wage determination in brazil the growth of union bargaining power and informal employment this article examines wage determination in brazilian manufacturing during the 1980s and early 1990s it presents evidence to show that the reduction in state regulation of collective bargaining has led to the development of a system of wage determination which is increasingly characterised by rent sharing and insider trade union bargaining power real wages appear increasingly inflexible with respect to movements in open unemployment with a large informal sector disciplining formal sector wage bargaining and cushioning the impact of broader labour market conditions an important consequence of this is that the employment costs of a successful counter inflationary strategy may be very severe

the american business cycle continuity and change in recent decades the american economy has experienced the worst peace time inflation in its history and the highest unemployment rate since the great depression these circumstances have prompted renewed interest in the concept of business cycles which joseph schumpeter suggested are like the beat of the heart of the essence of the organism that displays them in the american business cycle some of the most prominent macroeconomics in the united states focuses on the questions to what extent are business cycles propelled by external shocks how have post 1946 cycles differed from earlier cycles and what are the major factors that contribute to business cycles they extend their investigation in some areas as far back as 1875 to afford a deeper understanding of both economic history and the most recent economic fluctuations seven papers address specific aspects of economic activity consumption investment inventory change fiscal policy monetary behavior open economy and the labor market five papers focus on aggregate economic activity in a number of cases the papers present findings that challenge widely accepted models and assumptions in addition to its substantive findings the american business cycle includes an appendix containing both the first published history of the nber business cycle dating chronology and many previously unpublished historical data series

a public choice model of trade union behaviour and membership it is commonly assumed in the microeconomic literature concerned with trade union behaviour that the union maximises an aggregate utility function defined over homogeneous individuals and that the level of membership is fixed the purpose of this paper is to relax these two assumptions it is suggested below that trade unions may usefully be treated as political organisations comprising heterogeneous individuals and that the effects of union wage policies on the level of membership should be explicitly incorporated into the model consider first the assumption that the union is a homogeneous organisation this is often a convenient simplification but observation of the behaviour and government of trade unions suggests it is hardly realistic trade unions in the united kingdom are large groups based on a complex organisational structure comprising an executive a shop steward system and a body of rank and file members once the union is considered as a complex organisation the question arises as to how members preferences are transmitted through the hierarchical levels each of which may have conflicting aims there are two polar theoretical approaches to this question in the industrial relations literature clegg i980 at one extreme unions are seen as oligarchies unresponsive to members wishes full time officials it is argued secure a monopoly of power to stay in office with the assistance of low membership participation and apathy at the other extreme unions are regarded as organisations which are quasi democratic due to the presence of informal parties or factions the growth of workplace organisation and the existence of voting and postal or workplace balloting these two polar approaches to trade unions as large organisations may be linked up to parallel economic analyses of organisations if it is believed that trade unions are oligarchies then it may be enlightening to apply to unions economic models of bureaucracy or models of the firm comprising both shareholders and management alternatively if it is believed that trade unions are democratic organisations then public choice behavioural models may be enlightening the public choice model is chosen in this paper in preference to modern theories of the firm or of bureaucracies because it is believed that the public choice model represents a closer first approximation to trade union behaviour in the united kingdom although of course some particular unions may better fit the oligarchic model the second major concern of this paper is to relax the assumption of a fixed level of union membership the use of a fixed membership assumption in the

embeddedness cooperation and popular economy firms in the informal sector this paper is motivated by empirical observations on popular economy firms pefs in the informal sector of santiago de chile these are labor managed firms embedded in popular milieu where cooperation between their members plays a central role this paper develops a partial equilibrium microeconomic theory of pefs first it endogeneizes the level of cooperation between the workers second it develops a static and a dynamic model to analyze whether embeddedness influences the behavior of the pef embeddedness is assumed to be captured by three different characteristics suggested by the empirical observations most of them influence the employment and income levels in the pef

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

a test of the insider outsider hypothesis in union preferences in this paper a model of wage and employment determination in a unionized industry is developed and estimated the model incorporates rules governing union membership so that an insider outsider model can be estimated this approach allows the trade off the union makes between wages and employment to vary depending on whether membership is growing or contracting the model is estimated using data on the international woodworkers of america and the wood products industry in british columbia canada the insider outsider model is consistently rejected in favor of models in which some positive weight is placed on all levels of employment the results do suggest however that the weight the union places on employment decreases with the level of employment copyright 1995 by the london school of economics and political science

do unionized firms hire better workers i introduction many economists firmly believe that union firms offset higher union wages by hiring better workers the contrasting view that union employers react to higher union wages by hiring poorer quality workers is regarded as impossible 1 yet this contrasting view is highly plausible in the context of standard economic modeling and with what is known about labor markets there is evidence supporting this view the standard story for unionized firms hiring better workers goes like this a union raises wages and the firm foils the union by hiring better quality workers the problem with this myopic story is that it ignores what happens in the future it assumes that unions will sit idly by and let union firms whittle away any union wage differential by hiring better quality workers i would argue that it is more likely that unions would respond to better quality workers by raising wages even more employers anticipating this may respond by hiring lower quality workers this article is the first to consider how unionized firms choose worker quality when they anticipate the future consequences of quality on wages under reasonable conditions these consequences cause employers to hire lower quality workers while i do not contend this always occurs i do argue that there are reasonable grounds for rejecting the better quality proposition in addition there is evidence that unionization often does result in lower quality workers the results presented here suggest that economists should look again at how unions affect wages productivity equality and society this is not the first paper to suggest unions lead to lower quality workers it is however the first to suggest this result is due to employers making profit maximizing decisions when they anticipate the future consequences of their actions there are two other articles that also suggest unions can lead to lower quality workers first robinson 1989 assumes that unionized employers do want higher quality workers but do not hire them because nonunion firms pay them more as the nonunion firms are assumed to have better monitoring technology and a more flexible reward system second bronars and lott 1989 show that unions that seek the maximum dues will want poorer quality workers while these models focus on factors that may prove to be important the model presented here is theoretically more forceful first it is based upon standard economic modeling second using ochkam s razor it assumes the least added factors and finally its central assumption that people anticipate the future has a large body of economic evidence behind it by demonstrating that the better quality proposition is not supported by conventional economic analysis this article shows the better quality proposition should not be given a greater weight in the priors of economists having done this these other models then should and hopefully will be examined more closely ii the case for unions leading to better quality workers in discussing the wage gap between union and nonunion workers h gregg lewis 1986 46 concisely presents the case that union firms select better workers i have strong priors on the direction of the selectivity bias let a union through collective bargaining impose on an employer higher wages for his workers than he otherwise would pay them with worker quality not tightly specified in the collective bargaining agreement the higher wages will lengthen the queue of the applicants for the unionized jobs including some applicants of greater productiveness than otherwise would have applied the employer has an incentive to evade the increase in his labor costs by employing workers of greater quality the evasion will take time and will be impeded by the cost of screening workers imperfect substitution in production among worker quality and employment constraints in the collective bargaining agreements

a generalised wage rigidity result abstract this paper provides an alternative explanation of the empirically observed wage rigidity in industrialized economies we provide sufficient conditions under which the negotiated wage in unionized imperfectly competitive industries is independent of a number of product market features as well as of the bargaining institution right to manage or efficient bargains as long as negotiations are centralised at the industry level the wage rate turns out to be the same independently of e g the number of firms the degree of product substitutability or the intensity of market competition and this result is shown to hold in a broad class of industry specifications widely used in the literature

the tradeoff between wages and employment in trade union objectives this paper demonstrates that contrary to a widely held opinion the determination of the goals of unions is fully amenable to empirical analysis a characterization of the wage and employment setting process in unionized markets is adopted and its qualitative implications examined the first order condition for this model is fitted to time series data on the newspaper industry from ten cities the international typographical union s objective function reveals very restricted opportunities for substituting wages for employment in response to a change in the slope of the employer s labor demand function larger union locals place greater emphasis on wages versus employment than smaller union locals

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

price dynamics and production lags this paper provides a new explanation of why inflation is sluggish in response to aggregate demand shocks and why aggregate output changes as result of such shocks we argue that these phenomena are related to lags between inputs and outputs in the production process production lags for short the broad intuition is that production activities in a modern economy are interconnected through complex input output relations with production lags within individual firms and that it takes considerable time for cost and price changes to penetrate the entire input output system our analysis provides a rationale for a prolonged inverse relation between inflation and unemployment the paper suggests that the interaction of inflation persistence and unemployment persistence may offer a possible explanation of high and prolonged european unemployment this abstract was borrowed from another version of this item

intergenerational transfers as social insurance abstract in an overlapping generations model with stochastic population changes a social security scheme with a fixed level of payments to the retired can be interpreted as providing social insurance against the risks of demographic change

have postwar economic fluctuations been stabilized previous investigations of whether the volatility of the u s economy diminished after world war ii have been inconclusive because of questionable prewar macroeconomic aggregates we examine more broadly the hypothesis of the stabilization of the postwar economy by focusing on the duration of business cycles rather than their amplitude in the process we avoid the debate about the quality of prewar aggregates using distribution free statistics we find clear evidence of postwar duration stabilization in terms of a shift toward longer expansions and shorter contractions moreover we find no shift in whole cycle durations which suggests a reallocation of the business cycle away from contraction and toward expansion

do turnover costs protect insiders the ability of insiders to extract rents associated with exogenous turnover costs is addressed in a dynamic model the higher these rents the higher is the incentives for outsiders to obtain future insider status and thus to underbid current insiders as a consequence there is a lower limit to the number of insiders that can avoid entrance of outsiders and the insiders cannot in each period obtain a rent equal to the turnover costs the insider model never explains a lower but may result in a higher employment level than in the case where all workers are wage takers copyright 1994 by royal economic society

on union preferences and labour market models insiders and outsiders this paper constructs a model of trade union behavior in which there is a distinction between insiders and outsiders this is used to examine one of the most troublesome issues in macroeconomic theory namely the extent to which a rise in aggregate demand might generate wage increases rather than growth in employment a generalization of the most widely used union utility function is presented the analysis reveals the conditions under which insiders will agree to let outsiders into employment derives two step wage preferences and proves a new result on wage rigidity copyright 1987 by royal economic society

intergenerational risk sharing abstract in this paper we examine government debt and tax transfer policies that can be improve the allocation of risk between generations markets cannot allocate risk efficiently between two generations whenever the two generations are not both alive prior to the occurence of a stochastic event this implies that government policies transferring risk between generations have the potential to create first order welfare improvements our model provides a non keynesian justification for the debt finance of wars and recessions as well as an added rationale for social security type tax transfer schemes which aid unlucky generations e g the depression generation at the expense of luckier generations

international evidence on the historical properties of business cycles we contrast properties of real quantities with those of price levels and stocks of money for ten countries over the last century although the magnitude of output fluctuations has varied across countries and periods relations among real quantities have been remarkably uniform properties of price levels however exhibit striking differences between periods inflation rates are more persistent after world war ii than before and price level fluctuations are typically procyclical before world war ii and countercyclical afterward fluctuations in money are less highly correlated with output in the postwar period but are no more persistent than in earlier periods jel e32 e31

the steady states of a stochastic decentralized growth model the purpose of this paper is to prove the existence of a steady state for a simple decentralized growth model which is subject to random shocks the model has the following elements the population is composed of an endless sequence of overlapping cohorts of two period households each cohort is the same size and there is an aggregate production function and one output good because the labor supply is fixed the production function relates output in each period t to the total saving of all young families in period t 1 and to the current realization zt of a random variable z the random variable has an exogenous unchanging and known distribution futures markets are imperfect young families can save at time t only by investing in physical capital which will pay a return at time t 1 the return depends on the size of the time t 1 capital stock k and on zl r let y y k 1 zt be the vector of incomes of young families at time t then such families use a function g vf k to predict k note that g is nonstochastic the families adjust their saving to maximize their expected utility where the latter is computed using g and the distribution function for 5 we call resulting aggregate savings by young families y y g we use a fixed point argument to prove the existence of sets k and y and an expectation function g such that if all realizations of 5 fall within z i y k x z c k ii g y k and iii g y y y g all y e y the resulting g determines in a very simple context what grandmont 7 would call rational expectations and what radner 17 181 would call an equilibrium of plans and expectations we use this g to generate a transition function v for k we then show v has a finite invariant set k which includes all feasible states except one trivial one there are a finite number of ergodic sets el en c k for v and there is a unique stationary distribution function di associated with each ei each pair di ei constitutes a steady state corresponding to green and majumdar s 9 concept of an equilibrium distribution and to grandmont s 71 long run equilibrium once the evolution of the economy carries it into ei some

existence and local uniqueness of functional rational expectations equilibria in dynamic economic models abstract this paper established the existence and local uniqueness of stationary functional rational expectations equilibria for an open set of multi good multi agent pure exchange overlapping generations models in which agents endowments are random such equilibria are given by prices which are functions of one period lagged prices and endowments and of current endowments

insider power unemployment dynamics and multiple inflation equilibria this paper incorporates employment dynamics due to insider power into the barro gordon theory of inflation unlike in the static barro gordon case and even though our infinitehorizon model is linear quadratic there can be two markov perfect equilibria so that the same unemployment may correspond to either low or high inflation both equilibrium inflation rates measured per unit of the gap between the insiders and government s employment targets are higher than the corresponding rate in the static case the low inflation equilibrium has intuitive comparative statics properties in that inflation is increasing in insider power and the discount factor but the high inflation equilibrium behaves in the opposite way the highinflation equilibrium can be eliminated by a future precommitment to a fixed inflation regime e g erm but only if this precommitment can be made with certainty contrary to the static model inflation may be lower when the union puts a positive weight on a wage target than when it cares only about employment even when this wage target is consistent with a lower employment level than the employment target

a dynamic model of trade union behaviour this paper constructs a dynamic model of trade union behavior in which union membership is endogenous unemployed workers are assumed to leave their union as they seem to in reality and the union must therefore solve an intertemporal optim ization problem the results imply that conventional static models ov erstate the distortions caused by monopoly unionism and that the rece nt empirical mod els of union behavior may be misspecified the paper s analysis can be seen as an attempt to construct a model of the pos t entry closed shop copyright 1987 by the review of economic studies limited

endogenous market incompleteness without market frictions dynamic suboptimality of competitive equilibrium in multiperiod overlapping generations economies abstract in this paper we show that within the set of stochastic three period lived olg economies with productive assets such as land markets are necessarily sequentially incomplete and agents in the model do not share risk optimally we start by characterizing perfect risk sharing and find that it requires state dependent consumption claims which depend only on the exogenous shock realizations we show then that the recursive competitive equilibrium of any overlapping generations economy with weakly more than three generations is not strongly stationary this then allows us to show directly that there are short run pareto improvements possible in terms of risk sharing and hence that the recursive competitive equilibrium is not pareto optimal we then show that a financial reform which eliminates the equity asset and replaces it with zero net supply insurance contracts arrow securities will implement to pareto optimal stochastic steady state known to exist in the model finally we also show via numerical simulations that a system of government taxes and transfers can lead to a pareto improvement over the competitive equilibrium in the model

the use of the balance of payments as a shock absorber in fixed rate and managed float systems abstract this paper analyzes the use of the balance of payments as a shock absorber in fixed and managed exchange rate regimes the analysis is conducted in a monetary intergenerational model it shows that the balance of payments can be used to smooth consumption and raise the welfare of individuals the paper also justifies the stabilization of consumption as a policy goal achieved through the balance of payments mechanism

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 new deal and modern memory summary economists and other social scientists may never be able to explain fully why the greatdepression happened when it did or why it initially was so severe numerous hypotheses havebeen advanced as we have seen and each of them contributes important insights into thecauses of the macroeconomic calamity in which most of the world was mired in 1929 1933 if however one is forced to adopt a monocausal theory it must center on the actions of america scentral bank which presided over an extraordinary expansion in bank credit in the mid to late1920s and then took the punch bowl off the table for the purposes of this article though the key question is why did the great depressionlast longer in the united states than it did in any other nation the answer as laid out in thenext section is presidential politics 23 there will come seven years of great plenty throughout all the land of egypt but after them will arise seven years offamine and all the plenty will be forgotten in the land of egypt the famine will consume the land genesis 41 29 30 nkjv

insiders and outsiders in wage determination a firm starts with a group of insiders or seasoned workers there is also a large pool of outsiders who are initially less productive but are transformed into insiders after one period of employment the firm gains from having a large pool of insiders some of whom may be laid off in bad years insiders gain from keeping their numbers small if the insiders set their wage unilaterally they will choose a path that in this extreme case prevents employment of outsiders even if future employment prospects are good if the wage path is set by bilateral bargaining the extra advantage to the firm permits employment of some outsiders in some situations

a rational economic model of paygo tax rates abstract we argue that paygo rates are determined by a representative agent and a benevolent government jointly maximizing the expected life time utility of the agent the distributions of labor and capital income are calculated from national data on real gdp real wages and the real return to capital since 1950 with uniform risk aversion predicted rates explain 83 of the variance of observed rates the globalization of capital markets would lead to convergence of paygo rates our results are immune to crises like 2008

union firm bargaining and the influence of product market power and production technology on systematic risk the relationship between the capm firm beta and the firm s microeconomic decisions is studied by a model under uncertainty which combines the feature of an ex ante inputs substituable production technology and the existence of a union which bargains over various economic dimensions of the firm it is shown that the earlier findings of a relationship between the firm beta the firm product market power and the labor capital ratio may be reinforced through the indirect channel of labor market bargaining but the relationship becomes more complex and heavily depends on the scope of the union firm bargaining process this yields the empirical prediction confirmed for a panel of belgian firms that any proper estimation of the determinants of firm beta must control for firms in the sample being unionized

aspects of monetary and banking theory and moral hazard we consider two problems in monetary and banking theory in this paper the first of these deals with differences between monetary and tax transfer resolutions of risk sharing problems in overlapping generations 12 15 models of fiat money under uncertainty our second contribution the scenario for which is also motivated in part by interventions needed for risk sharing reasons is an attempt to provide a rationale for interest rate controls on the liabilities of intermediaries that invest in risky assets both models consider environments in which uncertainty exists private markets are incomplete and most importantly some material payoff relevant actions are not perfectly observable the goal of this research is to provide further momentum to theoretical developments that serve to integrate information based models of investment and intermediation with theories of unbacked fiat money and the control of monetary institutions in recent years there has been a great deal of research interest in explicating the micro economic foundations of fiat money i e valued government created assets which are unbacked by payoffs from productive investments or taxes and the uniqueness and criteria for regulation of depository intermediary firms important contributions have been among others the works of bryant 3 the papers in kareken and wallace 7 fama 6 merton 10 and diamond and dybvig 5 asymmetric information based foundations of intermediary functioning have been provided by the papers of leland and pyle 9 followed by diamond 4 in most of this work there has usually been a dichotomy between models that focus on providing and analyzing a role for fiat money and those which analyze the rationale regulation and pricing of capital market intermediaries and their contracts regrettably we persist in having this dichotomy in our work some recent work like fama 6 does merge these two aspects however by emphasizing perfect information complete market environments in which the financial structure irrelevance theorems of modigliani and miller 10 apply models of unbacked fiat money many different types of which are to be found in kareken and wallace 7 can be usefully dichotomized as being of two types in the first fiat money serves the function of opening up or expanding trading opportunities among contemporaneously living agents who have endowment

customer markets trade unions and stagflation customer market analysis combined with trade union wage setting is shown to yield a range of equilibrium levels of employment only when employment is forced outside this range can the disequilibrium acceleration or d eceleration of the price level be expected to operate numerical calc ulations suggest that this range is quite large implying that the ma ximum level of unemployment consistent with nondecelerating inflation is way above the minimum level of unemployment consistent with nonac celerating inflation a range of equilibrium employment levels appear s to be in closer agreement with empirical experience than a unique natural rate of unemployment copyright 1987 by the review of economic studies limited

political intergenerational risk sharing abstract in a stochastic two period olg model featuring an aggregate shock to the economy ex ante optimality requires intergenerational risk sharing we compare the level of intergenerational risk sharing chosen by a benevolent government and by an office seeking politician in our political system the transfer of resources across generations is determined as a markov equilibrium of a probabilistic voting game low realized returns on the risky asset induce politicians to compensate the old through a payg system this political system typically generates an intergenerational risk sharing scheme that is i larger ii more persistent and iii less responsive to the realization of the shock than the social optimum this is because the current politician anticipates her transfers to the elderly to be compensated by future politicians through offsetting transfers and hence overspends

output growth and its volatility the gold standard through the great moderation this study examines the relationship between u s output growth and its volatility over the period 1876 i to 2012 ii we adjust the data for outliers and structural breaks we employ generalized autoregressive conditional heteroskedasticity garch and exponential garch egarch specifications normality and homoskedasticity appear only in the garch or egarch model that corrects for the outliers when including the break in the mean equation high volatility persistence remains after also accommodating the breaks in the variance equation the integrated garch effect proves spurious either for the symmetric or the asymmetric model finally our empirical results suggest that the finding of higher output growth volatility stimulating output growth and higher output growth reducing its volatility obtained from the symmetric garch in mean garch m model also proves spurious as a result of the emergence of an asymmetric effect our more appropriately specified asymmetric egarch m model suggests positive volatility in mean and level effects in the long period real gross national product series

a dynamic model of union membership and employment that it recognizes some link between present wage and employment levels and future membership and that it has an interest in the level of membership attained we model membership decisions with stochastic demand and a differential layoff rate for union and non union workers membership dynamics are behavioural in that membership increases when the utility of being a member exceeds the utility of not being a member the model permits a variety of possible relationships between employment and membership in the adjustment to steady state

an economic theory of the open shop trade union there has been significant interest recently both in the empirical investigation of the determinants of trade union membership in the u k and elsewhere and in the theoretical analysis of the economic effects of the closed shop trade union however there is little rigorous microeconomic explanation of union membership which is relevant for much of the u k and similar labour markets where the open shop union is prevalent this paper attempts to overcome the free rider problem of explaining union membership in the open shop we argue that both private pecuniary gains and social influences affect the individuals union membership decisions citing evidence in support of these basic assumptions we show that stable intermediate union density is a possible equilibrium outcome in a generalised social custom model we also analyse the simultaneous determination of wages and union membership deriving a number of comparative static results in particular we find that both wages and union density depend upon inter alia the level of strike pay the net cost of union membership and the individual s sensitivity to social custom and associated solidarity effects we argue that the approach is consistent with various stylised facts concerning both wage bargaining and union membership and is able to explain a number of otherwise puzzling features of union membership

did leaving the gold standard tame the business cycle evidence from nber reference dates and real gnp most probable break point ushering in an era of longer u s expansions both absolutely and relative to subsequent recessions their analysis is based on cycle durations as defined by national bureau of economic research nber reference dates however much of macroeconomic analysis is based on i growth cycles i e periods when the economy s production is above or below trend rather than absolute increases or decreases in economic activity and ii aggregate time series volatility as the prime indicator of macroeconomic stability in light of this we reevaluate the march 1933 break point first using hp filtered quarterly gross national product gnp our analysis of growth cycle durations still implies a break point near 1933 second we test for structural breaks in the volatility of gnp growth rates and deviations from trends these tests suggest a structural break considerably later than

do trade unions reduce job opportunities of non members this paper examines the structure of the optimal contract that would be chosen by a self interested trade union that represents the interests of some set of m members when it is assumed that there exists a pool of unemployed workers outside the union whose opportunity cost of working is such that they would at least in some states of demand have been employed in a competitive labor market the authors compare wage and employment levels under such a contract with those that would be observed in competitive markets in particular focusing on the impact of the union on the employment opportunities and welfare of non union members copyright 1989 by royal economic society

social security taxation and intergenerational risk sharing the life cycle hypothesis has become the dominant mode used to analyze the effects of a social security system on private saving the labor leisure choice and social welfare as both barro and samuelson indicate a fully funded social security program in a world of certainty would drive out an equivalent amount of private saving if the interest rate is r the effects of a payment of a dollar into the social security pool while young would just offset the effects of receiving 1 r dollars as a transfer when retired papers by diamond hi and samuelson among others have examined the effects of non fully funded social security schemes in a growing economy a non fully funded program can be used to alter the private sector s saving rate and hence the capital labor ratio social security then can be used as a policy tool for achieving the or some variant of the golden rule growth path this abstract was borrowed from another version of this item

union membership and employment dynamics abstract this note examines the behavior of a monopoly union that cares about its future membership and recognizes the dynamic dependence of membership on employment a characterization is given both of the steady state and of the interdependent employment and membership dynamics out of that steady state

the effect of outsiders on union contracts abstract a recent proposal for incorporating the insider outsider distinction into the static monopoly union model results in implausible comparative static properties this paper presents an alternative formulation that rehabilitates the monopoly union model

business cycle durations and postwar stabilization of the u s economy average postwar expansions are twice as long as prewar expansions and contractions are one half as long this paper investigates three possible explanations the first explanation is that shocks to the economy have been smaller in the postwar period the second explanation is that the composition of output has shifted from very cyclical sectors to less cyclical sectors the third explanation is that the apparent stabilization is largely spurious and is caused by differences in the way that prewar and postwar business cycle reference dates were chosen by the national bureau of economic research the evidence presented in this paper favors this third explanation copyright 1994 by american economic association

taxation of corporate capital income tax revenues versus tax distortions this paper shows that when uncertainty is taken into account explicitly taxation of corporate income can leave corporate investment incentives and individual savings incentives basically unaffected in spite of the sizable tax revenues collected in some plausible situations such taxes can increase efficiency the explanation for these surprising results is that the government by taxing capital income absorbs a certain fraction of both the expected return and the uncertainty in the return while investors as a result receive a lower expected return they also bear less risk when they invest and these two effects are largely offsetting

trade unions and seniority employment rules abstract some but not all trade union and insider outsider models assume that a seniority employment rule is used we investigate when firm and union members gain from such a rule and the consequences of their adopting one generally providing a seniority wage scale is also used they gain if union membership is not too large relative to demand and union bargaining power not too great moreover when outsiders are hired under a seniority employment rule employment is at the competitive level these results might explain why bargaining over employment is relatively uncommon and typically occurs only in industries with declining employment

inter industry and occupational wage differentials in italy the vast literture on wage determination in the post war era extensively documents the existence of large and persistent wage differentials among industries and workers of comparable skills this paper addresses the issue of wage dispersion in the context of the italian economy the stability over time of industry relative wages confirme previous results obtained for the other countries a wide class of earings equations is estimated using microdata for the italian manufacturing industry the results provide little evidence in support of the view that wage dispersion can be explained by either unmeasured workers charcteristics or by compensating wage differentials conversely the estimated pattern of industry occupation wage differentials is consistent with the existence of rent sharing mechanisms and fairness considerations

the computational experiment an econometric tool an economic experiment consists of the act of placing people in an environment desired by the experimenter who then records the time paths of their economic behavior performing experiments that use actual people at the level of national economies is obviously not practical but constructing a model economy and computing the economic behavior of the model s people is such experiments are termed computational this essay specifies the steps in designing a computational experiment to address some well posed quantitative question the authors emphasize that the computational experiment is an econometric tool used in the task of deriving the quantitative implications of theory

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

informational diversity over time and the optimality of monetary equilibria abstract the temporal realizations of a random state variable in an overlapping generations model create an informational diversity between members of different generations and require a reexamination of the optimality that competitive equilibria might display in such an environment using an optimality criterion that reflects this informational diversity we prove the optimality of competitive equilibrium in a model with a fixed stock of fiat money a single spot market and good endowments that follow a markov process the need for an optimality criterion that incorporates informational diversity is further motivated by studying the same model with the operation of complete contingent commodities markets

strategic delegation with endogenous costs a duopoly with wage bargaining abstract this paper examines the owners problem of strategic delegation when managers choose the level of sales and are responsible for cost control fershtman and judd american economic review 1987 77 927 940 and vickers economic journal 1985 95 1387ndash 147 showed that when managers are responsible for sales alone in oligopolistic markets then owners will want managers to maximise sales rather than profits in this paper the cost structure as well as sales depends on the choices of managers owners want managers to act more like profit maximisers when cost control is important this issue is analysed in the context of a model with union bargaining in the model it is shown that stronger unions may benefit owners because of the strategic incentive setting process and that the need for cost control can actually raise profitability

wages policy and unemployment in australia it is generally accepted among australian economists that high rates of growth of wages at various times over the last decade have made the achievement of full employment and lower rates of inflation more difficult fear of a further acceleration of wage growth has also been a policy constraint it is when one attempts to go further that considerable disagreement becomes evident from a labour market viewpoint there does not seem to be a consensus as to the answers to the two broad questions that should be addressed first how important are wage changes relative to other factors that depress employment and add to the inflation rate second how does government policy impinge on the process that generates wage changes to do justice to both of these in a paper as short as this one is difficult so i shall focus most of the paper on the second question the relationships between government policy and wage changes are particularly important at this time for most of the last decade successive governments have operated a national wages policy which to a large degree has been based on the indexation of wages for past price changes the latest experiment the prices and incomes accord is the centrepiece of the current government s employment and inflation policy and after almost two years of wide community and media support the key principles upon which it is based are suddenly being questioned 1 our prime endeavour therefore will be to build up sufficient understanding of the wage determination process so that some evaluation can be made as to the effectiveness of these national wage policies this turns out to be a remarkably difficult task which generates considerable concern in our mind that the data may not be sufficiently rich to serve as a basis for sound judgments it does appear however that the effect of a given level of unemployment upon wage changes has consistently weakened over the last decade why this should be so is a major unresolved puzzle i offer a loosely constructed theory that is consistent with the facts but it is by no means the only possible explanation section i provides a description of wage setting in australia and some key facts of the economy in section ii the statistical analysis of wage changes focuses on two competing theories one is the phillips curve approach and the other stresses that wage outcomes may be to a significant degree independent of the level of unemployment and may depend instead on utilization rates of labour within the firm section iii considers the efficacy of incomes policies in australia some final comments areoffered in section iv

stationary equilibrium transition rules for an overlapping generations model with uncertainty abstract an overlapping generations model incorporating random production shocks is studied households have finite life spans futures markets are incomplete agents have full information in one case and receive only a limited signal in another in both instances the existence of a time autonomous transition rule is proved such that if all agents forecast using it the economy s actual growth will bear the predictions out the rule corresponds to a steady state for a non stochastic model with limited information it is seen to depend on all past signals several approximation theorems which may facilitate future applications are presented

wage rivalry and insider outsider relations evidence for skilled and unskilled men in denmark a model with trade union rivalry is used to derive wage reaction functions which are then estimated for skilled and unskilled men in denmark the results show substantial differences in wage determination between the two groups of workers in the short term but once the wage wage spiral starts to operate some of the differences disappear wage setting for unskilled men is subject to insider outsider effects whereas it is uncertain whether wage determination for skilled workers suffers from such imperfections copyright 1992 by the editors of the scandinavian journal of economics

the estimation of prewar gross national product methodology and new evidence the paper develops new methodology for the estimation of prewar gnp taps previously unused data sources and develops new estimates for the periods 1869 1908 and 1869 1928 primary among the new data sources are direct measures of output in the transportation communications and construction sectors and estimates of the consumer price index new measures of real gnp nominal gnp and the gnp deflator are developed the new estimates of real gnp are as volatile on average over the business cycle as the traditional kuznets kendrick series but dampen the amplitude of some cycles while raising the amplitude of others the new estimates of the gnp deflator are distinctly less volatile than the traditional series and in fact no more volatile than those in the postwar period

does detrending matter for the determination of the reference cycle and the selection of turning points we examine the sensitivity of turning points classification to detrending and compare the implied cycles to those derived by nber or doc researchers two dating rules are considered turning point dates are broadly insensitive to detrending with one dating rule but not the other and many procedures generate false alarms and miss several common turning points with the latter one amplitude and duration properties are also sensitive detrending and dating rules the hodrick and prescott and a frequency domain filters are best in mimicing nber and doc cycles regardless of the dating rule used

do unions contract for added employment the efficient contract model predicts unions will contract for added employment that is a level of employment higher than would be predicted by the demand curve for labor using three data sets on canadian industries in 1971 81 u s industries in 1972 and u s construction projects in 1973 74 and several estimation techniques the author estimates and compares labor demand equations for both union and nonunion firms some regressions that control for few variables support the added employment hypothesis but those with more complete specifications reject it