seasonality and habit persistence in a life cycle model of consumption summary the allocation of non durable consumers expenditure over the four quarters of the year reflects choices made by consumers implying a utility function exhibiting seasonality incorporating such a function the life cycle model fails to explain fully the observed dynamics in uk seasonally unadjusted data seasonal habit persistence effects are introduced and found to be significant although this generalized model stands up well to testing in a univariate context it fails to exclude a predictive role for lagged income changes seasonality is inherent in many economic time series but it is rarely considered to be an issue of interest in econometric model building rather than explicitly investigating the economics underlying seasonal variation modellers typically try to remove its effects either by using seasonally adjusted data or by including seasonal intercept dummies in their equations the former practice is criticized by wallis 1974 who shows that it may distort the relationship between variab le the latter assumes that the function simply shifts up or down with the season however except for degrees of freedom considerations there seems to be no a priori reason why the same parameters or functional form should apply at different times of the year indeed gersovitz and mackinnon 1978 argue that realistic utility cost or production functions result in models in which seasonal influences cannot be separated out in a simple fashion in the present study seasonality is treated as one of the features to be explained within the economic model thus in the particular application to non durable consumers expenditure it is argued that the allocation of expenditure over the year reflects seasonal tastes and hence seasonality in the underlying utility function the implications of this are explicitly investigated the framework for our analysis is the influential paper by hall 1978 who derives a randomwalk model for real non durable consumers expenditure when rational expectations are combined with a life cycle theory of consumption hall does not investigate seasonality at all and employs seasonally adjusted values in his empirical analysis although subsequent us authors have examined many aspects of this theory the type of data used has rarely been

l investissement francais dans les colonies 1876 1940 une autre analyse de l enquete de gouvernement de vichy 1943 this paper presents an econometric model of trade union membership in the united kingdom the empirical model utilizes cyclical variables in the explanation of membership changes and separates the short and long run dynamics explicitly it proves to be a superior specification to previous business cycle models estimated for the united kingdom and predicts satisfatorily the recent decline in membership the inclusion of a dummy variable reflecting the political complexion of the government is the only secular variable which significantly improves equation performance but the composition of changes in employment plays no part in explaining the recent decline in membership copyright 1988 by the london school of economics and political science

a comparison of standard multi unit auctions with synergies in an example with two objects and four bidders some of which have superadditive values we characterize the equilibria of a simultaneous ascending auction and compare the revenue and efficiency generated with ones generated by the sequential the one shot simultaneous and the vickrey clarke groves auctions

seasonality in dynamic regression models this paper examines the implications of treating seasonality as an unobserved component which changes slowly over time this approach simplifies the specification of dynamic relationships by separating non seasonal from seasonal factors we illustrate this approach using the consumption model of davidson et al 1978 and estimate a stable error correction model between consumption income and prices over the period 1958 92 more generally we argue that autoregressive models are unlikely to successfully model slowly changing seasonality and may confound seasonal effects with the dynamic responses of prime interest our approach can be used in a wide range of cases and we show that there is little loss in efficiency even if seasonality is deterministic

job queues and the union status of workers this paper develops a model of the determination of the union status of workers that allows for the possibility of queuing for union jobs the empirical results derived using a sample from the university of michigan panel study of income dynamics are supportive of the queuing hypothesis the no queue model can be rejected using a likelihood ratio test this suggests that a simple probit or logit model for union status is misspecified because it is not based on any consistent behavioral theory an important implication of the model is that because most new entrants to the labor market prefer union jobs but cannot get them and because accrual of nonunion seniority makes workers progressively less likely to desire union jobs the union status of workers is largely determined by their success in being selected from the queue early in their working life

an asymmetric error correction model of uk consumer spending this paper augments the granger and lee journal of applied econometrics 4 1989 non symmetric error equilibrium correction model to assess the possibility that in the aggregate consumers respond differently to different types of disequilibrium error this idea is illustrated using an engle granger implementation of the davidson hendry srba and yeo dhsy economic journal 80 1978 model the disequilibrium error is endogenously determined by the long run empirical model and a binary dummy variable captures two alternative states above and below equilibrium spending interaction of the dummy variable with key variables in a short run dynamic model of uk consumer spending augments the dynamics of the dhsy model income elasticities inflation elasticities and speeds of adjustment are all seen to change significantly depending on whether the disequilibrium error is positive or negative and is suggestive of asymmetric behaviour on the part of consumers moreover the asymmetrically augmented mode

dhsy revisited the role of asymmetries davidson et al s data set is used to demonstrate the existence of a significant asymmetry in the adjustment of consumption towards equilibrium the granger lee and escribano pfann methods of partitioning the error correction term are compared and it is shown that the latter produces better results in this case it is concluded that adjustment is faster under conditions of recession than it is during boom periods

investigation of production sales and inventory relationships using multicointegration and non symmetric error correction models the accumulated sum of a stationary series is called integrated if a linear combination of some of the integrated series is stationary it is said to be cointegrated this paper presents empirical results on inventories to consider the possibility of a deeper form of cointegration called multicointegration which is introduced in granger and lee 1989 a vector integrated series is multicointegrated if the accumulated sum of its stationary cointegrated linear combination is again cointegrated with itself inventory which is the accumulated sum of production minus sales is probably cointegrated with production and sales the empirical results generally support the presence of multicointegration of production and sales in many u s industries and industrial aggregates the results also favour the non symmetric error correction model providing evidence that the strength of attraction is different on both sides of the attractor a modified s s rule for inventory control is investigated in the context of a non symmetric error correction model and the results generally do not support the s s rule sufficient evidence is found to conclude that multicointegration is a useful concept in the area of inventory determination

seniority and efficiency the role of seniority in efficient compensation and employment arrangements between a firm and its labor pool is examined seniority is treated as an endogenous factor in a dynamic model with uncertainty nonseparability over time in preferences and production emerges as a pivotal aspect of seniority provisions in efficient allocations the analysis focuses on two dynamic factors that have been emphasized in the literature nonseparable worker preferences in leisure and a learning by doing process of human capital accumulation copyright 1992 by the editors of the scandinavian journal of economics

trade union efficiency and overemployment with seniority wage scales inefficient unemployment of union members depends upon the inability of the union to bargain over employment as well as wages the issue of union membership limitations has received less attention as seen in the survey by oswald i 983 grossman i983 considers endogenous membership size with mixed efficiency results but he imposes a number of severe restrictions on allowable contracts in the current paper we examine the issue of union membership size under very general contracts where unions negotiate over wage rates employment levels and compensation payments to laid off workers and further can negotiate differential treatment of seniority groups these general contracts represent a useful benchmark case recognising that the results will change as various limitations on the contract are imposed the treatment of seniority is crucial and we model this by an overlapping generations approach continuing workers at the firm negotiate the contract to be applicable to the following period new hires over that period in the number stipulated in the contract then gain seniority and negotiate the contract for the period after the formulation of the problem with the exception of the treatment of new hirings is similar to that in the implicit contracting literature and many of the results will be familiar unemployment of union members only occurs when the marginal value product of labour fails below the opportunity cost leisure value

sequential auctions with synergies an example abstract an equilibrium in an example of a two unit sequential ascending price auction where some bidders have superadditive values is presented the equilibrium is in pure strategies in equilibrium the expected price declines from the first to the second auction

labor union objectives and collective bargaining we consider a model oflabor union behavior in which workers make decisions about wages and employment by simple majority rule we show that under general conditions such a union has a well behaved objective function different from those previously postulated in the literature we then show that the union s majority preferences generally lack a von neumann morgenstern utility representation and thus cannot be inserted into traditional bargaining models we then develop and characterize the solutions to a new bargaining model that is consistent with the structure of union preferences several comparative statics results are presented

the effect of customer satisfaction on consumer spending growth abstract predicting aggregate consumer spending is vitally important to marketing planning yet traditional economic theory holds that predicting changes in aggregate consumer spending is not possible previous attempts to predict consumer spending growth using standard macroeconomic predictor variables have met with little success the authors show that the lagged change in customer satisfaction which contributes to future demand has a significant impact on spending growth however this impact is moderated by increases in consumers debt service ratio a key budget constraint that affects consumers ability to spend using an asymmetric growth model more than 23 of the variation in the one quarter ahead spending growth is explained which represents a notable improvement over prior specifications

how high is the private gain from wage indexation the effects of firm specific shocks on the gain from writing state contingent wage contracts are examine in an extension of the model in gottfries 1992 it is shown that the introduction of firm specific uncertainty increases the gain from indexation to prices only moderately moreover nominal wage contracts should be more prevalent when unemployment benefits are high or unemployment spells are short

jump bidding and overconcentration in decentralized simultaneous ascending auctions abstract a model of english auctions is proposed to incorporate the possibility of jump bidding when two objects are sold separately via such auctions bidders signal their willingness to pay via jump bids thereby forming rational expectations of the prices without relying on any central mediator hence a multi item bidder does not suffer the exposure problem of having to buy an item while he is uncertain about the price of its complement single item bidders however free ride one another in competing against a multi item bidder consequently the auctions overly concentrate the goods to a multi item bidder and never overly diffuse them to single item bidders

counterinflationary policy in a unionised economy with nonsynchronised wage setting a model of the determination of wages and employment in a unionised economy with nonsynchronised wage setting is presented in this paper it is shown that a monetary deflation can lead to prolonged unemployment even though the unions act rationally and with full information about the change in policy the model generates a statistical phillips curve in which the rate of change of money wages depends on the anticipated growth rate of the money supply and on disequilibrium unemployment conventional incomes policies are shown to have desirable social effects but run counter to the perceived self interest of the trade unions and are therefore likely to be resisted taxes on wage increases have desirable long run effects but do not appear able to reduce the transitional unemployment costs of monetary deflation

trade unions wage formation and macroeconomic stability an introduction the process of wage formation is a crucial aspect of the current discussion about the causes of stagflation in fact differences between various policy prescriptions usually depend on differing assumptions about wage responses proposals to reduce unemployment through expansion of monetary demand are usually based on assumptions of rigid money wages in contrast recommendations of non intervention policies often rest on the opposite assumption of rigid real wages in which case monetary expansion will cause inflation but not affect employment

the assessment consumer expenditure this article aims to illuminate two sets of consumption puzzles the first concerns the behavior of aggregate saving rates in the 1980s and early 1990s collapse and rebound in scandinavia and the u k and apparently a more secular decline in the u s the second set of puzzles concerns various apparent contradictions of the rational expectations permanent income hypothesis e g in time series the excess sensitivity of consumption changes to anticipated income changes and in cross sections the tendency of consumption and income age profiles to follow each other more than standard life cycle theory implies the article discusses in relatively non technical terms the implications both for euler equations and solved out consumption functions of introducing uncertainty credit constraint consumption leisure interactions habits and durability alternative to rational expectations the illiquidity of some assets and financial deregulation it also compares the merits of euler and solved out models of aggregate consumption

drive out fear unless you can drive it in the role of agency and job security in process improvement understanding the wide range of outcomes achieved by firms trying to implement total quality management tqm and similar process improvement initiatives presents a challenge to management theory a few firms reap sustained benefits from their programs but most efforts fail and are abandoned in this paper i study one dimension of this phenomenon the role of impending layoffs in determining employee commitment to process improvement currently the literature provides two opposing theories concerning the effect of job security on the ability of firms to implement change initiatives the drive out fear school argues that firms must commit to job security while the drive in fear school emphasizes the positive role that insecurity plays in motivating change in this study a contract theoretic model is developed to analyze the role of agency in process improvement the main insight of the study is that there are two types of job security internal and external that have opposing impacts on the firm s ability to implement improvement initiatives the distinction is useful in explaining the results of different case studies and can reconcile the two change theories

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

efficient union labour contracts under seniority employment rules abstract a firm and worker sign a price contigent wage employment contract under lifo ly off rules a worker may prefer a contract which lays him off at low prices to one under which he is guaranteed employment at all prices

union wages temporary lay offs and seniority it is widely believed that the seniority system in conjunction with the collective bargaining process contributes significantly to the determination of the unemployment level in unionized sectors causa i empiricism suggests that real wage demands often remain buoyant in these sectors in the face of seemingly high rates of unemployment among union members james medoff 1979 p 380 convincingly documents the evidence that adjustment through lay offs is substantially greater in unionized firms than in comparable non unionized firms the usual but somewhat informal explanation is that the outcome of union voting is greatly influenced by senior workers who are fairly certain that they will not be laid off when normal shifts in the industry s demand for labour occur 2 these inframarginal workers are believed to vote for higher wage settlements than they would if their own jobs were not so secure

equilibrium long term labor contracts the paper presents a labor market equilibrium analysis of implicit contract theory a two period single good model is used to propose consistent notions of labor market equilibrium for long term employment contracts both when labor is specialized and cannot move in the second period and when there is free mobility without costs the result that long term contracts emerge in equilibrium even without mobility costs is novel and contrary to common beliefs the main features of equilibrium are that risk neutral firms will insure risk averse workers against downside risk yielding downward rigid wages wages are not fully rigid as in earlier work on contract theory because workers may quit and wages have to be bid up to retain them the firm gets its return of the insurance deal by paying less than marginal product in the first period the resulting equilibrium is second best and lies between productive efficiency and full insurance workers gain from long term contracts in comparison to spot markets whereas owners may not in the model with specialized skills there exist transfer payments such that both parties are better off within an equilibrium with long term contracts

estimating long run economic equilibria with stochastic trends an asymptotic theory is provided to analyze a menu of currently existing estimators of cointegrated systems we study in detail the single equation ecm seecm approach of hendry our theoretical results lead to prescriptions for empirical work such as specifying seecm s nonlinearly and including lagged equilibrium relationships rather than lagged differences of the dependent variable as covariates simulations support these prescriptions and point to problems of overfitting not encountered in the semiparametric approach of phillips and hansen 1990

workers versus government who adjusts to whom a dominant trade union and the government are regarded as players in a game it is argued that the institutional setting is such that the union in effect makes the first move and government the last then the stackelberg solution with the union as the leader is a nash equilibrium this solution is in accordance with an accommodating policy implying relatively high wage and price levels and a poor trade balance a nonaccommodating policy with the unions as the follower would be preferred by the government and may not imply lower employment but is likely to require short run losses in order to be established a cooperative solution could be to mutual benefit but is rarely observed problems of realizing such a solution are discussed