optimal labour contracts when workers have a variety of privately observed reservation wages if a firm does not know the individual ex post outside opportunities of its contracted workforce then it can use hours wages and redundancy payments to screen them will a second best contract have underemployment inefficiency or overemployment and with a stochastic contract are those workers randomly selected for layoff worse off than their retained colleagues involuntary layoff or vice versa involuntary retention the answers depend on the nature of the workers preferences two polar cases are looked at corresponding to permanent and temporary layoff the former is characterized by overemployment and involuntary retention the latter by underemployment and involuntary layoff also examined are simple contracts where all retained workers are paid a common wage and all laid off workers receive a common redundancy payment handling asymmetric information in stochastic contracts has led to two technical innovations first a number of results are proved even though all the truth telling constraints are explicitly included second a new regularity condition is found under which the local constraints are sufficient to ensure global incentive compatibility at an optimum

limit theorems for markets with sequential bargaining this paper models trade as a non coopertative strategic game played at an inlinite sequence of dates a single indivisible commodity is traded buyers and sellers have transferable utility and are characterized by their reservation utilities they meet at random and bargain over the price at which a single unit of the good will be exchanged under a variety of circumstances it is shown that as the costs of search and bargaining become negligible the outcome of the game converges to the competitve flow equilibrium even when there is complete information journal of economic literature classification numbers 022 19x7

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

implicit contracts moral hazard and unemployment this paper considers a firm whose marginal revenue product of labor is a random variable we derive the form of an optimal long term contract between workers and the firm under the assumption that labor s marginal product is observed by the firm but not by the workers we show that the existence of asymmetric information causes unemployment to be greater than in a situation where information about labor s marginal product is public or where employment is determined in spot markets in particular unemployment can occur when the marginal product of labor exceeds the reservation wage

miners wages in post war britain an application of a model of trade union behavior the paper studies the determination of wages in the british coal industry a utility maximising model of a trade union is used to represent the behaviour of the national union of mineworkers a non linear structural model is derived and is estimated by full information maximum likelihood the results are quite encouraging there is support for a neo classical demand curve for miners labour and a significant estimate of workers relative risk aversion

decentralized trading strategic behaviour and the walrasian outcome for a market with a finite number of agents pairwise matching and bargaining it is shown that even when the market is frictionless the equilibrium is not necessarily competitive it depends on the amount of information agents use if their behaviour is conditioned only on the sets of agents present and the time the competitive solution is the unique subgame perfect equilibrium if agents have full information and condition their behaviour on some of it there are also noncompetitive equilibria in which behaviour depends on specific information such as the identity of the trading partner and past events

what do unions maximise evidence from survey data highly formalised models of union behaviour have been developed and are widely used within neoclassical economics this approach is justified by the argument that most goals pursued by unions can be reduced to a wage or wage equivalent employment trade off however the strong assumptions made about union goals and preferences how these are determined and the range of issues over which a union will seek to bargain with a firm are not supported by extensive empirical evidence this paper explores these issues through a survey of union leaders to ascertain the range of union goals and their preferences and the types of issues over which unions bargain with employers the results of the survey present convincing evidence that standard neoclassical models do not adequately capture union bargaining behaviour or union goals and preferences the findings presented here also throw open but do not resolve the question of whether unions are rational maximisers the most inter esting result not widely found within the economics or industrial relations literature concerns the nature of union bargaining preferences union bargaining over employment appears to be asymmetric around current levels of employment in that unions appear to care more about the employment implications of their bargain ing strategies when they are likely to result in employment decreases

wages and employment under trade unionism microeconomic models and macroeconomic applications the first part of this paper is a critical survey of microeconomic research into behavioural models of trade unionism although certain formulations of union objectives and models of wage and employment determination in unionized markets have found favor with economists unfortunately only a little is known about their empirical relevance the second part of this paper deals with the daunting problems of applying these models at the macroeconomic level one such model is estimated with data from sweden s mining and manufacturing sector from 1968 to 1982

exchange rate policy and wage formation in an economy with many trade unions abstract exchange rate policy may confront governments with an important credibility problem while there is usually a long run gain from abstaining from devaluations there may also be a short run benefit from a devaluation this short run benefit may cause expectations of future devaluations resulting in wage and price rises that make the expectations self fulfilling this issue is analysed within a model with many trade unions if the government pursues a non devaluation policy the trade unions gain from voluntary wage restraint however if the non devaluation policy isn t credible the cooperation on wage restraint may break down

privatization liberalization wages and employment theory and evidence for the uk most agency based privatization models are of the owner manager relation and ignore the labour market yet in the 1980s there were profound changes in public sector and privatized firms to wages and employment we develop a bargaining model of the manager workforce relation that explains employment and wages when firms are privatized government objectives become more commercial and markets are liberalised using data on 14 uk companies 1972 1988 that were publicly owned in 1972 we find a employment fell following the change to more commercial objectives b wages were only slightly affected by this but fell if the firm lost market power

layoffs with payoffs a bargaining model of union wage and severance pay determination popular characterizations of union preferences assume that the income of laid off union members is exogenous there is evidence however of intra union distribution schemes such as severance payments unemployment insurance retraining arrangements and early retirement schemes this paper develops a model of wage and severance pay determination by a trade union and a firm bargaining in a right to manage framework the important point differentiating the model in this paper from the orthodox union model is that it is efficiency improving in the sense that it makes full insurance possible and marginal productivity is equal to the opportunity cost of labour moreover with redundancy pay on the bargaining agenda both the right to manage and the efficient bargaining union models are characterized by the same efficiency conditions this has implications for empirical research which attempts to distinguish between these two models since the outcome of both models is the same finally the union firm bargaining model can also be compared with the outcome of the implicit contract model with redundancy pay there is an important difference between the two approaches however while the result in this paper derives from an imperfectly competitive labour market where unions and firms bargain over wages and redundancy pay the implicit contract result derives from a perfectly competitive labour market in which competitive forces lead to an efficient outcome

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

bargaining in a network of buyers and sellers abstract we analyze bargaining between buyers and sellers who are connected by an exogenously given network players can make repeated alternating public offers that may be accepted by any of the responders linked to each specific proposer our purpose is to find the conditions of the network which drive the price distribution in equilibrium this paper uses graph theory tools to provide necessary and sufficient conditions regarding the architecture of networks for the subgame perfect equilibrium of the bargaining game to coincide with the walrasian outcome

devaluation fiscal deficits and the real exchange rate this article examines the use of fiscal policies to sustain the effects of a nominal devaluation on the real exchange rate it is shown that the magnitude of the change in the real exchange rate depends not only on the size of the devaluation and the degree of fiscal adjustment but also on the means by which the fiscal deficit is reduced the change in the nominal exchange rate necessary to maintain the depreciation of the real exchange rate will depend on whether the fiscal deficit is eliminated by increasing taxes or by reducing government expenditures on traded and nontraded goods the required depreciation of the domestic currency will be larger if the fiscal deficit is reduced by increasing taxes than it will be if the deficit is cut by lowering government expenditures further the depreciation would be smaller if the cuts in expenditure fell on traded rather than nontraded goods this result implies that the authorities must ensure consistency between exchange rate action and policies to reduce fiscal imbalances in order to achieve a desired level of the real exchange rate necessary to attain balance of payments equilibrium the real exchange rate represents a key relative price in the economy and policies to change it are often the centerpiece of adjustment programs designed to improve international competitiveness and shift resources toward the production of tradable goods consequently it is critical for policymakers to have some idea of the magnitude and time path of the likely response of the real exchange rate to nominal exchange rate action it is a well accepted proposition however that a nominal devaluation will only have a transitory effect on the real exchange rate in the long run domestic wages and prices will rise by the full amount of the devaluation and the real exchange rate will return to its original level to alter the real exchange rate on a permanent basis therefore devaluation has to be supplemented by policies that restrain the increase in domestic factor costs that results from a devaluation generally speaking the effects of a devaluation on the real exchange rate can

industrial relations in britain this work has 17 chapters covering trade unions management collective bargining industrial conflict the labour market labour law and state intervention in industrial relations each chapter is an essay which brings together the most up to date theoretical and empirical work each focuses on trends over the past two or three decades and says something about likely developments over the 1980s the emphasis is on analysis and explanation as well as on description

equilibrium in a market with sequential bargaining this paper considers a market where pairs of agents who are interested in carrying out a transaction are brought together by a stochastic process and upon meeting initiate a bargaining process over the terms of the transaction the basic bargaining problem is treated with the strategic approach the paper derives the steady state equilibrium agreements analyzes their dependence on market conditions such as the relative numbers of agents of different types and discusses their relations with the competitive equilibrium outcome and other results in the search equilibrium literature this paper considers a market that operates in the following way pairs of agents who have mutual interest in carrying out a transaction are brought together by a stochastic process when two agents meet they initiate a bargaining process over the terms of the transaction if two agents reach an agreement a transaction takes place and they leave the market of course the bargaining positions and hence the agreement reached in any particular meeting will be affected by the conditions prevailing in the market these will include the chances that each of the negotiating parties have of meeting other partners in the event that the agreement in the current negotiations is delayed also the expected length of time required to achieve an alternative transaction and the expected behavior of alternative partners the study of such a market mechanism is of interest for two reasons firstly it captures some realistic aspects of the trade in certain specific markets e g asset markets such as housing and some labor markets secondly it contributes to an understanding of the micro mechanisms of price formation and their role in shaping market outcomes in both cases the features studied are largely neglected in the traditional market equilibrium analyses the related literature includes the articles by diamond 4 5 diamond and maskin 6 mortensen 8 9 and zusman and bell 13 these articles consider markets of the type described above in which transactions are concluded at pairwise meetings of agents the major difference between our work and these articles is in the approach to the basic bargaining problem in the cited articles it is assumed that a meeting is concluded with an instantaneous agreement which divides the associated surplus in an arbitrary predetermined way when the surplus is assumed to be divided equally the division rule is in fact nash s axiomatic bargaining solution in contrast the present paper treats the basic bargaining problem with the strategic approach see rubinstein 19 which constitutes an attempt to look into the bargaining black box this approach explicitly models the time dimension of the bargaining process describes in detail the bargaining procedure and justifies the agreement as a perfect equilibrium in

bilateral bargaining in networks abstract each connected pair of nodes in a network can jointly produce one unit of surplus a maximum number of linked nodes is selected in every period to bargain bilaterally over the division of the surplus according to the protocol proposed by rubinstein and wollinsky equilibrium in a market with sequential bargaining econometrica 53 1985 1133 1150 all pairs which reach an agreement obtain the discounted payoffs and are removed from the network this bargaining game has a unique subgame perfect equilibrium that induces the dulmage mendelsohn decomposition partition of the bipartite network of the set of nodes in this network

optimal labour contracts under asymmetric information an introduction the review of economic studies has instituted a new series of lectures to be given annually by a younger british economist at the association of university teachers of economics meetings the choice of lecturer is determined by a panel whose members are currently professors hahn mirrlees and nobay this paper is a revised version of the first lecture in the series it was presented at the aute meeting held at the university of surrey in april 1982 and was refereed in the usual way mak

a theory of buyer seller networks this paper introduces a new model of exchange networks rather than markets of buyers and sellers it begins with the empirically motivated premise that a buyer and seller must have a relationship a link to exchange goods networks buyers sellers and the pattern of links connecting them are common exchange environments this paper develops a methodology to study network structures and explains why agents may form networks in a model that captures characteristics of a variety of industries the paper shows that buyers and sellers acting strategically in their own self interests can form the network structures that maximize overall welfare

the ghost of financing gap testing the growth model used in the international financial institutions abstract the harrod domar growth model supposedly died long ago still today economists in the international financial institutions ifis apply the harrod domar model to calculate short run investment requirements for a target growth rate they then calculate a financing gap between the required investment and available resources and often fill the financing gap with foreign aid the financing gap model has two simple predictions 1 aid will go into investment one for one and 2 there will be a fixed linear relationship between growth and investment in the short run the data soundly reject these two predictions of the financing gap model

rationalizable strategic behavior the notion of equilibrium proposed by nash 19 has come to play a dominant role in economic applications of noncooperative games while analyses of nash equilibria have unquestionably contributed to our understanding of economic behavior it would be unreasonably optimistic to maintain that nash solved the problem of noncooperative strategic choice there is a small literature beginning with ellsberg 6 and a much larger oral tradition which argues that nash behavior is neither a necessary consequence of rationality nor a reasonable empirical proposition in this paper i take the view that although there may be various reasons why an agent might select a nash strategy the notion of an equilibrium has little intrinsic appeal within a strategic context when an agent reaches a decision in ignorance of the strategies adopted by other players rationality consists of making a choice which is justifiable by an internally consistent system of beliefs rather than one which is optimal post hoc this point of view is not original indeed most serious justifications of the nash hypothesis embrace such an approach arguing that agents will expect the game to yield a nash outcome and consequently will choose their equilibrium strategies nevertheless when we think in terms of maximizing utility subject to expectations rather than realizations it becomes clear that the nash hypothesis far from being a consequence of rationality arises from certain restrictions on agents expectations which may or may not be plausible depending upon the game being played we are then quite naturally led to ask are there any restrictions of individuals expectations and hence choices which are required by rationality alone rather than by subjective plausibility this paper is concerned with defining justifying characterizing and refining a criterion for rational strategic choice which i label rationalizability

an empirical model of wage indexation provisions in union contracts this paper describes the responses of index linked wage rates to concurrent price increases for a sample of canadian union contracts and then analyzes theseresponses in terms of a simple model of indexation to the aggregate price level the model highlights the importance of aggregate price movements in conveying information about industry specific prices the empirical analysis confirms that industry specific correlations between input and output prices and the consumer price index are important determinants of the flexibility of wages to prices across indexed contracts

the interruption of productivity growth in the united states cessation or near cessation of productivity growth in the united states started in i974 and has continued until now the change from the previous steady advance was abrupt and its timing unmistakable although retardation earlier in the postwar period can be identified it was small readily explained and not particularly worrisome this paper will therefore focus on comparisons of changes from i973 to i98i with changes from i948 to i973

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

optimal wage bargains recent attempts to provide a theoretical framework for macroeconomics have focused on the nature of wage employment agreements between firms and workers workers are in general unable to purchase insurance against future income fluctuations on grounds of for example moral hazard and consequently firms may find it profitable to offer workers a contract that provides them with partial insurance as well as employment compensation the seminal papers are those of azariadis 1975 and baily 1974 henceforth a b and a useful survey is provided by azariadis 1981 in their model hiring decisions must be made before uncertainty about product market conditions is resolved if firms are risk neutral and severance payments to the unemployed are disallowed then the optimal contract entails a state invariant real wage and the possibility of ex post involuntary unemployment while this model provides important insights it has been criticized on a number of grounds first akerlof and miyazaki 1980 and pissarides 1981 have pointed out that unemployment can occur in the simple a b model only when the marginal revenue product of labour falls below the reservation wage so that unemployment would also occur in a walrasian model and that in general the level of unemployment will be less than would be experienced in spot markets although it does provide a clue to the involuntary nature of that unemployment second the ad hoc exclusion of payments by the firm to the unemployed can be criticized if these are allowed then the optimal contract involves a topping up of the reservation wage to provide complete income rather than wage stabilization and the ex post efficient level of employment will be sustained these criticisms have prompted a number of authors to examine the implications of assuming asymmetric information about the state of nature an early example of this literature is provided by calvo and phelps 1977 who note that under an a b contract because there is a tendency to overemployment in bad states there will be an incentive for firms to misrepresent the state of nature and lay off more workers than previously agreed but that this incentive may be attenuated by making the wage schedule contingent on the level of employment that is assumed to be observed by workers the properties of these contracts usually depend on the precise assumptions of the model however in some versions unemployment may be greater than would occur in the walrasian model hart 1983 for instance considers a model in which severance payments are allowed but firms as well as workers are risk averse then the optimal contract will involve lower wages in bad states of nature in order to spread risk but the only way this information can be conveyed to workers is by lowering the level of employment the papers by grossman and hart 1981 and by azariadis chari green and kahn and grossman and hart in the symposium in the quarterly journal of economics

employment with asymmetric information in an economy without informational and other distortions entrepreneurs and workers can write labor contracts that support a pareto optimal allocation of resources this paper is an attempt to characterize contracts when enterpreneurs are better informed about the state of nature than are their workers asymmetric information generally results in a suboptimal allocation of both risk and worker effort in particular if consumption and leisure are perfect substitutes employment will be less than fully pareto optimal in all but the most favorable states of nature

market power in a non monetarist inflation model for greece a post keynesian inflation model for greece is constructed and tested the model consists of three equations including a cost demand price equation for the gross domestic expenditure deflator cost demand functions have been occasionally estimated in the past the equation presented is a more systematic test since the effect of industry concentration is examined both theoretically and empirically a collective bargaining equation for the first time in greece was simultaneously estimated the role of public deficit was investigated and it was found that this exerts a moderate influence on inflation

bargaining in stationary networks we study an infinite horizon game in which pairs of players con nected in a network are randomly matched to bargain players who reach agreement are replaced by new players at the same positions in the network we show that all equilibria are payoff equivalent the payoffs and the set of agreement links converge as players become patient several new concepts mutually estranged sets partners and shortage ratios provide insights into the relative strengths of the positions in the network we develop a procedure to deter mine the limit equilibrium payoffs for all players characterizations of equitable and nondiscriminatory networks are also obtained jel c78 d85 competitive equilibrium theory assumes large and anonymous markets in which every buyer can trade with every seller underlying these assumptions are standard goods and services that may be traded at low transaction costs by agents who are not in specific relationships with one another however in many markets goods and services are heterogeneous e g cars apartments or need to be tailored to particular needs e g manufacturing inputs technical support furthermore trad ing opportunities may depend on transportation costs social relationships infor mation advertising trust technological compatibility joint business opportunities free trade agreements etc in such cases it is natural to model the market using a network where only pairs of connected agents may engage in exchange new theories are needed to explore the influence of the network structure on market outcomes many questions arise how does an agent s position in the net work determine his bargaining power and the local prices he faces who trades with whom and on what terms when are prices uniform in the network one possible conjecture is that an agent s bargaining power is determined by his relative number of connections in the network however this simple theory is implausible consider the network of four sellers located at the top nodes and nine buyers located at the bottom nodes depicted in figure 1 assume that each seller supplies one unit of a homogeneous indivisible good each buyer demands one unit of the good and all buyers have identical values for the good the buyer located in the middle has the largest number of links in the network as he is connected to each

theories of institutions and economic reform in africa abstract the paper presents and critically examines the theories of institutions that can be used as a guide to economic reform in africa three approaches to institutions are initially discussed the model of structural adjustment new institutional economics and the old institutionalist tradition five institutions related to the development of markets in africa are examined from the three perspectives the institutions include property rights including their role in agriculture money and financial institutions prices and markets firms and industrial organization and markets and states the main conclusion of the paper is that structural adjustment due to its neoclassical roots is basically ainstitutional and therefore ill equipped to promote the development of markets in africa while new institutionalism provides interesting insights it is also limited by its neoclassical economic foundations thus if african governments desire to promote market reform they would be best advised to consult the old institutionalist literature particularly the very interesting recent work of proponents of this tradition

staggered vs synchronised wage setting in oligopoly abstract this paper analyses the dynamic equilibrium which emerges when wages are bargained upon at different times in the various firms operating in an oligopolistic industry unions set wages the management of the firms the output level and the outcome of this interaction is captured by the game theoretic concept of markov perfect equilibrium the steady state equilibrium is compared with that which would emerge if all wage negotiations occurred simultaneously it is shown that staggered wage setting leads to higher steady state levels of wage and unemployment than synchronised wage setting it is also shown that a longer duration for wage contracts leads other things equal to lower wages and higher employment the final part of the paper shows that allowing for nash bargaining between union and management and for risk averse unions does not alter the conclusions of the paper

stabilization the political economy of overkill abstract this paper considers whether national and international aspects of the imf s stabilization programmes during the 1970s and early 1980s have resulted in a process of overkill or in other words a process of economic retrenchment which went much further than was strictly necessary in terms of what could have been regarded as reasonable objectives in the international context the author describes how the attack on inflation has become an end in itself at the expense of other stated objectives of the imf thus creating a distortion of its priorities the paper discusses errors of diagnosis which have led to this disorientation and explains why deflationary policies should not be regarded as a panacea the paper then considers the nead for equity and efficiency in the distribution of the political and economic costs of adjustment the next section of this paper discusses the assumptions underlying the imf s treatment of fund members and to what extent even handedness in the application of stabilization measures may result in inequality of burden sharing among borrowers problems related to monetarist theories and the consequent policies are examined followed by a consideration of the dangers involved in devising straightforward performance criteria in the form of precise monetary targets that can readily be monitored by the imf this means of evaluating the national adjustment policies success is seen to be unsatisfactory viz the frequency of stand by arrangement breakdowns and mistakes in forecasting the paper concludes that the concept of unilateral adjustment is not an acceptable basis for imf supervision of the international monetary system in addition care should be taken to avoid overkill in determining the degree and character of adjustment needed in stabilization programmes one possible solution to the extra burden imposed on the ldcs might be a liberalization of the compensatory financing facility with the objective of applying the same kind of regime to imports as to exports

privatisation and x inefficiency a bargaining approach the usual analysis of privatization and x inefficiency uses agency theory to model managerial effort the authors model worker effort as determined by a bargain between firms and workers workers dislike effort because it lowers utility firms prefer high effort because it raises productivity public sector firms are assumed to be social welfare maximizers and therefore compared to private sector firms they bargain lower effort levels since they have the interests of consumers and workers at heart the authors model predicts that under certain conditions privatization should raise effort and so lower x inefficiency and that wages may increase or decrease copyright 1995 by blackwell publishing ltd

a strategic model of social and economic networks we study the stability and efficiency of social and economic networks when self interested individuals can form or sever links first for two stylized models we characterize the stable and efficient networks there does not always exist a stable network that is efficient next we show that this tension persists generally to assure that there exists a stable network that is efficient one is forced to allocate resources to nodes that are not responsible for any of the production we characterize one such allocation rule the equal split rule and another rule that arises naturally from bargaining of the players

membership seniority and wage setting in democratic labour unions the dynamic behavior of a democratic monopoly labor union that allocates employment on a length of service basis is studied in the context of a simple model the author shows that a median voter equilibrium can exist in a union consisting of senority ranked workers when voting membership depends on past employment the closed form wage rule of such a union induces a unit root in the autoregressive representation of employment even if the underlying determinants of labor demand are strictly stationary on the other hand chesire cat or disappearing union phenomena are likely to be limited by the forward looking behavior of union members and the sensitivity of union membership to employment copyright 1990 by the london school of economics and political science

multi item auctions a collection of items is to be distributed among several bidders and each bidder is to receive at most one item assuming that the bidders place some monetary value on each of the items it has been shown that there is a unique vector of equilibrium prices that is optimal in a suitable sense for the bidders in this paper we describe two dynamic auction mechanisms one achieves this equilibrium and the other approximates it to any desired degree of accuracy

margins concentration unions and the business cycle theory and evidence for britain abstract a number of recent studies have examined the cyclical relationship between price cost margins concentration and unions u s data has concluded that unions reduce margins margins vary over the cycle and concentration unionisation and the cycle interact in their effect on margins however there is almost no theory to account for these results we propose a simple theory that assumes only that there is overhead labour present at the firm this produces theoretical predictions that can explain these results and discriminate between existing theories we present results of our own using u k panel data and show similar findings to the u s

the monetarist experiment in chile a critical survey abstract chile constitutes the most outstanding case of implementation of an extreme market economy model during nine years between 1973 and 1982 a model was implemented that for its pureness deepness and extension induced a drastic transformation of the chilean economy the main features of the model are examined focusing on the anti inflationary policy the reform of the financial system and the external opening then the global results concerning output income distribution and saving investment are studied the paper shows that the balance of the results was clearly negative during the 1973 1981 period output stagnated the concentration of wealth was spectacular and saving and investment rates fell significantly the characteristics themselves of the model and the weakening of the productive apparatus that they originated additionally explain that the international recession was multiplied during 1982 within the domestic economy the paper concludes with an attempt to interpret the main causes of the failure of this experiment

adjustment with growth abstract this paper describes and examines simple versions of the analytical approaches employed by the international monetary fund and the world bank in designing adjustment programs that support their lending activities in the case of the bank this means essentially a variant of the two gap growth model and for the fund a model derived from the monetary approach to the balance of payments an attempt is also made to merge the fund and bank approaches within a consistent framework to demonstrate their complementarity

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

insiders outsiders and nominal wage contracts while the consequences of nominal wage contracts have been rather thoroughly analyzed there is no generally accepted theory of why such contracts prevail in this paper i argue that the distinction between insiders and outsiders is important for understanding nominal wage contracts since most employment fluctuations take the form of fluctuations in hiring insiders are normally not affected by them since prices are primarily determined by costs demand shocks have small effects on real wages thus insiders have little incentive to change to more complicated contracts with rigid nominal wages nominal demand shocks have large effects on the employment opportunities of outsiders but outsiders have little influence on labor contracts

unemployment and macroeconomics this paper discusses some issues in the theory of unemployment proposes a framework for the analysis of unemployment and applies the framework to the analysis of the rise in unemployment in britain after 1979 the framework is based on bilateral monopoly in the labor market and the explanation for the rise in unemployment in britain rests primarily with a demand side shock which caused the rise in 1980 81 and supply side persistence which has kept unemployment up since then copyright 1989 by the london school of economics and political science

trade union behaviour and inter regional variations in unemployment rates an important problem in the political economy of the uk is that the disparity of unemployment rates across its regions is much more marked than the corresponding dispersion of wage rates one possibility is that this is due to the attitude of trade unions to their members in different regions if unions wish to preserve parity between members in different regions then they will value wage equality between regions over and above wage levels this may then persuade them to overlook inter regional productivity differences in setting wages the price that low efficiency regions will then pay for this desire for wage equality is higher unemployment rates

profit sharing as a cure for unemployment some doubts abstract in this paper we argue that given that a wage system is preferred to profit sharing in an insider outsider model tax incentives to encourage profit sharing could be dissipated by the use of cosmetic schemes the same may also be true in models in which unions care about employment hence we should be cautious about accepting weitzman s claim that profit sharing will reduce unemployment

union firm bargaining order of play and efficiency abstract this paper shows that a modified alternating offers rubinstein model can provide a pareto superior outcome in the context of the right to manage union firm bargaining two examples of bargaining protocols that yield a superior outcome are provided in the first example the parties engage in a game in which the order of play is determined as part of the bargaining we show that the game has a unique subgame perfect equilibrium in which the firm always moves first in the wage bargaining game the equilibrium wage is therefore unique in the second example we examine a two part tariff alternating offers bargaining protocol where the parties bargain over the wage and transfer payments we show that this bargaining protocol has a pareto efficient unique subgame perfect equilibrium thus although the parties do not bargain over the level of employment the outcome under this protocol is nevertheless socially optimal

markov equilibria in a model of bargaining in networks abstract we study the markov perfect equilibria mpes of an infinite horizon game in which pairs of players connected in a network are randomly matched to bargain players who reach agreement are removed from the network without replacement we establish the existence of mpes and show that mpe payoffs are not necessarily unique a method for constructing pure strategy mpes for high discount factors is developed for some networks we find that all mpes are asymptotically inefficient as players become patient

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

self enforcing wage contracts we examine long term wage contracts between a risk neutral firm and a risk averse worker when both can costlessly renege and buy or sell labour at a random spot market wage a self enforcing contract is one in which neither party ever has an incentive to renege in the optimum self enforcing contract wages are sticky they are less variable than spot market wages and positively serially correlated they are updated by a simple rule around each spot wage is a time invariant interval and the contract wage changes each period by the smallest amount necessary to bring it into the current interval