who s on first an empirical test of the coase theorem in baseball because of their highly developed skills major league baseball players generate significant economic rents according to the weak version of the coase theorem the allocation of these players is independent of who controls the rights to these rents which depends on the rules governing competition in the baseball labour market the rules of major league baseball establish a dual system for senior players the market is competitive and players have the right of free agency allowing them to attempt to contract with the team of their choice for players with fewer years of experience the market is monopsonistic and a player s right to play baseball is owned by his current team consequently we simultaneously observe two different allocations of property rights using individual player data for 1979 and 1980 we test whether baseball player movement is independent of the ownership of these rents we estimate the wage marginal revenue determination process for free agent and non free agent movers and

migration trends and earnings of free agents in major league baseball 1976 1979 this paper is an empirical investigation of the effect of team characteristics on the migration pattern of free agents in major league baseball during the period 1976 1979 the results indicate that high quality free agents tend to leave winning teams and move to teams in cities with large or rapidly growing populations the compensation paid to free agents is shown to depend on these team characteristics as well as the players personal characteristics and market conditions

profit sharing capital formation and the nairu this paper reconsiders the impact of different remuneration systems on aggregate employment contrary to common wisdom on this topic we show that the switch from a fixed wage economy to a share economy results in lower aggregate unemployment an additional innovation of this paper is the endogeneity of the capital stock decision of the firm which enables us to assess and reject the common disincentive to invest criticism of a share economy

externalities property rights and the allocation of resources in major league baseball most economists who have analyzed professional baseball have concluded that two distinctive features of its labor market the reserve clause and player draft influence the distribution of wealth between players and owners but do not affect the allocation of playing talent among teams such conclusions which are strongly at variance with laymen s views of such matters are derived from theoretical considerations rather than empirical examinations our paper examines data from the two decades of major league history and concludes that on the basis of that data the empirical generalizations of previous economists do not appear to be justified

profit sharing credit market imperfections and equilibrium unemployment we investigate the interaction between labour and credit market imperfections for equilibrium unemployment in the presence of profit sharing in a partial equilibrium with exogenous outside options increased bargaining power of banks has adverse employment effects in a general equilibrium with endogenous outside options this relationship is frequently reversed reduced credit market imperfections increase equilibrium unemployment if the labour market imperfections measured by the bargaining power of trade unions are sufficiently strong and the benefit replacement ratio is sufficiently high finally we show that higher bankruptcy risks increase equilibrium unemployment under similar conditions

ethical spillovers in firms evidence from vehicle emissions testing in this paper we explore how organizations influence the unethical behavior of their employees using a unique data set of over three million vehicle emissions tests we find strong evidence of ethical spillovers from firms to individuals when inspectors work across different organizations they adjust the rate at which they pass vehicles to the norms of those with whom they work these spillovers are strongest at large facilities and corporate chains and weakest for the large volume inspectors these results are consistent with the economics literature on productivity spillovers from organizations and peers and suggest that managers can influence the ethics of employee behavior through both formal norms and incentives the results also suggest that employees have persistent ethics that limit the magnitude of this influence these results imply that if ethical conformity is important to the financial and legal health of the organization managers must be vigilant in their hiring training and monitoring to ensure that employee behavior is consistent with firm objectives

sunk investment bargaining and choice of capital structure this paper shows how a firm might optimally choose debt to affect the outcome of bilateral bargaining with workers or other input suppliers it is shown that debt may alleviate the well known underinvestment problem associated with the inability to write precommitment contracts also in such circumstances debt could be pareto improving over complete equity financing the relationship between the optimal level of debt and asset specificity of investment and bargaining power of the firm vis a vis the workers is explored the williamson conjecture that higher asset specificity will lead to less debt is shown not to be valid in general

profit sharing and optimal labour contracts this paper examines the effect of introducing profit sharing arrangements into union firm contracts it is shown that if bargaining is efficient using the generalized nash bargain profit sharing has no effect on the bargaining outcome this is true both when the profit sharing restriction is exogenously imposed by legislation and when profit sharing is part of the optimal contract however if the initial bargaining process is inefficient because direct negotiation on total employment is precluded an optimal contract can use profit sharing to establish the efficient bargaining outcome both types of bargaining models have been employed in the literature

debt and wage negotiations a bankruptcy based approach the role of debt in wage negotiations is considered in a framework where both the entrepreneur and the workforce are indispensable in production when workers and the entrepreneur fail to reach an agreement the firm eventually defaults bankruptcy is represented as a three party bargaining game among the entrepreneur workers and lenders we show that debt financing by reducing workers bargaining power increases the firm s share of surplus and improves the incentives to invest further our model allows for overborrowing the firm borrows more than required by its productive activity as well as underinvestment due to wealth constraints i introduction as asserted by grout 1984 the inability of labour unions to make wage commitments creates an underinvestment problem when wages can be negotiated after investment has been sunk the entrepreneur chooses an inefficiently low investment level in this paper we reconsider grout s underinvestment problem by concentrating on the role of debt in wage bargaining when long term labour contracts cannot be written as we show through an explicit analysis of the threat of bankruptcy the extent of underinvestment depends on whether leverage can influence the distribution of surplus between wages and profits we analyse the relation between debt and wages in a strategic bargaining framework assuming that delays in agreement will reduce the surplus

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

a bargaining model of financial intermediation abstract in a financial market the investor searches for investment projects and bargains with the entrepreneur about the financial contract alternatively he may delegate search and bargaining to a financial intermediary delegation generates a commitment advantage in bargaining it may however induce excessively risky investments because the investor cannot monitor the intermediary s search behavior this restricts the parameter constellations under which equilibrium intermediation occurs competition may not reduce the intermediaries profits to zero because of incentive restrictions

are free agents perspicacious peregrinators the perspicacious peregrinator model of solomon w polachek and francis w horvath hypothesizes that individuals decide to migrate based on the size of potential gains this model is tested using themigration decisions of major league baseball players between 1977 and1979 potential gains are measure d as the differ ence between earnings with and without migration a distinction is made between players eligible for free agency and those ineligible so as to a ccount for differences in the level of competition for players services in diff erent segments of this market migration is found tobe related to the expected gain from earnings for players eligible for free agency but not for those ineli gible copyright 1987 by mit press

profit sharing wage bargaining and unemployment bertil holmlund the paper examines the effects of profit sharing in an economy with decentralized wage bargaining profit sharing makes workers income more sensitive to wage changes and this leads to wage moderation but economy wide profit sharing may also improve workers outside income opportunities and this strengthens the union s hand in bargaining and tend to raise wages it turns out that equilibrium unemployment is reduced by profit sharing as long as the elasticity of substitution between labor and capital is less than one whereas unemployment is increased if the elasticity of substitution is greater than one i introduction martin weitzman s book the share economy 1984 proposes fundamental changes in labor compensation systems the basic idea is that the traditional fixed wage remuneration should be replaced by a scheme with a fixed base wage plus a share of profits or revenues hiring decisions are assumed to rest with the employers who will expand employment until workers marginal product equals the pre determined base wage the latter is taken to be lower in the profit sharing economy than the wage level in the corresponding wage economy the lack of widespread use of profit sharing arrangements is attributed to externalities and weitzman therefore argues in favor of tax incentives to promote the sharing system does profit sharing actually lead to wage moderation this paper examines this issue within a simple model where wages are set through negotiations between unions and firms profit sharing creates a direct link between the performance of the firm and workers income and this involves incentives to settle for lower wages and higher employment an economy wide profit sharing system will however also affect workers income opportunities outside their current firm this will strengthen the union s hand in bargaining by raising its threat point i e the expected income available to workers if an agreement is not reached in the wage negotiations it turns out that the general equilibrium effect of economy wide profit sharing is crucially dependent on the elasticity of substitution between labor and capital profit sharing leads to wage moderation thereby reducing unemployment when the elasticity of substitution is less than one but increases unemployment when the elasticity of substitution is greater than one the next section of the paper outlines the bargaining model that is used in the analysis sections 3 and 4 examine profit sharing and section 5 concludes the paper ii bargaining in a wage economy imagine an economy with a perfectly competitive output market with output prices normalized to unity suppose that wage negotiations take place at the level of the firm and that the employer determines the employment level after the wage negotiations have been settled to characterize the bargaining outcome we invoke the widely used right to manage framework of nickell and andrews 1983 in this model there is bargaining over the wage in contrast to a monopoly union model in which the union simply calls out its desired wage to which firms passively respond by adjusting employment to the profit maximizing level the negotiated wage is assumed to be given by a nash bargain between the local union and the firm and the bargain pertaining to firm union pair i maximizes the product substitute mathematical expression omited 1 where lambdal sub i is workers utility from agreement and lambdal sub 0 is the union s threat point i e the utility available in case of disagreement pi sub i is the firm s profits when there is an agreement and pi sub i is the fall back level of profits the degree of union power is captured by beta if beta is equal to one we have the monopoly union case where the union simply chooses its desired point on the labor demand curve each union is assumed to care about the expected income of its members

is there a tradeoff between bank competition and financial fragility abstract we use a model of mean shifting investment technologies to study the relationship between market structure risk taking and social welfare in lending markets introduction of loan market competition is shown to reduce lending rates and to generate higher investments without increasing the equilibrium bankruptcy risk of borrowers hence there need not be a tradeoff between lending market competition and financial fragility such a tradeoff may not emerge either when banks compete by conditioning interest rates on investment volumes irrespectively of whether credit rationing takes place or not

credit market imperfections and persistent unemployment abstract this paper develops the thesis that credit market frictions may be an important contributor to high unemployment in europe when a change in the technological regime necessitates the creation of new firms this can happen relatively rapidly in the u s where credit markets function efficiently in contrast in europe job creation is constrained by credit market imperfections so unemployment rises and remains high for an extended period the data show that there has not been slower growth in the most credit dependent industries in europe relative to the u s but the share of employment in these industries is lower than in the u s this suggests that although credit market imperfections are unlikely to have been the major cause of the increase in european unemployment they may have played some role in limiting european employment growth

shirking or stochastic productivity in major league baseball reply firms produce in an uncertain environment the long literature on the theory of the firm under uncertainty has focused on demand uncertainty 4 18 14 the unanimity question 8 15 or technological uncertainty 23 1 7 regarding the latter an interesting question is how that randomness enters the technology one source might be purely unpredictable factors such as the weather or accidents agricultural output for instance is dependent not only on the quantity of inputs hired but on the amount of rainfall natural disasters and the like a different source of technical uncertainty is variations in the quality and reliability of the input services hired in professional sports for example the performance of an athlete varies from game to game and season to season the reliability of capital a crucial issue in nuclear power generation is another example reflecting the stochastic nature of input productivity one economic consequence of this randomness of productivity is that an employer cannot know a priori the input s value but rather must form an estimate of its expected marginal contribution spence 20 showed how an employer uses signals such as educational attainment to determine if a worker is worth hiring once hired the firm still faces the difficulty of determining if a below average realization of productivity resulted from shirking by the employee or a bad draw from his productivity distribution this agency problem outlined in detail by alchain and demsetz 1 and holmstrom 10 has important implications to our perception of work effort especially in the presence of long term labor contracts allegations of shirking due to long term job security have been associated with seniority rights professional athletes and in the academic institution of tenure

firm level employment labour market reforms and bank distress abstract we explore the impact of financial frictions on the employment effect of labour market reforms our study combines a new cross country reform database on labour market reforms with matched firm bank data for nine euro area countries over the period 1999 to 2013 while we find that labour market reforms are overall effective in increasing employment restricted access to bank credit can undo up to half of medium to long term employment gains at the firm level entrepreneurs without sufficient access to credit cannot reap the full benefits of more flexible employment regulation

deleveraging and monetary policy japan since the 1990s and the united states since 2007 japan s deleveraging became serious because the negative feedback loop was japan s deleveraging became serious because the negative feedback loop was not contained in its early stage of development the japanese government did not not contained in its early stage of development the japanese government did not act promptly to recapitalize banks that were suffering from the erosion of their act promptly to recapitalize banks that were suffering from the erosion of their capital buffer due to their large holdings of stocks as a result japan s banks only capital buffer due to their large holdings of stocks as a result japan s banks only slowly recognized bad loans while stopping lending to promising new projects slow slowly recognized bad loans while stopping lending to promising new projects slow but protracted asset sales resulted in a long period of asset price declines nonfi nanbut protracted asset sales resulted in a long period of asset price declines nonfi nancial companies perceived the deterioration of their balance sheets as permanent cial companies perceived the deterioration of their balance sheets as permanent and cut spending drastically as japan s economy stagnated the total amount of bad and cut spending drastically as japan s economy stagnated the total amount of bad loans turned out to be much larger than initially estimated loans turned out to be much larger than initially estimated

labor force migration and allocative efficiency in the united states the roles of information and psychic costs this paper examines the relative importance of information psychic and other costs of relocation as mitigating factors off sets to spatial earnings differentials within the migration decision the method employed for this examination is based upon 1 observation of relationships between the geographic allocation and personal characteristics of labor force migrants and 2 inferences drawn from these observations about the relative importance of various relocation cost components empirical analyses of the migration decision based upon this indirect method provide important insights on both the determinants and allocative efficiency of interstate labor force migration in the united states excerpt

post migration earnings profiles an application of human capital and job search models several studies have noted that post migration earnings of migrants rise more rapidly than earnings of non migrants 13 42 9 human capital models would attempt to explain this by differences in the investment profiles of migrants and non migrants these differences could be due to migration selectivity whereby migrants have different investment incentives due to ability or motivation or to the loss of human capital by migrating and the recoupment of this capital after migration search models would explain this phenomenon by imperfect information migrants may have less information about wage distributions at the destination than non migrants enter the destination job market at a low wage and engage in subsequent post migration search for better earnings or as yezer and thurston 15 have suggested search may be selective and migrants whose reservation wages are not met after some time at the destination leave i e we observe migrants having steeper earnings profiles since those who do not obtain high earnings leave as one might expect neither of these pure models is alone sufficient to explain the factors that create the different earnings streams instead they can be viewed as complementary explanations the failure to recognize that migration involves both job search and human capital changes could lead to biased tests of hypotheses originating from only one model a good example of this and the one addressed in this paper is testing hypotheses regarding the source of differences between experience earnings profiles of migrants and non migrants for example yezer and thurston 15 establish and test the hypothesis that the distance migrated should be positively associated with income gains after migration they find the expected relation using regressions with a distance dummy 2 however it is well known that more educated individuals travel greater distances 11 and generally have steeper earnings profiles than less educated persons the correlation between education and distance migrated makes any test of the yezer and thurston hypothesis biased toward accepting their search model when education is not controlled

steady state unemployment under profit sharing this paper demonstrates how asymmetric treatment of high seniority insider workers and non tenured outsiders gives rise to bad macroeconomic st eady states in a wage economy the framework uses a nash bargaining solution where workers may bargain over pay but firms control hiring profit sharing is then considered as an alternative payment mechanism having the automatically corrective incentive property that employers want to hire more outsiders given the assumptions of the model it is shown that widespread profit sharing results in lower unemployment and more output even though it is individually rational for insiders to prefer wages over profit shares copyright 1987 by royal economic society

the effects of profit sharing on employment wages stock returns and productivity evidence from uk micro data this paper provides evidence based on u k firm level data that 1 the authors cannot reject the view that profit sharing firms view the total level of remuneration as the marginal cost of labor which is contrary to much of weitzman s analysis 2 there is some support for the popular view that profit sharing raises total remuneration and can therefore be inflationary and 3 the introduction of profit sharing does lead to higher productivity but this combined with the employment reducing consequences of 2 leads the authors to conclude that the net employment effect is small and uncertain copyright 1990 by royal economic society