unionization and input flexibility in u s manufacturing 1973 1996 input flexibility as measured by the ability of firms to vary input demand in the face of changes in input prices is an important dimension of labor market flexibility using a new dataset the authors analyze the impact of unionization on input flexibility in u s manufacturing from 1973 to 1996 a period in which production was arguably becoming more flexible due to deep changes in the u s industrial relations system and in the broad macroeconomic environment the authors quantify the effects of unionization on input flexibility by estimating elasticities of substitution between a broad range of labor and non labor inputs controlling for unionization the pattern that emerges is more complex than that suggested by other research in particular low unionization apparently is associated with greater flexibility in the use of labor inputs but less flexibility in the use of non labor inputs

adapting prices or quantities in the presence of adjustment costs it is often hypothesized that costs of adjusting both price and quantities may have important implications for the macroeconomic adjustment process not least to nominal shocks we analyse this in an explicit intertemporal general equilibrium model considering the empirically relevant case of fixed costs of adjusting prices and fixed and variable costs of adjusting quantities we find that the presence of both price and quantity adjustment costs changes the response to shocks significantly it is an implication that small shocks do not support the menu cost case but rather both fixed prices and quantities rationing a numerical analysis based on available evidence on adjustment costs is used to illustrate the likelihood that the various adjustment patterns actually arise

on the utilisation controversy a theoretical and empirical discussion of the kaleckian model of growth and distribution this paper examines the utilisation controversy around the kaleckian model of growth and distribution we show that the federal reserve data on capacity utilisation which have been used by both sides of this debate are the wrong kind of data for the issue under examination instead a more appropriate measurement can be derived from the data on the average workweek of capital we argue that the long run dynamic adjustment proposed by kaleckian scholars lacks a coherent economic rationale we provide an alternative path towards the endogeneity of the desired utilisation at the micro and macro levels finally we examine the proposed adjustment mechanism econometrically our results verify the endogeneity of the normal utilisation rate

inflation costly price and quantity adjustments and time spent in the keynesian regime abstract this paper considers a menu cost firm under inflation due to costly quantity adjustments the firm is sometimes in a keynesian regime where sales are demand determined with a positive real interest rate the proportion of time in the keynesian regime is less than the inverse of the absolute value of the average elasticity of demand in that regime

adjustment costs inventories and output this paper analyzes the optimal adjustment strategy of an inventory holding firm facing price and quantity adjustment costs in an inflationary environment the model nests both the original menu cost model that allows production to be costlessly adjusted and the later model that includes price and quantity adjustment costs but rules out inventory holdings it is shown that the firm s optimal adjustment strategy may involve stockouts at low inflation rates output is inversely related to the inflation rate and the length of time demand is satisfied increases with the demand elasticity but decreases with the storage cost and the real interest rate

domestic support and border measures for processed horticultural products in horticultural markets trade barriers often apply to the processed products whereas domestic support applies to farm produced raw commodities here we assess the effects of such trade barriers and domestic support by simulating the effects of policy reform on global processing tomato markets which are faced with modest processed product tariffs and high domestic support in the european union eu both protection and eu subsidy drive down world welfare but we find that reducing import tariffs for tomato products would yield greater effects on markets and larger welfare impacts outside europe than would reductions in eu domestic support copyright 2008 oxford university press

the cyclical behavior of the price cost markup countercyclical markups constitute the key transmission mechanism for monetary and other demand shocks in new keynesian models this paper tests the foundation of those models by studying the cyclical properties of the markup of price over marginal cost the first part of the paper studies markups in the aggregate economy and the manufacturing sector we use bils s 1987 insights for converting average cost to marginal cost but do so with richer data we find that all measures of markups are either procyclical or acyclical moreover we show that monetary shocks lead markups to fall with output the second part of the paper merges input output information on shipments to the government with detailed industry data to study the effect of demand changes on industry level markups industry level markups are found to be acyclical in response to demand changes

measurement of monopoly behavior an application to the cigarette industry a simple scheme is proposed to measure monopoly pricing behavior the coefficient of the tax rate term in a price equation identifies the ratio of price to marginal cost no direct measurement of costs is required so a major problem for other empirical studies of monopoly is avoided empirical results for cross section time series data support rejection of atomistic competition but also provide evidence against the operation of an effective cartel in the cigarette industry the model represents an alternative interpretation of related results in a recent paper by barzel application of the methodology to other markets is feasible

the producer welfare effects of trade liberalization when goods are perishable and habit forming the case of asparagus asparagus is a perishable highly seasonal crop we find that out of season imports of asparagus caused habit formation that increased demand in the u s growing seasons we find that habit effects offset about 64 of the welfare losses to u s asparagus producers from increased mexican imports under nafta and all of the u s producer welfare losses from increased peruvian imports under the andean trade preference act we estimate that the u s producer welfare losses from nafta are less than the annualized value of market loss assistance provided them in the 2008 farm bill jel classifications d12 f130 q17 q18

pass through of exchange rates and tariffs in greek us tobacco trade abstract the paper examines the extent to which exchange rate and unit tariff changes are passed through in us import prices of unmanufactured greek oriental tobacco the results indicate partial pass through of exchange rates and tariffs exchange rate pass through is about 0 272 and tariff pass through about 0 185 one possible reason for the partial pass through is oligopoly in tobacco exporting oligopoly would imply that depreciation of the drachma relative to the us dollar benefits tobacco exporters operating in greece a second possible reason is a possible correlation between exchange rates premiums paid to tobacco exporters in previous agricultural policies an important implication of this possible correlation is that greek tobacco prices may be more sensitive to exchange rate changes under the current agricultural policy

output fluctuations at the plant level this paper examines the short run dynamics of manufacturing costs by detailing how plants in the u s automobile industry change output weekly data show a variety of margins on which firms adjust production these margins which are distinct from the usual factor demand choices differ in their lumpiness their adjustment costs and their variable costs the existence of these margins explains several empirical puzzles of output fluctuations using a theory of the short run dynamic cost function we are able to infer some of the characteristics of the underlying cost function from the dynamic behavior of the different margins

did lower unionization in the united states result in more flexible industries do unions really impede manufacturers output flexibility if so in what ways the authors propose a methodology for quantifying george stigler s concept of output flexibility and for decomposing the effects of unionization on average cost differences between union and non union plants using a recently compiled data set on u s three digit manufacturing industries from 1973 to 1996 they adapt this methodology to simulate the effects of unionization on flexibility and average costs for average size plants simulation results indicate that higher unionization was associated with higher average costs and lower flexibility than low unionization higher average costs appear to have been primarily due to higher fixed costs such as higher benefits

the demand for cigarettes in japan a two stage budgeting procedure was used to estimate demand elasticities for cigarettes in japan cigarettes were disaggregated into japanese u s and rest of world testing for habit effects was performed at both stages results indicated that habit effects occur for total expenditures on cigarettes but not between types

durable goods oligopoly with secondary markets the case of automobiles we study the effects of durability and secondary markets on equilibrium firm behavior in the car market we construct a dynamic oligopoly model of a differentiated product market to incorporate the equilibrium production dynamics that arise from the durability of the goods and their active trade in secondary markets we derive an econometric model and estimate its parameters using data from the automobile industry over a 20 year period our estimates are used to provide a measure of the competitive importance of the secondary market

differentiated products and supply controls in the analysis of agricultural policy reform the case of tobacco abstract with a multi market model of the u s tobacco and cigarette industries we analyze the impact of a reduction in the assistance to u s tobacco producers by relaxing production quotas with nonbinding price support and by lowering tariffs on tobacco imports the results show the importance of incorporating differentiated product and supply control assumptions into agricultural policy analysis

part time work and the hiring of older workers this research uses german establishment data to examine the relationship between back loading compensation the hiring of older workers and their part time status we confirm that establishments that defer compensation are less likely to hire older workers we demonstrate for the first time that establishments that defer compensation are more likely to limit older workers to part time jobs when they do hire them thus deferred compensation plays a larger role in reducing the chances of older workers being hired into full time jobs than would be inferred from past estimates simply examining their odds of being hired at all

the production impact of cash for clunkers implications for stabilization policy during july and august of 2009 americans purchased nearly 700 000 new automobiles or light trucks under the government s cash for clunkers program officially the car allowance rebate system or cars under the terms of the purchase qualified buyers traded in their old vehicles to receive a rebate on the price of a new vehicle the amount of the rebate either 3 500 or 4 500 depended on both the model that was traded in and the model that was acquired the direct cost to taxpayers of subsidizing these purchases was roughly 2 8 billion the program had two primary goals to reduce energy consumption and pollution by inducing consumers to replace their old gas guzzlers with newer fuel efficient models and to serve as a stimulus for the troubled automobile industry and the u s economy as a whole in this article we take a close look at the second objective exploring how the cars program affected sales and more important production in the automobile industry 1 drawing on our findings we then propose an answer to the more difficult question of the program s impact on u s gross domestic product gdp 2 in line with other recent studies our analysis shows that the cars program had only a transitory cumulative effect on sales we estimate an initial impact of about 450 000 additional automobile sales but these were essentially shifted from the periods before and especially after the program we calculate that by january 2010 the cumulative effect of the cars program on auto sales was essentially zero 3 more important for our purposes however is the program s effect on automobile production while most studies of cars have focused on sales we argue that the program s success as a stimulus to the economy hinges on its impact on production production increases are more likely to translate into higher gdp and employment gdp being fundamentally a measure of production sales clearly rose at the outset but given that the industry can simply let inventory stocks absorb the increase in sales higher sales alone do not imply higher gdp or employment 4 overall we find that the program had a very modest and short lived effect on production production was about 200 000 units higher during the program in comparison to the 450 000 increase in sales sales from september 2009 to january 2010 were correspondingly lower than they would have been in the absence of cars which allowed producers to have lower production while still replenishing their inventory stocks thus on a quarterly basis we estimate that the cars program shifted production by around 100 000 units from 2009q4 and 2010q1 to 2009q3 these calculations suggest that the program had a negligible direct effect on gdp shifting less than roughly 2 billion or less than one tenth of 1 of gdp into 2009q3 from the subsequent two quarters this contrasts starkly with a study released by the department of transportation dot in the immediate aftermath of the program which concluded that cars had given a substantial boost to both gdp and employment in the final section of the article we discuss why our conclusions differ from those of the dot study our findings raise broader questions beyond just this particular program about the efficacy of efforts to stimulate short term spending it is clearly a mistake to gauge their impact by just looking at the spending they induce without looking at the supply side it is reasonable to expect that producers will use other margins than production and employment to respond to temporary movements in sales so the only question is quantitative how large is the gap between the sales and production impact we find it to be large in the case of cash for clunkers in what follows we will lay out the economics behind our analysis by examining how rebates and other transitory price changes affect consumer purchases and manufacturers inventory decisions

the labour input response to permanent changes in output an errors in variables analysis based on panel data using panel data for norwegian manufacturing we revisit the increasing returns to scale puzzle for labour inputs we consider the response of the input of white collar workers blue collar workers and blue collar worker hours to permanent changes in output permanent and temporary changes in output are treated as latent variables we compare ols iv and gmm estimates of the response elasticities and conclude that the distinction between permanent and temporary changes is essential our gmm estimates suggest that the increasing returns to scale puzzle remains for all measures of the labour input also when we consider their response to permanent changes in output for materials the output response indicates approximately constant returns to scale this suggests non homotheticity of the production technology jel classification c23 j23

determining market power exertion between buyers and sellers empirical techniques commonly used in industrial organization to measure market power exertion typically assume imperfectly competitive behaviour by firms on only one side of the market firms on the other side are assumed to be perfectly competitive in this paper we extend traditional neio methods by developing a method to estimate market power exertion when firms on both sides have potential market power using monte carlo simulations we find that the model correctly estimates market power exercised by firms on either or both sides of a market and also correctly estimates firms technology parameters when applied to the us leaf tobacco market findings indicate that cigarette manufacturers exert some monopsony power in purchasing leaf tobacco while producers organized as a cartel exhibit no countervailing monopoly market power copyright 2000 john wiley sons ltd

cigarette taxes and smoking restrictions impacts and policy implications the effects of recently proposed increases in cigarette excise taxes and smoking restrictions on tobacco prices and quantities quota lease rates and revenues to tobacco producing areas are analyzed the price elasticity of demand for u s cigarette exports is estimated proportionally similar increases in smoking restrictions or cigarette taxes are shown to have effects of similar magnitude on cigarette consumption a policy of reducing price instead of the quantity produced is found to minimize the impact of increased taxes and smoking restrictions on revenues to tobacco producing areas

pollination markets and the coupled futures of almonds and honey bees simulating impacts of shifts in demands and costs honey bees have garnered much attention in recent years concerns about long term sustainability of pollinator populations have been coupled with concerns about implications for food supplies we use a novel formulation of a multiple input multiple output two season equilibrium simulation model to explore economic linkages across the markets of buyers and sellers of pollination services and honey we specify and calibrate in a tractable way the empirical relationships between pollinators and the crops they pollinate especially almonds our model highlights the sequential nature of the pollination season and implication for revenue from pollination and honey production we demonstrate how shifts in almond supply and demand and the much discussed honey bee hive health problems cause price and quantity adjustments in horizontally and vertically related markets and quantify these effects we show that the economic fortunes of the almond industry including demand growth cost concerns and the potential for new almond varieties that use fewer bees crucially affect the returns to beekeeping and the number of hives these drivers of almond economics also have substantial effects on the cost of pollination for crops that are pollinated later

unraveling the multiple margins of rent generation from individual transferable quotas individual transferable quotas itqs induce changes along both the extensive margin via consolidation of quota among fewer vessels and the intensive margin as harvesters adjust their behavior to itq incentives we use itq introduction in the bering sea crab fishery to decompose the sources of rent generation across both margins we embed an empirically calibrated structural model of the harvesting process into a sector level model allowing us to experimentally unravel the itq treatment we show that the magnitude and source of rent generation under itqs critically depends on the manner and degree of rent dissipation before itqs are implemented

capital utilization economic growth and convergence abstract optimal decisions by economic agents regarding the utilization of capital lead to empirically plausible speeds of convergence in one sector models of economic growth the relationship between depreciation and capital utilization plays a crucial role in slowing down convergence to the steady state cross country differences in the extent to which the capital utilization decision is internalized along the transition path may lead to differences in convergence rates even for countries with similar initial and terminal conditions finally by assuming a constant depreciation rate and full capital utilization standard growth models may be overstating the magnitude of the steady state equilibrium

inventories and the automobile market this article studies the within model year pricing production and inventory management of new automobiles using new monthly data on u s transaction prices we document that for the typical vehicle prices fall over the model year at a 9 0 annual rate concurrently both sales and inventories are hump shaped to explain these time series we formulate an industry model for new automobiles in which inventory and pricing decisions are made simultaneously the model predicts that automakers build to stock inventory management policy substantially influences the time series of prices and sales accounting for four tenths of the price decline observed over the model year

a stylized model of overrepresentation and quality in the congress abstract traditionally overrepresentation has been used to explain the distribution of benefits across jurisdictions leaving aside quality components we present a model that demonstrates that in the dispute of limited federal benefits although quantity is important at the margin quality matters

effects of an increase in the federal excise tax on cigarettes the economic impact of a cigarette tax increase on the cigarette and tobacco industries depends on market forces and on the u s tobacco program this study uses a log linear equilibrium displacement model parameter estimates from prior studies and recent data to indicate quantitative effects international trade implies that the effect of the tax increase on the price of domestic tobacco will be small even in the case of fixed tobacco quotas however the effects on tobacco producers revenue quota lease rates and producer economic rents can be significant depending on the response of u s tobacco policy to a tax change

substitutability for farm commodities the demand for u s tobacco in cigarette manufacturing a generalized leontief cost function and system of factor demand functions for the domestic cigarette industry is estimated we strongly rejected fixed proportions both imported tobacco and other inputs are substitutes for u s tobacco the estimated output constant price elasticities are combined with the output effect calculated from cost shares and time series estimates of the cigarette demand elasticity and an export demand elasticity from previous studies to consider the effects of reducing the u s price support competition from foreign tobacco implies that a u s price decline would increase significantly the quantity of u s tobacco demanded

interest rates and the market for new light vehicles we study the impact of interest rates changes on both the demand for and supply of new light vehicles in an environment where consumers and manufacturers face their own interest rates an increase in the consumers interest rate raises their cost of financing and thus lowers the demand for new vehicles an increase in the manufacturers interest rate raises their cost of holding inventories both channels have equilibrium effects that are amplified and propagated over time through inventories which serve as a way to both smooth production and facilitate greater sales at a given price through the estimation of a dynamic stochastic market equilibrium model we find evidence of both channels at work and of the important role played by inventories a temporary 100 basis point increase in both interest rates causes vehicle production to fall 12 percent and sales to fall 3 25 percent at an annual rate in the short run

tax changes and cigarette prices the recurring question of the difference between specific and ad valorem taxes has recently been revived by barzel 1976 who argued p 1185 that when quality is not fully controlled the effects of the two types of taxes differ radically the excise tax induces a substitution of quality for quantity resulting in a greater increase in the price per unit than predicted by the constant quality model the ad valorem tax induces a reduction in quality and lower after tax price than predicted evidence consistent with these hypotheses is found in the response of cigarette prices to tax changes in the further tests reported by johnson 1978 prices rise significantly less than the tax in new hampshire where the state tax was ad valorem and significantly more in the remaining states which impose specific taxes the purpose of this note is to question not barzel s analysis but rather the interpretation of the evidence on the pedestrian grounds of implausibility as barzel himself observes p 1194 n 32 the size of new hampshire makes it unlikely that cigarettes would be tailormade for it the scope for removing characteristics is quite limited then the scope for adding characteristics in other states seems equally limited to avoid misunderstanding it should be emphasized that the hypothesized variations in quality are a supply side phenomenon not a demand side response to the relative cheapening of superior brands when a specific tax is increased johnson s estimates imply that the 90 increase in the new hampshire tax over the period 1954 76 should have reduced the net price by 3 6 ceteris paribus the slightly larger mean tax increase in the remaining 48 continental states should have raised net price by 0 90 what changes in the quality of the services sold with cigarettes could have justified such a differential what are the observable counterparts of the tax changes in the absence of a convincing answer to those questions the estimated response of cigarette prices to taxes represents a fact in search of a theory

impact of domestic content requirement on the us tobacco and cigarette industries abstract using a log linear equilibrium displacement model we quantify the impact of the recent domestic tobacco content requirement on us cigarette manufacturing we investigate effects on us growers and manufacturers and competing tobacco imports the policy increased domestic use of us grown tobacco but induced a small negative output effect tobacco imports decreased substantially the paper also discusses the political economic incentives for us manufacturers to comply with such policies the political cooperation between us growers and manufacturers decreases the opposition of the latter to protectionist policies championed by the former

are consumers myopic evidence from new and used car purchases abstract we investigate whether car buyers are myopic about future fuel costs we estimate the effect of gasoline prices on short run equilibrium prices of cars of different fuel economies we then compare the implied changes in willingness to pay to the associated changes in expected future gasoline costs for cars of different fuel economies in order to calculate implicit discount rates using different assumptions about annual mileage survival rates and demand elasticities we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow we interpret this as showing little evidence of consumer myopia jel d12 h25 l11 l62 l71 l81

non convex costs and capital utilization a study of production scheduling at automobile assembly plants i study detailed data from eleven automobile assembly plants these data display considerable cross plant heterogeneity in production scheduling to explain the observed heterogeneity i solve a dynamic programming model when desired production is below the plant s minimum e cient scale non convexities induce production bunching the plant uses less than full capital utilization on average and production is more volatile than sales when desired production is above the plant s minimum e cient scale the plant operates in a convex region of the cost curve in this case it uses high levels of capital utilization and production is less volatile than sales 2000 elsevier science b v all rights reserved jel classixcation e23 d21 l23

plant level nonconvex output adjustment and aggregate fluctuations in most manufacturing industries plant level output is adjusted along three margins of capacity utilization shiftwork weekend work and closing temporarily down due to the discrete and lumpy nature of these margins only a fraction of plants adjust output in response to shocks in a business cycle model calibrated to establishment level observations these nonconvexities make aggregate output less volatile than when plants can adjust smoothly further the mass of adjusting plants is larger in downturns than in upturns leading to counter cyclical volatility of aggregate output and government policy being slightly more effective in recessions than in expansions

financing constraints and inventories abstract this paper investigates the impact of financing constraints on firms inventory and cash management in particular it examines the extent to which the presence of such constraints may account for certain empirical regularities these include e g the excess variance of production vis a vis that of sales as well as the counter cyclicality and persistence of the inventory sales ratio we model the intertemporal decision making on production cash retention and dividends of a firm that is exposed to stochastic demand shocks in every period and faces constrained access to external sources of finance it is found that the presence of financing constraints can explain the excess variance of production in a model which otherwise would not deliver this result moreover as long as demand is positively serially correlated they also contribute to the counter cyclicality and persistence of the inventory sales ratio the paper suggests that financing constraints should not be discarded as a factor driving the cyclical behaviour of inventories