a natural rate model of frictional and long term unemployment a simple labor market with spatial separation and markov production shocks is presented in the stationary equilibrium some workers are frictionally unemployed and others are long term unemployed the amounts of frictional and long term unemployment at each location depend on its recent history of productivity shocks producing a local hysteresis effect changes in the parameters affect the equilibrium aggregate amounts of frictional and long term unemployment differently in particular economies with larger moving costs will have more long term and total unemployment but less frictional unemployment this finding is broadly consistent with recently reported stylized facts

inconsistent preferences in environmental protection investment and the central government s optimal policy environmental protection plans cannot succeed without full cooperation among related units however inconsistent investment preferences toward environmental protection increase the damage to the environment this article employs the contract mechanism to analyse environmental protection effects when the central government directly subsidizes the local governments the results reveal that subsidies from the central government are not only unable to solve the problem of the inconsistent investment preferences among the central and local governments but also induce the free riding behaviour of local governments because of the free riding behaviour of the local governments there is no such equilibrium in which the central government prefers the sequential investment mode while the local governments prefer the simultaneous investment mode

measuring and assessing capacity utilization in the manufacturing sectors of nine oecd countries following a tradition established by cassels klein and hickman we employ the economic theory of cost and production and define economic capacity output as that output at which short and long run average total cost curves are tangent to one another capacity utilization cu rates are then computed as the ratio of actual to capacity output we implement this framework empirically by specifying and estimating a translog variable cost function for the manufacturing sectors of nine oecd countries we find that by the end of the historical sample the early 1980s pervasive and chronic excess capacity exists while the average cost consequence of excess capacity was relatively modest in the 1960s the burden increased considerably after opec i and after opec ii the premium was as large as 15 of average total costs we also find that electricity and fuel price increases had small impacts on capacity output relative to that from labor or capital finally we adjust conventional measures of multifactor productivity growth for changes in cu and find that the adjusted growth is larger after 1973 than that based on traditional procedures

evaluating generic milk promotion effectiveness with an imperfect competition model a framework is proposed for incorporating the degree of market competition in evaluating milk promotion effectiveness the imperfect competition model allows simultaneity in price and quantity with an endogenous fluid milk premium the model s usefulness is demonstrated with japanese generic milk promotion data results show a conventional exogenous price or exogenous premium model will underestimate returns to milk promotion

the distribution of unemployment spells canada 1978 82 this paper empirically examines entire distributions of unemployment spells according to a novel duration share approach based on decile shares and lorenz curves of unemployment the approach is applied to a canadian micro data source akin to the work experience surveys for the united states the major empirical findings are that long term unemployment accounts for a very substantial proportion of total weeks of unemployment despite the short duration of the average spell of unemployment the structure of unemployment spell distribution differs significantly by gender age education and region and significant cyclical effects on the distribution of unemployment spells are associated with the severe recession in 1982

real options wage bargaining factor subsidies and employment the paper combines a translog variable cost function a bargaining model of wage determination and a real option model determining real capital using this framework the effect of factor subsidies on labour demand is estimated based on aggregate panel data for norwegian manufacturing industry in the period 1980 1988

a study of the impact of sectoral shifts on aggregate unemployment in canada the recent trend in macro economic literature has been to explain cycles in aggregate output and employment in terms of unexpected nominal shocks only in these models the natural rate of unemployment is constant this paper diverges from this approach and following a recent paper by david lilien 1982 considers the impact of real as well as nominal variables the main findings are 1 a significant part of the fluctuations in the canadian unemployment over the 1957 83 period was caused by real shocks to the economy and 2 most of the transmission of the business cycle from the united states to canada is effected through real variables as well une etude de limpact de deplacements sectoriels sur le niveau de ch6mage agrege au canada dans la litterature macroeconomique recente on a eu tendance a expliquer les cycles dans le niveau de la production et de l emploi a peu pres strictement en termes de chocs nominaux non anticipes dans ces modeles le taux de ch6mage naturel est constant ce memoire prend des distances par rapport a cette approche et suit pluto t la direction suggeree par un memoire recent de david lilien qui considere l impact des variables reelles tout autant que celui des variables nominales les resultats principaux sont 1 une portion significative des fluctuations dans le niveau du chomage canadien entre 1957 et 1983 a et causee par des chocs reels subis par l economie 2 le gros de h1 transmission du cycle economique des etats unis vers le canada se fait par le truchement des variables reelles

generic fluid milk advertising demand expansion and supply response the case of new york city a transfer function was used to estimate the fluid milk demand equation of new york city the consumption effect of a generic fluid milk advertising program in the city was found to be positive and statistically significant the resulting higher blend price of milk was found to have a negligible effect on the subsequent supply of milk though being successful in generating positive returns on advertising it was found that a 35 reduction in the advertising expenditures would have been optimal in the marginal sense

mutually exclusive investment with technical uncertainty a firm which faces technical uncertainty as in pindyck 1993 can choose between two mutually exclusive investment projects projects 1 and 2 the added option to exercise project 2 makes the firm less likely to exercise project 1 an increase in the degree of technical uncertainty the investment rate or the investment value upon completion for project 2 encourages the firm to exercise project 2 by increasing the trigger level of the expected cost of project 2 this however ambiguously affects the firm s incentive to exercise project 1 as the firm would rather implement project 1 2 in a region where the expected cost of project 2 is relatively high low

the hartz reforms the german miracle and labor reallocation abstract we analyse the recent history of unemployment and labor reallocation in the german economy using a variant of lucas and prescott s 1974 reallocation model modified to include unemployment benefits rest unemployment and aggregate shocks we focus on the implied effects of the hartz reforms and the great recession in the model and compare them with the corresponding movements in german data we find that the model s qualitative predictions for reallocation and unemployment correspond well with the observations when we calibrate the model to assess its quantitative performance however we find that it significantly overestimates the changes of both reallocation and unemployment since the introduction of the hartz reforms

dynamic model of fresh fruit promotion a household production approach many studies consider the dynamic effects of commodity promotion on demand but few derive the theoretical basis for these effects in a model of optimal consumer behavior this study develops a dynamic household production model of u s fresh fruit consumption which it uses to evaluate the effectiveness of advertising and promotion expenditures by the washington apple commission estimates from a dynamic dual generalized leontief system show direct advertising to be marginally more effective than retail promotion in increasing apple sales but advertising has positive spillover effects to sales of other fruits whereas promotion reduces sales of competing products

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

determining the environmental effects of indirect subsidies integrated method and application to the netherlands the term environmentally damaging subsidies covers all sorts of direct and indirect subsidies with negative consequences for the environment this article presents a method to determine the environmental impact of these subsidies it combines a microeconomic framework with an environmental impact module the method is particularly useful for analysing indirect subsidies these are often hidden and therefore not recognized as subsidies use of the method will provide a basis for formulating corrective policy the method is applied to several important subsidies in the netherlands in agriculture energy and transport sectors the results reveal large environmental effects which deserve serious attention from policy makers to illustrate the specific features of the method its application to a particular subsidy namely the exemption of excise taxes on aviation fuels is presented in full detail

two views of the geographic distribution of unemployment this paper investigates the extent to which equilibrium and disequilibrium explanations can account for unemployment rate differentials between cities it shows that shocks that disturb the steady state relationship among the unemployment rates of metropolitan areas tend to be eliminated by mobility within a single year it also shows that high unemployment areas tend to be those with attractive climates and amenities high wages and high unemployment insurance it argues that the main effect of government programs that create jobs in high unemployment areas will be to lure additional job seekers to those areas

the canadian real wage phillips curve a sectoral shift interpretation post world war two data in canada is found to be consistent with the hypothesis that nominal wages prices and real wages are integrated of order two while the unemployment rate is integrated of order one when considering bivariate statistical relationships it is found that solid evidence for co integration exists only between the rate of change of real wages and the level of the unemployment rate that is the data are consistent with a real phillips curve interpretation it is argued that this finding can be explained by the sectoral reallocation view of unemployment

the elasticity of scale and the shape of average costs different concepts of returns to scale the first which is most widely used for defining returns to scale is the relative increase in output as all input quantities are increased proportionally along a ray through the origin the second which is the more relevant concept for micro economic analysis is the increase in output relative to costs for variations along the expansion path where input prices are constant and costs are minimized at every output 2 as it turns out these two concepts yield equal measures for the elasticity of scale3 e at every minimum cost point in the input space however the change in e with output is generally different for the two concepts 4 since expansion paths do not coincide with rays unless the production function is homothetic 5 but it is the change of e along the expansion path and not along the raywhich determines the shape of the average cost curve ac and which is therefore relevant for the analysis of firms and industry behavior under competition 6 these relations are stated and analyzed below it is shown that assumptions made in the literature7 which are related to the behavior of e along rays or to the slope of the technically optimal surface where returns to scale are locally constant are irrelevantbeing neither necessary nor sufficient for implying classical u shaped average cost curves the following definitions and results are used here

search unemployment and growth we develop a model to study the effects of changes in the size of technological innovations upon search and waiting time unemployment when search is costly and shocks are positively autocorrelated we find that increases in the size of innovations increase steady state search decrease steady state waiting time unemployment and decrease total unemployment

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

the rise in unemployment a multi country study one of the most remarkable features of recent economic history has been the remorseless rise in unemployment throughout the industrialized countries however while the trend to higher unemployment is universal the experience of individual countries also differs widely the increase is especially marked within the european community where unemployment rates rival those reached in the interwar years by contrast in the scandinavian countries and japan unemployment is lower and has risen very much less experience in the united states lies somewhere between these extremes and in the last few years unemployment there has fallen sharply

duration and concentration of unemployment this paper examines labour market turnover as a determinant of unemployment in canada the distribution of completed spells of unemployment is generated from gross flow data by using hazard functions unemployment is found to be more concentrated in long spells than can be expected under markov processes difficulties in access to jobs are also revealed in a high proportion of unemployment spells not ending in jobs but in withdrawals from the labour force the incidence of multiple spells of unemployment is also high on balance the characterization of unemployment and the policy conclusions differ markedly from those emphasized by the turnover literature duree et concentration du ch6mage ce memoire examine le roulement sur le marche du travail comme une force determinante du ch6mage au canada la distribution de la longueur des periodes de ch6mage est etablie a partir des donnees brutes par le moyen de fonctions de risque on trouve que le chomage a tendance a se concentrer bien davantage en periodes plus longues que ne le suggererait un modele markovien le serieux des difficultes que les travailleurs ont a se donner acces a un emploi est revele par la proportion des periodes de ch6mage qui se termine non pas par un emploi mais par un retrait de la main d oeuvre active l incidence de plusieurs periodes de chomage est tres forte d un facon generale les diagnostics et les politiques recommendees par la litterature specialisee qui met l accent sur le roulement sur le marche du travail comme force determinante ne semblent pas etre supportes par les resultats des auteurs

work rest and search unemployment turnover and the cycle this paper presents a model that generates procyclical search procyclical labor productivity and countercyclical unemployment broadly consistent with the actual behavior of these time series concretely the model introduces an aggregate shock into the sectoral demand shift model of the type analyzed by lucas and prescott if aggregate shocks operate multiplicatively and are autocorrelated the payoff to unemployed search can be procyclical to an extent large enough to offset the productive losses associated with search that also are procyclical

job creation and destruction over the business cycle empirical evidence suggests that there is a great deal of turbulence in labour markets in all phases of the business cycle jobs are created and destroyed simultaneously in booms and recessions at significant rates for example using manufacturing data davis and haltiwanger 1990 1992 find that the average rates of job creation and destruction in the u s are 9 2 and 11 3 respectively this clearly indicates that in order to understand the nature of employment dynamics we need theories that include some sort of heterogeneity in the labour market that allows for simultaneous creation and destruction davis and haltiwanger also find that job destruction is countercyclical job creation is procyclical and job destruction is more volatile than job creation any theory of the labour market should be consistent with these basic stylized facts recent theoretical work that has tried to account for these phenomena has typically used the aggregate matching function approach in particular blanchard and diamond 1989 and mortenson and pissarides 1994 construct models in which each firm has one job to offer and the matching function brings together vacancies and searching workers to create jobs in these environments each worker receives a constant fraction of the surplus generated by the match justified by nash bargaining in this paper we take a different modelling approach we model the economy as a set of spatially separated competitive local labour markets that are subjected to idiosyncratic stochastic shocks the model is based on the framework developed by lucas and prescott 1974 in which differences in local conditions cause workers to search across locations we make two key alterations to this model first we introduce aggregate shocks which can be interpreted either as aggregate demand or technology disturbances second we introduce a constant value alternative to working in each location which can be interpreted as waiting time unemployment as in