unemployment profit sharing and japan s economic success abstract in this paper we examine the economic effects of profit sharing in a duopoly model where one firm engages in sharing profits with its union while the other firm does not the results show that profit sharing i reduces wages demanded by the unions ii tends to increase employment of the profit sharing firm and to increase employment in the entire industry and iii tends to increase the joint welfare of the profit sharing firm and the profit sharing union these results seem to suggest that the japanese success may be partly attributable to their informal profit sharing scheme

employment policies wage formation and trade union behavior in a small open economy a model of trade union determined wages is developed which provides an explanation of underemployment based on optimizing behavior it is shown that fiscal policy will in general affect employment under perfect foresight and immediate wage flexibility future consequences of short run stabilization policies are discussed ratchet effects with respect to government expenditure and game theoretic interdependence between government and trade union behavior are emphasized if the trade union takes short run policy measures in order to increase employment as an indication of an employment stabilization rule the future behavior of the trade union changes and the result may be a decrease in long run employment

the yield factor and the learning curve in semiconductor production the role of the yield factor and the learning curve is estimated at the firm level the estimated learning curves for the different generations of semiconductor memory chips are clustered around the 72 per cent type the results are consistent with the persistence of leadership hypothesis an incumbent firm has an advantage over a new entrant in adopting a new technology because it can move quicker down the learning curve

estimating markups and market conduct with multidimensional product attributes we demonstrate how to estimate a model of oligopoly pricing when products are multi dimensionally differentiated we provide an empirical counterpart to recent theoretical work on product differentiation using specifications informed by economic theory we estimate price cost margins for products differentiated in many dimensions

dictator loyal and opportunistic agents the soviet archives on creating the soviet economic system studies of the mature soviet economy focus on the structuralweaknesses of rent seeking and corruption such an economy ispresumed to perform better in its adolescent phase under astrong stationary bandit dictator dedicated to growth andable to control rent seekers we use the recently openedsoviet state and party archives to show the process that beganin the 1930s of transforming the inner circle of the sovietstationary bandit into a rent seeking bureaucracy lackinglong term goals

learning by doing and competition in the early rayon industry in this article i derive a structural econometric model of learning by doing from a dynamic oligopoly game unlike previous empirical models this model is capable of testing hypotheses concerning both the technological nature and strategic implications of learning i estimate the model with firm level data from the early u s rayon industry the empirical results show that there were considerable differences across firms in both proprietary and spillover learning the results also indicate that the two leading firms took their rival s reactions into account when choosing their strategies

unions oligopoly and the natural range of employment a simple two sector general equilibrium macromodel is presented wi th oligopolistic price determination in the product market and a unionized labor market in the first stage unions set the nominal wage and in the second stage firms choose outputs given wages by altering the balance of fiscal policy between the two sectors the government can achieve a continuum of aggregate employment levels the natural range of employment a unique natural rate will occur only i f one requires fiscal policy to be the same in both sectors this indicates that the natural rate property of some single or representative sect or macromodels is a special case

competing wage claims cost inflation and capacity utilization this paper develops a theory of competing wage claims and cost inflation and attempts to integrate this theory into the core of modern macroeconomic analysis specifically the paper proposes an e

endogenous unions and governments a game theoretic approach abstract this paper applies some elements of game theory to the determination of government spending and wages within a simple macroeconomic framework where these variables are ordinarily treated as exogenous in the short run by showing how nominal wages respond to increased government spending and taxes and vice versa the paper attempts to explain the simultaneous tendency of many western economies toward persistent inflation and expansion of the public sector in particular the paper stresses the macroeconomic consequences of the interaction between endogenous utility maximizing governments and labour unions and shows how the response of the economy to changes in government and union behaviour depends on the preferences of both parties with respect to inflation employment real disposable wages and government spending as well as on their view of the relative magnitude of the employment and price effects of such changes

trades unions seniority and unemployment the paper offers a general equilibrium model of an economy containing powerful trades unions which set the wage levels to which competitive firms adjust which have some perception of the bearing of their policies on the economy as a whole and within which seniority and majority rule prevail it is shown that increases in the dole or in the size of the workforce increase the level of employment and depress the net wage and that technical improvements have the opposite effect several externalities are identified these make possible less conventional outcomes for instance an increase in the dole sometimes may be unambiguously welfare improving

classical unemployment accommodation policies and the adjustment of real wages a model of wage formation and stabilization policy in economies with strong trade unions is developed the analysis provides a theoretical underpinning for the assertion that accommodation policies may cause wage inflation and ultimately reduce employment various methods of accomplishing a real wage adjustment are discussed i a policy of complete nonaccommodation 2 continued accommodation policies but with lower employment targets 3 social contracts and 4 tax based incomes policies tip

the macroeconomics of inflation non neutrality inflation non neutrality can only be properly considered in a complete macro model but most existing treatments use partial equilibrium approaches this paper develops an open economy macro model incorporating labor markets and the government budget constraint as well as the product and domestic asset markets that normally feature in the neutrality literature this model is used to examine stability and long run inflation multipliers with various policy combinations numerical simulations show that the quantitative importance of nonneutralities varies across different policy combinations in some cases nonneutralities are very significant copyright 1989 by royal economic society

a structural model on the impact of prediscovery licensing and research joint ventures on innovation and product market efficiency abstract using a novel database on prediscovery licensing agreements one type of r d cooperation as well as detailed firm level and semiconductor market specific information we estimate the impact of prediscovery licensing agreements pdlas on innovation and product market efficiency our results show that pdlas reduce innovative activity in the semiconductor industry by 10 percent or 4089 patents throughout the 1989 1999 period on the contrary research joint ventures a different type of r d cooperation increase innovative activity based on a structural model we provide evidence that pdlas increase production costs and semiconductor prices by 1 percent which results in customers paying an additional 1 1 billion for semiconductors per year beyond the common concern that r d cooperations facilitate coordination activities in product markets via price fixing our study highlights that pdlas can be used as an instrument to coordinate r d activities which can reduce innovation activity and increase costs and prices

remaining puzzles and neglected issues in macroeconomics this paper analyses the chain of transmission mechanisms of economic policy actions to financial markets output and employment and finally unemployment in an attempt to identify remaining puzzles and neglected issues in macroeconomics the paper emphasizes the consequences of fiscal and monetary policy actions on real variables including real interest rates and real exchange rates an attempt is made to explain why product demand shocks often tend to have faster effects on output and employment than on prices the paper also discusses why demand induced increases in output and employment are not systematically connected with a reduction in the product wage rate the paper ends with a discussion of various supply side considerations in macroeconomics

expectations and adjustment an alternative approach with an application to overlapping wage contracts in many contexts individual agents behavior depends on their expectations of other agents expectations about which there is no available source of objective information standard rational expectations models have avoided not resolved this problem this paper models an alternative approach involving asymmetric adjustment in response to exogenous shocks this is applied to a model of overlapping wage contracts and causes wages to fall slower in response to deflationary shocks than they rise in response to expansionary shocks this contrasts with standard overlapping contract models incorporating rational expectations in which adjustment is symmetric copyright 1988 by the london school of economics and political science

social comparisons in oligopsony abstract a large body of evidence suggests that social comparisons matter for workers valuation of the wage they receive the consequences of social comparisons in imperfectly competitive labor markets are less well understood we analyze an oligopsonistic model of the labor market where workers derive dis utility from comparing their own wage with wages paid at other firms as social comparisons become more prevalent all workers are paid higher wages the wage distribution becomes more equal and employment shifts to high productivity firms moreover the total wage bill and output increase while aggregate profits decline overall welfare rises our theoretical results have implications for estimating the elasticity of the labor supply curve facing a firm

allocation under dictatorship research in stalin s archives we survey recent research on the soviet economy in the state party and military archives of the stalin era the archives have provided rich new evidence on the economic arrangements of a command system under a powerful dictator including stalin s role in the making of the economic system and economic policy stalin s accumulation objectives and the constraints that limited his power to achieve them the limits to administrative allocation the information flows and incentives that governed the behavior of economic managers the scope and significance of corruption and market oriented behavior and the prospects for economic reform

pervasive shortages under socialism we present a new theory of pervasive shortages under socialism based on the assumption that the planners are self interested because the planners meaning bureaucrats in the ministries and managers offirms cannot keep the official profits that firms earn it is in their interest to create shortages of output and to collect bribes from consumers the theory implies that 1 an increase in the official price of a good might reduce output 2 market socialism is bound to fail even without computational complexities facing the planners and 3 price liberalization will succeed only iffirms get to keep their profits

envy fairness and political influence in local government wage determination evidence from norway the main question in this paper is do wages of low skilled workers in norwegian local governments adjust to clear the labor market for such workers or are the wages affected by trade unions comparing their wages with other wages inside the local governments the main empirical findings are as follows first wages of low skilled local government employees respond not to wages in the external labor market but to wages of higher skilled and higher paid workers inside the local government second wages are positively associated with the share of socialist politicians in the local council these results are interpreted as support for a union model with internal pay comparisons in norwegian local governments copyright 1995 by the london school of economics and political science

dynamic oligopoly in the rice export market a linear quadratic dynamic oligopoly model is used to estimate the competitiveness of the rice export market the model nests various market structures using either open loop or feedback strategies the estimated feedback model implies a less competitive market structure than the estimated open loop model the rice export market is oligopolistic but it is closer to competitive than collusive copyright 1989 by mit press

explanations of unemployment economists commonly distinguish between two sorts of unemployment roughly speak ing the involuntarily unemployed workers are unwillingly out of work i e they feel that they would be better off with jobs on the other hand the voluntarily unemployed workers prefer to be out of work for any of a wide variety of reasons e g because they are searching or training for a job or because they choose leisure over work

relative standing comparisons risk taking and safety regulations abstract we study the question of how relative standing comparisons or status seeking influence risk taking when utility is separable in consumption and status the following results apply with non systematic risks more concern for status leads to more less risk taking when in a sense made precise in the paper the utility function is less more concave in status than in pure consumption with systematic risk risk taking always increases with the concern for status however status seeking always implies socially excessive risk taking thus suggesting a role for public regulation of risky choices

applied fairness theory and rationing policy in the past few years several economists notably duncan foley hal varian e a pazner and david schmeidler have produced a novel analytical theory of fairness in the distribution of resources in contradistinction to the efficiency of their allocation this work is primarily philosophical in orientation being concerned primarily with the logical underpinnings of an analysis of fair division rather than with its application here i offer a nontechnical introduction to the subject providing a few new results about the construction but this is only a preliminary to an attempt to show how fairness theory can be used to study policy employing the issue of rationing of commodities as an illustration persons who design public policy are typically at least as concerned with issues of equity as with allocative efficiency the economist s influence is therefore impeded by his inability to deal with issues of fairness in applied problems fairness theory perhaps for the first time provides an analytic instrument for the purpose inevitably it must of course rest upon value judgments as well as observable relationships but what is remarkable about fairness theory is that both the behavioral relationships and the value judgments on which it is based are essentially those used in the standard welfare analysis of resource allocation in both the basic data are consumer preferences and production relationships and in both the basic value judgment is that the desires of the affected individuals rather than those of some superior arbitrator must count our illustrative policy issue the rationing of commodities has reemerged with the fuel problem here i will examine the choice between two points rationing arrangements under which consumers are each issued a fixed number of ration points redeemable at a fixed points price pg per gallon of gasoline or at another coupon price p h per gallon of heating oil etc the consumer is thereby subjected to a second budget constraint expressed in ration points rather than money economists have suggested that the efficiency of such a rationing system can be improved if it is accompanied by a white market in which consumers with unwanted ration coupons can sell them to others at a market clearing money price i will show that while there is a valid efficiency argument favoring the white market arrangement over one in which the sale of ration coupons is prohibited fairness analysis yields a presumption that goes the other way this may provide some justification for the apparently widespread suspicion of the fairness of white markets among noneconomists

trade policy and learning by doing the case of semiconductors abstract the study examines the role of learning by doing for production of different types of semiconductors and how this affects the dynamics of market structure for erasable programmable read only memories eproms the learning curve determines aggregate market dynamics whereas for dynamic random access memories drams economies of scale seem to be more important these results are compared with some stylised facts for eproms persistence of leadership in product innovation could be observed whereas for drams there was leap frogging in product innovation moreover scope for vertical product differentiation is more enhanced for eproms and price competition is less intense these findings are then related to the problem of identifying the appropriate trade policies in oligopolistic industries the analysis concerns the antidumping actions undertaken by the european commission it is shown how markets enjoying similar patterns of protection have a completely different evolution of market shares for european producers the conclusion for strategic trade policy is that industry specific features matter crucially

testing dynamic oligopolistic interaction evidence from the semiconductor industry abstract the objective of this paper is to test whether firms in the dynamic random access memory dram industry take the intertemporal strategic effect of their contemporaneous output decision on their rivals future output decision into account or whether they precommit themselves to a production plan learning by doing and spillovers are present in this industry and introduce an intertemporal component to firms strategies a simplified version of jarmin s rand j econ 250 1994 441 dynamic oligopolistic model is applied to firm level data demand and pricing relations for five dram generations are estimated the empirical results show that firms behave strategically and price cost margins are likely overestimated in a precommitment specification

the learning curve in the production of semiconductor memory chips the relevance of the learning curve in the production of semiconductor memory chips is examined it is shown that the learning curve differs across quite similar products such as distinct types of memory chips on the other hand the learning curve does not show significant variation over successive generations of the same type of memory chip it is then shown thatthe interpretation given to the heterogeneity of learning by the effects across chip types and especially the importance of economies of scale is consistent with some stylized facts from the industry

dynamics of unemployment vacancies and real wages with trade unions this paper considers the response of wages unemployment and vacancies to shocks when the number of job slots and real wages are determined by a nash bargain between a firm and a small union unemployment and vacancies co exist because of search considerations there is a unique natural unemployment rate which ensures that every firm union s bargained wage is stationary shocks that are eventually absorbed by wages cause deviations of unemployment from its natural rate because the firm union initial response to a shock is to change vacancies and possibly wages which cause changes in unemployment flows via the search process

the evolution of market structure in semiconductors the role of product standards abstract this paper looks at the role of product standards in determining the evolution of market structure in semiconductors theory suggests that product standards along with learning by doing effects lead to market concentration and persistence of leadership in product innovation empirical evidence supports this with some qualifications the market concentration hypothesis is confirmed for all submarkets of the semiconductor industry persistence of leadership is obtained for markets based on proprietary product standards in the market for microprocessors we have persistence of leadership in product innovation that is accompanied with overall market dominance for microcontrollers we observe persistence of leadership in product innovation but not concomitant overall market dominance whereas learning by doing effects seem to be strong in the small market for microprocessors they are weaker in the much larger market for microcontrollers

an empirical analysis of dynamic nonprice competition in an oligopolistic industry this article develops a dynamic model of nonprice competition in an oligopolistic industry and uses it to analyze advertising competition in the u s cigarette industry the model generalizes existing studies by allowing advertising to affect both firm market shares and the total size of the market the model also allows dynamic conjectural variations to arise from the intertemporal links created by the durability of advertising we use these dynamic conjectural variations to distinguish alternative models of competitive interaction we estimate the complete model of firm production demand and advertising choice by using data for u s cigarette producers the results indicate that firm advertising primarily affects the level of market demand with a firm s effect on rival firms market shares arising through variations in the number of brands sold empirical results on firm behavior suggest that firms act as if their advertising choices will alter the future advertising choices of rival firms in both the high tar and low tar cigarette markets

does devaluation improve the current account this paper incorporates the link between devaluation foreign interest payments and the current acccount into a fairly general macroeconomic model in which exchange rate changes influence aggregate demand through exports imports and expenditures as well as aggregate supply via the cost of imported factors of production on the basis of avaliable statistical estimates of the behavioral and structural parameters of the model an attempt is mafe to assess the empirical importance of this link among others in a group of highly indebted industrial and developing countries by and large the empirical results indicate that high foreign debt and interest payments tend to reduce the short to medium run effect of devaluation on national income expecially in the ldcs but make little difference to its generally positive effect on the current account

wage interdependence through decentralized bargaining abstract the idea that sector specific unions are influenced by the wages obtained by other unions has mainly been used to support the empirical observation that wages are highly correlated among industries the sources of wage interdependence can mainly be found in unions preferences in the nature of technology and in price and demand determination the presence of externalities and of strategic complementarity among unions leads to suboptimal equilibria which generates non desired inflation unemployment and possibly also trade balance deficit this enforces the idea that part of current unemployment can be eliminated by improving the cooperation between social actors

liberalization and rent seeking in china s labor market communist party membership can generate labor market benefits in at least two ways first the party may hand out direct benefits to favored groups in the form of higher earnings alternatively the party may function in much the same way as education in western countries screening workers for talent and motivation we find very little evidence of earnings premiums to party membership or to cadre status prior to chinese market liberalization with liberalization comes less emphasis on being red and a greater capacity to earn wages that reflect ability both observed through schooling and identified by the party we find that party premiums are inversely related to education modest premiums to cadre status appear in 1995

capacity and product market competition measuring market power in a puppy dog industry abstract in this paper we specify and estimate a structural model which accounts for competition in two variables capacity and prices the model has a two stage setup in the first stage firms make capacity decisions followed by a product differentiated price setting game in the second stage since costs are endogenized through the first stage this has important implications for the measurement of market power in the product market in particular simpler one stage specifications would result in a bias in the measurement of market power which can be linked to the taxonomy for two stage games given in fudenberg and tirole 1984 fudenberg d tirole j 1984 the fat cat effect the puppy dog ploy and the lean and hungry look american economic review paper and proceedings 74 361 366 we then estimate this model demand cost short and long run and conduct for the european airline industry using data for the period of 1976 1990 we perform a number of specification tests and reject a simple one stage specification in favor of our two stage set up in particular we find that some degree of market power in the product market exists however market conduct in the two stage set up is significantly less collusive than in the more widely employed one stage specification which is consistent with the direction of bias in puppy dog games this illustrates that collusiveness of firms market conduct in the product market is significantly overestimated whenever capacity competition is not accounted for

testing for market power using a dynamic oligopoly model abstract we propose a dynamic reformulation of the oligopoly model of bresnahan 1982 and lau 1982 in an error correcting framework this reformulation addresses both statistical problems generated by short run dynamics in the data and incorporates important dynamic factors such as habit formation from the demand side and adjustment costs for the producer we also propose a test for separability of the variables involved in the identification of the market power parameter to illustrate the model the french market for fresh salmon is analysed the results suggest the salmon market to be competitive in the long run but indicate that the largest producer norway has some market power in the short run

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