why u s wage and employment behavior differs from that in britain and japan if a poll were to be conducted among american academic economists to select the most mystifying economic phenomenon of our time surely the sticky nominal wage rate would emerge at or near the top of the list the slow and partial response of the nominal wage rate to changes in aggregate nominal spending has been a central postulate of macroeconomic theory for the past 45 years from keynes general theory down to the standard postwar textbook keynesian paradigm to the more modern fixed wage price models of robert barro and herschel grossman i976 and edmond malinvaud i977 unwilling passively to accept nominal wage rigidity as an unexplained assumption many labour market theorists have followed the lead of costas azariadis i975 and martin baily i974 in building models to explain rigid wages and layoff unemployment as the rational outcome of a profit maximising calculus as i pointed out in an early critique of the azariadis baily model i976a their assumptions cannot explain cycles in employment but rather why workers would want fixed incomes i e a fixed wage rate and fixed employment soon thereafter barro i977 went one step further and argued that contract theory is a facade which cannot explain why workers would choose a rigid wage and variable employment in preference to the classical equilibrium quantity of employment that equates the marginal product of labour with the marginal value of time now an examination of the evidence has led me to the realisation that rigid wages cannot provide the underpinnings for a universally valid theory of the business cycle simply because wages are not universally rigid i document below with postwar quarterly data that the share of fluctuations in the manufacturing wage bill taking the form of nominal wage changes as compared to changes in hours worked is five to ten times greater in britain and japan than in

capacity investment preemption and commitment in an infinite horizon model the commitment value of capacity is analyzed in an infinite horizon duopoly model the paper focuses on the role of alternative behavioral assumptions about the ability of firms to commit to investment paths each firm s investment strategy in a feedback nash equilibrium is shown to be a decreasing function of its rival s current capacity this creates an incentive for a firm to expand its capacity to preempt subsequent rival investment in a precommitment equilibrium there are no incentives to invest preemptively as a consequence steady state capacity levels are greater in a feedback nash equilibrium than in a precommitment equilibrium copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

can hysteresis explain different labour market operations between europe and the united states this paper offers an analysis of the labour market operation in europe and the united states during 1970 1985 it appears that the labour market developments in europe are more characterized by hysteresis than in the united states simulation results indicate that the unemployment rate in europe would have reached the level of that in the united states in 1985 when wage formation had been more similar

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

bundling and licensing of genes in agricultural biotechnology we examine the strategic incentive for gene holders to vertically integrate with seed companies and chemical input companies with homogeneous conventional seeds we find that a pure bundling strategy produce the genetically modified seed only is dominant when the gene holder and breeder are respectively the monopolistic producers of genetically modified and conventional seeds they may commit to mixed bundling supply both genetically modified and conventional seed to deter potential entry to the conventional seed market a vertical merger may solve the credibility issue of the mixed bundling commitment through third party licensing agreements in the conventional seed market copyright 2009 oxford university press

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

is increased price flexibility stabilizing this paper uses john taylor s model of overlapping contracts to show that increased wage and price flexibility can easily be destabilizing because of the mundell effect while lower prices increase output the expectation of falling prices decreases output simulations based on realistic parameter values suggest that increases in price flexibility might well increase the cyclical variability of output in the united states copyright 1986 by american economic association

scientific basis for the greenhouse effect the international community may reach agreement to limit carbon emissions as early as i 992 when brazil will host a negotiating convention on climate change europe and japan have already made commitments to place ceilings on future emissions at or below present rates because the cost of switching to alternative fuels could be high with profound implications for long term economic growth especially in developing countries policy action must be based on the view that the science of the greenhouse effect is compelling this essay considers the scientific logic and evidence for the effect from the viewpoint of an economist it draws heavily on the findings of the intergovernmental panel on climate change ipcc i will stress that both the science and the policy discussion so far including by ipcc have focused insufficiently on effects in the very long term on the order of 250 to 300 years

unemployment disequilibrium and the short run phillips curve an econometric approach the paper specifies a disequilibrium model for the aggregate labour market consisting of demand and supply functions for labour an adjustment equation for wages as well as for prices a transactions equation and finally an equation that relates measured unemployment to vacancies and to excess demand the model has a more sophisticated treatment of dynamics than earlier disequilibrium models the parameter estimates and the goodness of fit are satisfactory and the model s implications for the behaviour of several important variables are sensible in particular excess demand estimates computed in various ways are reasonable

can leviathan governments mitigate the tragedy of the commons this paper explores the conjecture whether the leviathan motive of politicians to tax for the purpose of raising revenues rather than for benevolent pigovian motives helps to overcome the inefficiency of international pollution spillovers such as in the cases of acid rain and global warming it turns out that this conjecture is true in a static context that captures flow externalities e g acid rain as long as environmental damages are not too high in contrast leviathan motives aggravate the already existing inefficiency in the case of stock externalities e g global warming despite probably high taxes at the beginning

the rise in unemployment a multi country study one of the most remarkable features of recent economic history has been the remorseless rise in unemployment throughout the industrialized countries however while the trend to higher unemployment is universal the experience of individual countries also differs widely the increase is especially marked within the european community where unemployment rates rival those reached in the interwar years by contrast in the scandinavian countries and japan unemployment is lower and has risen very much less experience in the united states lies somewhere between these extremes and in the last few years unemployment there has fallen sharply

topics in the oecd phillips curve how strongly have wages and unemployment been related in oecd countries during the postwar period a simple answer is that on average a one percentage point higher rate of unemployment has been associated with a fall of about one percentage point in the rate of nominal wage increase in the current year compared with the rate of increase a year earlier but such a figure needs interpretation and the aim here is to describe wage behaviour in more detail

hysteresis and instability in the natural rate of unemployment in this paper it is pointed out that the long run phillips curve genus contains upward and downward sloping species as well as the vertical species two models are used in one the rate of inflation helps determine the natural rate of unemployment as proposed by friedman in the other the process of moving from one inflation rate to another helps shape the natural rate according to the hysteresis effect proposed by phelps in both cases the resulting models are unstable implying that a vertical long run phillips curve will not be regained if disturbed

disequilibrium models with rational expectations an application to the uk labour market this paper develops and estimates an explicit switching model for the u k labour market which includes expectations terms in the labour demand function these expectations terms are dealt with by using the rational expectations hypothesis