an equilibrium model of the business cycle with household production and fiscal policy the authors estimate a dynamic general equilibrium model of the u s economy that includes an explicit household production sector and stochastic fiscal variables they use their estimates to investigate two issues first the authors analyze how well the model accounts for aggregate fluctuations they find that household production has a significant impact and reject a nested specification in which changes in the home production technology do not matter for market variables second the authors study the effects of some simple fiscal policy experiments and show that the model generates different predictions for the effects of tax changes than similar models without home production copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

inter firm social dilemmas with agency risk abstract many social dilemmas involve decisions made by firms we design a laboratory experiment that represents firms principal agent problem and includes an inter firm social dilemma and stochastic agent performance agents unobservable effort affects the likelihood of a bad outcome occurring such as a regulatory violation this harms the agent s principal but can also damage others thus creating an inter firm social dilemma in our baseline treatment we omit the agency problem and principals make their firm s effort decision directly in the second treatment principals can only offer an unconditional wage contract to their agent although a non contractual ex post bonus can be paid in a third treatment principals can condition wages on the stochastic outcome and a fourth treatment combines the conditional wage with a non contractual bonus we find that principals use a combination of a conditional wage and the non contractual ex post bonus to help overcome the agency problem and incentivize agents to choose higher effort fixed wage unconditional contracts lead to significantly lower effort levels even when augmented with bonuses similarly conditional contracts on their own also perform poorly only the combination of conditional wage contracts and discretionary bonuses is effective in limiting agency risk to address the inter firm social dilemma problem

specialization and human capital in search equilibrium this paper constructs a general equilibrium search matching model with heterogeneous workers workers choose whether to invest in general human capital or specific human capital when they enter the labor market we analyze how unemployment benefits affect the choice of the type of human capital investment jel e24 j41 j64 j65

it s what you say not what you pay an experimental study of manager employee relationships in overcoming coordination failure we study manager employee interactions in experiments set in a corporate environment where payoffs depend on employees coordinating at high effort levels the underlying game being played repeatedly by employees is a weak link game in the absence of managerial intervention subjects invariably slip into coordination failure to overcome a history of coordination failure managers have two instruments at their disposal increasing employees financial incentives to coordinate and communication with employees we find that communication is a more effective tool than incentive changes for leading organizations out of performance traps examining the content of managers communication the most effective messages specifically request a high effort point out the mutual benefits of high effort and imply that employees are being paid well

a search theoretic approach to monetary economics the essential function of money is its role as a medium of exchange the authors formalize this idea using a search theoretic equilibrium model of the exchange process that captures the double coincidence of wants problem with pure barter one advantage of the framework described here is that it is very tractable the authors also show that the model can be used to addre ss some substantive issues in monetary economics including the potenti al welfare enhancing role of money the interaction between specializat ion and monetary exchange and the possibility of equilibria with multip le fiat currencies copyright 1993 by american economic association

are workers paid their marginal products status is like coase s social costs a reciprocal phenomenon given that one person s gain in status can occur only at the expense of a loss in status for others and that workers are free to choose their coworkers it follows that the competitive wage structure within a firm must be one in which individual wage differences understate individual differences in marginal products the purpose of this paper is to examine a variety of empirical evidence that relates to this proposition about the firm s internal wage structure the paper is organized as follows section i briefly summarizes the theoretical considerations that govern competitive wage determination when status matters to people and firms are viewed as voluntary associations of workers section ii then confronts the predictions of section i by examining pay and productivity schedules for a group of sales occupations for which these schedules are relatively easily observed section ii also examines the relationship between wages and productivity for a sample of university professors an occupation in which individual productivity differences are for a variety of obvious reasons relatively more difficult to measure all of the evidence examined is consistent with the hypothesis that within firms wage rates vary substantially less than do individual productivity values section iii discusses additional observations and evidence that bear on this same hypothesis it suggests that the implicit market for status may strongly influence the ways in which firms are organized to carry out the tasks they perform section iv concludes by considering the claim that egalitarian internal wage structures arise because of equity considerations it argues that the concept of equity appears very closely linked to the concept of status and suggests a strategy for assigning monetaty value to the equity considerations that so often dominate public policy decisions

jack of all trades or a master of one specialization trade and money we consider a model of decentralized exchange where individuals choose the set of goods they produce specialization involves producing a smaller set of goods and doing it more proficiently in doing so agents reduce production costs but also reduce the ease of trading their output we derive the equilibrium degree of specialization and examine how it is affected by underlying fundamentals due to the existence of a hold up problem individuals specialize too little relative to the social optimum introducing money leads to more specialization relative to barter and increases welfare

a materialist development of some recent contributions to the labour theory of value the paper offers a novel interpretation and affirmation of the opening arguments of capital answering the fundamental but neglected question of why labour is the substance of value marx s arguments require that two philosophical threads often separated in the literature on value be woven together the argument that value is the intrinsic content making commodities exchangeable employs the thread of realism the argument that abstract labour is the emergent social substance of value employs the thread of dialectics this interpretation develops the materialist and dialectical philosophy of e v ilyenkov and deepens the approach to value theory initiated by ben fine

beyond environmental and ecological economics proposal for an economic sociology of the environment the vast majority of approaches in environmental economics attribute the current ecological crisis to the fact that from its inception the industrial economic system was founded on premises that made no allowance for the limits and regulatory functions of ecosystems according to these approaches we must therefore remedy the historical error of dissociating the fields of economics from the natural sciences notably by restoring the links between these two disciplines distinguishing themselves from the two historic approaches environmental economics and early ecological economics the emerging institutionalist schools evoke not only the constructed nature of the environmental crisis generally viewed as an objective fact by both traditional environmental economists and ecological economists but also the socially constructed nature of the economy and its institutions an actionalist regulationist approach allows us to formalize this twofold construction and lays the groundwork for a new economic sociology of the environment in which the technical modalities of ecological modernization are studied in light of social relations with the understanding that social relations are also affected by the materiality of the environmental crisis this actionalist regulationist approach also lends itself to anticipating likely trajectories in the future ecological modernization of economic institutions

effort and comparison income experimental and survey evidence the authors test the hypothesis that individual effort on the job depends both on one s own income and on the individual s position in the relevant income distribution combining experimental evidence from a gift exchange game with multi country issp survey data they analyze the extent to which relative income affects an individual s effort finding that an individual s rank in the income distribution more strongly determines effort than does others average income which suggests that comparisons are more ordinal than cardinal their experiment also reveals that comparisons over time affect effort individuals who received higher income offers or enjoyed higher income rank in the past exerted lower levels of effort for a given current income and rank

overcoming accumulation is a capitalist steady state economy possible abstract this article critically reviews the case for a steady state zero growth economy posing the question whether such an economy can be stable and socially just given that in the current global economy lack of growth is synonymous with crisis the sse thesis is analysed within a framework of marxian political economy concluding that a stable and just sse is possible but not feasible within the social relations of capitalism using the marxian analysis of capital accumulation the article then considers whether the reforms proposed by ecological economists can form an effective countervailing force to the drive for accumulation the conclusion is that such reforms can be successful but only in so far as they are complemented and brought to their logical conclusion by a wider attempt to transcend the capitalist relations of production

environmental innovations and firm profitability unmasking the porter hypothesis we examine impacts of different types of environmental innovations on firm profits following porter s sci am 264 4 168 1991 hypothesis that environmental regulation can improve firms competitiveness we distinguish between regulation induced and voluntary environmental innovations we find that innovations which do not improve firms resource efficiency do not provide positive returns to profitability however innovations that increase a firm s resource efficiency in terms of material or energy consumption per unit of output have a positive impact on profitability this positive result holds for both regulation induced and voluntary innovations although the effect is greater for regulation driven innovation we conclude that the porter hypothesis does not hold in general for its strong version but depends on the type of environmental innovation our findings rest on firm level data from the german part of the community innovation survey 2008 cis 2008

jevons paradox revisited the evidence for backfire from improved energy efficiency beginning with william stanley jevons in 1865 a number of authors have claimed that economically justified energy efficiency improvements will increase rather than reduce energy consumption jevons paradox is extremely difficult to test empirically but could have profound implications for energy and climate policy this paper summarises and critiques the arguments and evidence that have been cited in support of jevons paradox focusing in particular on the work of len brookes and harry saunders it identifies some empirical and theoretical weaknesses in these arguments highlights the questions they raise for economic orthodoxy and points to some interesting parallels between these arguments and those used by the biophysical school of ecological economics while the evidence in favour of jevons paradox is far from conclusive it does suggest that economy wide rebound effects are larger than is conventionally assumed and that energy plays a more important role in driving productivity improvements and economic growth than is conventionally assumed

toward a new conception of the environment competitiveness relationship accepting a fixed trade off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress studies finding high environmental compliance costs have traditionally focused on static cost impacts ignoring any offsetting productivity benefits from innovation they typically overestimated compliance costs neglected innovation offsets and disregarded the affected industry s initial competitiveness rather than simply adding to cost properly crafted environmental standards can trigger innovation offsets allowing companies to improve their resource productivity shifting the debate from pollution control to pollution prevention was a step forward it is now necessary to make the next step and focus on resource productivity

a theory of wage dynamics a dynamic equilibrium model of long term implicit labour contracts under incomplete but symmetric information is developed workers are assumed to be risk averse and of unknown ability or productivity risk neutral firms learn as do workers about each worker s productivity by observing the worker s output over time it is shown that equilibrium contracts provide for wages which never decline with age and increase only when the worker s market value increases above his current wage in addition to characterizing the equilibrium wage contract we also derive some of its implications for the behaviour of aggregate wages across various groups of workers these implications explain some findings in the recent empirical literature on ageearnings profiles in particular our model can explain why earnings may be positively related to experience even after controlling for productivity as some empirical studies have indicated

coordination in the presence of asset markets markets aggregate widely dispersed information and direct resources to where they produce the greatest value friedrich a hayek 1945 adam smith 1776 these dual roles of informational and allocative efficiency help explain why asset markets are often used to guide economic activity such as production and investment many economic contexts involving production and investment are characterized by multiple equilibria john bryant 1983 jack hirshleifer 1983 russell w cooper 1999 colin camerer and marc knez 1997 jordi brandts and david j cooper 2006 when asset markets are linked to such contexts it is important to understand what role they play in aiding coordination and selecting equilibria if asset markets obtain both informational and allocative efficiency in a multiple equilibrium con text then they should coordinate the beliefs of economic agents and guide behavior to an efficient equilibrium indeed some evidence suggests that one sided auction markets may facilitate efficient coordination in an environment with multiple equi libria john b van huyck raymond c battalio and richard o beil 1993 vincent crawford and bruno broseta 1998 however the broader question of whether asset markets generally lead to efficient coordination in environments with multiple equi libria remains an open question in this paper we explore experimentally the influence of two sided futures asset markets on behavior and outcomes in an economic activity characterized by multi plicity of equilibria we use laboratory experiments where we can control impor tant features of both the market and the underlying activity and focus on situations where the outcome of the economic activity is sensitive to the behavior of small numbers of agents the economic activity in our setting consists of a coordination game with pareto ranked equilibria in which the payoff to each player is a function of her own choice or input and group output which is some order statistic such as the minimum of all players input choices see van huyck battalio and beil 1990 van huyck battalio and beil 1991 crawford 1995 players all do better if they coordinate on the highest output efficient equilibrium which is pareto optimal but they also prefer to select a lower input if they believe others will do so coordination games of this kind have been applied widely to model economic activity from the relationship between beliefs and output in macroeconomic models cooper 1999 to public good provision hirshleifer 1983 to firm production

unemployment vs mismatch of talents reconsidering unemployment benefits we develop an equilibrium search matching model with risk neutral agents and two sided ex ante heterogeneity unemployment insurance has the standard effect of reducing employment but also helps workers to get a suitable job we show through calibrations how the mere difference on unemployment insurance when countries experience a common skilled biased technological shock may result in differences in unemployment productivity growth and wage inequality these results are consistent with the contrasting performance of the labour market in europe and the united states in the last twenty five years the model is used to address some political economy issues

pay equality and industrial politics personnel managers often argue that equitable pay treatment manifested as wage compression is useful because it reduces disharmony among workers but it is far from obvious that a compressed salary structure is morale improving since better workers may feel disenchanted by this scheme however when workers rewards are based on relative comparisons salary compression reduces uncooperative behavior that is detrimental to the firm relative comparisons imply that some reference group must be selected the major result is that within the relevant groups some wage compression is efficient

marriage and class here we consider a matching model where agents are heterogeneous and utilities nontransferable we utilize this framework to study how equilibrium sorting takes place in marriage markets we impose conditions that guarantee the existence of a steady state equilibrium and then characterize it several examples are developed to illustrate the richness of equilibria the model reveals an interesting sorting externality that can support multiple steady state equilibria even with constant returns to matching excerpt

gift exchange in a multi worker firm one of the main findings of a large body of gift exchange experiments is that in an incomplete contracts environment workers on average do not shirk and usually provide more than the minimum enforceable effort level in general 40 to 60 percent of the workers reward higher wages with higher effort these results are observed for simple one employer one worker relationships in this paper we investigate whether they generalize to the more realistic situation in which the employer employs several workers we compare a bilateral gift exchange game with a treatment in which each employer has four workers we find that effort levels in the latter treatment are only marginally lower gift exchange thus appears to be robust to increases in the size of the workforce and intention based reciprocity rather than social preferences seems to be the main driving force behind gift exchange

environmental regulation a value theoretic and class based analysis following a value theoretic and class based approach it is argued in this paper that ecological problems are inseparably linked to the process of extracting surplus value in capitalism and owing to their adverse impacts instigate struggles over the appropriation of nature these struggles fought within and outside the state by competing agents shape environmental regulation in particular taxes permits command and control measures and subsidies affect prices profits and rents and have class and other social implications evidence of current environmental regulation shows that it takes places under the great influence of capitalist concerns

market inertia and the introduction of green products can strategic effects justify the porter hypothesis if according to porter s hypothesis a greener strategy is more profitable why may its implementation need regulatory intervention we present a repeated cournot duopoly where the market may exhibit inertia towards the adoption of even cost efficient environmental goods with consumers recognizing that a product is green only with a time lag if a firm unilaterally adopts the green product initially loses profit due to a increased costs direct effect and b reduced market share strategic effect by imposing simultaneous adoption regulation eliminates b thus enhancing long run profitability through a similar mechanism a government can increase its domestic firms international market share and profits by forcing them to simultaneously adopt the green product

two paradoxes with one stone a critical reading of ecological modernization abstract the current contribution aims at critically reviewing state initiatives in the frame of ecological modernization under the lenses of the labor theory of value further the article addresses two phenomena related to ecological modernization that have received much attention namely the porter hypothesis and the jevons paradox state led environmental regulation in terms of environmental legislation as well as initiatives to promote green technology can be understood as a twofold attempt which ultimately leads to re defining socially necessary labor time first state intervention would wish to remove surplus profit from polluting or resource depleting capitals through legislation which would tend to increase socially necessary labor time in the branch of production under reference state policy might then attempt to propel the adoption of green technology which would tend to decrease socially necessary labor time in the sectors targeted through state initiatives competition among rival capitals would be re aligned so as to allow for conditions of production to be renewed the porter hypothesis can be approached as a strategy followed by individual capitals to gain an early mover advantage while the jevons paradox can be seen as the result of an imitation process when rival capitals take up technological modifications launched by innovators

wage secrecy as a social convention there is a time to keep silent and a time to speak out ecclesiastes 3 7 ask anyone who works for a living how much money he or she makes and you are likely to encounter a range of responses from evasion to outright hostility such responses however should not be surprising according to organizational etiquette it is considered gauche to ask others their salaries in a study at e i du pont de nemours all employees were asked if the company should disclose more payroll information so that everyone would know everyone else s pay only 18 voted for an open pay system dolan and schuler 1987 315 m any organizations have strict policies and norms about the secrecy of pay it is seen as inappropriate in most companies for employees to talk about what they earn and data are rarely given out even internally on salaries some organizations even fire individuals who release salary data this is one way to make it very clear that the organization means it when it says it believes in pay secrecy lawler 1990 239 t he issue of openness or secrecy in the communication of compensation information is one of the most important issues facing senior management henderson 1985 379 i introduction despite the general belief that a free flow of information enhances efficiency social convention appears to call for secrecy regarding individuals wages this paper provides an explanation for this convention we suggest that the role of wage secrecy is to reduce effective labor mobility and thereby enhance the feasibility of risk shifting contracts wage secrecy may yield a mix of mobility and risk shifting that is superior both to a spot market for labor and to a social convention that binds workers to their employers in promising to pay a worker a pre agreed wage rate labor contracts shift uncertainty from workers to employers and provide workers with insurance in particular if workers are risk averse and firms are risk neutral such contracts may enhance the welfare of workers without imposing a cost on firms since a risk shifting contract shields workers from the vicissitudes of the market wage rates need not equal the marginal product of labor in good outcomes workers pay the firm an insurance premium by accepting a wage rate that is lower than their marginal product in bad outcomes workers collect on their insurance policy earning a wage rate that exceeds their marginal product 1 if workers can move freely from one firm to another however risk shifting labor contracts may not be feasible given such freedom of movement workers will stay with their firm if the wage rate exceeds that offered elsewhere and move if they can obtain a higher wage rate in another firm hence without restrictions on labor mobility risk shifting contracts will not be offered and wage rates will vary with the marginal product of labor in this case the market in labor is a spot market the risk shifting role of labor contracts may be salvaged by a social convention that binds workers to their firms this would require that a worker who leaves his employer earlier than the accepted norm would be viewed as breaking a social convention and develop a damaging reputation we shall refer to this type of convention as a binding convention 2 it appears that a binding convention is assumed in most of the implicit contract literature binding however comes at a cost while facilitating risk shifting it may lead to inefficient resource allocation with a binding convention the tradeoff between the loss in output and the extent of workers exposure to risk depends on the nature of risks faced by the firm when the only risk that firms face is an aggregate shock defined as a shock that affects all firms in a sector in the same way binding does not reduce production efficiency if the marginal product of labor is the same in all firms the worker s place of employment does not affect output

social comparison and performance experimental evidence on the fair wage effort hypothesis we investigate the impact of wage comparisons for worker productivity we present three studies which all use three person gift exchange experiments consistent with akerlof and yellen s 1990 fair wage effort hypothesis we find that disadvantageous wage discrimination leads to lower efforts while advantageous wage discrimination does not increase efforts on average two studies allow us to measure wage comparison effects at the individual level we observe strongly heterogeneous wage comparison effects we also find that reactions to wage discrimination can be attributed to the underlying intentions of discrimination rather than to payoff consequences

the hidden advantage of delegation pareto improvements in a gift exchange game this paper analyzes the effect on performance and earnings of delegating the wage choice to employees our results how that such delegation significantly increases effort levels moreover we observe a pareto improvement as the earnings of both employers and employees increase when employers delegate than when they do not interestingly we also find that the employees performance under delegation is higher than under non delegation even for similar wages while there is strong evidence that behavior reflects strategic considerations this result also holds for one shot interactions a possible non strategic motivation explaining the positive reaction to delegation is a sense of enhanced responsibility

efficient unemployment insurance this paper constructs a tractable general equilibrium model of search with risk aversion an increase in risk aversion reduces wages unemployment and investment unemployment insurance has the opposite effect insured workers seek high wage jobs with high unemployment risk an economy with risk neutral workers achieves maximal output without any unemployment insurance but an economy with risk averse workers requires a positive level of unemployment insurance to maximize output therefore moderate unemployment insurance not only improves risk sharing but also increases output

the effect of production technology on trust and reciprocity in principal agent relationships with team production we introduce differently sized teams rather than a single worker and three production technologies to an otherwise standard gift exchange environment to study experimentally whether and to what extent trust and reciprocity is affected moving to a team of workers introduces new motivations such as free riding and coordination burden that are likely to intensify with team size and the technology used by the firm we find that the positive relationship between wages and effort although affected still holds workers reduce their efforts when coordination for efficiency is more difficult using a particular production technology results also suggest that for any given technology firms react to their relevant outcome profitability and not just to workers efforts

specialization and efficiency with labor market matching abstract this paper constructs a labor market matching model with heterogeneous workers due to matching frictions there may be a mismatch of talents within a production team forcing a worker to specialize in a task at which she is not talented we consider a partnership model where production takes place in teams consisting of two workers we characterize the steady state of the matching equilibrium the constrained efficiency of the matching equilibrium depends on the distribution of talents the constrained efficient allocation can always be implemented by a type specific tax we also examine an alternative model with diamond mortensen pissarides type matching between firms and workers