a review of the recent empirical literature on displaced workers this article reviews the empirical literature on job displacement job displacement is widespread and strongly countercyclical tending to peak during economic downturns but concentrated in indus

advance notice and job search the value of an early start recent studies of the effect of advance notice on jobless duration following displacement misspecify the relationship between these two variables by treating advance notice as a dummy regressor in conventional survival time models job search theory however suggests that the major impact of advance notice is not to alter the efficiency of search after job loss but rather to allow workers to begin search before job loss the authors develop a sequential regimes job search model which allows search prior to displacement for workers with advance knowledge of layoff with different search intensities before and after layoff maximum likelihood estimates of the model are then computed using a pooled data set from the 1984 and 1986 displaced worker surveys advance knowledge is found to significantly shorten jobless duration for most labor force groups using these estimates the authors simulate the effect of various levels of advance knowledge on jobless duration their results indicate that relatively modest advance notice substantially benefits many displaced workers

the phillips curve the persistence of inflation and the lucas critique evidence from exchange rate regimes comment we present evidence from the united states and the united kingdom that the persistence of price inflation is significantly higher under managed exchange rate regimes than under gold based fixed exchange rate regimes these differences are also reflected in expectations augmented phillips curves we use a two country macro model with forward looking price setters to demonstrate that higher monetary accommodation of inflation and exchange rate accommodation of inflation differentials increase inflation persistence the evidence does not contradict this hypothesis it supports the hypothesis of forward looking price setters and highlights the empirical significance of the lucas critique jel e31 e42 f33

speculative bubbles in the ff dm parity during the 1980s it is often argued that exchanged rates volatility during the 1980s was too excessive to be attributed only to market fundamentals this paper investigates for speculative bubles in the franc mark exchange rate applying direct tests for determinate bubbles and indirect ones according to the issues of integration and cointegration for stochastic bubbles in the context of a sticky price monetary model no clear cut conclusions can be drawn from these tests although all of them indicate that the no bubble hypothesis cannot be easily accepted however any evidence for bubbles should be interpreted with caution since a possible misspecification of the model may produce misleading inferences

econometric analysis of cps type unemployment data analysts studying the unemployment experiences of population members often have access to data collected from a sample of individuals at a point in time which contain the length of the ongoing spell of unemployment for sample members currently unemployed no information regarding the lengths of ongoing employment spells is collected this paper considers how such information may be utilized in the estimation of parameters of alternating renewal process models of labor market attachment in the presence of both observed and unobserved population heterogeneity a number of models are presented and estimation is carried out using a cps type data set from italy

the effect of advance notification of plant closings on unemployment using data from the 1984 displaced worker survey the authors model the determinants of time without work following job displacement for a large sample of workers laid off because of plant shutdowns between 1979 and 1984 the major focus of the paper is on the role of advance notification in mitigating unemployment the estimating procedure accommodates right censored observations stemming from continuing or open ended spells of unemployment advance notification is found to have significantly reduced the duration of unemployment of those notified workers who did not draw unemployment insurance benefits and in particular of those who left the plant prior to termination advance notice had much less effect on the time without work of notified workers whose spell length of unemployment was long enough for them to collect unemployment insurance benefits

entry stackelberg equilibrium and reasonable conjectures we show that the consideration of stackelberg equilibrium and reasonable conjecture equilibria r c e provide some foundation to the concept of limit pricing

female labor supply following displacement a split population model of labor force participation and job search following permanent layoffs most women search for new jobs but some withdraw from the labor force we develop a joint model of the choice to undertake postdisplacement job search and unemployment durations for searchers and estimate it using data from the 1988 displaced worker survey maximum likelihood estimates of this split population model show that labor force withdrawal is an important factor explaining the distribution of postdisplacement jobless spells the model also allows us to distinguish the effect of any covariate on the decision to engage in postdisplacement search from its effect on search duration single population models obscure this distinction

advance notice and postdisplacement joblessness this article investigates whether prenotification decreases postdis placement joblessness reduced form estimates indicate that lengthy written notice is associated with small increases in the probability of avoiding nonemployment but with no decline in average durations significant reductions are found however for household heads women nonwhites and in local labor markets with high unemploy ment rates a new method is developed to control for the endogeneity of voluntarily provided advance notice this procedure suggests that previous research substantially overstates the degree to which preno tification reduces nonemployment and indicates that the actual de crease is between 2 and 5 working days

budgetary policy and unemployment dynamics in an olg model with collective bargaining we consider a dynamic general equilibrium model with capital accumulation and collective wage bargaining and investigate how unemployment responds to structural shocks under two stylised budgetary policies under balanced budgets tax adjustments lead to higher unemployment on impact but enable a quick recovery of employment by contrast unbalanced budgets mitigate unemployment effects on impact but dynamics are more persistent due to weaker capital accumulation and future fiscal consolidations these results are consistent with empirical evidence on a positive cross country relationship between government borrowing and unemployment persistence this paper starts out from the well known fact that many european countries have suffered from persistently high unemployment over the past two decades there is a large literature which attempts to explain this development as resulting from a combination of structural shocks and mechanisms which make the effects of any such shifts more persistent one prominent branch of this literature stresses that adverse structural shocks tend to induce a slowdown in capital accumulation which reinforces the employment losses and adds to unemployment persistence bean 1989 benassy 1997 blanchard 1997 burda 1988 caballero and hammour 1998 daveri and tabellini 2000 similarly these studies point out that when the shock is over the recovery of employment depends critically on the speed with which investments in capital respond to the new situation the purpose of this paper is to reconsider this capital shortage hypothesis by linking it explicitly to the stance of fiscal policy to see the importance of fiscal policy in this context consider a government which faces an adverse structural shock such as a drop in employment due to a wage setting shock and decides whether it should keep its budget balanced or not this decision will affect the overall structure of assets in the economy i e the mix between capital and government bonds and this mix will in turn be an important determinant of the speed with which the economy can create employment once the shock is over in particular according to the capital shortage hypothesis the recovery in terms of employment is likely to take longer under a policy which temporarily accepts structural budget deficits particularly when crowding out effects have been substantial

on the job search the case of nevada test site contractor employees the us nuclear testing moratorium has reduced employment levels at the nevada test site nts this study analyses the incidence duration and determinants of on the job search activity of nts employees who expect permanent job losses empirical results support theoretical predictions originating from search theory and suggest that high skilled white collar workers are the most likely to search while employed and therefore are the least likely to face severe dislocation problems

a puzzling aspect of the effect of advance notice on unemployment displaced workers with generous periods of advance notice are more likely than their non notified counterparts to avoid post displacement unemployment altogether but once unemployed they tend to escape from unemployment much more slowly the authors using data from the five year retrospective 1988 and 1990 displaced worker surveys examine three potential explanations for this puzzle delaying behavior induced by the receipt of unemployment insurance nonrandom distribution of notice to workers and previous studies failure to appropriately incorporate the pre displacement search time of notified workers this analysis supports the third explanation after allowing for less intense search prior to displacement than following displacement the authors find that the pattern of escape rates for otherwise observationally equivalent workers does not differ by notification status

the wage effects of voluntary labor mobility with and without intervening unemployment this study investigates how an unemployment spell between jobs affects a job changer s new wages one hypothesis holds that the search and mobility costs associated with unemployment between jobs are compensated for by increased wage gains resulting from more intensive job search opposing hypotheses are that unemployed job changers are at a disadvantage because they have fewer job contacts than job changers who move directly from one job to another or because they are unable to gain new skills or develop good work habits while unemployed the results of this analysis of 1979 81 data from the national longitudinal survey of young men support the first hypothesis an unemployment spell between jobs is associated with wage gains higher than those obtained when the job change was made with no intervening unemployment

managing channel profits a channel of distribution consists of different channel members each having his own decision variables however each channel member s decisions do affect the other channel members profits and as a consequence actions a lack of coordination of these decisions can lead to undesirable consequences for example in the simple manufacturer retailer consumer channel uncoordinated and independent channel members decisions over margins result in a higher price paid by the consumer than if those decisions were coordinated in addition the ensuing suboptimal volume leads to lower profits for both the manufacturer and the retailer this paper explores the problems inherent in channel coordination we address the following questions what is the effect of channel coordination what causes a lack of coordination in the channel how difficult is it to achieve channel coordination what mechanisms exist which can achieve channel coordination what are the strengths and weaknesses of these mechanism what is the role of nonprice variables e g manufacturer advertising retailer shelf space in coordination does the lack of coordination affect normative implications from in store experimentation can quantity discounts be a coordination mechanism are some marketing practices actually disguised quantity discounts we review the literature and present a simple formulation illustrating the roots of the coordination problem we then derive the form of the quantity discount schedule that results in optimum channel profits this article was originally published in marketing science volume 2 issue 3 pages 239 272 in 1983

imperfect information and dynamic conjectural variations this article analyzes oligopoly interaction in an environment where firms are imperfectly informed about the evolution of the market demand curve the analysis develops a two period cournot framework under the assumptions that demand shifts are positively serially correlated that firms never directly observe the demand curve and that firms never observe the previous quantity decisions of rivals firms do draw inferences about the position of the demand curve from past observations on prices consequently the current output of a firm will influence the current market price which will then influence rivals inferences about future demand the future output decisions of rivals will respond accordingly the theory predicts negative dynamic conjectural variations essentially a firm perceives that an increase in its output will lower the current market clearing price which will cause rival firms to think that the demand curve has shifted down and hence induce them to lower their outputs in the future

plant closings and their regulation in maine 1971 1982 this paper describes the plant closing regulations adopted in maine during the 1971 81 period and documents a pattern of relatively poor compliance with the advance notice and severance pay requirements of the law data on the number of workers laid off in major plant closings on prenotification of workers and on state and local unemployment rates provide the basis for an econometric estimate of the effects of closings with and without early notification on local unemployment rates and the size of the local labor force the results suggest that advance notification significantly lowers the unemployment resulting from a closing

preunemployment job search and advance job loss notice preunemployment search is the fundamental labor market process generating beneficial effects of advance notice yet theory indicates that workers receiving notice may not search whereas others may search even without advance notice our weighted results indicate that over one third of all nonnotified workers still search and over 40 of workers receiving notice do not respond by searching further preunemployment search determinants differ for notified nonnotified workers and men women for notified men search is strongly increased by longer notice and strongly decreased by higher unemployment insurance benefits but neither factor affects the employed search decisions of notified women

financial interdependence and the state international monetary relations at century s end as the twentieth century draws to a close one can find sharply contrasting views among leading scholars on almost every key issue in positive international political economy how strong are international as opposed to domestic influences on policy how important are issues of national security high politics versus economic considerations low politics what role do institutions international and domestic play in influencing and constraining the behavior of governments why is international cooperation rare but not unheard of the list goes on and on

strategic investment and conjectural variations abstract this paper analyzes investment decisions under the alternative assumptions of competitive collusive open loop non cooperative and feedback non cooperative behavior steady state capital stocks prices and outputs are obtained and compared the paper shows that one of the linear feedback equilibrium decision rule coefficients is a dynamic version of a contemporaneous conjectural variation the same decision rule coefficients are shown to imply a particular value for the contemporaneous conjecture the implied conjecture embodies subgame perfection and approaches the competitive value as the number of firms in the industry increases

the workers value of the remaining employment contract duration this paper introduces and applies a method for estimating workers marginal willingness to pay for job attributes employing data on job search activity worker s willingness to pay for the remaining duration of the employment contract is derived we provide evidence that workers attach substantial value to the remaining contract duration a temporary worker with a remaining contract of 6 months is willing to pay about 10 of the wage to increase the contract by one month

how do unemployment insurance and recall expectations affect on the job search among workers who receive advance notice of layoff this paper explores how advance notice of layoffs recall rehiring expectations and unemployment insurance ui benefits affected on the job search among a random sample of arizona ui recipients in 1975 76 the analysis which includes extensive controls for the characteristics of workers and their jobs indicates that pre unemployment search increased with length of notice and decreased with expected recall also among workers not expecting recall pre unemployment search decreased with the level of ui benefits available after layoff the authors argue that improved experience rating would encourage firms to give employees advance notice when layoffs are imminent and re employment bonuses for workers with zero or short unemployment spells would encourage early search

discrimination and the unemployment durations of white and black males in this study we develop a model to decompose the longer unemployment duration of blacks into discriminatory and non discriminatory components by extending becker s theory of discrimination to job search theory the discriminatory component is seen to be the result of two separate effects first a white treatment advantage shortens the unemployment duration of whites because they receive more frequent and higher wage offers than would prevail in the absence of discrimination for working alongside blacks second a black treatment disadvantage lengthens the jobless spell of blacks because blacks receive lower wage offers than would prevail without discrimination as discriminating employers extract quasi rents from their labour we estimate our model using date from the cps displaced workers survey the results show that 3 81 of the 4 58 weeks longer unemployment spell for blacks is due to discrimination with 3 11 weeks resulting from the white treatment advantage and 0 7 weeks emanating from the black

the returns to mobility and job search by gender using data from the national longitudinal survey of youth the authors estimate the returns to job search mobility and the interaction of search and mobility for young men and women they find st

an empirical test of the theory of on the job search preunemployment search is the fundamental labor market process generating beneficial effects of advance notice yet theory indicates that workers receiving notice may not search whereas others may search even without advance notice our weighted results

trade liberalization in oligopolistic industries the quota case abstract this paper analyzes the short and long run effects on domestic price and output of partially liberalizing quota restrictions in a general model of oligopolistic interactions it is shown that perverse outcomes are possible in a number of cases including that of rational conjectures a larger quota may result in an increase in domestic output in the short run and a higher price in the long run the relationship between oligopolistic conjectures and the number of firms in the industry is critical in determining the long run outcome

an empirical analysis of employed and unemployed job search behavior this paper analyzes the job search activities of employed and unemployed job seekers using self reported data from a 1980 survey one novel finding from reduced form equations is that many searchers both employed and unemployed rejected at least one offer before accepting a job the reduced form results are used to estimate reservation wages based on a fairly standard model of job search most of the job searchers accepted a job offer with a wage below the estimated reservation wage suggesting that the model does not fit the data well

are rational conjectures rational the concepts of rational conjectures and reasonable conjectures are critically reviewed it is shown that their operation depends crucially on an invisible non optimizing deus ex machina hence these concepts are not really suitable for understanding competition among optimizing firms in addition the widely claimed fact that bertrand conjectures are locally rational conjectural variations is shown to be erroneous the message of this paper should be plain from the title it reflects a disillusionment with the concepts of rational conjectures and reasonable conjectures for helping us understand economic interactions under imperfect competition on the face of it these concepts seem to offer the economic modeller some useful tools hence this paper is in some sense intended as a friendly warning to other economic modellers there are inherent conceptual weaknesses in these concepts that do not become apparent until one begins to penetrate their inner logic to make plain the weaknesses of rational conjectures and reasonable conjectures we shall concentrate on the simplest application of the ideas to duopoly and we shall illustrate our points using the classical cournot example of duopolists facing a common linear demand curve and having the same constant marginal cost the reader may know that this example figures prominently in the rational conjectures literature it being shown that bertrand conjectures are locally rational conjectural variations we shall see in section vi that this claim is not really valid although widely asserted but our real message is on a different plane and pertains to the usefulness of the concepts in general

union membership in the united states 1973 1981 this paper reports estimates of union membership gathered from may current population surveys from 1973 to 1981 the authors present data by occupation industry selected states and smsas race gender and educational attainment the paper both extends and differs from that by freeman and medoff which presents unionism estimates for the private sector for 1968 75 to facilitate longitudinal analysis this paper reports three year moving averages of occupational and industry data and annual estimates of demographic classifications the data include public sector as well as private sector workers and they exclude workers not covered by the national labor relations act also the authors provide only union membership estimates not estimates on workers covered by union contracts this paper suggests that the percentage of all workers that are unionized in the united states remained fairly constant over the 1973 81 period

the incidence of entry in 3 oligopoly models three of the least satisfactory features of oligopoly theory are that the beliefs of firms are frequently arbitrary that the solution concept which reflects these beliefs used is taken as exogenous and that its role in conditioning the results is neglected the first criticism has been resolved to a large extent in the recent consistent conjectures literature bresnahan 1981 perry 1981 ulph 1983 for critical views see laitner 1980 or boyer and moreaux 1983 which characterizes equilibria having the property that firms hold locally correct conjectures about rivals reactions yet however satisfactory they are on the question of arbitrariness consistent conjectures unfortunately run afoul of the exogeneity criticism for it is by no means clear how firms come to possess the information needed to form such beliefs quite clearly the complete answer to the exogeneity question lies in models of information acquisition and evaluation by firms nevertheless it would be unwise to abandon static models wholesale for they can be useful if supplemented by a set of comparative static exercises revealing how variations in the solution concept itself conditions the results this paper advances the case for such a comparative statics with respect to solution concept primarily by discussing a somewhat unusual illustration much recent work has been devoted to entry and its effects on market performance but relatively little is known about how putative entrants are attracted to the market how much entry occurs in particular types of markets how fast it occurs how incumbents anticipate putative entrants and their speed of reaction thus while we have some feel for how variations in solution concept affect the market share or profits of a given set of firms in post entry equilibria e g shubik 1980 ulph and folie 1980 dixit 1980 spulber 1981 we have very little in the way of answers to questions like is there more entry when firms play cournot than when one firm acts as a stackelberg leader vis a vis the rest or does successful entry and even displacement of relatively inefficient incumbents occur more or less rapidly when firms behave as cournot than when industry conduct is described by some other solution concept such questions are natural for example if one is interested in the persistence of market power and its speed if any of decline section ii contains some slightly startling results which emerge from considering what is very much a special case of an entry process while the main interest in the results arises because they underline in a particularly emphatic manner the sort of interesting phenomena that can be revealed by such comparative static exercises i shall in section iii pursue these results as having interest in their own right and speculate on their robustness to various extensions of the model section i commences the whole discussion with some methodological remarks

changes in labor force status among the unemployed i argue against the popular view that young black men experience more joblessness than their white counterparts because they have priced themselves out of the labor market the seemingly excessive reservation wages of jobless young black men what they

recent advances in oligopoly theory from a game theory perspective abstract this paper surveys the contribution that recent developments in game theory have made to the understanding of oligopoly theory it is argued that conventional models suffer from the problem that there are a number of solution concepts offered with little guidance as to which should be selected and this is related to the static nature of the models employed one important development in game theory has been the analysis of repeated games and when applied to oligopoly theory this suggests that outcomes may be more cooperative than conventional theory suggests related to this is the requirement that firms employ credible threats to punish cheating from cooperative outcomes and the paper examines the extent to which imperfect information may restrict the scope of firms to employ such punishments one way in which firms may seek to make threats credible is through strategic investments for example in production capacity and the paper explores how competition over price or output is integrated with competition over instruments for strategic investment

unemployment insurance job queues and systematic job search an equilibrium approach the labor market effects of unemployment insurance ui have been viewed in several contexts by economists on the one hand the ui system of jobless benefits and experiencerated taxation of firms is seen as influencing firms decisions to lay off workers 9 10 24 2 key in such analyses is the degree to which firms layoffs are subsidized by an imperfect experience rating a tax system in which employers ui taxes increase by less than their workers benefits increase on the other hand many other studies of ui place primary focus on the worker although employer concern for worker well being plays a role even in the work on the impact of ui on firm layoff decisions each of these worker based studies is concerned with one of two issues 1 ui and compensating wage differentials 14 24 or 2 u i and the job search process first hutchens assumes that workers face a choice in the labor market between high wage high layoff probability firms and low wage low layoff probability firms 14 by reducing the cost of being laid off ui increases one s likelihood of choosing the former kind of job along these lines topel finds evidence that ui generosity substitutes for wages and therefore lowers the compensating differential associated with a high layoff job 23 second several authors have studied the effect of ui on job search this work recognizes that ui lowers the cost of searching and therefore raises the reservation wage expected unemployment duration and expected post unemployment wages 2 previous work on the impact of ui on firm layoff decisions has assumed either a layoff subsidy 9 or demand uncertainty 2 in order to generate layoffs and therefore a u i impact on layoffs in contrast to such work this paper views layoffs in an equilibrium context they occur in our model even with no layoff subsidy and or with no demand uncertainty layoffs are of value to the firm in our model since they correspond to workers rejected from a queue of potential trainees from the firm s point of view a queue of applicants may be desirable in order to lower

the relative effects of employed and unemployed job search a lthough many early models of job search assumed that job seekers were unemployed economists have come to recognize the importance of on the job search mattila 1974 for example found that roughly 60 of quitters experienced no unemployment between jobs implying that the majority of voluntary job changers engaged in on the job search the choice of search mode i e employed vs unemployed search has been modelled in the theoretical search literature barron and mccafferty 1977 burdett 1978 however there have been no attempts to estimate empirically the determinants of this choice 2 some researchers have however examined the resulting wages associated with these two types of search and found a greater wage return to employed than to unemployed search mattila 1969 black 1980 however because voluntarily unemployed search involves forgoing income burdett 1978 while employed search does not abstracting from voluntary reductions in hours incomemaximizing job seekers would never quit to search unless the expected net return to unemployed search exceeded that for employed search thus the previously mentioned empirical findings at first glance might appear to contradict the assumption of income maximization by job seekers because some workers do quit into unemployment 3 in this paper it is argued that previous attempts to compare the returns of employed and unemployed job search suffer from a selectivity problem specifically searchers who accept offers without experiencing any unemployment are likely to have unobservable variables such as informal job contacts and ability which will raise the relative return to employed search compared to that of voluntarily unemployed job seekers 4 providing an explanation for higher wages for on the job searchers than for unemployed searchers this paper estimates the relative wage effects of employed and unemployed search and the determinants of the choice of search mode i e employed vs unemployed search unlike earlier work mattila 1969 black 1980 the previously mentioned selectivity problems are accounted for this is the first attempt to estimate the determinants of choice of search mode 5 without adjusting for selectivity bias as regards employed vs unemployed search it is found that employed search is associated with greater expected wage offers than unemployed search controlling for measurable personal characteristics however accounting for selectivity the expected wage offer given unemployed search is greater than that given employed search finally the greater is the difference between the expected offer given unemployed and that given employed search the more likely one is to choose unemployed search these findings suggest that quitting to search unemployed may be a wealth maximizing decision received for publication november 5 1980 revision accepted for publication august 17 1981 university of illinois at urbana champaign and arizona state university respectively professor low is partially supported by a faculty grant from the graduate college at arizona state university the authors thank francine blau wallace hendricks and two anonymous referees for comments and suggestions i for a summary of this literature see lippman and mccall 1976 2 barron and mccafferty 1977 do estimate an aggregate time series model of the log of the proportion of quits entering unemployment as a function of the vacancy rate proxied by the help wanted advertising index however such a model ignores search that does not lead to quits and does not include variables beyond the vacancy rate that influence an individual s choice of search mode i it is also possible that the forgone earnings due to unemployed search could in principle be less than the possible savings in direct search costs due to unemployed search relative to employed search see burdett 1978 in this case a lower wage return to unemployed search could imply that quitting was based on income considerations further individuals may have quit for nonwage reasons 4 black 1980 found that other things equal those who planned to seek new employment but did not quit had significantly lower wage growth than those who did not plan to search and did not quit this finding strongly suggests the likelihood of a selectivity bias black 1980 p 227 black s 1976 1980 data the michigan panel study of income dynamics psid for his work on employed search did not allow him to distinguish employed and unemployed search

consistent linkages across markets abstract consistent conjectures are derived within and across markets in a two market duopoly when marginal costs are not constant intermarket linkages arise which can have an adverse impact on competition this is the first formal derivation of such linkages in a static model with full information

rational conjectures in the theory of oligopoly abstract the paper employs the notion of rational conjectural equilibrium to remove the arbitrary nature of conjectures about rivals reactions which characterises the traditional non cooperative theory of oligopoly a general definition of these equilibria is given and the concept is then applied to a simple duopoly model the standard models of perfect competition monopoly limit price dominant firms are shown to emerge as special cases of rational conjectural equilibria

the value of commuting time in an empirical on the job search model an application based on moments from two samples this article estimates the value of commuting time voct among swedish males in an empirical on the job search model it uses a large sample of employee establishment linked data obtained from administrative registers the sample lacks information on mode choice for the journey to work we therefore estimate a mode choice model on another sample and use this model to link the administrative data to the relevant set of travel times costs and distances the voct is found to be 1 8 times the net hourly wage rate in the sample the relatively high estimate results from a high voct among cohabiting men

consistent conjectures in monopolistic competition abstract models of monopolistic competition such as dixit and stiglitz and spence typically assume firms take market variables as parametric this conjectural variation corresponds to chamberlin s large group approximation although these models need not have a large number of firms the present note following perry shows that consistent conjectures about the size and number of rivals can provide a more satisfactory basis for this assumption

tax progressivity income distribution and tax non compliance this article examines the determinants of tax non compliance when we recognise the existence of an imperfectly competitive tax advice industry supplying schemes which help taxpayers reduce their tax liability we apply a traditional industrial organisation framework to model the behaviour of this industry this tells us that an important factor determining the equilibrium price and hence the level of noncompliance is the convexity of the demand schedule we show that in this context this convexity is affected by the distribution of pre tax income the progressivity of the tax schedule and the way in which monitoring and penalties vary with income it is shown that lower pre tax income inequality as well as a less progressive tax code may cause more tax minimisation activities therefore the frequently advocated policy of reducing the highest tax rate may fail as a policy directed at improving tax discipline one way of offsetting the possible harm to tax compliance from a less progressive tax could be an adjustment of the penalty and monitoring functions

inflation target shocks and monetary policy inertia in the euro area the euro area as a whole has experienced a marked downward trend in inflation over the past decades and concomitantly a protracted period of depressed activity can permanent and gradual shifts in monetary policy be held responsible for these dynamics to answer this question we embed serially correlated changes in the inflation target into a dsge model with real and nominal frictions the formal bayesian estimation of the model suggests that gradual changes in the inflation target have played a major role in the euro area business cycle counter factual exercises show that had monetary policy implemented its new inflation objective at a faster rate the euro zone would have experienced more sustained growth than it actually did

job search by employed and unemployed youth analysis of data from the new youth cohort of the national longitudinal survey yields evidence that young unemployed job seekers chose higher levels of search effort as measured by number of methods used and time spent per method and lower reservation wages relative to offered wages than did comparable employed job seekers in 1981 these differences in search choices at least partly explain differences in search outcomes between the two groups unemployed searchers apparently were more likely than employed searchers to gain new employment and the wages they obtained were slightly lower the author argues that the greater search effort by unemployed job seekers is due to the higher costs of search they bear because of foregone earnings

conjectural variation and the indeterminancy of duopolistic equilibria the purpose of this article is to investigate the basic premise that the various oligopoly models result in an unacceptable divergence in market equilibria in the first half of the paper a theoretical model of a static conjectural variation duopoly with symmetric costs is presented using this model we define the coefficient of dispersion of equilibria and show that it is solely a function of the basic conditions of the market costs and demand this result is of empirical significance because it is possible to determine ex ante from easily observable information the extent to which conjectural variation market conduct will influence market equilibrium variation conjecturale et indetermination des equilibres duopolistiques l objectif de cet article est d analyser la proposition fondamentale que les divers modeles d oligopole se resolvent en une divergence inacceptable d equilibres de marche dans la premiere partie du m6moire on presente un modele theorique de duopole avec variation conjecturale statique et couits symmetriques avec l aide de ce modele on definit le coefficient de dispersion des equilibres et on montre qu il est seulement fonction des conditions du marche cofits et demande ce resultat a une importance empirique significative parce qu il devient possible de determiner ex ante a partir de renseignements facilement observables jusqu a quel point la variation conjecturale la conduite sur le marche va influencer l equilibre du marche

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

work incentive effects of taxing unemployment benefits before 1979 unemployment insurance ui benefits were not treated as taxable income in the united states several economists criticized this policy on the ground that not taxing ui benefits while taxing earned income allegedly encourages unemployed persons to conduct longer than socially optimal job searches since 1979 however ui benefits received by persons in higher income families have been subject to income tax this paper investigates whether the introduction of benefit taxation has had the predicted effect of reducing unemployment duration the study uses data on a sample of persons that filed for ui in 1978 or 1979 to examine whether high income claimants collected benefits for shorter periods after the tax change than they did before benefits became taxable as part of the empirical analysis the paper develops a generalization of the weibull distribution and applies a limited dependentvariable technique for this distribution similar to the tobit technique for the normal distribution despite some variation in the results from different model specifications the analysis presents persuasive evidence of a tax effect on unemployment duration the 1979 policy change is estimated to have reduced average compensated unemployment duration among the sampled high income claimants by about one week

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

conjectures rationality and duopoly theory abstract the main results of this paper are twofold first we show that any sustainable pair of production programs can be obtained as a locally rational conjectural equilibrium for appropriately chosen linear conjectural functions for the duopolists then we show that constant conjectural variations duopoly models could in a sense be made rational if the value of the conjectural variation is considered not as a constant but rather as a specific value taken at the equilibrium

consistent conjecture and free entry oligopoly a general analysis abstract this paper shows that in an oligopoly model that allows free entry only competitive conjecture is consistent for any demand and cost functions and for any conjectural variation function that depends on the firm s own output and the outputs of the other firms

the importance of composition of fiscal policy evidence from different exchange rate regimes abstract we study the macroeconomic effects of fiscal policies in an open economy we emphasize two transmission mechanisms the cost channel by which wage government spending and labor taxes raise the real wage firms must pay and the exchange rate channel by which the nominal exchange rate shifts induced by fiscal policy have real effects if some prices and wages are sticky the latter channel implies that changes in wage government spending or in labor taxation should have different effects under flexible than under fixed exchange rates in a 1964 93 panel of oecd countries we find significant evidence for both channels moreover we find that the real product wage and profitability are more responsive than quantities employment and output to fiscal policy innovations

the determinants of jobless durations of displaced workers in canada a hazard model of jobless durations is estimated using data from the 1986 canadian displaced workers survey hypothesis concerning demographic difference in reeployment transitions are testes and the effect of certain labour market and policy variables is assested the findings are compared with those published in studies using the united states displayed workers survey and attempt to exploit certain information which is unavailable in the us data set the demographic variables play an important ans expected role in determining the distribution of jobless spels characterstic pertaining to the former job such as union status and wage level also have explanatory power contrary to the findings of us studies the length of tenure of the former job is insignificant and the less difference in duration is found for workers who lost their jobs due to a plant closure as opposed to those displaced via a partial layoff

consistent conjectures in a value maximizing duopoly recent literature on consistent conjectures has established that under a variety of conditions only competitive behavior is rational rationality or consistency is defined in this literature as the condition that the slope of a firm s profit maximizing reaction function must equal the conjecture made about the firm s reactions by its rivals this concept of consistency is due to bresnahan 5 who uses it to select among the many possible conjectural equilibria in duopoly as defined by bowley 3 perry 24 extends the duopoly analysis to the case of an arbitrary fixed number of identical firms as well as to the case of free entry and exit both papers show that only the bertrand conjecture in which firms accommodate rivals output changes by making equal and opposite changes is consistent when marginal costs are constant in addition perry shows that this result also holds when entry and exit are free the bertrand conjecture is identified with competitive behavior since it implies price taking and marginal cost pricing the equivalence that both papers establish between consistent conjecture equilibrium cce and competitive equilibrium under constant marginal cost may have important practical implications johnston summarizes his thorough survey of cost functions with the comment two major impressions however stand out clearly the first is that the various short run studies more often than not indicate constant marginal cost and declining average cost as the pattern that best seems to describe the data that have been analyzed 15 168 therefore the results of bresnahan and perry would seem to apply to a wide range of observed behavior making a strong theoretical case that much economic activity is truly competitive regardless of the number of firms 2 even when marginal costs are not constant and the number of firms is fixed the implication of the consistent conjectures hypothesis for profit maximizing firms is that behavior is more competitive than coumot this result in itself is important since recent work has indicated that cournot equilibrium approaches the competitive limit in the case of large economies see for

advance notice and unemployment new evidence from the 1988 displaced worker survey this paper examines how advance notice of layoff affects the incidence and duration of unemployment following displacement the authors use the displaced worker survey for 1988 which unlike earlier surveys in the series contains information on written notice the results are mixed longer written notice may more than double the proportion of white collar workers who move directly to new employment but written notice has no such positive effects for blue collar workers regardless of its length informal unwritten notice benefits male workers either by improving their chances of avoiding unemployment white collar men or by reducing the average spell of unemployment blue collar men

the evolution of consistent conjectures in this paper we model the evolution of conjectures in an economy consisting of a large number of firms which meet in duopolies the duopoly game is modelled by the conjectural variation cv model an evolutionary process leads to more profitable conjectures becoming more common payoff monotonic dynamics under this class of selection dynamics convergence occurs to a small set of serially undominated strategies containing the consistent conjecture this set can be made arbitrarily small by appropriate choice of the strategy set if the game is dominance solvable then the dynamics converge globally to the unique attractor

european inflation dynamics abstract we provide evidence on the fit of the new phillips curve npc for the euro area over the period 1970 1998 and use it as a tool to compare the characteristics of european inflation dynamics with those observed in the u s we also analyze the factors underlying inflation inertia by examining the cyclical behavior of marginal costs as well as that of its two main components namely labor productivity and real wages some of the findings can be summarized as follows a the npc fits euro area data very well possibly better than u s data b the degree of price stickiness implied by the estimates is substantial but in line with survey evidence and u s estimates c inflation dynamics in the euro area appear to have a stronger forward looking component i e less inertia than in the u s d labor market frictions as manifested in the behavior of the wage markup appear to have played a key role in shaping the behavior of marginal costs and consequently inflation in europe

the logic and limits of desinflation competitive how could it be that starting with a keynesian marxian economic programme the socialists decided in 1983 two years after coming to power in france to adopt a diametrically opposed economic policy the desinflation competitive which has been maintained for fifteen years comprises an almost classic conservative policy substituting nominal stability wage restraint and public finance discipline for increased consumption nationalizations and devaluations this major shift in fact corresponds to the acknowledgement by the socialists of the new rules of opened and internationalized economies the desinflation competitive was certainly necessary in the early 1980s to correct severe imbalances however it appeared more and more irrelevant and counterproductive as inflation disappeared and unemployment kept on rising the failure of the desinflation competitive either to bring about disinflation other than through brutal market adjustments or to stop the rise in unemployment reveals the inability of the french socialists to build up genuine social democratic institutions and policies copyright 1998 by oxford university press

international policy design and the sustainability of policy bargains events of the past decade and the persistence of the worldwide recession have underlined the interdependence of the major economics competitive devaluations first illustrated the dangers of unilateral decisions and politicians have regularly called for concerted policies since the bonn economic summit in 1978 economic theory has shown that coordinated policies can bring gains but the question of whether those gains will be significant and how they will be distributed remains unanswered remarkably few empirical results on how interdependence should affect policy design or even on the signs of spillovers between economies have been produced this paper estimates the costs of uncoordinated policies to the us and eec economies and also the potential gains and risks in cooperation it focuses particularly on the process of determining rational policy bargains and whether in an international context such bargains are likely to be sustainable

international trade and the labor market experience of displaced workers using data from the displaced workers survey and the national bureau of economic research trade and immigration dataset the author of this study finds that among manufacturing workers displaced in 1979 83 the average duration of joblessness varied directly with the rise in their industry s import share since 1972 74 this relationship appears to be due in large part to the fact that the work force in industries with rising import shares tends to have demographic characteristics associated with labor market adjustment difficulties such as higher proportions of women and blue collar workers than are found in other industries

on the job search some empirical evidence from britain abstract this paper considers evidence from the labour force survey concerning job search by employed workers the unconditional probability of observing on the job search is decomposed into the product of two constituent probabilities upon which maximum likelihood estimation is performed the analysis facilitates the identification of who searches and whether search takes place in work or from unemployment temporary or part time employment encourages continued search by men but not women skilled workers search more than the unskilled and demonstrate a preference for employed search inter industry wage relativities encourage search on the job job tenure is a significant determinant of the quality of a job match and the subsequent likelihood that on the job search is undertaken employed job seekers adopt search strategies that are more readily integrated into a working environment

an empirical model of employed search unemployed search and nonsearch the 1969 1971 national longitudinal surveys data on young men were used to study the employed worker s choice among employed search unemployed search and not searching for a new job we assume that an unobserved variable search intensity governs this choice such that unemployed search involves a greater intensity than employed search which of course is associated with greater intensity than nonsearch the principal results are that current wages seniority collective bargaining coverage employment outside construction and employment by government are each ceteris paribus negatively associated with search intensity further each of these variables lowers the probability of not searching and raises the probabilities of employed and unemployed job search

competitiveness through disinflation an assessment of the french macroeconomic strategy france olivier jean blanchard and pierre alain muet over most of the last decade france has followed increasingly rigorous policies the hard franc approach has meant that external competitiveness is no longer sought through devaluation instead the new policy is to achieve a lower inflation rate than abroad in principle the competitiveness through disinflation approach should work and eventually bring down the unemployment rate which has remained broadly unchanged at a high level for many years while maintaining external balance this article investigates whether the policy is working inflation is lower than in germany profits have steadily increased and trade balance has been reestablished but unemployment is higher than in 1983 the policy has been more successful at bringing down inflation than at returning the economy to lower unemployment the adjustment process has been protracted credibility effects have not been fulfilled but nor however have fears that the drastic change of policy might prove unusually disruptive it simply turns out that the policy is working very slowly it would take an improbable 30 accumulated competitiveness gain to bring unemployment down by 3 which does not seem acceptable to france s trading partners

on strategic cost increases in a duopoly abstract this study determines whether duopolists can profit from imposed cost increases even if both firms are affected equally implicit in any analysis of strategic behavior is the assumption that firms are sufficiently sophisticated to anticipate the new industry equilibrium requiring each duopolist to have consistent conjectures abouts its rival s behavior we show that if the firms marginal cost curves are sufficiently flat increasing the slopes of these curves can raise profits the steeper marginal cost curves encourage regulatory coordination that is the rivals move closer to the joint profit maximizing outcome

testing long run purchasing power parity under exchange rate targeting abstract the present paper exploits the idea that empirical estimates of the long run ppp relationship may compound two distinct influences coming from the behavior of market participants and policy makers when the latter are targeting the exchange rate this tends to bias tests of long run ppp against its acceptance the validity of the theoretical arguments is assessed by drawing on the experience of two european union countries greece and france for the post bretton woods period estimation biases due to the omission of policy effects are found to be significant only in the case of greece for france our test results provide evidence bearing on the effectiveness of the competitive disinflation strategy pursued by the french authorities