corporatism and unemployment in the 1980s and 1990s a number of studies have found an association between corporatist institutions and low unemployment in the 1970s and or 1980s three gaps in our understanding of corporatism s labor market effects are addressed here 1 which of the two principal forms of corporatism corporatist wage setting or union participation in economic policymaking or both generates these effects 2 what are the causal mechanisms 3 did these effects continue in the 1990s in the face of globalization restrictive monetary policy growing dissension within labor movements and related developments the impact of corporatism across 16 affluent oecd countries in the 1980s and 1990s is assessed using pooled time series cross section analysis the results suggest that wage coordination was conducive to low unemployment in the 1980s because it fostered moderation in labor costs spurred faster economic growth and encouraged governments to more aggressively pursue policies to reduce unemployment in the 1990s this effect disappeared largely because unemployment outcomes in low wage coordination countries improved rather than because unemployment outcomes in high wage coordination countries deteriorated union participation in economic policymaking was associated with low unemployment throughout the two decades conditional on the presence of leftist government union participation appears to have had this effect mainly via government policy

price setting during low and high inflation evidence from mexico this paper provides new insight into the relationship between inflation and the setting of individual prices by examining a large data set of mexican consumer prices covering episodes of both low and high inflation when the annual rate of inflation is low below 10 15 the frequency of price changes comoves weakly with inflation because movements in the frequency of price decreases and increases partly offset each other in contrast the average magnitude of price changes correlates strongly with inflation because it is sensitive to movements in the relative shares of price increases and decreases when inflation rises beyond 10 15 few price decreases are observed and both the frequency and average magnitude are important determinants of inflation i show that a menu cost model with idiosyncratic technology shocks predicts the average frequency and magnitude of price changes well over a range of inflation similar to that experienced by mexico

economic culture and foreign policy the cognitive analysis of economic policy making political scientists researching economic foreign policy have generally taken one of two analytic approaches the first is based on realpolitik the traditional application of high politics to the low politics of economics this approach considers economics subordinate to politics the concept of the national interest dominates the pursuit of power what enables the state to achieve its goals of security welfare and other societal values is seen to underlie most actions the study of foreign economic policy is thus an analysis of the distribution of power among states within the international system by understanding a state s sources of strength and areas of vulnerability in relation to other states the analyst will better understand the creation of foreign policy hans morgenthau notes that while states may sometimes pursue economic policies for their own sake in which case they should take little interest in their success the more important economic policies they will favor are instruments of political power stephen krasner views the state as an autonomously motivated actor able to guide policy in pursuit of state priorities while resisting interest groups and ideologies according to this power theory the state tries to increase its economic competitiveness ensure security of material needs and promote its broad foreign policy objectives economic policy is for the most part subordinate to and best explained by state priorities and prerogatives robert tucker klaus knorr robert gilpin and others have also adopted this framework

globalization and the great u turn income inequality trends in 16 oecd countries the debate on the resurgence of income inequality in some advanced industrial societies has often focused on the impact of an increasingly integrated world economy typified by growing capital mobility heightened international competition and an increase in migration this study represents one of the first systematic cross national examinations of the role of globalization in the inequality u turn results indicate on the one hand that total inequality variation is principally affected by the percentage of the labor force in agriculture followed by the institutional factors union density and decommodification and only then by globalization on the other hand longitudinal variation in inequality while still dominated by the percentage of the labor force in agriculture is also principally affected by aspects of globalization such as southern import penetration and direct investment outflow and to a lesser extent by migration in other words globalization explains the longitudinal trend of inc

sticky prices and deviations from the law of one price evidence from mexican micro price data abstract this paper uses a novel dataset of weekly sampled store level prices to study the impact of sticky prices on the volatility and persistence of intranational deviations from the law of one price lop the volatility of lop deviations is found to be increasing both on the distance separating two locations and on the degree of price stickiness sticky prices are also found to be systematically related to the persistence of lop deviations half lives of lop deviations are systematically larger for goods with stickier prices these observations are shown to accord well with the predictions of a dynamic general equilibrium model featuring real market segmentation and calvo pricing i also find evidence of remarkably fast convergence to the lop average half lives of lop deviations are in the order of 3 6 weeks and show that previously reported convergence estimates may be afflicted by a positive temporal aggregation bias

the behavior of prices and inflation an empirical analysis of disaggregat price data this paper analyzes the effects of inflation on the dispersion of prices as well as other aspects of price behavior using disaggregated data on prices of foodstuffs in israel during 1978 84 we find that the effect of expected inflation on intramarket price variability is stronger than the effect of unexpected inflation we show that even in times of high inflation price quotations are not trivially short and price changes are not synchronized across firms these facts taken together confirm that there is some staggering in the setting of prices we find that the distribution of real prices is far from being uniform as many menu cost based models assume or conclude in fact as inflation increases to very high levels this distribution is not even symmetric when the annual inflation rate reaches 130 percent there are equal chances of finding real prices above or below the market average but upward deviations in the real price are further away from zero than downward ones furthermore as the annu

closely competing firms and price adjustment some findings from an online marketplace we investigate retailers price setting behavior using a unique dataset containing by the second records of prices offered by closely competing retailers on a major japanese price comparison website first we find that when the average price of a product across retailers falls rapidly the frequency of price adjustments increases and the size of price adjustments becomes larger second we find positive autocorrelation in the frequency of price adjustments implying that there tends to be clustering where price adjustments occur in succession in contrast there is no such autocorrelation in the size of price adjustments these two findings indicate that the behavior of competing retailers is characterized by state dependent pricing rather than time dependent pricing

menu costs and markov inflation a theoretical revision with new evidence abstract we revisit a foundational theoretical paper in the menu cost literature sheshinski and weiss 1983 optimum pricing policy under stochastic inflation review of economic studies 50 3 513 529 one of the few to treat stochastic inflation with persistent deviations from trend in contrast to the original finding we show that optimal pricing in this environment entails using different s s bands in high inflation and low inflation states of the world the low inflation band is strictly contained within the high inflation band this revised solution has very different implications from the original one firms are generally risk loving not risk averse with respect to inflation an increase in the variance of inflation increases price dispersion when inflation is high and decreases price dispersion when inflation is low on an aggregate level this optimal pricing would lead to bunching of prices and non neutrality of money in the setting of caplin and spulber 1987 menu costs and the neutrality of money quarterly journal of economics 102 4 703 725 to test the main finding we construct an establishment level dataset from the months surrounding mexico s tequila crisis in 1995 in the high inflation state price increases are larger and establishments allow their prices to vary more widely around their respective long run mean relative prices cross establishment price dispersion is lower but this result seems due to decreased establishment heterogeneity rather than narrower s s bands overall the evidence suggests that establishments employ wider s s bands in the high inflation state

paradoxes of social policy welfare transfers relative poverty and redistribution preferences korpi and palme s 1998 classic the paradox of redistribution and strategies of equality claims that universal social policy better reduces poverty than social policies targeted at the poor this article revisits korpi and palme s classic and in the process explores and informs a set of enduring questions about social policy politics and social equality specifically we investigate the relationships between three dimensions of welfare transfers transfer share the average share of household income from welfare transfers low income targeting and universalism and poverty and preferences for redistribution we analyze rich democracies like korpi and palme but we also generalize to a broader sample of developed and developing countries consistent with korpi and palme we show 1 poverty is negatively associated with transfer share and universalism 2 redistribution preferences are negatively associated with low income targeting and 3 universalism is positively associated with transfer share

much ado about ideas the cognitive factor in economic policy this article examines recent works that investigate how ideas acquire influence over economic policy choice the revival of interest in the material power of ideas stems from discontent with the inability of rational interest based models to explain particular policy outcomes except by resorting to auxiliary assumptions the works under review primarily apply ideas approaches as supplementary analytical devices to clarify the dynamics of policy choices these studies succeed in illuminating the interpenetration of interests and ideas in order to plumb the problematic variability of interest formation and the degree of public influence over economic policy parameters the bolder thesis that ideas have a force of their own independent of all interests is however misconceived and unproved

the rise of the super rich power resources taxes financial markets and the dynamics of the top 1 percent 1949 to 2008 the income share of the super rich in the united states has grown rapidly since the early 1980s after a period of postwar stability what factors drove this change in this study we investigate the institutional policy and economic shifts that may explain rising income concentration we use single equation error correction models to estimate the long and short run effects of politics policy and economic factors on pretax top income shares between 1949 and 2008 we find that the rise of the super rich is the result of rightward shifts in congress the decline of labor unions lower tax rates on high incomes increased trade openness and asset bubbles in stock and real estate markets

price competition in an inflationary environment we study how inflation and deflation affect firms ability to cooperate in an experimental bertrand duopoly with differentiated products we find that there is significantly less cooperation in the treatments with inflation and deflation compared to the no inflation treatments the difficulties to cooperate affect prices and welfare depending on the market structure inflation and deflation lead to significantly lower real prices and higher welfare

imperfectly credible disinflation under endogenous time dependent pricing the real effects of an imperfectly credible disinfl ation depend critically on the extent of price rigidity therefore the study of how policymakers credibility affects the outcome of an announced disinflation should not be dissociated from the analysis of the determinants of the frequency of price adjustments in this paper we examine how the policymaker s credibility affects the outcome of an announced disinflation in a model with endogenous time dependent pricing rules both the initial degree of price ridigity calculated optimally and more notably the changes in contract length during disinflation play an important role in the explanation of the effects of imperfect credibility we initially evalute the costs of disinfl ation in as etup where credibility is exogenous and then allow agents to update beliefs about the type of monetary authority that they face we show that in both cases the interaction between the endogeneity of time dependent rules and imperfect credibility increases the output costs of disinflation

collective labor rights and income inequality this article examines the relationship between income inequality and collective labor rights conceptualized as workers legal and practical ability to engage in collective activity although worker organization is central to explaining income inequality in industrialized democracies worldwide comparative studies have neglected the role of class based actors i argue that the repression of labor rights reduces the capacity of worker organizations to effectively challenge income inequality through market and political processes in capitalist societies labor rights however are unlikely to have uniform effects across regions this study uses unbalanced panel data for 100 developed and less developed countries from 1985 through 2002 random and fixed effects models find that strong labor rights are tightly linked to lower inequality across a large range of countries including in the global south interactions between regions and labor rights suggest that the broader context in which class based actors a

sticky prices a new monetarist approach why do some sellers set nominal prices that apparently do not respond to changes in the aggregate price level in many models prices are sticky by assumption here it is a result we use search theory with two consequences prices are set in dollars since money is the medium of exchange and equilibrium implies a nondegenerate price distribution when the money supply increases some sellers may keep prices constant earning less per unit but making it up on volume so profit stays constant the calibrated model matches price change data well but in contrast to typical sticky price models money is neutral jel e52 e31 e42

working class power capitalist class interests and class compromise this article proposes a general theoretical framework for understanding the concept of class compromise in terms of a reverse j model of the relationship between the associational power of workers and the interests of capitalists increases in working class power adversely affect capitalist class interests until such power crosses some intermediate threshold beyond which further increases in working class power are potentially beneficial to capitalists interests this article argues that the reverse j curve is itself the result of two distinct kinds of effects of workers power on capitalists interests one a negative effect in which workers power undermines the capacity of capitalists to unilaterally make various kinds of decisions and the second a positive effect in which workers power helps capitalists solve the various kinds of collective action problems they face

financialization and u s income inequality 1970 2008 focusing on u s nonfinance industries we examine the connection between financialization and rising income inequality we argue that the increasing reliance on earnings realized through financial channels decoupled the generation of surplus from production strengthening owners and elite workers negotiating power relative to other workers the result was an incremental exclusion of the general workforce from revenue generating and compensation setting processes using time series cross section data at the industry level we find that increasing dependence on financial income in the long run is associated with reducing labor s share of income increasing top executives share of compensation and increasing earnings dispersion among workers net of conventional explanations such as deunionization globalization technological change and capital investment the effects of financialization on all three dimensions of income inequality are substantial our counterfactual analysis suggests that financial

social class and income inequality in the united states ownership authority and personal income distribution from 1980 to 2010 this study outlines a theory of social class based on workplace ownership and authority relations and it investigates the link between social class and growth in personal income inequality since the 1980s inequality trends are governed by changes in between class income differences changes in the relative size of different classes and changes in within class income dispersion data from the general social survey are used to investigate each of these changes in turn and to evaluate their impact on growth in inequality at the population level results indicate that between class income differences grew by about 60 since the 1980s and that the relative size of different classes remained fairly stable a formal decomposition analysis indicates that changes in the relative size of different social classes had a small dampening effect and that growth in between class income differences had a large inflationary effect on trends in personal income inequality

menu costs and phillips curves this paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation sellers can change price only by incurring a real menu cost we calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new u s data set of individual prices due to klenow and kryvtsov the prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with international evidence from various studies the model is also used to conduct numerical experiments on the economy s response to various shocks in none of the simulations we conducted did monetary shocks induce large or persistent real responses

lumpy price adjustments a microeconometric analysis based on a reduced form state dependent pricing model with random thresholds we specify and estimate a nonlinear panel data model with an unobserved factor representing the common cost or demand components of the unobserved optimal price using this model we are able to assess the relative importance of common and idiosyncratic shocks in explaining the frequency and magnitude of price changes in the case of a wide variety of consumer products in belgium and france we find that the mean level and variability of the random thresholds are key for explaining differences across products in the frequency of price changes we also find that the idiosyncratic shocks represent the most important driver of the magnitude of price changes supplementary materials for this article are available online

cooperation and political economic performance in affluent democratic capitalism research on comparative political economic performance has traditionally followed two separate tracks one concerned with collective economic gain growth and efficiency and the other focused on distribution and redistribution cooperative institutions offer a key to understanding cross national variation among the affluent capitalist democracies in both facets of political economic performance these institutions cluster along two dimensions neocorporatism and firm level cooperation pooled time series analysis for 18 nations over 1960 89 suggests that 1 neocorporatism is a major source of distributive redistributive policies and outcomes and of several sources of collective gain 2 firm level cooperation is a key contributor to economic growth

finance dominated capitalism and re distribution of income a kaleckian perspective in this article a major channel through which financialisation or finance dominated capitalism affects macroeconomic performance is examined the distribution channel empirical data for the following dimensions of re distribution in the period of finance dominated capitalism since the early 1980s is provided for 15 advanced capitalist economies functional distribution personal household distribution and the share and the composition of top incomes based on the kaleckian approach to the determination of income shares the effects of financialisation on functional income distribution are studied in more detail some stylised facts of financialisation are integrated into the kaleckian approach and by means of reviewing empirical and econometric literature it is found that financialisation and neoliberalism have contributed to the falling labour income share since the early 1980s through three main kaleckian channels 1 a shift in the sectoral composition of the economy 2 an increase in management salaries and rising profit claims of the rentiers and thus in overheads and 3 weakened trade union bargaining power

inflation and output dynamics with state dependent pricing decisions this paper studies a state dependent pricing model in which firms face a fixed cost of changing their pricing plans a pricing plan specifies an entire sequence of time varying future prices allowing firms to choose a pricing plan rather than a single price generates inflation inertia in the response of the economy to small changes in the growth rate of money allowing firms to choose when to change their pricing plan generates a non linear response of inflation and output to small and large changes in the money growth rate the non linear solution method also reveals that the model generates an asymmetric response of output and inflation to monetary expansions and contractions

fiscal policy and class income inequality the distributional consequences of governmental revenues and expenditures in the united states 1949 1976 despite the vast expansion in governmental spending during the post second world war era few researchers have sought to analyze the income distributional consequences of state fiscal policies the present research initially elaborates three abstract perspectives on the state and on united states budgetary practices then using factor share income as a proxy for broad class groupings this research provides a time series regression analysis of the impact of state expenditures and revenue extraction on the distribution of income in the united states for the years 1949 1976 results suggest that governmental revenue policies have had a procapital bias while state expenditures have tended to favor labor relative to capital the net impact of these contradictory tendencies has left the market based income distribution relatively unchanged despite the sizeable growth of the public sector during the period under study

the effect of foreign acquisition on employment and wages evidence from finnish establishments employee characteristics by skill groups makes it possible to disentangle the effect of foreign ownership on wages from its effects on the quality of the workforce furthermore this information allows us to examine the heterogeneity of the effect of foreign acquisition on wages and employment third the long timespan of our data thirteen years enables us to consider the effects of foreign acquisition in the long run hiring and firing costs may delay the effects of foreign acquisition by looking at the effects of acquisition in several periods after it has taken place these delays can be taken into account we believe finland to be an interesting case study for the effects of foreign ownership it is a typical example of a small open economy where foreign investment plays an important role furthermore our data cover the years 1988 2001 when the share of foreign direct investments rose rapidly in finland this increase is depicted in figure 1 and it partly reflects the worldwide trend in foreign direct investment but the years 1988 2001 were also characterized by two phenomena which undoubtedly led to the increase in the share of foreign owned firms first finland experienced a very severe recession in the early 1990s and the recovery from this crisis was associated with a rapid restructuring of the economy and a growth of new industries in particular the export oriented high tech sector 2 second finland joined the european union in 1995 which naturally removed a considerable number of barriers to foreign investment in the finnish economy the results derived by both matching and regression methods indicate that foreign acquisition has a positive effect on wages in all skill groups this wage increase is not immediate but occurs within one to three years after the acquisition the magnitude of this effect increases with the level of schooling of the workers the results indicate that there is a small decrease in the share of highly educated workers after foreign acquisition the decrease in the share of highly educated workers after acquisition also seems to hold for domestic acquisitions the paper is organized as follows the next section briefly describes the theoretical background for the analysis and reviews some previous empirical findings the third section describes the statistical framework and the fourth section presents the data sets the results are provided in the fifth section the last section concludes the paper

when unionization disappears state level unionization and working poverty in the united states although the working poor are a much larger population than the unemployed poor u s poverty research devotes much more attention to joblessness than to working poverty research that does exist o

the central government private sector wage differential since ehrenberg and schwarz 1986 there has been a plethora of articles investigating the relationship between public and private sector wages this article examines part of this post 1986 literature by reviewing articles that examine central government private sector wage differentials in sum most articles find that there is a premium paid to central government workers although the premium has declined in recent years in developing countries however the differential is usually negative women and minorities tend to do better in the public sector relative to their private sector counterparts the evidence on union premiums between sectors is mixed although the premium tends to be higher in the private sector however public sector union workers do not do much better than private sector union members the magnitude of all of the wage differentials discussed are sensitive to the estimation technique and data source used the most common explanation for the public sector wage premium is economic rent accruing to government workers although the public sector wage determination literature suggests that the differential is due to returns to political and vote producing activities not relevant in the private sector

accounting for labors share class and income distribution in the printing industry this study investigates the distribution of income between capital and labor in the printing and publishing industry the authors first compare a variety of conceptualizations and operational measures of labor s share and then estimate models for the period 1946 78 that explain the movements in several share measures on the basis of variables that represent the differential power of labor and capital their findings indicate that worker power particularly the extent of unionism and sometimes strike frequency increased labor s share especially in the 1946 62 period whereas employer power asset size and capital intensity decreased it

macroeconomic effects of regulation and deregulation in goods and labor markets product and labor market deregulation reduce and redistribute rents leading economic players to adjust to this new distribution it typically comes with distribution and dynamic effects to study these effects we build a macroeconomic model on two central assumptions monopolistic competition in the goods market which determines the size of rents and bargaining in the labor market which determines the distribution of rents product market regulation determines entry costs and the degree of competition labor market regulation determines the bargaining power of workers we show the effects of deregulation we then use our results to discuss the political economy of deregulation and recent macroeconomic evolutions in europe

price setting in the euro area some stylized facts from individual producer price data this paper summarizes the microevidence on the setting of producer prices in the euro area the main findings are i 21 of producer prices are adjusted each month ii producer prices are changed more frequently and by smaller amounts than consumer prices even after controlling for product characteristics iii price decreases are relatively frequent iv inflation correlates positively with the difference between the frequency of price increases and decreases and v there is substantial variation in price flexibility across sectors which can be explained in part by differences in the cost structure the degree of competition and the level of sectoral inflation

the effect of unions on wage inequality in the u s labor market this study uses current population survey micro data for 1973 74 and 1993 to evaluate the effect of changing union membership on trends in male and female wage inequality unionization rates of men fell between the two sample periods with bigger declines among lower skill groups these trends account for 15 20 of the rise in male wage inequality union membership rates of low wage women also declined while unionization increased among higher wage women on balance shifting unionization accounts for very little of the rise in female wage inequality economy wide trends in unionization mask a sharp divergence between the private sector where unionism was declining and the public sector where it was rising comparisons across sectors suggest that unionization substantially slowed the growth in wage inequality in the public sector

sticky prices new evidence from retail catalogs this paper presents new results on the size frequency and synchronization of price changes for twelve selected retail goods over the past 35 years three basic facts about the data are uncovered first nominal prices are typically fixed for more than one year although the time between changes is very irregular second prices change more often during periods of high overall inflation third when prices do change the sizes of the changes are widely dispersed both large and small changes occur for the same item and the sizes of these changes do not closely depend on overall inflation

the political economy of strategic trade policy and the brazil canada export subsidies saga in this paper we study the on going trade dispute between canada and brazil on export subsidies in the aircraft industry and the reasons for its escalation this is a peculiar case of strategic trade policy insofar as the good i e regional jets is heavily dependent on sub systems that are imported in the two countries the hypothesis that the dispute solely derives from the search for rents and externalities is therefore incomplete without downplaying the role of interest politics we argue that in both countries ideas about the goals of trade policy have an important place in explaining why this dispute drags on for canada the belief in a rules based trading regime has led it to strongly oppose violations while insecurity about its competitiveness has led to a variety of government schemes to support firms in advanced sectors like aerospace for brazil its place as a leader of the developing world acted as a rallying point for government and firms alike the research also argues that the wto process has actually made a resolution of the dispute more difficult by making it too costly for firms and countries to comply with the costs of losing

profit growth in boom and bust the great recession and the great depression in comparative perspective the great recession of 2007 2009 and the great depression of the 1930s were triggered by the collapse of asset price bubbles however preexisting structural imbalances in the us economy were the reason why the burst of speculative bubbles induced a general economic collapse this article argues that the imbalance created by the combination of stagnant labor earnings and surging corporate profits not only played a leading role in the run up to the downturns but also was chiefly responsible for the slow recoveries on the one hand the relative stagnation of labor income represented a key factor behind rising income inequality and a potential drag on consumption which was temporarily alleviated by credit expansion hence the rising household debt levels eventually became unsustainable on the other hand rising corporate profits created an overhang of idle money eager to lend itself to speculative ventures which played a key role in fueling the stock market bubble of the 1920s and the housing bubble of the 2000s the article further argues that despite various superficial and deeper similarities between the circumstances surrounding the great recession and the great depression some fundamental differences in the structure of the us economy then and now suggest vastly different future prospects for american capitalism

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

money supply class power and inflation monetarism reassessed recent sociological work shows that pro market neoliberal policies across advanced capitalist countries are due to distributional struggle between classes in the 1970s and 1980s the orthodox monetarist view alternatively sees neoliberal reform as a nonpolitical attempt to end the stagflation crisis of the 1970s from this perspective monetary and fiscal expansions brought high inflation and central bank discipline and government austerity is the solution but the recent trend of low inflation despite accelerating money growth and government spending contradicts this view analyses of time series cross section data for 23 oecd countries from 1960 to 2009 support the thesis that the rise and fall of inflation is more about distribution of power between labor and capital than about monetary and fiscal discipline inflation in the 1970s originated from a strong working class and hurt capital more than it did workers while neoliberal repression of workers power has kept inflation low from the 1980s onwa

the impact of financialisation on the wage share a theoretical clarification and empirical test it is frequently asserted that financialisation has contributed to the decline in the wage share this paper provides a theoretical clarification and a systematic empirical investigation we identify four channels through which financialisation can affect the wage share 1 enhanced exit options of firms 2 rising price mark ups due to financial overhead costs for businesses 3 increased competition on capital markets and shareholder value orientation and 4 the role of household debt in increasing workers financial vulnerability and undermining their class consciousness the paper compiles a comprehensive set of empirical measures of financialisation and uses it to test these hypotheses with a panel regression of 14 oecd countries over the 1992 2014 period we find strong evidence for negative effects of financial liberalisation and financial payments of non financial corporations on the wage share that are in the same order of magnitude as the effects of globalisation

the decline of the labor income share in mexico 1990 2015 abstract the paper studies the decline of the labor income share lis in mexico during the period 1990 2015 the decline is mostly explained by reductions within the economy s major sectors including manufacturing tradables and non tradables rather than by a recomposition of value added towards sectors with low labor shares in contrast to agriculture where lis fell due to a shift of labor force from self employment to wage employment in other major areas of the economy the fall in lis is explained by reductions within the wage employment sector econometric estimations indicate that parallel declines in the wage share and relative productivity of non tradables and in the us manufacturing labor share all played a large role in the reduction of the manufacturing wage share in mexico more generally the analysis suggests that the lagging productivity of the economy s informal non tradable sector itself a reflection of the country s low aggregate rate of economic growth is a crucial factor in the fall of lis in the formal sectors the paper concludes by discussing possible explanations for the paradox of the slow rate of economic growth in mexico despite the rise in the profit share

the decentralization of collective bargaining a literature review and comparative analysis the author reviews evidence that the bargaining structure is becoming more decentralized in sweden australia the former west germany italy the united kingdom and the united states although in

gender the welfare state and public employment a comparative study of seven industrialized countries using data from the luxembourg income study lis the authors explore the influence of government employment on the gender gap in earnings in seven countries they address four questions on the effects of public sector employment on the gender gap in earnings 1 do governments offer jobs that are comparatively high paying 2 does public employment benefit some workers such as low paid workers more than others 3 are public sector employment advantages explained by differences in worker characteristics and the occupational mix 4 what is the effect of public employment its extent and its pay structure on gender gaps in wages the results indicate marked variation across liberal conservative and social democratic welfare states but reveal a number of uniformities as well in most of the seven countries in the sample public sector workers earn more on average than do workers in the private sector and most earnings advantages are concentrated on the low end of the earnings distribution the effect of public employment on the overall gender gap in wages is limited in most countries the authors discuss the implications of these results for theory and research on gender and the welfare state

from normalcy to new deal industrial structure party competition and american public policy in the great depression industrial partisan preference may be formally modeled as the joint consequence of pressures from labor and the differential impact of the world economy on particular businesses this basic and static model when extended to cover the money market can be used to examine questions of political development including the effects of fluctuations in national income on political coalitions american institutions and public policy during the new deal are used to test the theory against empirical evidence much of it from new primary sources the rise of the new deal coalition is traced to changes in the american industrial structure deriving from the boom of the 1920s and the reversal of the u s financial position that resulted from world war i in addition to the well known labor militancy of the 1930s the effect of these changes was the rise of a democratic political coalition dominated by capital intensive multinationally dominant firms and industries with a strong interest in free trade and a historically unprecedented ability to cope with major industrial upheavals without resort to force the major public policy initiatives of the new deal are reexamined from this standpoint

people flows in globalization the policy debate over globalization in the past decade has largely bypassed the international mobility of labor restrict trade and cries of protectionism resound suggest linking labor standards to trade and it s protectionism in disguise limit capital flows and the international monetary fund is on your back but restrict people flows that s just an accepted exercise of national sovereignty during the last few decades when most countries reduced barriers to trade in goods and services and liberalized financial capital markets most also sought to limit immigration in this essay i examine what we know about the causes and consequences of immigration i argue that people flows are fundamental to creating a global economy and that the interplay among immigration capital and trade is essential to understanding the way globalization affects economies i consider ways to reduce barriers to immigration that could improve the well being of workers around the world

inflation and price setting in a natural experiment abstract we analyze the behavior of price setters in poland during the transition from a planned to a market economy using a large disaggregated data set the size and frequency of price changes as well as relative price variability all increase as inflation rises the effect of expected inflation on relative price variability is much stronger than the effect of unexpected inflation despite the unusual economic environment the results are qualitatively identical and quantitatively stronger than those in lach and tsiddon 1992 journal of political economy 100 349 389

the optimal inflation rate in new keynesian models should central banks raise their inflation targets in light of the zero lower bound we study the effects of positive steady state inflation in new keynesian models subject to the zero bound on interest rates we derive the utility based welfare loss function taking into account the effects of positive steady state inflation and solve for the optimal level of inflation in the model for plausible calibrations with costly but infrequent episodes at the zero lower bound the optimal inflation rate is low typically less than two percent even after considering a variety of extensions including optimal stabilization policy price indexation endogenous and statedependent price stickiness capital formation model uncertainty and downward nominal wage rigidities on the normative side price level targeting delivers large welfare gains and a very low optimal inflation rate consistent with price stability these results suggest that raising the inflation target is too blunt an instrument to efficiently reduce the severe costs of zero bound episodes

determinants of labour s income share in the era of financialisation numerous studies have analysed the decline in the labour share of income but only few have linked it to the increase in financialisation the process of financialisation can roughly be described as an increasing importance of the financial sector that had an impact on the distribution between wages and profits on the one hand and retained earnings and financial income in the form of dividends and interests on the other hand this article seeks to explore the relationship between financialisation and labour s share of income using a time series cross sectional dataset of 13 countries over the time period from 1986 until 2007 the results suggest that there is indeed a relationship between increasing dividend and interest payments of non financial corporations and the decline of the share of wages in national income other factors that can account for the decline relate to globalisation and a decrease in the bargaining power of labour

price adjustments in a general model of state dependent pricing we study the distribution of retail price adjustments under the assumption that firms are more likely to adjust their prices when doing so is more valuable our setup nests calvo 1983 at one extreme and a fixed menu cost model at the other all parameterizations are ranked by a measure of state dependence high state dependence implies counterfactually that there are no small price changes and that the variance of price changes falls sharply with trend inflation the parameterization that best fits microdata has low state dependence implying a phillips curve coefficient 60 as large as that of the calvo model but is nonetheless well behaved at high inflation rates

taking time seriously dramatic world change has stimulated interest in research questions about the dynamics of politics we have seen increases in the number of time series data sets and the length of typical time series but three shortcomings are prevalent in published time series analysis first analysts often estimate models without testing restrictions implied by their specification second researchers link the theoretical concept of equilibrium with cointegration and error correction models third analysts often do a poor job of interpreting results the consequences include weak connections between theory and tests biased estimates and incorrect inferences we outline techniques for estimating linear dynamic regressions with stationary data and weakly exogenous regressors we recommend analysts 1 start with general dynamic models and test restrictions before adopting a particular specification and 2 use the wide array of information available from dynamic specifications we illustrate this strategy with data on congressional approval and tax rates across oecd countries

a dynamic economy with costly price adjustments this paper studies a general equilibrium model of a dynamic economy with menu costs each firm s productivity is exposed to idiosyncratic and aggregate productivity shocks around a trend and the money supply to monetary shocks around a trend all consumption pricing and production decisions are based on optimizing behavior there exists a staggered markov perfect equilibrium with prices determined by a two sided s s markup strategy the paper analyzes the optimal markup strategy and investigates the dynamics of the price index and the aggregate output the welfare consequences of the uncertain aggregate productivity and money supply are also examined

wage setting institutions and pay inequality in advanced industrial societies the distribution of pay differs significantly across countries and over time among advanced industrial societies in this paper institutional and political determinants of pay inequality are studied in sixteen countries from 1980 to 1992 the most important factor in explaining pay dispersion is the level of wage setting i e whether wages are set at the level of the individual the plant the industry or the entire private sector the impact of centralization is the same whether centralization occurs via collective bargaining or via government involvement in private sector wage setting the concentration of unions and the share of the labor force covered by collective bargaining agreements also matter after controlling for wage setting institutions other variables such as the governing coalition the size of government international openness and the supply of highly educated workers have little impact economic political and norm based explanations for the association of centralization with egalitarian outcomes are discussed

the drivers of income inequality in rich countries rising income inequality has recently come centre stage as a core societal concern for rich countries the diagnosis of the forces driving inequality upwards and their relative importance remains hotly contested notably with respect to the roles of globalization versus technology and of market forces versus institutions and policy choices this survey provides a critical review and synthesis of recent research the focus is on income inequality across the entire distribution rather than only on what has been happening at the very top we pay particular attention to including what has been learned from the analysis of micro data to ensuring that the coverage is not unduly us centric and to analyses of the interrelations between the different drivers of inequality the marked differences in inequality trends across countries and time periods reflect how global economic forces such as globalisation and technological change have interacted with differing national contexts and institutions major analytical challenges stand in the way of a consensus emerging on the relative importance of different drivers in how income inequality has evolved in recent decades

the adjustment of prices to monetary shocks when trade is uncertain and sequential trade is both uncertain and sequential money surprises are not neutral because prices at the beginning of the trading process cannot depend on its end in contrast with fixed price models in this paper sellers can change prices during trade in contrast with lucas s article here there is no asymmetry in the information about the money supply the price quoted by individual sellers may adjust slowly to changes in the targeted money supply but the distribution of quoted prices adjusts perfectly to these changes and the real price distribution is independent of the anticipated rate of change in the money supply

what s behind the rise in profitability in the us in the 1980s and 1990s profitability in the us has been rising since the early 1980s and by 1997 was at its highest level since its post world war ii peak in the mid 1960s and the profit share by one definition at its highest point in this paper i examine the role of the change in the profit share and capital intensity as well as structural change on movements in the rate of profit between 1947 and 1997 its recent recovery is traced to a rise in the profit share in national income a slowdown in capital labour growth at the industry level and employment shifts to relatively labour intensive industries copyright 2003 oxford university press

the structure of class conflict in democratic capitalist societies the article presents a theory of class conflict between workers and capitalists who pursue their material interests under a form of societal organization that combines private ownership of instruments of production with representative political institutions there exist economic and political conditions under which both classes would simultaneously choose courses of action that constitute a class compromise workers consent to the institution of profit and capitalists to democratic institutions through which workers can effectively press claims for material gains when these conditions hold and a compromise is in force the role of the state consists in institutionalizing coordinating and enforcing the terms of a compromise that represents the preferences of workers as well as capitalists the combination of private ownership of the instruments of production with representative political institutions based on widespread suffrage constitutes a compromise between workers who consent to the private appropriation of profit by owners of capital and capitalists who accept the democratic institutions through which workers can make effective claims for an improvement of their material conditions this form of societal organization was con

income inequality democracy and public sector size this study synthesizes and tests explanations of how public sector size and democracy affect income inequality the results based on unbalanced panel data for 64 developing and developed countries

macroeconomic structure and labor s share of income united states 1950 to 1980 we test several hypotheses derived fr om marxist crisis theories regarding the impact of macroeconomic performance on the distribution of income between labor and capital in the united states during the period 1950 to 1980 using annual data on compensation profits and employment we estimate the short term effects of cyclical variations in unemployment inflation growth and capacity utilization on labor s income share with an additive decomposition of labor s income share we then estimate the extent to which the observed effects can be attributed to changes in compensation output and employment we find little support for the hypothesis that tight labor markets increase labor s income share by increasing the bargaining position of labor the hypothesis that labor compensation lags behind profits over the business cycle is supported our results therefore favor the realization failure rather than the reserve army theory of cyclical crisis

factor shares the principal problem of political economy this paper identifies three reasons for studying factor shares to make a link between incomes at the macroeconomic level national accounts and incomes at the level of the household to help understand inequality in the personal distribution of income and to address the concern of social justice with the fairness of different sources of income in each case i explore the implications and point to ways in which the analysis could be taken forward in a twenty first century treatment of the classical problem of political economy

the ideological determinants of liberal economic reform the case of privatization ollowing the collapse of the communist regimes in eastern europe one of the first priorities of the reform governments was to transform the system of ownership the new governments overwhelm ingly chose to pursue a broad program of sweeping privatization trans ferring the bulk of state property to the private sector given that most property was controlled and owned by the state and that there was no historical precedent for privatization on an economy wide scale policy makers had to design from scratch a program to transfer the wealth of the state to private hands with few exceptions east european priva tization officials appointed to this task concluded that it would be too slow and unwieldy to rely on the piecemeal sale of enterprises to pri vate investors as was typical in west european privatization more commonly they developed programs to transfer the ownership of state enterprises to private individuals and groups through mass distribution programs to be followed by or supplemented with piecemeal sales as one can imagine these policymakers and technocrats could de sign the mass privatization program in ways that held different distri butional consequences for society such that some groups would benefit more than others for example citizens over foreigners one former elite group over another managers over labor and so on in the czech re public the government designed a mass privatization program in which there were no special privileges for any particular groups in society the author wishes to express her gratitude for the helpful comments and suggestions on earlier drafts from andrew barnes thomas callaghy margaret hanson meredith el nems steven fish denise powers and peter rutland in addition the author wishes to acknowledge the woodrow wil son center and the kennan institute for advanced russian studies for their generous support the opinions expressed are those of the author and do not necessarily reflect the institutions or individuals acknowledged above responsibility for any errors is assumed entirely by the author

state dependent pricing and the general equilibrium dynamics of money and output economists have long suggested that nominal product prices are changed infrequently because of fixed costs in such a setting optimal price adjustment should depend on the state of the economy yet while widely discussed statedependent pricing has proved difficult to incorporate into macroeconomic models this paper develops a new tractable theoretical state dependent pricing framework we use it to study how optimal pricing depends on the persistence of monetary shocks the elasticities of labor supply and goods demand and the interest sensitivity of money demand

determinants of relative poverty in advanced capitalist democracies using relative poverty measures based on micro level data from the luxembourg income study in conjunction with pooled time series data for 14 advanced capitalist democracies between 1970 and 1997 the authors analyze separately the rate of pretax transfer poverty and the reduction in poverty achieved by systems of taxes and transfers socioeconomic factors including de industrialization and unemployment largely explain pre tax transfer poverty rates of the working age population in these advanced capitalist democracies the extent of redistribution measured as poverty reduction via taxes and transfers is explained directly by welfare state generosity and constitutional structure number of veto points and the strength of the political left both in unions and in government

nominal wage rigidities in mexico evidence from social security records abstract this paper analyzes the existence and extent of downward nominal wage rigidities in the mexican labor market using data from the administrative records of the mexican social security institute imss this establishment level panel dataset allows us to track workers employed with the same firm observe their wage profiles and calculate the nominal wage changes they experience over time based on the estimated density functions of nominal wage changes we are able to calculate some standard tests of nominal wage rigidity that have been proposed in the literature furthermore we extend these tests to take into account the presence of minimum wage laws that may affect the distribution of nominal wage changes the densities and tests calculated using these data are similar to those obtained using administrative data from other countries and constitute a significant improvement over the measures of nominal wage rigidities obtained from household survey data we document the importance of minimum wages in the mexican labor market as evidenced by the large fraction of minimum wage earners and the indexation of wage changes to the minimum wage increases we find considerably more nominal wage rigidity than previous estimates obtained for mexico using data from the national urban employment survey eneu suggest but lower than that reported for developed countries by other studies that use comparable data

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting

the rise of finance and firm employment dynamics this article sheds light on the ongoing employment stagnation in the united states by investigating the links between the rise of finance and firm employment dynamics during the 1982 2005 period i argue that the rise of finance marginalized the role of labor in revenue generating and sharing processes which led to employment stagnation among the largest nonfinancial firms in the united states evidence suggests that increasing investment in financial assets depresses the workforce size the growing dependence on debt reprioritizes the order of distribution heightening the need for workforce reduction the increasing rewards for shareholders generate a downsize and distribute spiral in which labor expense becomes a primary target of cost cutting strategies further analysis indicates that production and service workers are more vulnerable to shifts associated with the rise of finance than managers and professionals

good times bad times postwar labor s share of national income in capitalist democracies this article returns to a classic question of political economy the zero sum conflict between capital and labor over the division of the national income pie a detailed description of labor s shar