rational addiction case

demand markups and the business cycle abstract we generalize the demand side of a real business cycle model introducing non homothetic intratemporal preference aggregators over differentiated final goods under monopolistic competition this generates markups which vary with aggregate consumption we estimate a flexible preference specification through bayesian methods and obtain results consistent with substitutability across goods that is increasing in consumption the associated markup variability magnifies the propagation of shocks through additional substitution effects on labor supply and consumption

the cyclical behavior of the price cost markup countercyclical markups constitute the key transmission mechanism for monetary and other demand shocks in new keynesian models this paper tests the foundation of those models by studying the cyclical properties of the markup of price over marginal cost the first part of the paper studies markups in the aggregate economy and the manufacturing sector we use bils s 1987 insights for converting average cost to marginal cost but do so with richer data we find that all measures of markups are either procyclical or acyclical moreover we show that monetary shocks lead markups to fall with output the second part of the paper merges input output information on shipments to the government with detailed industry data to study the effect of demand changes on industry level markups industry level markups are found to be acyclical in response to demand changes

an empirical analysis of alcohol addiction results from the monitoring the future panels in a panel of young adults we find that alcohol consumption is addictive in the sense that increases in past or future consumption cause current consumption to rise the positive and significant future consumption effect is consistent with the hypothesis of rational addiction the long run price elasticity is approximately 60 larger than the short run price elasticity and twice as large as the elasticity that ignores addiction thus a tax hike policy to curtail consumption or abuse may not have a favorable cost benefit ratio unless it is based on the long run price elasticity jel 110

customer markets credit market imperfections and real price rigidity according to standard theory an increase in demand should raise prices of goods given factor prices empirically however prices appear to be unaffected by short run variations in demand this paper suggests an explanation of this observation if customers react slowly to price changes and credit markets are imperfect prices may be unchanged or even fall when demand increases the reason is that when demand is high profits are high and firms can compete more intensely for customers without increasing their borrowing copyright 1991 by the london school of economics and political science

wages hours and overtime premia evidence from the british labor market unlike the united states britain has no national laws regulating overtime hour assignment or compensation using individual level data on male non managerial workers from the 1998 british new earnings survey the authors investigate relationships among the standard hourly wage rate hourly earnings including overtime the overtime premium and the length of overtime hours they find that when overtime is accounted for average hourly wage earnings are fairly uniform across firms in a given industry because firms paying below market level straight time wages tend to award above market level overtime premiums and conversely firms paying above market level straight time wages provide below market level overtime premiums

unionism mio the cyclical behavior of the labor tv rket in u s manufacturing t he traditional view of market dynamics implies that when demand varies intertemporal variation in quantities exchanged increases as prices become less flexible this reasoning leads to the proposition that wage and price rigidities are important contributors to cyclical fluctuations in output fischer 1977a and gray 1978 based formal macro models on this principle although this view is common it has little empirical support the coexistence of union and nonunion establishments engaged in similar activities contains potential for testing its merits economists have long maintained that in the short run union wages are less flexible than nonunion wages dunlop 1950 rees 1951 this difference should produce larger fluctuations in union employment and hours empirical studies have generally supported the union wage rigidity hypothesis lewis 1963 ashenfelter johnson and pencavel 1972 and hendricks 1981 2 but until recently lack of data precluded analysis of hours and employment definitive answers to the important questions concerning unions influence on cyclical behavior require yet unavailable information matching the behavior of firms and characteristics of workers but data from modem surveys have allowed considerable progress nevertheless it remains a challenge to determine how much of differences observed in the stability of labor utilization are attributable to differences in the stability of demand medoff 1979 and raisian 1979 report that cyclical variation of employment and hours is indeed greater for union labor but despite attempts to allay suspicion that their finding arises primarily from concentration of union members in cyclically sensitive industries both studies leave room for doubt raisian estimated functions relating an individual s wage and weeks worked in a year to a proxy for excess demand that year s unemployment rate in the worker s industry the technique is attractive but raisian s data included workers from the entire economy and the industries were broad aggregates thus differences in the union and nonunion groups compositions may play a large role medoff who confined his study to production workers in manufacturing and used data allowing finer partitions investigated the importance of composition more thoroughly but he did not estimate relationships between adjustments in employment or hours and a measure of demand furthermore his focus was principally on the composition of manhours adjustments rather than their size in this paper i combine the strongest features of the medoff and raisian studies in further examination of the influence of unionism on cyclical fluctuations using current population surveys u s department of commerce 1978 from may of 1973 75 my analysis covers production workers in manufacturing during a period of rising inflation and unemployment the heart of the analysis is a measure of residual employment that quantifies by three digit industry and year shortrun excess demand for labor i construct this variable from employment time series and use it to estimate union nonunion differences in the cyclical responses of unemployment hourly wage rates and hours worked the results are consistent with the view that increasing rigidity in wages amplifies cyclical fluctuations in the utilization of labor the wage regressions add further to the literature s already strong support for the union wage rigidity hypothesis the employment status and hours regressions imply that the sensitivities of employment received for publication august 12 1981 revision accepted for publication february 11 1983 federal reserve bank of dallas this paper is based on my ph d dissertation which was completed at ucla with financial assistance from the rand corporation and the department of labor comments by referees and by participants of labor workshops at ucla and the university of chicago as well as the computation assistance of brian mckee are gratefully acknowledged i am responsible for any remaining errors the views expressed should not be attributed to the federal reserve bank of dallas or the federal reserve system one study is gordon 1982 who concludes page 41 that macroeconomic instability in the united states has been aggravated by the unusually sluggish behavior of nominal wages in the postwar era 2see also johnson 1975 parsley 1980 and moore and raisian 1980

hours of work and trade unionism this article is concerned with hours worked per employee in unionized labor markets first the determination of hours is examined in the context of various bargaining models and in the process these models are nested in a general framework then cross section and time series data are drawn on to quantify the effects of unionism on hours worked the time series data from 1920 to 1980 imply a negative impact of unionism on full time hours while cross section data for 1978 suggest some notable differences in both the direction and the magnitude of this impact across occupations and industries

the effect of unions on the receipt of unemployment insurance benefits using national longitudinal survey of youth data for 1979 91 the authors analyze the effect of union representation on the likelihood that individuals eligible for unemployment insurance ui bene

the transition to a market economy pitfalls of partial reform we present a theory of a partial economic reform of a planned economy similar to the one that took place in russia since 1988 and in china earlier in such a reform some markets are liberalized in the sense that producers can sell output to whomever they want including private firms at free prices but at the same time must sell to state firms at state prices we show that such a reform can result in a substantial diversion of subsidized inputs away from state firms and toward private firms even when state firms value these inputs more the result may be a reduction of total output the simple analysis sheds light on many consequences of the soviet reform such as breakdown of coordination of production increased state policing of delivery quotas prohibitions of trading cooperatives and opposition to privatization the model also explains why partial reform failed in russia but worked in china

cigarette smoking and self control this paper empirically studies time inconsistent preferences in the context of cigarette smoking behavior with hyperbolic discounting an individual has time inconsistent preferences which give rise to a lack of self control i e she may perpetually postpone the execution of a plan this implies that a smoker who wants to quit has a demand for control devices e g a smoking ban in public areas or a hike in cigarette excise taxes this paper empirically tests this implication using a sample that is based on survey data from taiwan the estimation results indicate that a smoker s intention to quit has a positive effect on the smoker s support for smoking bans and a cigarette excise tax increase these results lend support to the validity of the time inconsistent preferences in the context of cigarette smoking behavior this casts doubt on the validity of the assumption that individuals have time consistent preferences in becker and murphy s becker g s murphy k m 1988 a theory of rational addiction journal of political economy 96 4 675 700 rational addiction model

why are stabilizations delayed when a stabilization has significant distributional implications e g tax increases to eliminate a large budget deficit socioeconomic groups may attempt to shift the burden of stabilization onto other groups the process leading to stabilization becomes a war of attrition each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden the authors solve for the expected time of stabilization in a model of rational delay and relate it to several political and economic variables they motivate this approach and its results by comparison to historical and current episodes copyright 1991 by american economic association

endogenous market structures and optimal taxation this article provides optimal labour and dividend income taxation in a general equilibrium model with oligopolistic competition and endogenous firms entry in the long run the optimal dividend income tax corrects for inefficient entry the dividend income tax depends on the form of competition and the nature of the sunk entry costs in particular it is higher in market structures characterised by competition in quantities rather than those characterised by price competition oligopolistic competition leads to an endogenous countercyclical price markup as a result offsetting the distortions over the business cycle requires deviations from full tax smoothing

the process of socialist economic transformation in this paper we consider the reform process in those central and east european countries that have made the decision to move from a more or a less planned socialist system to a private market economy one in which private ownership predominates and most resources are allocated through markets because the reform process is both complex and intertwined with political factors especially the shift towards representative democracy and because there are substantial differences among the reforming countries no single detailed road map can guide the way to the new systems rather the paper sets out general considerations that provide a framework for reform and relates the choices to some initial conditions of the various reforming countries the framework applies also to the soviet union or in the event of its disintegration to its successor states as they move to market systems

overtime pay overtime hours and labor unions this article analyzes the effect of labor unions on overtime compensation and overtime hours estimates from may 1985 current population survey data indicate that unionization increases the prevalence of premium pay for overtime and reduces the incidence and extent of overtime hours along with the finding of previous research that unionized workers are more susceptible to temporary layoffs these results are consistent with a model in which unions use overtime pay to stabilize working hours and expand membership

did lower unionization in the united states result in more flexible industries do unions really impede manufacturers output flexibility if so in what ways the authors propose a methodology for quantifying george stigler s concept of output flexibility and for decomposing the effects of unionization on average cost differences between union and non union plants using a recently compiled data set on u s three digit manufacturing industries from 1973 to 1996 they adapt this methodology to simulate the effects of unionization on flexibility and average costs for average size plants simulation results indicate that higher unionization was associated with higher average costs and lower flexibility than low unionization higher average costs appear to have been primarily due to higher fixed costs such as higher benefits

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

addiction and cue triggered decision processes we propose a model of addiction based on three premises 1 use among addicts is frequently a mistake 2 experience sensitizes an individual to environmental cues that trigger mistaken usage 3 addicts understand and manage their susceptibilities we argue that these premises find support in evidence from psychology neuroscience and clinical practice the model is tractable and generates a plausible mapping between behavior and the characteristics of the user substance and environment it accounts for a number of important patterns associated with addiction gives rise to a clear welfare standard and has novel implications for policy

occupational social value and returns to long hours this paper examines the phenomenon of uncompensated long hours in jobs with pro social characteristics and presents evidence that long hour wage premiums and occupational social value are substitutes in compensating salaried workers who supply hours exceeding the standard working week i show that the social value of an occupation in particular the degree to which jobs involve helping or providing service to others is inversely related to long hour pay allowing for heterogeneity in the degree to which workers value their job s helping orientation lets me explore how gender differences in employees attitudes toward pro social behaviour can explain some of the observed occupational sorting trends and gender differences in long hour compensation women tend to be more strongly drawn to helping occupations and at the same time receive lower long hour premiums in these jobs relative to men i offer a theoretical framework to rationalize the empirical trends

foreign trade elasticities and import discipline this paper provides new evidence on the trade as discipline7rsquo hypothesis by considering the determination of price cost margins with a panel of 41 four digit us food manufacturing industries from 1972 to 1987 following the empirical specification suggested by competitive fringe oligopoly models we include estimated domestic demand elasticities and cross price elasticities of import demand as explanatory variables and the empirical results confirm the importance of these variables in assessing the hypothesis

a dual self model of impulse control we propose that a simple dual self model gives a unified explanation for several empirical regularities including the apparent time inconsistency that has motivated models of quasi hyperbolic discounting and rabin s paradox of risk aversion in the large and small the model also implies that self control costs imply excess delay as in the o donoghue and rabin models of quasi hyperbolic utility and it explains experimental evidence that increased cognitive load makes temptations harder to resist the base version of our model is consistent with the gul pesendorfer axioms but we argue that these axioms must be relaxed to account for the effect of cognitive load

business cycles and the relationship between concentration and price cost margins using a newly constructed panel data base we examine changes in price cost margins in 284 manufacturing industries between 1958 and 1981 a key finding is a dramatic narrowing of the spread between the margins of concentrated and unconcentrated industries over this period we provide evidence that this narrowing is a result of the greater sensitivity of price cost margins in more concentrated industries to demand fluctuations this finding is robust to the inclusion of other industry variables and to measures of import competition the results indicate that cross sectional estimates of the concentration margins relationship are likely to be both biased and misleading

union effects on white collar compensation this paper uses two new data sources each of which combines information on worker and establishment characteristics with detailed information on the components of employee compensation to examine union nonunion pay differentials for white collar workers estimates reveal that nonunion wages and total compensation are more responsive than union pay levels to worker productivity differences such as education and work experience also large firms pay 10 to 15 percent more to their white collar employees than small firms in the nonunion sector but only 5 percent or less in the union sector overall the white collar union wage differential appears to be 3 5 to 4 0 percent rising to 7 1 percent when fringe benefits are included in the dependent variable significant spillovers to nonunion white collar workers which appear to erode the measured union nonunion pay differentials are also found

fixed costs and hours constraints hours constraints are typically identified by worker responses to questions asking whether they would prefer a job with more hours and more pay or fewer hours and less pay because jobs with different hours but the same rate of pay may be infeasible when there are fixed costs of employment or mandatory overtime premia the constraint in those cases may be illusory cross section estimates of reported hours constraints are consistent with this model implying that the overall level of hours constraints may exaggerate the extent to which the labor market is characterized by frictions and imperfections

business cycles in international historical perspective business cycle models seek to answer the question of why economies go through cycles of recession and recovery or boom and bust any theory of the business cycle makes two sorts of claims what shocks are most important in disturbing the economy and what economic structure is necessary for propagating these shocks for example one common explanation of business cycles begins with monetary shocks and then seeks to explain why monetary shocks are not purely neutral as neoclassical theory would have it and instead have real effects at least in the short term early models in this vein were often implicitly or explicitly based on the proposition that markets do not clear continuously early equilibrium real business cycle theories instead emphasized the importance of real shocks especially to technology which may cause socially efficient fluctuations even when markets are always in equilibrium more recent models have attempted to marry the equilibrium approach to macroeconomics with the substantive keynesian ideas that money is not neutral and that economic fluctuations are costly new keynesian theories of the business cycle admit the possibility of a number of economic shocks including monetary and technology shocks but then focus on explaining how nominal price rigidities within the economy can turn these shocks into recessions or booms other models show that business cycles driven by keynesian animal spirits are consistent with rigorous microfoundations and rational expectations seeking empirical evidence for and against these various approaches we turn business cycle theories loose on perhaps the greatest macroeconomic laboratory

the determination of profit margins in uk manufacturing this paper examines the determinants of profit margins in 91 u k manufacturing industries over the period 1983 86 it considers how the inclusion of labor market characteristics in empirical industrial organization specifications affects the estimated concentration margins relationship the empirical work pays detailed attention to the endogenous nature of variables derived from structural industrial organization models the authors report instrumental variables estimates of margins equations in which there emerges a significant role for labor market characteristics indeed both unionization and industrywide unemployment are found to depress profit margins the impact of concentration is seen to be biased downward when these variables are omitted

the demand for hours of labor direct evidence from california california s longstanding requirement that most women receive time and a half pay for workhours beyond eight in one day was extended to men in 1980 analyzing current population survey data from 1973 1985 and 1991 we find that this overtime penalty substantially reduced the amount of daily overtime worked by california men relative to men in other states comparisons that use women to control for california specific shocks show even stronger effects the estimates imply a price elasticity of demand for overtime hours of at least 20 5

european inflation and the new keynesian phillips curve author affiliation sandeep mazumder mazumds wfu edu acknowledgment i wish to thank the anonymous referees for their valuable comments and suggestions that helped shape this manuscript 1 introductionon june 1 1998 the european central bank came into being with the goal of maintaining price stability in the euro zone 1 the ability to describe inflation as accurately as possible has long been a key goal that macroeconomists pursue and in light of the introduction of the euro currency in the late 1990s this topic is particularly pertinent in europe to this end recent research has devoted a great deal of time to the new keynesian phillips curve nkpc a model that examines price setting behavior based on nominal rigidities founded on the work of authors such as taylor 1980 and calvo 1983 this model has not been without controversy but even so it remains a workhorse of macroeconomics perhaps attributable to the lack of a better alternative in particular the model is thought to have first seen genuine empirical success when gali and gertler 1999 estimated the nkpc using u s data and found that the model describes changes in u s prices considerably well indeed gali gertler and lopez salido 2001 conduct a similar exercise using european inflation data and find that the nkpc is even more applicable to the euro area than for the united states over the period from the 1970s to the latter 1990s one of the key innovations of these articles is that the labor income share equivalently real unit labor costs is used as the proxy for real marginal cost in the nkpc as opposed to previously used proxies such as detrended real output following in the same vein as gali gertler and lopez salido 2001 others have also found that the nkpc can be accurately used to describe inflation in europe for example rumler 2007 estimates the labor share nkpc for nine euro area countries and finds evidence in favor of the model while jondeau and bihan 2005 argue that the labor share nkpc may describe european inflation dynamics well depending on the number of leads or lags that one is willing to include into the model similarly leith and malley 2005 use the nkpc to find greater evidence of price stickiness in europe as compared to the united states where the proxy for real marginal cost is labor s share of income while some authors have questioned the empirical performance of the nkpc in europe when using different econometric techniques such as bardsen jansen and nymoen 2004 paloviita 2005 lawless and whelan 2007 boug cappelen and swensen 2010 a more obvious problem remains with the approach of gali gertler and lopez salido 2001 to estimating the nkpc for europe that has not received much attention in the literature that is the labor income share cannot be used to proxy for real marginal cost in the nkpc if we are to address the cyclicality of real marginal cost in a manner in keeping with predictions from basic microeconomic theory namely we believe that marginal cost is likely to be procyclical over the business cycle whereas the labor income share in fact moves countercyclically furthermore the labor share proxy of real marginal cost is founded on the assumption that labor input can be freely adjusted at a fixed real wage rate the problem with this assumption is that it ignores the notion of labor adjustment costs which is something that cannot reasonably be discounted specifically one can think of labor as being the product of the number of workers in an economy and the respective number of hours that they work seminal work by oi 1962 has argued that employment is not perfectly flexible in the short run something that the derivation of the labor share marginal cost proxy does not take into account this article reconsiders the derivation of a proxy for real marginal cost in a similar manner to that done in gali and gertler 1999 and gali gertler and lopez salido 2001 with the crucial difference that we account for the existence of labor adjustment costs

12 million salaried workers are missing evidence from current population surveys various cohorts of the national longitudinal surveys and the panel study of income dynamics suggests that the fraction of american employees who were paid salaries held constant from the late 1960s through the late 1970s and continued to hold constant or perhaps fell slightly thereafter through the late 1990s an analysis that accounts for the changing industrial occupational demographic and economic structure of the work force shows that this fraction was 9 percentage points below what would have been expected in the late 1970s this shortfall is not explained by growth in the temporary help industry declining unionization institutional changes in overtime or wage payment regulation the increasing openness of american labor and product markets or convergence of nonwage aspects of hourly and salaried employment the author suggests several alternative explanations

the cyclicality of real wages within employer employee matches using data from the panel study of income dynamics the author examines the cyclicality of wages within employer employee matches for the years 1970 91 recent research on wage cyclicality has suggested that wages are very procyclical tending to rise and fall with economic upturns and downturns even for workers who remain with the same employer the author finds however that the evidence for wage procyclicality within the matches he examines is rather weak except for the small group of workers who were paid by piece rate or commissions despite having acyclical wage rates men who were paid hourly had earnings movements that were very procyclical salaries exhibited little cyclicality but salaried workers who had income sources from bonuses commissions or overtime had procyclical earnings the results suggest that the increasing prevalence of incentive based pay will increase the procyclicality of wages within matches

what shapes are overtime premium schedules some evidence from japan the uk and the us we provide estimates of the shapes of overtime premium schedules for three contrasting economies based on two digit industries through time at one end of the spectrum the united kingdom has no legislation concerning the minimum premium rate while at the other the united states mandates a high minimum premium of 1 5 times the straight time hourly rate in between these extremes japan sets a minimum premium of 1 25 we concentrate in particular on the question of whether the premium rises in average hours

technology utilization and inflation what drives the new keynesian phillips curve we argue that the new keynesian phillips curve literature has failed to deliver a convincing measure of real marginal costs we start from a careful modeling of optimal price setting allowing for nonunitary factor substitution nonneutral technical change and time varying factor utilization rates this ensures the resulting real marginal cost measures match volatility reductions and level changes witnessed in many u s time series the cost measure comprises conventional countercyclical cost elements plus procyclical and covarying utilization rates although procyclical elements seem to dominate the components of real marginal cost components are becoming less cyclical over time incorporating this richer driving variable produces more plausible price stickiness estimates than otherwise and suggests a more balanced weight of backward and forward looking inflation expectations than commonly found our results challenge existing views of inflation determinants and have important implications for modeling inflation in new keynesian models

the effect of unionism on fringe benefits this study analyzes the impact of unionism on fringes paid to production workers using data on individual establishments it compares fringe expenditures in establishments having the same level of compensation per hour and finds that unionism raises the share of compensation allotted to fringes particularly to pensions vacation pay and life accident and health insurance in addition since unionism also raises the straight time wage rate itself a prime determinant of expenditures on fringes unionism has a very sizeable impact on total fringe expenditures as well as on the fringe share of compensation the union fringe effect exceeds in percentage terms the union wage effect and is sufficiently large to suggest that standard union wage studies understate the union effect on total compensation the study also compares the fringe expenditures of production and non production workers within the same establishment controlling for within establishment pay policies the findings suggest that the pres

the cyclical behavior of marginal cost and price the author examines the cyclical behavior of price marginal cost margins for u s manufac turing after 1956 short run marginal cost is markedly procyclical this is primarily due to procyclical overtime payments incurred beca use employment is not perfectly flexible in most industries output price fails to respond to the cyclical movement in marginal cost so price marginal cost margins are markedly countercyclical the res ults contradict business cycle theories that explain low production i n a recession by a high real cost of producing they support theories that explain low production in a recession by the inability of firms to sell their output copyright 1987 by american economic association

the response by the norwegian aluminium industry to changing market structure abstract this paper analyses how changes in market structure have affected the margins measured by the lerner index of norwegian aluminium plants instead of showing the expected negative trend due to increased competition internationally the margins are found to move procyclically around a constant that significantly exceeds zero three explanations for this stability in the levels of the margins are identified a better exploitation of scale economies increased productivity and product specialisation which allows norwegian producer prices to increase more rapidly than the international reference price

the impact of the overtime policy reform evidence from the low paid workers in taiwan this article investigates the effects of shortening standard workweek on workers with different income levels using two repeated cross sectional survey data the taiwanese manpower utilization survey and human resource survey we estimate the impacts of the new policy on working hours and monthly income our results show that the new standard workweek in taiwan has made the working hours drop but the scale of decrease becomes smaller in the following 3 years although the hours drop has gradually risen back for every worker the rate of increase is higher for the low income workers the monthly incomes of the high income female workers have decreased however the decreases in the hourly wage rates are less than their average wage rates our results also show that the firms have automatically adapted under the new law and a poor enforcement scheme after a period of time

dynamic factor demands and the effects of energy price shocks a dynamic model is used to understand how sharp changes in energy prices affect investment behavior employment and energy use the authors discuss the theory behind their model selection model specifications estimation methods and data list parameter estimates and elasticities for the selected model and describe the simulations they conclude that 1 the data strongly reject the hypothesis of constant returns to scale within their specification of aggregate production 2 the data indicate adjustment costs on labor are small and 3 their results help reconcile some of the conflicting estimates of energy demand elasticities appearing in recent literature 23 references 3 figures 3 tables

a survey of new keynesian theories of aggregate supply and their relation to industrial organization i survey the recent literature on the phillips curve along the way i will try to relate this literature to topics of interest to industrial organization i will also point out the gaps in our understanding and places where more careful micro economic analysis would be helpful to macroeconomists in the conclusion i summarize what an industrial organization economist might take away from this literature

the cost of overtime hours in british production industries both theoretical and empirical labour market papers that incorporate the workers hours dichotomy often contain assumptions about shapes of the overtime premium schedules faced by industry using cross section data for british production industries in three years of sharply contrasting economic climates 1981 1984 and 1988 this paper investigates empirically the appropriate choice of schedule and therefore the industrial cost consequences of changing the average number of overtime hours per period the analysis tackles problems associated with data disaggregation the proportion of workers working overtime omitted variables heteroscedasticity and intertemporal variation

does traditional price policy work for achieving low smoking rate empirical and theoretical evaluation based on the united states aggregate data in the united states smoking has been strictly restricted by both federal and state governments almost all the policies have imposed high tax on cigarettes for decreasing the number of smokers i

a causal interpretation of extensive and intensive margin effects in generalized tobit models the usual decomposition of effects in corner solution models into extensive and intensive margins is generally incompatible with a causal interpretation this paper proposes a decomposition based on the joint distribution of potential outcomes which is meaningful in a causal sense the difference between decompositions can be substantial and yield diametrically opposed results as shown in a standard tobit model example in a generalized tobit application exploring the effect of reducing firm entry regulation on bilateral trade flows between countries estimates suggest that using the usual decomposition would overstate the contribution of the extensive margin by around 15

the effects of overtime pay regulation on worker compensation proponents claim that a statutory overtime premium by raising the relative cost of overtime may encourage firms to substitute employment for overtime hours the author argues that there will be no real effects if firms reduce straight time wages so as to offer the same package of weekly compensation and hours of work that was acceptable initially empirical analysis suggests that wage differentials do arise to mitigate the purely demand driven effects predicted by previous models but these differentials are not large enough to neutralize overtime pay regulation completely copyright 1991 by american economic association

macropolicies in transition to a market economy a three year perspective countries in transition to market economies have had to implement macroeconoimic stabilization programs at the same time that they were engaged in massive changes of their political institutions and the systemic framework of their economies what has been the interaction of stabilization with economic liberalization and deep institutional reform in the countries of eastern europe in particular the relations among initial conditions political developments reform strategies and outcomes experience in eastern europe suggests that when there is a political breakthrough as in the countries under review a radical stabilization liberalization stragety is probably the least risky approach to reform and will not constrain output or structural reform over the medium term even stabilization that is initially successful in containing inflation will later come under pressure because of social policies and the structural transitions impelled by reform several factors are identified that affect the credibility of reforms and lessons are derived for countries that have stabilized and those that yet face this task

do markets differ much this essay reports the results of a crosssection study of differences in accounting profitability that sheds light on some basic controversies in industrial economics most previous cross section studies in this field have been concerned with testing hypotheses about structural coefficients in models meant to apply to essentially all markets as we have learned more about the difficulties of constructing such general models and of performing tests on their structural parameters properly structural cross section analysis has fallen out of fashion in contrast to most of the cross section literature the analysis reported here is fundamentally descriptive it does not attempt directly to estimate or to test hypotheses about structural parameters i hope to show by example that one can perform illuminating analysis of cross section data without a host of controversial maintained hypotheses cross section data can yield interesting stylized facts to guide both general theorizing and empirical analysis of specific industries even if they cannot easily support full blown structural estimation one can view the sort of search for stylized facts conducted here as either a replacement for or an input to interindustry structural estimation depending on one s feeling about the long run potential of that research approach this study also departs from much of the cross section literature by being fundamentally concerned with the importance of various effects not just with coefficient signs and t statistics in particular this essay provides estimates of the relative importance of firm market and market share differences in the determination of business unit divisional profitability in u s manufacturing using 1975 data from the line of business program of the u s federal trade commission ftc i find support neither for the existence of firm effects nor for the importance of market share effects moreover while industry effects apparently exist and are important they appear to be negatively correlated with seller concentration in these data section i relates firm market and share effects to current issues and controversies in industrial economics and thus supplies the motivation for our empirical analysis the remainder of the essay treats the data and

hours of work and the fair labor standards act a study of retail and wholesale trade 1938 1950 when the fair labor standards act was first implemented a 5 reduction in the length of the standard workweek reduced by at least 18 the proportion of men and women working more than 40 hours per week this analysis based on monthly time series data from 1935 41 bls surveys and individual level data from the 1940 and 1950 censuses shows that the act s impact was larger in the south where the proportion of men and women working over 40 hours fell by 23 and 43 respectively than in the north because of much lower pre act wages in the south than in the north the minimum wage provisions of the act were much more binding in the south southern employers were less able than northern employers to adjust straight time wages in response to the act s overtime provisions

the impact of cyclical demand movements on collusive behavior recent work by rotemberg and saloner 1986 investigates the effect of the business cycle on optimal collusive pricing by specifying that demand is subject to i i d shocks an implication of the i i d assumption is that firms expectations on future demand are unrelated to the current level of demand we put forth a model that allows for both the level of current demand and firms expectations on future demand to change over time thus it captures two important properties of the business cycle our analysis reveals that while the gain to deviating from a collusive agreement is greatest during booms firms find it most difficult to collude during recessions as the forgone profits from inducing a price war are relatively low an implication of this effect for pricing behavior is that at the same level of demand price is lower when demand is declining than when demand is rising consistent with previous theoretical work we find that firms price countercyclically for a range of values for the discount factor however numerical simulations reveal a greater tendency for firms to price countercyclically during recessions than during booms

testing the effectiveness of the french work sharing reform a forecasting approach the macroeconomic impact of the french work sharing reform of 2000 a reduction of standard working hours in combination with wage subsidies is analysed using a vector error correction model vecm for several labour market variables as well as inflation and output out of sample forecasts for 2000 2001 are produced a comparison of these forecasts which serve as a benchmark simulation without structural shifts to the realized values with shifts suggests significant beneficial employment effects of the policy mix other shifts were absent and thus cannot explain the outcome output productivity hourly labour costs and inflation are only transitorily affected or not at all

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

an investigation into the power of insiders in wage determination abstract this paper is concerned with the role of insider forces in wage determination various union and non union models of wage behaviour are considered and they imply that wages are a convex combination of internal and external factors certain union models also imply a degree of hysteresis data on fourteen british production industries reveal that i insider forces are important ii their importance is directly related to both union power and the degree of monopoly in the product market iii the state of the aggregate labour market is also important and iv hysteresis effects arising from insider power are only significant in a small minority of sectors

circumstance and choice this article takes an integrated approach to evaluating the interaction of initial conditions political change reforms and economic performance in a unified framework covering 28 transition economies in east asia central and eastern europe and the fsu initial conditions and economic policy jointly determine the large differences in economic performance among transition economies initial conditions dominate in explaining inflation but economic liberalization is the most important factor determining differences in growth political reform emerges as the most important determinant of the speed and comprehensiveness of economic liberalization raising the important question of what determines political liberalization results suggest the importance of the level of development in determining the decision to expand political freedoms