incentives productivity and labor contracts the relationship between age earnings profiles and worker incentives is examined by contrasting wage and salary workers with the self employed it is argued that the steepness of wage and salary workers age earnings profiles reflects the desire to provide work incentives to those workers since self employed workers do not face this agency problem they are used as a benchmark to gauge productivity empirical support of the proposition is provided and the effects of human capital accumulation are separated empirically from incentive effects the most important conclusion is that under some strong assumptions most of the slope in age earnings profiles is accounted for by the desire to provide incentives rather than by on the job training

land ownership as insurance and the market for land a study in rural vietnam we propose simple empirical insights to analyze the relationship between the value of the safety net embedded in land and households decision to sell land land sales may differ from other kinds of land transactions such as rental free loans and gifts in terms of future capacities to safeguard livelihood households well insured through nonland riskcoping mechanisms are expected to make use of sales more frequently than others we test this hypothesis with 2006 survey data from vietnam and find that selling households are less vulnerable better educated and richer than those that use other transfer types

measuring the value of life saving from consumer reactions to new information abstract past studies have relied on cross section patterns of risky behavior to generate estimates of the value of life saving this approach is colored by several problems that affect the reliability of the results in potentially serious ways it is difficult to separate the risk components from the dis utility attributes of work or consumption to avoid selectivity biases and to disentangle user costs e g wearing a face mask from the risk premium paid for accepting risk to circumvent some of these difficulties this paper uses a different approach one which exploits the information about the value of risk reduction that is provided by changing consumption patterns over time brought about by changes in available information about risks this approach makes it possible to more reliably estimate the pure effects of risks on behavior and to generate unbiased distributions of the value of life saving the case of cigarette consumption over time provides an ideal setting to illustrate this methodology

agent compensation and the limits of bonding agents in positions of trust may engage in malfeasance which is difficult to detect this paper develops a model in which employers seek to control malfeasance by paying wages contingent on imperfect monitoring and agents may be required to pay entry fees or post bonds we conclude that entry fees which exceed agents assets are ineffective in controlling malfeasance as a result conditions exist in which it is optimal to pay agents more than their opportunity cost such conditions lead to an excess supply of applicants and allow employers to engage in discrimination at zero cost to themselves

a model of efficiency wages as a signal of firm value we consider performance contracts with firm private information the verifiable components of the contract an up front wage and employment may serve both as a signal and a performance incentive job rent may be necessary for signaling and since efficient signaling is multidimensional there is an inextricable link between job rent and underemployment signaling can explain the lack of explicit bonding in actuality though our basic model is static our underemployment result is not a consequence of firm myopia when the firm is farsighted it will not maximize the joint future surplus if it cannot extract the worker s share at present copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

effort observability and worker productivity towards an explanation of economic dualism this paper suggests an explanation of the wage and productivity differentials between formal and informal sectors in developing countries this explanation is based on differences in the observability of effort that arise from technological differences such as size of operation the authors argue that observability of effort is lower in the formal sector and then show that under reasonable conditions this leads to higher wages and higher effort productivity this is because with lower observability the marginal cost of effort is lower when existing employees are induced to work harder than when more workers are hired explanations for intersectoral differences in factor intensities and sector specific unemployment rates also follow from the authors basic assumptions copyright 1989 by royal economic society

does rising landlessness signal success or failure for vietnam s agrarian transition in the wake of reforms to establish a free market in land use rights vietnam is experiencing a pronounced rise in rural landlessness to some observers this is a harmless by product of a more efficient economy while to others it signals the return of the pre socialist class structure with the rural landless at the bottom of the economic ladder the authors theoretical model suggests that removing restrictions on land markets will increase landlessness among the poor but that there will be both gainers and losers with uncertain impacts on aggregate poverty empirically they find that landlessness is less likely for the poor and that the observed rise in landlessness is poverty reducing on balance however there are marked regional differences notably between the north and the south

the forgotten property rights evidence on land use rights in vietnam summary studies of land property rights usually focus on tenure security and transfer rights rights to determine how to use the land are regularly ignored however user rights are often limited relying on a unique vietnamese panel data set at both household and plot levels we show that crop choice restrictions are widespread and prevent crop diversification restrictions do not decrease household income but restricted households work harder and there are indications that they are supplied with higher quality inputs our findings are consistent with the view that it is possible to intervene effectively in agricultural production to promote output and food security nevertheless potential benefits of a more diversified crop pattern must be carefully considered in a period where global food markets are in turmoil

can land market reform mitigate the exclusionary aspects of rapid agro export growth abstract agro export growth has been associated with land concentration and employment instability in the wake of exclusionary agro export booms land market reform has been proposed as a way to improve peasant land access through the market developing a model of the economic competitiveness of different classes of producers this paper evaluates the likely effectiveness of land market reform while the model itself gives ambiguous answers numerical simulation identifies a large gap between market price and peasants abilty to pay for land among the components of land market reform policy progressive land taxation appears unlikely to close that competitiveness gap while farm land mortgage banks appear more likely to mitigate exclusionary aspects of growth

behavioral responses to risk in rural china does risk perpetuate poverty in a credit constrained economy jalan and ravallion study portfolio and other behavioral responses to measured risk using household panel data for rural china one quarter of wealth is held in unproductive liquid forms but only a small share of this appears to be a precaution against income risk the authors estimate that eliminating income risk would reduce the share of wealth held in liquid form by less than 1 percentage point moreover that effect is confined largely to middle income groups high income households do not it seems need to hold unproductive cautionary wealth and the poor probably cannot afford to do so the authors find no evidence that income risk discourages schooling but risk does inhibit the out migration of labor generally the results provide only limited support for the idea that uninsured risks promote unproductive portfolio behavior in this setting there is such an effect but it is small in magnitude and cannot be deemed an important cause of poverty

formal and informal risk sharing in ldcs theory and empirical evidence in village economies limited commitment models have been proposed as theoretical alternatives to the complete markets hypothesis and have been shown to be empirically relevant yet village institutions might be able to enforce some contracts we construct a theoretical model which shows how households can insure through both formal and informal contracts when some verifiable production takes place in an environment of incomplete markets this theoretical setting nests the case of complete markets when all risks can be insured by formal contracts because all states of nature would be verifiable and the case where only informal agreements are available agreements specifying informal transfers that needs to be self enforceable we derive two equations of interest the income equation which is partially determined by the formal contract and an euler type equation where consumption growth is affected by lagged consumption instead of being a martingale using semi parametric specifications we derive testable restrictions of our model we estimate both equations using data of village economies in pakistan empirical results are consistent with the model the estimation and allows to show that the incentive constraints due to selfenforcement bind and that formal contracts are used to reduce the probability of binding the constraint

wage flexibility in the chinese labour market 1989 2009 abstractwage flexibility in the chinese labour market 1989 2009 regional studies china s bureaucratic wage determination system is gradually being replaced by a market based system leading to a novel version of a dual labour market this paper studies wage flexibility in this dual market its principal findings are as follows wages in both sectors have become less responsive to changes in official registered unemployment with an alternative market based measure of unemployment becoming more relevant there is evidence of convergence of flexibility between the two sectors the wages of women exhibit greater flexibility than those of men and there is evidence of differences in wage flexibility between workers who have urban residential rights and rural migrants

foreign direct investment with unemployment and endogenous taxes and tariffs it is well known that high tariffs can induce foreign direct investment or tariff jumping this paper analyzes tariff jumping in the context of a host government which can set specific tariffs and taxes subject to the credibility constraint that the chosen levels be optimal once capital is irreversibly in place the foreign multinational is assumed to choose its location and level of investment strategically taking into account the induced tax and tariff levels in the presence of unemployment the optimal tariff exceeds the optimal tax for any given level of capital investment leading to foreign direct investment

institutions and government controls abstract this paper develops a model of government policy toward industrial control and regulation that sheds light on the determinants of differential country experiences in terms of organizational arrangement and enterprise performance in contrast to the model developed by shleifer and vishny shleifer a vishny r w 1994 politicians and firms quarterly journal of economics 109 995 1025 shleifer a vishny r w 1998 the grabbing hand government pathologies and their cures harvard univ press cambridge ma which suggests that government controls over firms come about when politicians can use public funds to buyoff the managers and solicit their cooperation in politically motivated redistribution of rents the present shows that it may be the ability to use the government s regulatory powers at discretion that encourages politicians to impose controls on firms and redistribute their rents the model implies that the politicians appetite for intervention tends to be greater when the cost of collecting and using public funds is higher which is the opposite of what the shleifer vishny model predicts the present model helps explain the puzzling observation that countries with poor institutions are more likely to impose extensive controls on production and maintain large and inefficient public sectors the model also sheds light on a variety of other stylized facts and puzzles and offers new hypotheses to be tested

unemployment long term employment relations and productivity growth using an effort regulation type of efficiency wage model it is demonstrated that a firm may respond to slackening labor markets by acting to increase the intensity with which workers work the magnitude of this work intensity effect depends on the structure of employment relations where long term employment relations are prevalent the effect of labor market slack on work intensity may be diminished these propositions are tested empirically by estimating the effects unemployment and long term employment have on productivity growth in two digit manufacturing industries copyright 1987 by mit press

the effect of taxes on labour in efficiency wage models abstract this paper analyses the effects of labour taxation on wage and employment in a moral hazard efficiency wage model where effort is a continuous variable and workers are risk averse in the model examined ad valorem and specific taxes on labour do not have the same consequences on the real wage both taxes have a negative effect on employment but the imposition of a specific tax causes an increase in the net real wage including firms to raise the quality of their workers these results are compared with those obtained in other versions of the shirking efficiency wage model

work norms and involuntary unemployment consider the organizational environment of labor management wherein the firm can measure the average performance i e group work norm of its employees but has difficulty in observing the individual worker s performance within the group accordingly the worker s remuneration is based on the observed group norm because of the way in which workers interact among themselves in setting work norms there results an undersupply of effort from a given workforce size furthermore the group work norm is shown to be negatively correlated with the size of the workforce consequently short run unemployment can arise with involuntary features the paper also explores the effectiveness of alternative remuneration schemes in mitigating the inefficiency associated with the group work norm setting

job matching and job competition are lower educated workers at the back of job queues abstract during the cyclical downturn of the 1980s unemployment in the netherlands increased substantially with unemployment rates of lower educated workers increasing more than those of higher educated workers a possible explanation of this phenomenon is job competition between workers with different levels of education another explanation of the diverging unemployment rates is that employers dismiss replaceable lower educated workers before irreplaceable higher educated workers in this paper we scrutinize the job competition explanation our results show that there only is job competition between unemployed workers with an academic and a higher vocational education there is no job competition at lower levels of education

wage smoothing as a signal of quality we provide an explanation for firms smoothing wages over the business cycle that is based on asymmetric information about the quality of a firm s management team and does not depend upon the workers being risk averse when firms pay their workers the full information profit maximizing wage higher quality firms will attract more workers and earn greater profits than lower quality firms this provides a rationale for wage smoothing when quality is not observable to workers lower quality firms will resist cutting wages to the full information level in an economic downturn in an attempt to convince workers that they are of higher quality

asset smoothing consumption smoothing and the reproduction of inequality under risk and subsistence constraints abstract a growing literature asks whether low wealth agents can accumulate assets over time or whether they are trapped in poverty this paper develops a stochastic dynamic programming model with endogenous asset price risk to explore savings and portfolio decisions in a resource poor environment characterized by risk and subsistence constraints optimal portfolio strategies are found to bifurcate despite divisible assets and fully rational agents wealthier agents acquire a higher yielding portfolio and pursue conventional consumption smoothing poorer agents acquire a less remunerative portfolio and pursue asset smoothing rather than consumption smoothing asset based risk coping thus results in positive correlation between initial wealth and portfolio rate of return

the economics of vocation or why is a badly paid nurse a good nurse abstract given the longstanding shortage of nurses in many jurisdictions why could not nursing wages be raised to attract more people into the profession we tell a story in which the status of nursing as a vocation implies that increasing wages reduces the average quality of applicants attracted the underlying mechanism accords with the notion that increasing wages might attract the wrong sort of people into the profession and highlights an in efficiency wage mechanism particular to vocations which makes wages sticky up wards the analysis has implications for job design in vocation based sectors such as nursing and teaching

job duration seniority and earnings an important stylized fact about labor markets is that workers with longer seniority with their current employer have higher earnings than other workers with the same total labor market experience this study shows that workers in longer jobs earn more throughout than workers in a series of shorter jobs and that the measured positive cross sectional return seniority is largely a statistical artifact due to the correlation of seniority with an omitted variable representing the quality of the worker the job or the worker employer match the implication is tha t earnings do not in fact rise very much with seniority copyright 1987 by american economic association

new ways to assess and enhance land registry sustainability evidence from rwanda summary rwanda has recently implemented a nation wide program of first time land regularization ltr that many believe set new standards for the region we use administrative data combined with household survey and program rollout information to explore sustainability of the infrastructure created in this process including the impact of public efforts to increase registration of subsequent transactions we find that the program provided significant benefits in terms of gender equality and credit access while opening up new opportunities in terms of land taxation or land use planning but that high level of rural informality may undermine these in the medium to long term while public efforts to decentralize service provision helped to significantly reduce informality additional efforts are likely to be needed to ensure sustainability of the registry we discuss how rwanda can further move in this direction and draw out implications for other countries considering first time adjudication and registration of property rights

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

canadian jobs and firm size do smaller firms pay less even after controlling for observable workers characteristics and for occupation and industry specific effects a substantial wage differential remains between large and small firms what underlies the remaining wage differential is unclear direct evidence on pension plan coverage and on lay off rates by firm size is inconsistent with the bad working conditions hypothesis the union avoidance hypothesis does not seem to explain an important portion o f the wage differential as suggested by efficiency wage models part of the remaining wage differential may be due to firms heterogeneity similarly perhaps large firms pay higher wages simply partly beca use they employ workers with more unobserved abilities because differen t explanations of the wage differential may lead to different policy implications determining the source of the wage firm size effect is an important question for future research

information and the life cycle consumption of hazardous goods safety is a major area of public concern the fact that people take risky occupations smoke or fail to use seat belts often provokes a regulatory response designed to either protect people from the risks directly or to provide them with more information on the hazards involved such policy is often based on the view that risk taking behavior is irrational or ill advised this paper develops life cycle models of the decision to consume hazardous goods a particular focus of the analysis is to consider the rational response to information about hazards rational consumption of a hazardous good is shown to depend on such factors as the nature of the hazard age life expectancy age at which information on the hazard was received and of course the underlying value of the good itself

macroeconomic adjustment with segmented labor markets this paper analyzes the macroeconomic effects of fiscal and labor market policies in a developing economy with an informal sector and a heterogeneous work force a permanent reduction in government spending on nontraded goods leads in the long run to a deprecia tion of the real exchange rate a fall in the market clearing wage for unskilled labor an increase in output of traded goods and a lower stock of net foreign assets a permanent reduction in the minimum wage improves competitiveness and expands the formal sector the effect of changes in unemployment benefits are also analyzed q 1999 elsevier science

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

a dynamic option value for institutional change marketable property rights in the sahel in this article we use dynamic programming methods to create an option value measure of the value of the institutional innovation of marketable property rights this measure has two properties that are important to understanding institutional change it is truly dynamic and it allows for agent heterogeneity in the case of west africa we find that the collapse of customary risk management institutions is a vital part of the demand for marketability rights as agents struggle to smooth income and consumption in its wake we find that the social efficiency implications of this demand for institutional innovation are ambiguous

formal and informal rural credit in four provinces of vietnam abstract this paper uses a survey of 932 rural households to uncover how the rural credit market operates in vietnam households obtain credit through formal and informal lenders formal loans are almost entirely for production and asset accumulation while informal loans are used for consumption smoothening the determinants of formal and informal credit demand are distinct while credit rationing depends on education and credit history in particular regional differences in the demand for credit are striking a one size fits all approach to credit policy in vietnam would be inappropriate

non monotonic health behaviours implications for individual health related behaviour in a demand for health framework a number of behaviours influence health in a non monotonic way physical activity and alcohol consumption for instance may be beneficial to one s health in moderate but detrimental in large quantities we develop a demand for health framework that incorporates the feature of a physiologically optimal level an individual may still choose a physiologically non optimal level because of the trade off in his or her preferences for health versus other utility affecting commodities however any deviation above or below the physiologically optimal level will be punished with respect to health distinguishing between two individual types we study a the qualitative properties of optimal time paths of health capital and health related behaviour b the perturbations of the optimal time paths that result from changes in exogenous parameters and c steady state properties predictions of the model and the implications for empirical analysis are discussed at length some comments on potential future extensions conclude the paper

workers trust funds and the logic of wage profiles this paper defines a concept a worker s trust fund which is useful in analyzing optimal age earnings profiles the trust fund represents what a worker loses if dismissed from a job for shirking in considering whether to work or shirk a worker weighs the potential loss due to forfeiture of the trust fund if caught shirking against the benefits from reduced effort this concept is used to show that the implicit bonding in upward sloping age earnings profiles is not a perfect substitute for an explicit up front performance bond or employment fee it is also shown that the second best optimal earnings profile in the absence of an up front employment fee pays total compensation in excess of market clearing in a variety of stylized cases

land titling and rural transition in vietnam abstract we examine the impact of the 1993 land law of vietnam which gave households the power to exchange transfer lease inherit and mortgage their land use rights we use household surveys before and after the law was passed together with the considerable variation across provinces in the speed of implementation of the reform to identify the impact of the law we find that the additional land rights led to statistically significant increases in the share of total area devoted to long term crops and in labor devoted to nonfarm activities however these changes are not large in magnitude and appear to be driven mainly by the increased security of tenure provided by the law rather than by increased access to credit markets or greater land market participation

involuntary unemployment and worker self selection abstract consider a firm that lacks information about the reservation wage or ability of any specific worker but is aware that workers with higher reservation wages tend to be more able on average we show that under a simple condition that the efficiency wage exceeds the lowest reservation wage the optimal hiring policy for the firm involves 1 no wage discrimination and 2 rationing of jobs when demand for its product is low the result also extends to the case where hours of work are variable provided each worker is most productive when working a strictly positive number of hours per week

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

efficiency wages deferred payments and direct incentives in agriculture empirical evidence from agricultural labor markets is consistent with efficiency wage theory and inconsistent with several alternative explanations according to this theory the higher wage or deferred payment benefits that direct hire growers pay relative to that of farm labor contractors is an efficiency wage growers use this extra compensation to lower their monitoring expenses and reduce shirking by workers copyright 2002 oxford university press

incentive compatible long term contracts and job rationing this article presents a model in which markets for long term contractual employment coexist with spot markets for labor assuming the absence of third party enforcement wage contracts are required to be incentive compatible as a consequence contract wages yield higher expected utility to the worker than spot market wages so that in equilibrium contractual long term jobs are rationed

alcoholism work and income this article reports on an empirical analysis of the relationships between alcoholism and income and working we show that the relationships between alcoholism and labor market success have important age or life cycle dimensions we present evidence that alcoholism may affect income more by restricting labor market participation than by affecting the wages of workers finally we demonstrate that the effects of alcoholism on earnings depend on the extent to which one controls for other covariates associated with alcoholism as such we suggest that there may be important indirect as well as direct effects of alcoholism on labor market success

wage interdependence through decentralized bargaining abstract the idea that sector specific unions are influenced by the wages obtained by other unions has mainly been used to support the empirical observation that wages are highly correlated among industries the sources of wage interdependence can mainly be found in unions preferences in the nature of technology and in price and demand determination the presence of externalities and of strategic complementarity among unions leads to suboptimal equilibria which generates non desired inflation unemployment and possibly also trade balance deficit this enforces the idea that part of current unemployment can be eliminated by improving the cooperation between social actors

multiple expectational equilibria under monopolistic competition this paper shows that a monopolistically competitive economy with real investment can have multiple rational expectations equilibria one is associated with entrepreneurs optimistic expectations about future demand another with entrepreneurs pessimism it also shows that an optimistic expectational equilibrium pareto dominates a pessimistic equilibrium an investment subsidy can be beneficial both by reducing the original underinvestment distortion and by changing firms expectations from pessimistic to optimistic the most important assumption is increasing returns to scale and monopolistic competition makes increasing returns consistent with each producer s optimization

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

signalling ability to pay and rent sharing dynamics abstract it is often argued that competitive and rent sharing models of wage determination should be distinguished by their long run properties in general rent sharing models predict the existence of a long run relationship between wages and firm specific ability to pay but the competitive model does not i present a two period counter example which demonstrates that rent sharing can be merely a short run phenomenon in the separating equilibria the firm signals ability to pay through first but not second period wage offers the model also has pooling equilibria in which the firm pays rents in the long run

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

the development of a land market insights from cote d ivoire this paper contributes to the debate on rural land sales in africa first it shows that the emergence of sales in the forested area of cote d ivoire corresponds to an imperfect land commoditization due to the social embedding of land transfers in the autochthon migrant relationship then it analyzes land sales in a former no man s land outside this relationship where the transactions correspond to complete sales however a diachronic analysis reveals an involution in the market related to the transformation of the pioneer s individual private right into a family right once the land is inherited highlighting therefore another social dimension of land markets 2006 by the board of regents of the university of wisconsin system

an efficiency wage model with explicit monitoring abstract this paper develops an efficiency wage model of involuntary unemployment in a small open economy which uses two factors to produce three goods one of which is non traded monitoring aimed at reducing shirking by workers in all industries the analysis shows how a tariff on imports may lower employment but paradoxically raise social welfare at the same time as the paper also demonstrates the optimal policy combination includes not only taxes on capital and monitoring as well as a subsidy on employment but also despite the small country assumption a tax on consumption

the market for land an analysis of interim transactions abstract an interim sale is a sale undertaken with the intention of buying back the same good in the near future interim transactions play a prominent role in several markets and they tend to generate multiple equilibria such markets can get caught at a low turnover equilibrium it is alleged that in many ldcs the market for buying and selling land is extremely inactive an interim transactions model is constructed to explain this phenomenon wider issues in land markets including distress sales are analysed as well the model is applied also to labour tying and seasonality in backward agriculture

gender differences in land inheritance schooling and lifetime income evidence from the rural philippines this article examines the difference in lifetime incomes arising from parental preferences in the allocation of land inheritance and investments in schooling between sons and daughters in the rural philippines sons are preferred with respect to land inheritance receiving 0 15 additional hectares of land while daughters are treated more favourably in schooling investments receiving 1 5 more years of schooling however differences in both current and life cycle incomes between sons and daughters are insignificant this suggests that filipino parents allocate intergenerational transfers to equalise incomes among their children without sacrificing efficiency

implicit contracts incentive compatibility and involuntary unemployment this paper considers the enforceability of employment contracts when employees performance cannot be verified in court so that piece rate contracts are not legally enforceable part i shows that there exists a variety of self enforcing implicit contracts modelled as perfect equilibria in a repeated game and characterizes all the wage and performance outcomes that can be implemented implementation requires a strictly positive surplus from employment the form of the contract depending on how this surplus is divided between firm and employee piece rate contracts and contracts with an informally agreed bonus can be made self enforcing but the use of severance pay and bonding does not extend the set of implementable allocations the resulting contracts resemble actual labor contracts more than do the contracts in standard principal agent models part ii analyses market equilibrium with these contracts also modelled as perfect equilibria in a repeated game and shows that many such equilibria exist unfilled vacancies and unemployed workers can co exist despite the existence of contracts that are potentially mutually beneficial for those jobs that are filled any division of the potential surplus is possible so that the market can have at the same time involuntary unemployment and vacancies that are unfilled despite filled jobs earning positive profits as a criterion for selecting equilibria a notion of renegotiation proofness is applied then either all workers are employed or all jobs filled but any division of the potential surplus is still possible the paper explores what further restrictions on beliefs give rise to a walrasian outcome in which all the potential surplus goes to the short side of the market and to an efficiency wage type outcome in which the potential surplus goes to the long side

labor contracts under asymmetric information when workers are free to quit this paper examines the impact of workers ability to quit on the performance of labor contracts between workers and privately informed firms while the need to induce workers to remain with the firm necessarily lowers total welfare the effect on employment levels is to reduce the magnitude of the inefficiency due to asymmetric information whether this inefficiency is under or overemployment the model predicts that employment distortions increase with the strength of lock in effects on workers a prediction which contrasts with the results of efficiency wage models and which may help in empirical testing of labor contract theory

profit sharing risk sharing and firm size implications of efficiency wages by taking account of output fluctuations this paper constructs a synthesis of profit sharing and efficiency wage models to highlight the role of the risk attitudes of the firm and its employees we show contrary to the traditional efficiency wage theory that in a profit sharing economy unemployment is no longer a necessary device to induce work effort and consequently the labor market equilibrium may be characterized by full employment such a result is more likely to be true when the economy is characterized by small sized firms in addition we also provide a preliminary sketch of the situations in which the firm chooses a profit sharing program or a fixed wage one and discuss how a firm determines its pay parameters and employment in response to output fluctuations

commodity taxation in welfare states i introduction while the nature of unemployment is diverse a substantial part of unemployment in many developed countries it is argued stems from generous social welfare systems meyer 1990 nickell and layard 1999 and see figure 1 1 in fact the organization for economic cooperation and development oecd data show that countries with generous unemployment insurance ui face high unemployment rates and tend to have high commodity tax rates see figure 2 this paper attempts to account for these empirical patterns in the optimal taxation framework in a general equilibrium context the unemployment mentioned above can be viewed as a result of a a low work incentive induced by generous social insurance welfare benefits combined with b the subsequent employment adjustment by firms e g not renewing employment contracts or hiring a portion of temporary part time workers as regular workers to raise labor productivity to deal with this type of unemployment the government may need to seek reforms of social insurance welfare systems including a reduction in unemployment benefits but the public s redistributive motives often do not permit implementation of such reforms 2 under this socioeconomic constraint this paper raises a question can commodity taxation help reduce unemployment and improve efficiency perhaps a slightly different but equally interesting question that concerns many welfare states in recent decades may be suppose that a society agreed on the expansion of welfare programs in financing the increased welfare expenditure which tax increase consumption taxes or income taxes is more relevant figure 1 omitted figure 2 omitted to address these questions we examine the role of commodity taxation in a general equilibrium model where a taking into account wage unemployment benefits and taxes workers choose work effort that the firm can observe only through costly monitoring and b firms use both wage and monitoring as effort eliciting devices and they fire those caught shirking therefore the chosen level of a worker s effort affects the probabilities of employment and unemployment and thus involuntary unemployment arises from moral hazard 3 in this contractual setting with imperfect information we consider the government s problem of maximizing the representative worker s expected utility using income and commodity taxes we derive new results on commodity taxation and present supportive results using quantitative analysis our key results suggest that commodity taxation can be used to alleviate moral hazard and hence unemployment which can account for why countries with generous social welfare systems tend to adopt high commodity tax rates see figure 2 this main result is based on the following feature of the model given the aforementioned environment optimal commodity and income tax rates can be determined in contrast to the indeterminacy result of atkinson and stiglitz 1976 henceforth as 4 therefore our results provide an explanation for the widely observed coexistence of direct and indirect taxation to illustrate the intuition behind our results consider a situation where a a society provides liberal unemployment benefits for unemployed workers and b the government sets the levels of income and commodity tax rates so as to finance the expenditures for ui and public goods liberal unemployment benefits are equivalent to treating the consumption of unemployed workers favorably i e between states consumption choice distortion which creates moral hazard in the supply of effort under imperfect information about effort obviously drastic reforms in social insurance systems e g cutting benefits can correct moral hazard but the public s redistributive motives do not permit such reforms in this setting we show that strengthening commodity taxation while lessening income taxation penalizes moral hazard which lowers the between states consumption choice distortion leading to a greater supply of effort