strikes as a result of imperfect information this paper proposes a model of the bargaining process that recognizes that negotiators have only imperfect information at their command the author argues that the probability of a strike occurring will increase if one party bases its perception of the opponent s position on the same variables employed to form its own position when the opponent s position is in fact based on different variables strike probability is therefore assumed to be related to movements in variables of interest to only one side the model is tested on a sample of fourteen bargaining relationships drawn from the series wage chronology published by the bureau of labor statistics which details settlements between particular firms and unions over a period of about thirty years estimates of strike probability are derived from the maximum likelihood logit procedure the findings suggest that although both relative and absolute wage increases in a firm have a negative effect on strike frequency relative changes are more important

a dynamic analysis of the marketable permits approach to global warming policy a comparison of spatial and temporal flexibility abstract this paper presents a generalized dynamic model of greenhouse gas emissions trading under constraints on the volume of transactions an empirical version of the model is used to evaluate potentially cost saving flexibility mechanisms joint implementation and clean development mechanism and potentially cost adding restrictions supplementarity of the kyoto protocol the results indicate the greatest gains would stem from extending permit trading spatially among industrialized nations although sizable gains would also emanate from the inclusion of developing countries gains from intertemporal trading banking and borrowing are meager restrictions on the volume of permit purchases have by far the most costly effect when developing countries are incorporated into trading sensitivity tests with respect to differential discount rates across countries and technological change indicate the results are robust

imperfect information and strikes an analysis of canadian experience 1967 82 to test their hypothesis that the propensity to strike is affected less by the actual balance of bargaining power than by the parties uncertainty about their relative power the authors perform a probit analysis of data on 1 871 collective agreements negotiated in the canadian manufacturing sector between 1967 and 1982 they find consistent with their hypothesis that some characteristics of individual bargaining units the relevant industries and the economy as a whole that affect both the quantity and reliability of information needed to assess relative bargaining power do have significant value in predicting strike incidence across industries and over time

competing models of international lending activity abstract four competing models of the world bank s lending to developing countries are constructed and econometrically estimated by pooled time series and cross section data the analysis suggests that a model combining economic and political determinants performs best besides per capita income inflation balance of payment and budget deficit external debt and past growth political determinants such as the capitalist climate or political instability are also important as well as a recipient country s former status as a colony or dominion this politico economic model is successfully used to forecast the distribution of ibrd loans and ida credits among the developing countries

a conditional analysis of movers housing responses abstract movers responses to the five year trend in income prior to the move are studied using data from the panel study of income dynamics and the new slopes only option in the search program in osiris other events around the time of the move mask or dominate the income effects and even for otherwise stable families there are subgroup differences in the income elasticities modelling housing demand clearly requires such rich response data imbedded in dynamic simulation models

unions and strikes with asymmetric information strikes seem to be a pareto inefficient outcome of bargaining between a union and a firm however this paper shows that strikes can be the outcome of rational behavior by both agents if the firm has more information than the union concerning the state of nature the union can use strikes as a way of gaining information the paper uses an asymmetric information model where the firm has information about the state i e profitability that the union does not know the schedule of wage offers by the union then depends on the probability that a given state will occur

productivity and distribution effects of codetermination in an efficient bargaining model codetermination can be regarded as an extreme regulatory intervention of the legislator in the labor market which might affect the efficiency of production and the bargaining power of labor based on a model that covers both efficient bargaining and employment bargaining a simple equation is derived that is suited to empirical testing the empirical test is based on german data and includes years before and after the extension of german codetermination law in 1976 the estimates determine the productivity of labor and relative bargaining power of capital and labor it turns out that codetermination does not affect productivity but leads to a significant increase in workers bargaining power and the distribution of rents

will markets direct investments under the kyoto protocol lessons from the activities implemented jointly pilots under the kyoto protocol countries can meet treaty obligations by investing in projects that reduce or sequester greenhouse gases elsewhere prior to ratification treaty participants agreed to launch country based pilot projects referred to collectively as activities implemented jointly aij to test novel aspects of the project related provisions relying on a ten year history of projects we investigate the determinants of aij investment our findings suggest that review agency preferences related to national political objectives and possibly deeper cultural ties influenced project selection and limited the number of aij projects bilateral ties also appear to have affected investment decisions directly possibly because of related transaction costs the results suggest an investment process different from the assumptions that underlie well known estimates of cost savings related to the protocol s flexibility mechanisms we conclude that if approaches developed under the aij programs to approve projects are retained the scale of investment under kyoto s flexibility provisions and their cost savings will be less than what is generally anticipated and the pattern of investment less driven by abatement costs

the macroeconomic strike model a study of seventeen countries 1948 1975 this paper reports the results of an analysis of data on industrial conflict strikes and lockouts in seventeen oecd countries during the period 1948 75 a number of models are tested on this broad data set including the major elements of the ashenfelter and johnson model contrary to ashenfelter and johnson s results for the united states this study finds for most countries a positive relationship between the number of conflicts and the rate of increase in real wages in manufacturing further the increase in nominal wages produces stronger results in all models tested than the increase in real wages the effect of unemployment is unstable across countries and only one of two political variables yields even modest results the authors suggest that an explanation of their findings might be found in the relationship between changes in the wage structure and changes in the level of conflict

multifirm unions and the incentive to adopt pattern bargaining in oligopoly abstract this paper develops a model of wage bargaining between an industry wide trade union and firms in an oligopoly and considers the circumstances under which the union prefers pattern bargaining that is negotiating contracts in a sequential manner to simultaneous bargaining with the firms the paper goes on to consider the importance of the bargaining order in pattern bargaining when the firms are asymmetric the analysis shows that the union gains by first targeting a firm which is in a relatively weak bargaining position i e impatient to settle or a firm with relatively large profits

activities implemented jointly another look at the facts abstract the first conference of the parties to the united nations framework convention on climate change in berlin established a pilot phase of so called activities implemented jointly aij this pilot phase started in 1995 and was to end in 1999 it was prolonged at the fourth conference of the parties in buenos aires 1998 for a yet undetermined period after 2000 this paper is an empirical study of aij experience in the first five years 1995 1999 based on 96 aij from the unfccc s web site as of april 30 1999 and a separate study on seven aij projects of japan the main results of this study are 1 aij investment shows a pattern of regional specificity with rather divergent regional investment portfolios in the united states japan and europe this pattern can be traced back to differences in the national aij programs of investors and hosts on the one hand and to specific ways of minimizing transaction cost on the other e g by attaching aij to established institutional links of development co operation or by trading in the neighbourhood and 2 aijs are overwhelmingly no regret measures with almost zero or negative cost transaction costs of reporting have been minimized by applying simple and straightforward methods of baseline determination the exception to this is the verification procedure where expensive external verification prevails

emissions trading and transaction costs analyzing the flaws in the discussion abstract although emissions trading lowers the costs of climate change mitigation transaction costs e g to find a trading partner may reduce its cost effectiveness some economists claim that transaction costs for joint implementation ji and clean development mechanism cdm projects will be higher than for international emissions trading iet transfers arguing that projects require advance approval whereas permit transfers can be automatically registered and checked annually however this article demonstrates the incompleteness of their views by both analyzing empirical data and discussing the theoretical conditions under which transaction costs decrease for ji and cdm and increase for iet

the market for tradable ghg permits under the kyoto protocol a survey of model studies abstract this paper gathers results from 25 models of the market for tradable greenhouse gas ghg emission permits under the kyoto protocol due to diverging projections of emissions growth and different modeling approaches the model results differ substantially the average market volume is approximately 17 and 33 billion usd under global trading and annex b trading respectively including non carbon ghg lowers compliance costs and permit prices in the absence of the us permit demand roughly equals hot air from the former soviet union these countries can increase their revenues from selling permits by restricting supply which raises the permit price

the economic and organizational basis of early united states strikes 1900 1948 this paper examines the question of whether economic factors played an important role in determining strike activity in the united states in the first half of the twentieth century a review of recent research shows one author david snyder concluding that economic factors mattered little during that period and that union organization and political variables explained much more and another p k edwards concluding the opposite a retest of these authors analyses employing ordinary least squares regression and a variety of measures suggests that snyder s position is more sound this author argues however that edwards was correct in claiming that economic factors are major determinants of the extent of unionism as well as of strike activity and thus one needs to apply a two stage least squares test of the snyder hypothesis when that is done the results show that economic variables are highly significant determinants of strike activity throughout the pre 1949 period but for the subperiod 1921 29

tenure choice and the demand for housing this paper deals with the estimation by means of nonlinear methods of preference parameters from observation of behaviour in housing markets it differs from previous work on housing market behaviour in several important aspects first it treats the choice of tenure mode that is whether to rent or own and the housing consumption decision as a joint decision second it explicitly uses the same behavioural model in analysing these discrete and continuous elements of housing market behaviour third it allows for an analysis of the role of capital market imperfections and discriminatory practices in constraining housing market decisions

transaction costs in pollution markets an empirical study this paper studies a market in pol lution permits launched in los angeles in 1994 this tradable permit market has been projected to lead to substantial cost savings due to the flex ibility it provides firms in terms of compliance with environmental regulation this paper shows that transaction costs can play an important role in the initial years of the program the transac tion cost variables have been defined to include search costs and information costs these costs are significant in explaining non participation of some firms in the market the study also draws policy implications for the development of future emissions trading programs jel q28 q25

comparative economic voting britain france germany italy likelihood of a vote for the incumbent coalition in contrast personal economic circumstances no matter how measured demonstrate nonexistent to weak effects on vote choice overall economic conditions emerge as a relatively important vote determinant when a more properly specified general multi equation model of the vote is estimated economics shows itself to be as powerful as traditional factors used to explain the western european vote in particular economic variables exceed the impact of partisan identification in britain and roughly equal it in germany moreover the economic variables exercise more influence than the social cleavages of class and religion everywhere except italy

estimating strike effects in a general model of prices and quantities estimates of the effect of strikes on the production price and purchases of north american automobiles are provided over the period 1966 79 the estimates are based on a model that reflects the decisions of both consumers and producers and that captures important intertemporal adjustments before during and after the strike to allow for inventory buildup in anticipation of the strike as well as inventory depletion during the strike and replacement afterward the results generally indicated that both consumers and producers rationally responded to the expected and the actual event of the strike through a variety of related intertemporal adjustments and while the initial effects are in some instances quite pronounced the long run effects are usually minimal

dynamic aspects of consumer decisions in housing markets abstract in this study we estimate a model of the joint tenure length of stay and consumption level choices of families in the housing market this is the first attempt we know of to do this type of estimation the data pertain to a single residence spell per household from the panel study of income dynamics wealthier and better educated families were found to be more mobile in terms of housing consumption after accounting for tenure choice and controlling for planned length of stay renters and owners were found to have similar demand function relationships in terms of the impacts of socioeconomic variables this confirms the notion that renters and owners are not differentiated by housing choice but simply in life cycle circumstances as to when it is optimal to own or rent

tradeable emission permits and the control of greenhouse gases this article reiterates the case for tradeable permits as a global policy option for limiting greenhouse gas emissions and considers the detailed design of a global tradeable permit regime emphasising the importance of the initial assignment of property rights and arguing that the relevant property rights in this case are the rights of every member of the world community to share in a sustainable global atmosphere and climate the allocation of permits should therefore be done on a per capita basis across the world community with the result that rents generated by the process of reducing carbon emissions would accrue to non polluters most of whom live in the south the international transfers of income and wealth implied by the proposed scheme are large but feasible there is therefore a real prospect that an international convention on carbon dioxide emissions could end the debt crisis and finance sustainable development in the south

the industrial organization of congress or why legislatures like firms are not organized as markets this paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions like market institutions legislative institutions reflect two key components the goals or preferences of individuals here representatives seeking reelection and the relevant transactions costs we present three conclusions first we show how the legislative institutions enforce bargains among legislators second we explain why given the peculiar form of bargaining problems found in legislatures specific forms of nonmarket exchange prove superior to market exchange third our approach shows how the committee system limits the types of coalitions that may form on a particular issue

employee participation in management bargaining power and wages the paper analyzes the impact of employee participation in management on bargaining power and wages it presents an empirical model which allows for variable bargaining powers of the parties who jointly control the firm and it tests this model with postwar west german data the results suggest that parity codetermination has had a positive effect on earnings in iron and steel but not in coal mining moreover it appears that the positive effect in iron and steel could be due to increased profitability rather than an increase in the bargaining power of labor as defined in this study

bayesian inference for comparative research rv egression analysis in comparative research suffers from two distinct problems of statistical inference first because the data constitute all the available observations from a population conventional inference based on the long run behavior of a repeatable data mechanism is not appropriate second the small and collinear data sets of comparative research yield imprecise estimates of the effects of explanatory variables we describe a bayesian approach to statistical inference that provides a unified solution to these two problems this approach is illustrated in a comparative analysis of unionization a widely used tool in quantitative comparative politics is the linear regression model estimating relationships between institutional and economic variables observed for a set of countries constituting some population of interest a brief survey of recent comparative research finds no shortage of work of this type for instance remmer 1991 identifies economic crisis as a source of electoral volatility in latin american countries in the 1980s robertson 1990 presents evidence that institutions moderating the transaction costs of negotiations between capital and labor reduce industrial conflict and golden 1993 finds that union wage moderation in industrialized democracies results from coordinated collective bargaining although the methodological advantages are well documented jackman 1985 we identify two distinct problems of statistical inference endemic to this type of quantitative comparative research first because the data constitute all the available observations from a population conventional inference based on the long run behavior of some repeatable data mechanism is not appropriate second because data sets tend to be small and collinear the effects of explanatory variables are estimated imprecisely in most applications the first problem is generally ignored and the second is solved by imposing restrictions on the regression model to obtain sensible results the bayesian model of statistical inference provides a unified solution to these two distinct problems of quantitative comparative research two features of bayesian inference are important in this context first probability is conceived subjectively as characterizing a researcher s uncertainty about the parameters of a statistical model this subjective probability concept seems particularly useful in comparative settings where the data are typically convenience samples not generated by a known probability mechanism such as random sampling second bayesian inference allows the inclusion of other information in addition to the quantitative sample information again this seems useful in the comparative context where rich historical material is commonly available sparking ideas for researchers but formally discarded in the final analysis in the bayesian approach this historical material can be formally incorporated into the analysis we begin by detailing why the nonstochastic and weak data typical of comparative research are problematic for conventional linear regression analysis we next introduce some ideas about bayesian inference and describe bayesian regression analysis these ideas are applied to a comparative analysis of unionization the subject of a recent exchange in the american political science review between michael wallerstein and john stephens stephens and wallerstein 1991 wallerstein 1989 the bayesian regressions we present are supplemented with a sensitivity analysis that investigates how our conclusions depend upon the sample data and our prior beliefs although we survey some ideas in bayesian statistics a full introduction to the bayesian approach to statistical inference is beyond our scope here good book length treatments are pollard 1986 lee 1989 and at a slightly higher level press 1989 our intention here is to spotlight problematic but ignored issues of statistical inference in a common area of application the bayesian alternative that we present represents just one way forward to address these inferential problems

the new economics of organization over the last ten years or so an important new approach to the study of organizations has emerged within economics it is perhaps best characterized by three elements a contractual perspective on organizational relationships a theoretical focus on hierarchical control and formal analysis via principal agent models this paper provides political scientists with an overview of the new economics of organization and explores its implications for the study of public bureaucracy so far positive political theory has not contributed much to our understanding of public bureaucracy in part this is due to the unsympathetic treatment that rational modeling and most other modes of quantitative analysis have long received from students of public administration the other side of the coin however is that positive theorists have not made much of an effort to develop theories of bureaucracy their concerns have centered around two basic mechanisms of social choice voting and markets and they have devoted little systematic attention to a third mechanism that is clearly important for understanding how societies and other aggregates make collective decisions this third and relatively unexplored mechanism is hierarchy movement toward a positive theory of hierarchies would fill a serious gap in the social choice literature while at the same time making a theoretical contribution that strikes to the essence of public bureaucracy indeed of all organizations in fact significant steps toward a positive theory of hierarchies have very recently been taken but by economists not political scientists in small numbers of course economists made contributions to the study of public bureaucracy some time ago with the pioneering works of downs 1967 tullock 1965 and niskanen 1971 but this new wave of theoretical work is different it is already a large complex body of literature that is the focus of innovation and excitement among a growing number of economists and it reflects an unusual degree of theoretical coherence and cumulative effort work in this tradition tends to receive orientation from a distinctive economic approach to the analysis of organizations an approach perhaps best characterized by three elements a contractual perspective on organizational relationships a focus on hierarchical control and formal analysis via principal agent models this approach has emerged from recent attempts to move beyond the neoclassical theory of the firm which assumes away all organizational considerations to a theory of economic organizations that can explain why firms corporations and other enterprises behave as they do propo

technology and technical change in the mit eppa model potential technology change has a strong influence on projections of greenhouse gas emissions and costs of control and computable general equilibrium cge models are a common device for studying these phenomena using the mit emissions prediction and policy analysis eppa model as an example two ways of representing technology in these models are discussed the sector level description of production possibilities founded on social accounting matrices and elasticity estimates and sub models of specific supply or end use devices based on engineering process data a distinction is made between exogenous and endogenous technical change and it is shown how because of model structure and the origin of key parameters such models naturally include shifts in production process that reflect some degree of endogenous technical change as a result the introduction of explicit endogenous relations should be approached with caution to avoid double counting

regulatory constraints on environmental markets abstract there have been several recent regulatory reforms aimed at promoting economic efficiency these reforms fall into two broad categories those aimed at promoting competition in specific industries and those aimed at addressing problems that cut across several industries this analysis examines two reforms that fall into the latter category both of these policies are specifically designed to enhance environmental quality while promoting cost savings the analysis focuses on the biases and inefficiencies associated with the use of these policies the paper concludes with a discussion of the possibility of designing more efficient alternatives in light of the political constraints that are imposed on regulators

the effect of national culture on the choice of entry mode characteristics of national cultures have frequently been claimed to influence the selection of entry modes this article investigates this claim by developing a theoretical argument for why culture should influence the choice of entry two hypotheses are derived which relate culture to entry mode choice one focusing on the cultural distance between countries the other on attitudes towards uncertainty avoidance using a multinomial logit model and controlling for other effects the hypotheses are tested by analysing data on 228 entries into the united states market by acquisition wholly owned greenfield and joint venture empirical support for the effect of national culture on entry choice is found

transaction costs and tradeable permits abstract tradeable permit systems are at the center of current interest and activity in market based reforms of environmental policy because these systems can offer significant advantages over conventional approaches to pollution control unfortunately claims made for their relative cost effectiveness have often been exaggerated transaction costs which may be significant in these markets reduce trading levels and increase abatement costs in some cases equilibrium permit allocations and hence aggregate control costs are sensitive to initial permit distributions providing an efficiency justification for politicians typical focus on initial allocations

wage effects of increased union coverage methodological considerations and new evidence although many studies show a positive relationship between extent of unionization and union members wages some analysts suggest that this relationship could reflect a concentration of labor organization in industries with potentially high wage gains rather than unions efficacy in raising wages consistent with that speculation studies across occupations or geographic areas generally show a much weaker relationship between unionization and wages than do studies across industries the authors of this study argue however that the weakness of the relationship found in some empirical research is due to the use of data sets mixing local market industries characterized by local bargaining with national market industries characterized by national bargaining an empirical analysis supports this hypothesis wages are positively correlated with the extent of unionization in a local market industry supermarkets but not in a national market industry aerospace

bargaining power fear of disagreement and wage settlements theory and evidence from u s industry the paper develops and estimates a theoretical model of wage determination and union nonunion wage differentials in order to overcome the institutional ctiticisms of the formal bargaining literature the paper generalizes the nash zeuthen harsanyi model by linking the solution to the institutional concepts of bargaining power and fear or cost of disagreement and by making the outcome depend not only on endogenous but also on exogenous factors an operational specification of bargaining power and fear of disagreement allows the model to be estimated with data covering twelve companies and trade unions during the period from mid 1950 s to the late 1970 s while giving limited support to the nashzeuthen harsanyi solution the empirical analysis indicates that the bargaining outcome usually deviates from the nash zeuthen harsanyi point and in accordance with the institutionalist claim that it varies significantly with exogenous factors contrary to the traditional labor economics view the results do not support the general conclusion that the bargaining solution lies on the marginal revenue product curve of labor instead the relevant coefficients suggest that for many firms and unions the outcome might be better characterized by the efficient contract vertical contract curve

bargaining theory inflation and cyclical strike activity in manufacturing this paper presents a theoretical and empirical analysis of cyclical movements in strike activity the first part of the paper develops a bargaining model that demonstrates the crucial role of limi

strategic delegation and delay in negotiations over the bargaining agenda this paper develops a game theoretic model that endogenizes the items included in the bargaining agenda the model s equilibria suggest two possible sources of inefficiency 1 exclusion of items from the bargaining agenda and 2 delay to agreement due to negotiations over the bargaining agenda evidence from union contract negotiations is provided to demonstrate the relevance of these sources of inefficiency the model also allows strategic delegation by the union in certain equilibria the surplus maximizing union selects wage maximizing delegates such as senior union members to negotiate the contract

transaction cost economics and cross national patterns of industrial conflict a comparative institutional analysis at the core of a capitalist system is an implied coalition between labor and capital built upon a system of exchange and compromise without capital the material condition upon which labor s interests are realized would be impossible likewise without labor s consent to exchange wages for future investment capital could not procure the profits and savings necessary for its reproduction and transformation organizing stable and cost efficient class coalitions has long been recognized as not merely an economic priority but a political challenge yet some democracies have met this challenge more successfully than others for the student of comparative political economy an enduring question remains why the present study is an attempt to provide an answer that complements and integrates the more common macroand microanalytic studies of industrial conflict it is argued here that a useful approach is to explicate some of the major microeconomic dynamics that condition exchanges between labor and capital and to demonstrate how institutional devices designed to accommodate political representation and conflict resolution facilitate or impede the process of class compromise by employing the logic of transaction cost economics the analysis highlights the comparative institutional elements fundamental to economizing on the costs of exchange shaping consensus within a political economy s industrial relations system the resulting transaction cost efficiency model of industrial conflict specifies the ex ante cost factors price margin of transaction and the institutional control of bounded rationality and the ex post cost factors legislative polarized pluralism executive hegemony and the frequency of general elections central to the process of building and sustaining class coalitions the model is tested on data drawn from 19 democracies covering the years 1965 83 use of simulation models reveals the relative trade offs associated with different patterns of ex ante and ex post cost structures

the role of economics in climate change policy many policy problems have frustratingly long histories of inefficient regulation that can be difficult or impossible to reverse even where large efficiency gains might be had from doing so climate change is an exception however because little real action has been undertaken to date it presents an unusual opportunity for an efficient economic policy to be employed right from the beginning however the opportunity could easily be lost ongoing negotiations conducted under the auspices of the united nations framework convention on climate change have so far produced the kyoto protocol a deeply flawed agreement that manages to be both economically inefficient and politically impractical in this article we examine the key economic characteristics of climate change and argue that economic theory provides good guidance on the design of an efficient and politically realistic policy because climate change involves vast uncertainties and has potentially enormous distributional effects neither of the standard market based environmental policy instruments is a viable approach a tradable permit system would be inefficient and an emissions tax would be politically unrealistic however a hybrid policy combining the best features of the two would be an efficient and practical approach we then compare our hybrid proposal to the kyoto protocol and argue that it overcomes the protocol s shortcomings

technological change in economic models of environmental policy a survey this paper provides an overview of the treatment of technological change in economic models of environmental policy numerous economic modeling studies have confirmed the sensitivity of mid and long run climate change mitigation cost and benefit projections to assumptions about technology costs in general technical progress is considered to be a noneconomic exogenous variable in global climate change modeling however there is overwhelming evidence that technological change is not an exogenous variable but to an important degree endogenous induced by needs and pressures hence some environmenteconomy models treat technological change as endogenous responding to socio economic variables three main elements in models of technological innovation are i corporate investment in research and development ii spillovers from r d and iii technology learning especially learning by doing the incorporation of induced technological change in different types of environmental economic models tends to reduce the costs of environmental policy accelerates abatement and may lead to positive spillover and negative leakage

the structure of class conflict in democratic capitalist societies the article presents a theory of class conflict between workers and capitalists who pursue their material interests under a form of societal organization that combines private ownership of instruments of production with representative political institutions there exist economic and political conditions under which both classes would simultaneously choose courses of action that constitute a class compromise workers consent to the institution of profit and capitalists to democratic institutions through which workers can effectively press claims for material gains when these conditions hold and a compromise is in force the role of the state consists in institutionalizing coordinating and enforcing the terms of a compromise that represents the preferences of workers as well as capitalists the combination of private ownership of the instruments of production with representative political institutions based on widespread suffrage constitutes a compromise between workers who consent to the private appropriation of profit by owners of capital and capitalists who accept the democratic institutions through which workers can make effective claims for an improvement of their material conditions this form of societal organization was con

theory and estimation in the economics of housing demand the main purpose of this paper is to review recent theoretical and empirical developments in the economics of housing demand in particular we ask what is known concerning the permanent income elasticity of housing demand vis a vis the current or measured income elasticity what is known concerning price elasticities what is the appropriate functional form for housing demand equations what is the role of demographic variables what is known concerning dynamic aspects of housing demand what appear to be the major sources of bias in existing estimates of demand equations

the political model of strikes a new twist the political model of strikes in which work stoppages are viewed as the result of worker intransigence has occupied an influential position in the strikes literature since its empirical specification by ashenfelter and johnson 1 there are two basic reasons for the popularity of the model first it is an eminently accessible treatment in a literature of highly abstract bargaining models most of which do not have a direct bearing on strikes second until the ashenfelter johnson study little progress had been made in applying models of union behavior drawing on ross s 6 insight that the union was essentially a political institution operating in an economic environment ashenfelter and johnson sought to examine the implications for strikes of the divergent goals of the union leadership and the rank and file membership the basic idea is that strikes are caused by the unrealistically high wage aspirations of the latter which are nonetheless processed by the better informed union leadership so as to deflect any incipient challenge to its authority and continued tenure in office the function of a strike is an equilibrating mechanism to square up the membership s wage expectations with what the firm may be prepared to pay strikes are attributed exclusively to the union side the difficulty with the model lies precisely in its assumption that it is the union side which bargains badly and hence precipitates strikes for example one can construct a model employing the opposite assumption after eaton 2 and rabinovitch and swary 4 indeed the assumption that it is the employer side which bargains badly forms the basis of our revisionist model conceptual issues apart the twist is that our model is applied to the very same data set used by farber 3 in his re estimation of the ashenfelter johnson model using data on eighty contract negotiations for ten large manufacturing firms on which more below we show that the two very differently assumptioned models both yield reasonable results using the same data set the implications of this finding are then discussed

some stronger measures of risk aversion in the small and the large with applications the arrow pratt measures of risk aversion for von neumann morgenstern utility functions have become workhorses for analyzing problems in the microeconomics of uncertainty they have been used to characterize the qualitative properties of demand in insurance and asset markets to examine the properties of risk taking in taxation models and to study the interaction between risk and life cycle savings problems to name just a few applications equally importantly they have generated the linear risk tolerance class of utility functions which has provided canonical examples in such diverse areas as portfolio theory and the theory of teams despite these successes there have been a number of areas for which the results have been weaker than hoped it is natural to use the risk aversion measures to compare the behavior of individuals in risky choice situations for example consider the individual portfolio choice problem in a two asset world with a riskless asset and a risky asset if individual a has a uniformly higher arrow pratt coefficient of risk aversion than individual b then b will always choose a portfolio combination with more wealth invested in the risky asset but suppose that both assets are risky now there is no obvious sense in which the more risk averse individual can be said to hold a less risky portfolio but it seems strange that such a simple alteration should destroy the analytics which support the basic intuition similarly consider the basic insurance problem if one individual a is more risk averse than another b in the arrow pratt sense it follows that a will pay a larger premium to insure against a random loss than will b typically though an individual evaluates partial rather than total insurance that is only some gambles can be insured against and others must be retained in this case even when the gambles which are retained are independent from those which are insured it is no longer true that the individual whose arrow pratt measure of risk aversion is higher will pay a larger insurance premium the situation is no better when we consider comparative statics exercises for a single individual decreasing absolute risk aversion in the sense of arrow and

relative wage effects of unions dictatorship and codetermination econometric evidence from germany t he present study estimates the effects of trade unions hitler s regime and codetermination on relative wages in germany i each of these establishments is considered to have had important implications for germany s labor market moreover a thorough understanding of their effects can be valuable for comparative purposes following a brief discussion of these phenomena and their hypothesized effects on wages the analytical model is developed in section ii the empirical results are reported in section iii and section iv contains the summary and conclusions the extensive literature on the relative wage effects of trade unions has focused almost exclusively on the union impact in north america2 and more recently in great britain 3 since the german institutions of industrial and labor relations differ considerably from their angloamerican counterparts4 and often have been studied as a successful possibly superior system which might be adopted by others it is worthwhile exploring the magnitude of the union wage effect in the german institutional setting in particular it has been argued that compared to their american and british counterparts the continental unions tend to place more emphasis on political and social rather than economic achievements 5 if this hypothesis is correct then ceteris paribus the estimated relative wage effect of german unions ought to be smaller than that found in the united states and great britain with the advent of hitler s regime in 1933 there was a dramatic transformation of the existing political and economic institutions trade unions which in 1932 represented over 40 of the industrial labor force were promptly abolished6 and replaced by a government operated labor front 7 strikes and lockouts were forbidden and wages were determined centrally 8 while the effects of these changes on the cultural political and social life have been well documented few economic studies attempted to analyze the effect of hitler s regime on wages and incomes moreover those that did used a qualitative or only a loose quantitative approach partially as a result of the lack of a systematic wage series prior to 1934 9 w krelle 1962 p 17 has shown for example that labor income received for publication july 30 1979 revision accepted for publication may 1 1980 cornell university i would like to thank orley ashenfelter albert rees and two anonymous referees for helpful comments i have also benefited from discussions with j s butler william greene louis phlips and katherine terrell any remaining errors are of course my own this research was in part supported by a grant to the princeton university economics department from the sloan foundation i the term codetermination refers to the german participatory system of management as it was originally established in the federal republic by the 1951 codetermination act and the 1952 works constitution act 2 the most important work and collection of references on the subject is still lewis 1963 among the later studies in the private sector are ashenfelter 1972 ashenfelter and johnson 1972 bloch and kuskin 1978 boskin 1972 de menil 1971 rosen 1969 and schmidt and strauss 1976 public sector studies are summarized by lewin 1977 x see especially pencavel 1974 mulvey 1976 and metcalf 1977 4 needless to say there are important differences between the u s and british systems of industrial and labor relations they exhibit considerable homogeneity however when compared to the systems in continental europe historically the relatively most salient features of the german system have been 1 trade union affiliation with political parties and or religioiis organizations 2 industrial unionism 3 governmental interference in industrial and labor relations and 4 paternalistic management world war ii led to the unification of the formerly splintered unions in the deutsches gewerkschafts bund dgb close collaboration with the social democratic party sdp and the establishment of codetermination for institutional references see almanasreh 1977 fiirstenberg 1969 1977 schregle 1978 and vollmer 1976 1979 5 see kassalow 1969 1980 and windmuller 1969 6 employers associations followed their lead in 1934 7 the labor front included all employees and employers it represented the nazi government in the factories and possessed broad powers over its member subjects 8 in fact the entire economy underwent considerable centralization as hitler proclaimed his first four year plan in 1933 and a second one in 1936 9 among the most thorough and informative of these conventional studies is that of bry 1960 for a discussion of the data see gerss 1977

institutions transaction costs and economic growth this essay develops a theoretical framework which explores the historical obstacles to economic growth these obstacles are examined in the context of the political economic institutional framework of economies in history and consequent transaction costs that determine economic performance and growth the essay concludes with specific suggestions for the study of economic growth

transaction costs institutional rigidities and the size of the clean development mechanism transaction costs and institutional rigidities will reduce the attractiveness of the kyoto protocol flexibility mechanisms compared to domestic greenhouse gas abatement options the clean development mechanism cdm in particular is likely to entail considerable costs of baseline development project registration verification and certification the activities implemented jointly pilot phase and the prototype carbon fund programme give indications about these costs there is evidence that projects with high implementation costs have high transaction costs as well moreover cdm projects have to be approved by host country institutions and so far only a small share of host countries has been able to set up these institutions several of the larger host countries intend to only approve projects if the market price is above a certain threshold some governments will also levy fees to finance costs of approval bodies we assess these issues using a quantitative model of the kyoto protocol permit market we conclude that while changes in demand from annex b countries remain the crucial factor the size of the cdm will depend to a significant degree on transaction costs and institutional barriers in host countries

structural dependence of the state on capital a central claim of both marxist and neoclassical political theory is that under capitalism all governments must respect and protect the essential claims of those who own the productive wealth of society this is the theory of structural dependence of the state on capital using a formal model the internal logic and the robustness of the theory is examined we conclude that in a static sense the theory is false virtually any distribution of consumption between wage earners and owners of capital is compatible with continual private investment once an appropriate set of taxes and transfers is in place yet the state may be structurally dependent in a dynamic sense policies that once in place redistribute income without reducing investment do reduce investment during the period in which they are anticipated but not yet implemented

aid allocation and poverty reduction the authors derive a poverty efficient allocation of aid and compare it with actual aid allocations they build the poverty efficient allocation in two stages first they use new world bank ratings of 20 different aspects of national policy to establish the current relationship between aid policies and growth onto that they add a mapping from growth to poverty reduction which reflects the level and distribution of income they compare the effects of using headcount and poverty gap measures of poverty they find the actual allocation of aid to be radically different from the poverty efficient allocation in the efficient allocation for a given of poverty aid tapers in with policy reform in the actual allocation aid tapers out with reform in the efficient allocation aid is targeted disproportionately to countries with severe poverty and adequate polices the type of country where 74 percent of the world s poor live in the actual allocation such countries receive a much smaller share of aid 56 percent than their share of the world s poor with the present allocation aid is effective in sustainably lifting about 30 million people a year out of absolute poverty with a poverty efficient allocation this would increase to about 80 million people even with political constraints introduced to keep allocations for india and china constant poverty reduction would increase to about 60 million reallocating aid is politically difficult but it may be considerably less difficult than quadrupling aid budgets which is what the authors estimate would be necessary to achieve the same impact on poverty reduction with existing aid allocations

do corrupt governments receive less foreign aid critics of foreign aid programs argue that these funds often support corrupt governments and inefficient bureaucracies supporters argue that foreign aid can be used to reward good governments this paper documents that there is no evidence that less corrupt governments receive more foreign aid on the contrary according to some measures of corruption more corrupt governments receive more aid also we could not find any evidence that an increase in foreign aid reduces corruption in summary the answer to the question posed in the title is no

the determinants of strike incidence and severity a micro level study this paper investigates the determinants of strike incidence and severity during labor contract negotiations the author develops a model that considers the forces influencing both unions willingness to strike and employers willingness to take a strike and estimates it using data describing 1 050 negotiations in u s manufacturing during the 1971 80 period the results indicate that strike incidence is influenced by the gender composition of the labor force demand fluctuations in the product market location in a right to work state the number of workers in the bargaining unit union density in the industry and the extent to which wages kept pace with inflation over the prior contract period on the other hand neither the local unemployment rate when negotiations began nor the inflation rate over the term of the expiring contract influenced strike incidence or severity in this sample