inequality and fractionalization we present evidence that ethnic fragmentation explains variations in per capita income institutions and schooling better than income inequality when both are treated as endogenous to do so we identify instruments for ethnic fractionalization and income inequality based on historical experience using instrumental variables estimation we find that ethnic fractionalization explains the level of income both when income inequality is included as a control in the estimation and when it is not however we find no evidence that income inequality affects the level of income when ethnic fractionalization is properly treated as an endogenous variable we have similar findings when other development outcomes such as schooling or proxies for institutional quality are used as dependent variables these results are robust to various controls and changes in the sample size and suggest that some of the previous findings regarding the effect of income inequality on development should be attributed to ethnic fractionalization

temporary foreign workers and firms theory and canadian evidence abstract temporary foreign worker tfw programs have grown considerably in size when uncapped we develop a simple efficiency wage model to explain this phenomenon and examine the empirical evidence for it we also use the model to evaluate the implications of tfw programs for domestic workers in our framework firms that have been unable to find domestic workers may hire tfws at the wage previously advertised to domestic workers due to the lower outside option for tfws than domestic workers tfws will exert more effort for the same wage firms would thus prefer to hire otherwise identical tfws rather than domestic workers our model identifies an unintended consequence of a tfw program since the repercussions of a failed domestic job search are less severe if a tfw may be hired instead firms have an incentive to lower their wage offers made to domestic workers using canadian data we find that relative to domestic workers tfws work longer hours have lower rates of absenteeism and are less likely to be laid off consistent with higher effort in our model moreover for tfws from home countries with a relatively high outside option effort is lower than for tfws from other countries resume travailleurs etrangers temporaires et entreprises theorie et exemple canadien en l absence de plafonnement les programmes de travailleurs etrangers temporaires ptet se sont considerablement developpes afin d expliquer ce phenomene et d en examiner les preuves empiriques nous avons developpe un modele simple de salaire d efficience nous avons egalement utilise ce modele pour evaluer l incidence des ptet sur les travailleurs domestiques dans notre cadre d etude les entreprises peinant a trouver une main d uvre locale peuvent embaucher des travailleurs etrangers temporaires au salaire prealablement propose aux travailleurs domestiques compte tenu d options exterieures plus faibles les travailleurs etrangers temporaires deploieront davantage d efforts pour le meme salaire les entreprises prefereront donc embaucher des travailleurs etrangers par ailleurs identiques plutot que des travailleurs domestiques notre modele identifie une consequence inattendue aux ptet etant donne que les consequences d une recherche d employes domestiques infructueuse sont attenuees par l embauche de travailleurs etrangers temporaires les entreprises sont incitees a diminuer les offres salariales proposees aux travailleurs locaux en exploitant les donnees propres au canada nous avons decouvert que les travailleurs etrangers temporaires travaillaient plus d heures avaient des taux d absenteisme inferieurs et etaient moins susceptibles de se faire congedier que les travailleurs domestiques conformement au concept d effort accru developpe dans notre modele en outre pour les travailleurs etrangers temporaires originaires de pays a options exterieures relativement elevees l effort sera moindre que pour ceux provenant d autres pays

fair wages in the open economy we show how an extended theory of fair wages can be incorporated in the two by two heckscher ohlin model an important feature of the model is the existence of involuntary unemployment several results stand out first there is no longer a simple relatio

migration unemployment and discrimination abstract this paper uses a dynamic efficiency wage model to analyze the consequences of immigration for a small country when there is discrimination against immigrants in a dual labor market with unemployment discrimination is of the type equal pay for equal work but unequal work which is characteristic of economies with guest worker systems the model exhibits three regimes for rising immigration levels immigration is most beneficial for natives in the intermediate regime an analysis of regime switches shows that changes attributable to globalization and technical progress are consistent with growing opposition to immigration

undocumented immigration and unemployment of u s youth and minority workers econometric evidence we use census based data on the state distribution of the undocumented alien population in analyzing the relationship between that population and unemployment among youth and minority workers in the united states regression results from our two equation models do not support commonly expressed fears that undocumented immigration has caused any substantial increases in joblessness among these presumably vulnerable groups although small amounts of displacement are indicated a sizeable reverse effect is evident undocumented immigrants tend to concentrate in states where labor markets for these marginal groups are most favorable excerpt

illegal immigration in an efficiency wage model abstract this paper studies illegal immigration using an efficiency wage dual labor market model the illegal immigrants are endogenously sorted completely or incompletely into secondary labor markets the effects of immigration on native workers are more complex than in standard models of factor mobility as illegals first enter the country natives may gain because the number of primary sector jobs rises with enough illegals in the country natives are hurt because the migrants increasingly take those primary sector jobs enforcing immigration laws by deporting migrants who work in primary sector jobs is pareto superior to other forms of enforcement

a theory of dual labor markets with application to industrial policy discrimination and keynesian unemployment this paper develops a model of dual labor markets based on employers need to motivate workers in order to elicit effort from their workers employers may find it optimal to pay more than the going wage this changes fundamentally the character of labor markets the model is applied to a wide range of labor market phenomena it provides a coherent framework for understanding the claims of industrial policy advocates it also can provide the basis for a theory of occupational segregation and discrimination that will not be eroded by market forces finally the model provides the basis for a theory of involuntary unemployment

a note on pro poor growth this paper proposes a poverty growth curve that measures whether economic growth is pro poor or not propoor our methodology is developed based on atkinson s theorem linking the generalized lorenz curve and changes in poverty this methodology is applied to both thailand s unit record household surveys and international cross country data empirical study illustrates that our approach to measuring pro poor growth provides conclusive results in the majority of cases d 2004 elsevier b v all rights reserved

searching for the effect of immigration on the labor market we compare two approaches to analyzing the effects of immigration on the labor market and find that the estimated effect of immigration on u s native labor outcomes depends critically on the empirical experiment used area analyses contrast the level or change in immigration by area with the level or change in the outcomes of non immigrant workers factor proportions analyses treat immigrants as a source of increased national supply of workers of the relevant skill the different effects of immigration on native outcomes in the area and factor proportions methodologies appear to result from the diluting effect of native migration flows across regions and failure to take adequate account of other regional labor market conditions in area comparisons excerpt

on the choice between capital and labour mobility trade theorists since the pioneering work of kemp 1966 have considered the question of national advantage from international factor mobility by considering only one factor to be so mobile kemp analyzed elegantly the question of optimal policies in 2 x 2 x 2 model and showed that since monopoly power could exist in both the goods and factor markets in consequence of international capital mobility the optimal policy intervention would generally involve two policy instruments tariffs cum subsidies on goods and duties cum subsidies on international capital flows jones 1967 subsequently extended kemp s argument to the secondbest context by examining the optimal level of one of these instruments when the other was arbitrarily set at zero elsewhere in this issue brecher 1983 shows in an elegant and original contribution that the jones policy problem is in fact a third best rather than a second best problem as generally believed and that if only one of the tariff and capital mobility taxes cumsubsidies can be used it is generally possible to improve welfare further by admitting an altogether different domestic policy instrument namely a production or consumption tax cum subsidy as the case may be the research of bhagwati was supported by the german marshall fund grant no l 34015 the problem analyzed in the paper was posed in bhagwati 1979 and an early ingenious and neglected analysis in ramaswami 1968 was noted by bhagwati we have profited greatly from these contributions also from reading webb 1970 ramaswami 1970 and a recent paper of calvo and wellisz 1983 on this problem this result is in consonance with the results of bhagwati ramaswami and srinivasan 1969 for the case without international capital mobility but the consonance is intuitive only after the result was established for the case with international capital mobility

coexistence of gm and non gm crops with endogenously determined separation the possibility that genetically modified gm crops may contaminate non gm crops through pollen mediated gene flow presents a challenge to coexistence of gm agriculture with conventional and organic farming systems in this paper an analytical model of coexistence is developed that allows for endogenous derivation of efficient widths and allocation of pollen barriers to limit contamination of non gm crops to reflect the uncertainty that surrounds pollen dispersal mechanisms the model contains a stochastic contamination function and safety rule decision mechanism constraining the level of contamination to remain below a tolerated adventitious presence with a given probability two policies are considered and their performance is tested the tolerance level of adventitious presence and the allocation of responsibility for implementing coexistence measures to either gm or non gm farmers the relative size of gm rents the value of productivity gains and the non pecuniary benefits from gm crops rents for identity preserved non gm crops price premiums realised over the gm crop price characteristics of farms and possible variation in agricultural landscapes are also taken into account the findings indicate that conventional adventitious presence tolerances can be met without ex ante mandating large widths of pollen barriers at the policy level the findings of this paper are relevant for setting region specific pollen barriers widths and or for establishing institutions that facilitate cooperative coexistence

dynamic poverty decomposition analysis an application to the philippines summary in this paper we propose a new method of poverty decomposition our method remedies the shortcomings of existing methods and has some desirable properties such as time reversion consistency and subperiod additivity our decomposition integrates the existing methods of growth redistribution decomposition and sector based decomposition because it allows us to decompose the change in poverty into growth and redistribution components for each group e g regions or sectors in the economy our decomposition works well in cases where only partial data are available for some periods it is also flexible and can be extended to have the following six components population shift within region redistribution between region redistribution nominal growth inflation and methodological change components the empirical application of the six way decomposition to the philippines for the period 1985 2009 shows that important policies for poverty reduction may differ across regions for example the autonomous region in muslim mindanao would need growth enhancing policies whereas eastern visayas would need policies to improve the income distribution our decomposition method has a wide applicability and may complement the poverty profile approach

global estimates of pro poor growth summary the main objective of the present paper is to present a cross country analysis of pro poor growth in 80 countries in 237 growth spells during the period 1984 2001 to achieve this objective the paper proposes a new measure of pro poor growth that captures gains and losses of growth rates due to changes in the distribution of consumption the gains imply pro poor growth while the losses imply anti poor growth the statistical test carried out in the paper shows that regional location of countries has a significant association with the pro poorness of growth the paper also attempts to test for the association between growth patterns and certain variables that the literature has identified as significant determinants of growth and inequality out of many variables the paper focuses on four namely inflation the share of agriculture in gdp openness to trade and the rule of law

international trade and labor migration a theory of the relationship between international trade and labor mobility is developed that takes into account five characteristics of such migration including its temporary nature differences between migrant and native labor the acceptance of unpredictable conditions of employment by migrant labor the ready availability of further labor resources and international capital mobility particular attention is paid to the role of international labor migration in helping to insulate native populations from the rigors of industrial fluctuations and in helping to preserve import competing industries that would have succumbed without the availability of cheap imported labor

the theory of international factor flows the basic model abstract the basic model used to discuss the simultaneous international flow of labor and capital is a one commodity model in which a common technology is shared between countries the ramaswami result wherein an optimal restriction of labor inflows is superior to an optimal restriction on capital outflows for a capital abundant country is extended to reveal that optimality requires inflows of both factors box diagrams and iso welfare contours are used to show how optimal policy rankings are reversed if foreign labor must be paid higher home wages

a new measure of trade openness trade openness popularly measured as x m gdp in the hundreds of studies published to date consistently considers the world s biggest trading countries such as the usa the uk japan and germany to be closed economies irrespective of the data set used this study suggests a composite trade share measure that more completely reflects reality by combining two important dimensions of trade openness trade share and the relative importance of a country s trade level to total world trade robustness tests support the new proposed measure in lieu of the conventional measure of openness and suggest that the latter may not only be incomplete but may also overstate the impact of trade on such things as income and the environment

korea s growth driven trade policies inclusive or exclusive we attempted to find whether the korea s growth driven trade policies during the period of its industrialisation has contributed to output growth together with income distribution by qualitatively analysing the performance of trade policies interacting with the multilateral trading system over time in addition we conducted a regression analysis to investigate the effect of korea s trade growth on inclusive growth during its industrialisation period covering the period of 1976 2011 we found that the recent reform policies reported in the wto s trade policy review for korea in 2016 have attempted to achieve more balanced distribution of gains from trade but not enough to lead the korean economy to a well balanced welfare state more specifically we found the positive effects of international trade on inclusive growth driven by strong output growth effect not by the effect on income distribution even though income distribution measured by gini indices has been worsened after the east asian financial crisis we could not find significant evidence that korea s rapid international trade growth has been responsible for the deteriorating income inequality

pro poor growth and sustainable development framework evidence from two step gmm estimator abstract the environmental sustainability agenda is not easy to be achieved without implementing pro growth and pro poor growth policies across the globe pakistan s economy is no exception that strive hard to managed environmental resource capital and pro poor growth expenditures in order to reduce poverty incidence and carbon mitigation policies while many efforts need more sustainable instruments to be achieved united nation s assigned sustainable development target till 2030 the study selected an annual time series data from 1975 to 2016 and employed two step generalized method of moments gmm estimator for robust inferences the results show that higher economic growth decreases poverty incidence through social reforms while deforestation under 5 mortality rate trade openness carbon emissions and fdi inflows largely increases poverty incidence in a country the study confirmed environmental kuznets curve ekc hypothesis of carbon emissions in relation of per capita income and public spending on education while pollution haven hypothesis is confirmed due to high involvement of dirty polluting industries in country s economic transformation process the fossil fuel combustion and high population density increases carbon emissions that sabotage the process of sustainable development in a country thus it is imperative to device sustainable policies for mitigating carbon fossil emissions with cleaner production techniques and improves the quality of life of poor people through increase social expenditures that trickle down to the poor as compared to the non poor

efficiency wage models of unemployment keynesian economists hold it to be self evident that business cycles are characterized by involuntary unemployment but construction of a model of the cycle with involuntary unemployment faces the obvious difficulty of explaining why the labor market does not clear involuntarily unemployed people by definition want to work at less than the going wage rate why don t firms cut wages thereby increasing profits

does government spending affect income poverty a meta regression analysis summary this paper presents the results of a meta regression analysis of the relationship between government spending and income poverty with a focus on low and middle income countries through a comprehensive search and screening process we identify a total of 19 cross country econometric studies containing 169 estimates of this relationship we find that the size and direction of the estimated relationship are affected by a range of factors most notably the composition of the sample used for estimation the control variables included in the regression model and the type of government spending overall we find no clear evidence that higher government spending has played a significant role in reducing income poverty in low and middle income countries this is consistent with the view that fiscal policy plays a much more limited redistributive role in developing countries in comparison with oecd countries in addition we find that the relationship between government spending and poverty is on average less negative for countries in sub saharan africa and more negative for countries in eastern europe and central asia compared to other regions we also find that the relationship is less negative for government consumption spending in comparison with other sectors finally we find some evidence indicating the possibility of publication bias

efficiency wages employment versus welfare this paper analyzes the effects of government policies in an efficiency wage model in such a model wages exceed market clearing rates firms may pay high wages for many reasons levine gives thirteen motivations for efficiency wages 12 in the model used here high wages prevent shirking by workers the model is similar to those of shapiro and stiglitz sparks fairris and alston and others 15 17 7 efficiency wage models are often viewed as providing the microeconomic foundations of involuntary unemployment and keynesian economics 1 2 unemployment is also emphasized in many discussions of government policies 3 4 11 a major example is that of johnson and layard 9 they find that a per capita employment subsidy financed by an ad valorem wage rate tax would reduce unemployment they conclude that this policy would benefit a country because of the employment effect 2 yet this paper shows that the employment effect is misleading here a policy that causes employment to rise fall also must cause income net of effort to fall rise so total welfare falls rises the policy implications discussed by johnson and layard and others are therefore reversed

on the measurement of poverty official statistics in the united states and the united kingdom show a rise in poverty between the 1970 s and the 1980 s but scepticism has been expressed with regard to these findings in particular the methods employed in the measurement of poverty have been the subject of criticism this paper re examines three basic issues in measuring poverty the choice of the poverty line the index of poverty and the relation between poverty and inequality one general theme running through the paper is that there is a diversity of judgments which enter the measurement of poverty and that it is necessary to recognize these explicitly in the procedures adopted there is likely to be disagreement about the choice of poverty line affecting both its level and its structure in this situation we may only be able to make comparisons and not to measure differences and the comparisons may lead only to a partial rather than a complete ordering the first section of the paper discusses the stochastic dominance conditions which allow such comparisons illustrating their application by reference to data for the united states the choice of poverty measure has been the subject of an extensive literature and a variety of measures have been proposed in the second section of the paper a different approach is suggested considering a class of measures satisfying certain general properties and seeking conditions under which all members of the class which includes many of those proposed give the same ranking those sceptical about measures of poverty often assert that poverty and inequality are being confounded the third section of the paper distinguishes four different viewpoints and relates them to theories of justice and views of social welfare

an efficiency wage model with explicit monitoring abstract this paper develops an efficiency wage model of involuntary unemployment in a small open economy which uses two factors to produce three goods one of which is non traded monitoring aimed at reducing shirking by workers in all industries the analysis shows how a tariff on imports may lower employment but paradoxically raise social welfare at the same time as the paper also demonstrates the optimal policy combination includes not only taxes on capital and monitoring as well as a subsidy on employment but also despite the small country assumption a tax on consumption

undocumented mexico u s migration and the returns to households in rural mexico this paper presents estimates of net income gains to a sample of households in rural mexico from sending migrants illegally to the united states correcting for sample selectivity bias and it examines the role of expected income gains in driving illegal mexico u s migration there is no evidence that people who migrate illegally to the united states are above average contributors to household income either as workers in mexico or as mexico u s migrants however other things being equal villagers who are in the best position to contribute to household income as workers in mexico are positively selected not to migrate to the united states

efficiency wages in a ricardian model of international trade abstract this paper examines the implications of efficiency wages for international trade in a simple extension of the ricardian model in which labour performs two different tasks in production and where workers are imperfectly monitored in the performance of one of the tasks as a result of the factor market distortion the one factor economy may behave like a heckscher ohlin model an important result is that transfers of income have efficiency reducing effects and hence the standard aggregate analysis of trade policy may be inappropriate