exploring benefit transfer disamenities of waste transfer stations the benefit transfer method was developed as an alternative way to value externalities using values from studies of similar circumstances carried out at similar sites somewhere else given the challenges and high costs inherent in assessing the actual cost specifically in order to test the performance of the benefit transfer method employing hedonic price models this study focused on estimates of disamenities associated with waste transfer stations at four different cities in israel the sites were intentionally selected to represent a variety of circumstances we transferred the estimated benefit function from a study site to a policy site the goodness of fit was examined by comparing the calculated value with actual data from the policy site to test the sensitivity of the benefit transfer function to socioeconomic and housing characteristics it was repeatedly applied to different sets of observations the findings suggest that a relatively large number of alternative benefit functions are transferable statistical inequality outcome regarding the degree of similarity between samples does not unequivocally rule out the appropriateness of transferring environmental values across studies transfer errors varied between 21 and 29 and the absolute average error for all transfers was 15 4 errors were lower for transfer between relatively similar cities in terms of size and location and between sub samples that were similar in socioeconomic characteristics and housing type however when a site with very dissimilar data was involved the average absolute error rose to 19

a condition guaranteeing that the nash allocation is walrasian abstract consider the set of net trades attainable by an economic agent when he varies his strategy and all other agents stick to their strategies if all attainable sets for all agents are star shaped with respect to the origin then every pareto efficient nash allocation is walrasian this result bears upon the question whether it is possible to implement redistributive goals without impairing efficiency

wicksell lindahl and the theory of public goods wicksell s and lindahl s ideas on public goods and decisions are reviewed in light of later developments in the theoretical economics literature i begin by discussing their normative ideals in particular the notion of justness and the sources of the difficulties in reaching them wicksell s and lindahl s ideal states as well as the obstacles that they perceive are compared to more recent views on free riding and on the behavior of elected representatives their views on political bargaining are then related to later concepts in particular to the core of the economy

exchange rates and foreign direct investment an imperfect capital markets approach we examine the connection between exchange rates and foreign direct investment that arises when globally integrated capital markets are subject to informational imperfections these imperfections cause external financing to be more expensive than internal financing so that changes in wealth translate into changes in the demand for direct investment by systematically lowering the relative wealth of domestic agents a depreciation of the domestic currency can lead to foreign acquisitions of certain domestic assets we develop a simple model of this phenomenon and test for its relevance in determining international capital flows

equilibria and efficiency in the fixprice setting abstract the aim of this paper is to study efficiency under fixed price constraints and to define an equilibrium concept that extends to some degree the standard welfare analysis of general equilibrium theory this paper contains a description of the fixprice setting a study of the set of relatively pareto efficient allocations a definition of coupon equilibria the proof of their existence and an investigation into the structure of the set of coupon equilibria and of the set of economies admitting efficient coupon equilibria

willingness to pay for land preservation across states and jurisdictional scale implications for benefit transfer in stated preference valuation of farmland preservation respondents are often told that preservation will occur within various jurisdictional scales that is community or state but are not told the specific location of parcels the resultant availability of welfare estimates for different scales and regions provides numerous avenues for benefit transfer this paper provides a systematic assessment of transfer error contrasting different methods for the transfer of farmland preservation values across states and jurisdictional scales results drawn from multistate choice experiments suggest that the choice of across scale versus across state transfer method can have significant implications for transfer validity

the objective demand curve in general equilibrium with price makers objective demand curves in general equilibrium with explicitly modeled price makers have been defined so far in a number of specific cases this paper gives a general definition of such an objective demand curve the associated general equilibrium concept is defined and sufficient existence conditions are given copyright 1987 by royal economic society

organizing the global value chain a firm level test in this paper we study the organization of global value chains on a sample of about 4 000 manufacturing parent companies operating more than 90 000 affiliates on a global scale which chose to integrate at least once in the period 2004 2012 assuming a technological sequence of production stages a recent property rights framework antra s and chor 2013 alfaro et al 2015 predicts that a choice of vertical integration is crucially based on both the position of a supplier along the chain and on the relative size of demand elasticities faced by the final producer and the supplier we positively test whether if final demand is sufficiently elastic inelastic producers of final goods integrate production stages that are more proximate to far from the consumers however this is not valid for cases of midstream parents i e for producers of intermediate inputs that can integrate either backward or forward along the chain we document that midstream are at least as common as are downstream parent companies but that existing theory neglects them in these cases we find that demand elasticities do not play a significant role in integration choices interestingly both midstream and downstream parents tend to integrate affiliates that are more proximate in segments of a supply chain our findings point to a role for technological determinants that may be as important as are contracting frictions in organizing global value chains

monopolistic quantity rationing in this paper we address the question of whether a price setting monopolist can improve his welfare by imposing quantity constraints on buyers we show first that if all buyers are identical quantity rations are not useful for the monopolist we then show by means of an example that if buyers are diverse quantity rations may be desirable it is shown that if there are only two commodities the only constraint that may be useful to the monopolist is a zero constraint on one of the two commodities an example shows that this property does not hold for more than two commodities

the determinants of fdi location choice in china a discrete choice analysis this study addresses two questions what are the determinants of foreign direct investment fdi location choice in china what are the factors that determine investors choice between economic zo

the choice theory approach to market research this paper surveys economic choice theory stressing developments that permit use of data from psychometric and conjoint experiments to produce market demand forecasts alternatives to the widely used multinomial logit model are summarized and a new method for estimating multinomial probits is described an integration of choice models with attitudinal scaling and perceptual mapping within a latent variable system is described estimation of such systems under either random effects or fixed effects descriptions of heterogeneity across individuals is discussed issues in the use of choice models to describe responses from conjoint experiments are presented new regression diagnostic tests for the consistency of multinomial logit representations are discussed

ambiguities in the sign of excess effective demand by firms can we state that at a given benassy fixprice allocation z there is say excess effective demand for a commodity it turns out that in productive economies there may be ambiguities in the sign of excess effective demand different effective demand vectors with different signs may be compatible with z we prove a no ambiguity exists if intermediate goods are ruled out and if all firms in the long side of a market perceive binding constraints b in any case one can always select a vector of effective demands yielding minimal sets of buyer s and seller s markets

how reliable are meta analyses for international benefit transfers meta analysis has increasingly been used to synthesise the environmental valuation literature but only a few test the use of these analyses for benefit transfer these are typically based on national studies only however meta analyses of valuation studies across countries are a potentially powerful tool for benefit transfer especially for environmental goods where the domestic literature is scarce we test the reliability of such international meta analytic transfers and find that even under conditions of homogeneity in valuation methods cultural and institutional conditions across countries and a meta analysis with large explanatory power the transfer errors could still be large further international meta analytic transfers do not on average perform better than simple value transfers averaging over domestic studies thus we question whether the use of meta analysis for practical benefit transfer achieves reliability gains justifying the increased effort however more meta analytic benefit transfer tests should be performed for other environmental goods and other countries before discarding international meta analysis as a tool for benefit transfer

endogenous competition and strategic foreign investment direct foreign investment exerts a significant influence on domestic market structure in both developed and emerging economics an increased proportion of international commerce now takes the form of intrafirm trade and much of this trade involves foreign sourcing of production by domestic firms firms with such multinational production are also frequently the dominant firms in their domestic markets 1 several rationales exist for foreign investment and production by domestic firms most involve the effects of some inherent asymmetry between rival firms the possession by one firm of some internal advantage such as proprietary knowledge from research expenditures or superior management and marketing techniques could yield a cost advantage related explanations involve firms reacting to foreign entry in their domestic markets by sourcing labour intensive production abroad differential access to foreign subsidy programs the desire to secure access to a foreign market under the expectation of future import barriers sunk costs of entering a market under random fluctuations in the real exchange rate or a desire to hedge real exchange rate risk through diversification of production locations 2 while these explanations are plausible each relies on the existence of exogenous asymmetries between rival firms or on a corporate aversion to risk and imperfections in financial markets this paper offers a novel explanation for direct foreign investment in terms of its strategic value identical and risk neutral firms may engage in direct foreign investment and the timing of this can endogenously determine domestic market structure when uncertainty exists about production costs in a foreign location and the industry producing for the domestic market is concentrated direct foreign investment and production may occur because uncertainty over the relative costs of production at a foreign plant offers a

testing choice experiment for benefit transfer with preference heterogeneity benefit transfer is a cost effective method for estimating the value of environmental goods that relies on information obtained in previous studies the multiattribute approach of choice experiments should provide advantages in terms of benefit transfer allowing differences in environmental improvements between sites as well as differences in socioeconomic and attitude characteristics between respondent populations this article investigates the capability of choice experiment method to be used in environmental benefit transfer when a random parameters approach is used to allow for preference heterogeneity we find that the inclusion of respondents taste heterogeneity reduces the magnitude of the transfer error

a general equilibrium macro model with wage bargaining in a general equilibrium macro model with wage bargaining agents are divided into capitalists and workers the markets for produced goods and money are competitive but the wage rate is determined by negotiation between an employers union and a trade union unions are supposed to be long sighted and care about members utilities in stationary states nash bargaining equilibria are characterized by unemployment for certain parameter values this unemployment is persistent in the sense that it appears in an equilibrium with endogenous prices a neutrality result for monetary policy is also shown

context sensitive benefit transfer using stated choice models specification and convergent validity for policy analysis benefit transfer has been an important practical policy tool appealing to government agencies especially when time or budget is constrained however the literature fails to support convergent validity of benefit transfer using the stated preference method this empirical study conducts four convergent validity assessments of benefit transfer using the choice modeling method and data from rhode island and massachusetts regarding coastal land management the comparisons evaluate how individual characteristics improve benefit transfer and yield insights relevant to research specifications to produce studies adaptable for transfer applications empirical tests show benefit transfer using choice modeling may be acceptable and even empirically valid depending on the policy objectives and the context

reducing barriers in future benefit transfers needed improvements in primary study design and reporting abstract original research provides many social benefits including additions to our stock of knowledge benefit transfer is a formal process whereby our stock of knowledge rather than original research is used to inform decisions any shortcoming in this stock directly affects our ability to conduct valid and reliable benefit transfers this paper discusses three general criteria that are necessary for valid benefit transfers and how original research designs and reporting of results unnecessarily constrain the potential of benefit transfers we make several suggestions regarding how original research through improved design and reporting might increase the validity and reliability of benefit transfers we also recommend that repositories for original research surveys and data be developed to insure long term availability of study information

transferring environmental value estimates issues and alternatives abstract environmental value transfer needs to be understood in the context of scientific information use in general this provides a different perspective upon the reasons why benefit transfer in particular appears so controversial and raises concerns over the limited types of validity testing being undertaken by those supporting such applications as ecosystem services valuation another key issue which we emphasise is the unintentional challenge to standard economic theory raised by the models used to conduct value transfers existing value transfer practice reveals the need for a more inclusive approach if environmental values are to be addressed we argue that there are robust alternative means for including multiple environmental values in decision processes these cannot be dismissed out of hand and analysts should be expanding their understanding of the available approaches which include attitude and norm measures multi criteria analysis and participatory deliberative institutions

voluntariness and efficiency in the provision of public goods abstract this paper presents a characterization of lindahl allocations which makes no reference to personalized prices lindahl equilibria are characterized here by two conditions pareto efficiency and a voluntariness condition voluntariness requires that no consumer may benefit from a reduction in his contribution if this means that the vector of public goods must be reduced in the same proportion the intersection of the large set of voluntary allocations and that of efficient ones turns out to be under differentiability the set of lindahl allocations

keynesian unemployment as a nash equilibrium with endogenous wage price setting an example abstract a simple 3 good 1 consumer 1 firm model of fixed price quantity constrained equilibrium is developed a game is then defined on the set of globally unique equilibria the consumer sets the money wage the firm sets the money price of output money is numeraire nash solutions of the game exist and may involve keynesian unemployment but never involve classical unemployment or repressed inflation

the boundaries of multinational enterprises and the theory of international trade this paper begins with a review of empirical evidence on multinational firms conceptual underpinnings of a theory are developed relying in particular on the notion of knowledge capital as a mobile joint input into geographically separated production facilities this idea is embedded in a simple two country general equilibrium model that supports multinational production in equilibrium under conditions consistent with the empirical evidence the final section examines internalization and shows why certain properties of knowledge capital also imply a preference for transferring technologies internally within the firm rather than through arm s length markets

a remark on conjectural equilibria the notion of a conjectural equilibrium was introduced by hahn 1978 the underlying idea is to explain why prices may not change in a situation where markets do not clear and rationing occurs in a conjectural equilibrium prices are rigid because it is not in the interest of agents to change them more precisely agents conjecture prices at which they can achieve a trade beyond the given quantity constraints such that it is better for them to trade at the observed market prices within the constraints therefore the question of whether an allocation for given prices and quantity constraints is a conjectural equilibrium depends crucially on the agents conjectures in this situation by allowing arbitrary conjectures many such equilibria will exist as has already been claimed by hahn 1977 a 1977b and 1978 in this note it is shown that there are as many conjectural equilibria as there exist fixed price equilibria which satisfy the condition of voluntary exchange only to be more specific we prove that any conjectural equilibrium is a fixed price equilibrium and that for a given economy there are conjectures such that any fixed price equilibrium is a conjectural equilibrium in other words the kind of endogenous price setting described in hahn s model turns out to be equivalent to the fix price approach in the sense that both lead to the same allocations in the economy the result confirms the statement in drazen 1980 that by allowing arbitrary conjectures only one exogenous variable prices has been replaced by another conjectures

hyteresis in import prices the beachhead effect this paper shows that temporary real exchange rate fluctuations can have persistent hysteretic effects on trade specifically when market entry costs are sunk sufficiently large exchange rate shocks alter domestic market structure and thereby induce hysteresis this simple result has strong implications for exchange rate theory t rade policy and estimation of trade equations empirical evidence su ggests that the recent dollar overvaluation induced hysteresis in u s import prices namely the aggregate pass through equation of exchange rates to import prices shifted in the 1980s the shift s nature and timing is broadly consistent with the hysteresis hypothesis copyright 1988 by american economic association

rational fix price dynamics abstract we study a macroeconomic model where stabilization problems arise as the result of a dynamic game of income distribution between capitalists and workers the two agents control the supply sides of the goods and labor markets respectively using price changes as strategic variables and a static fix price model with money labor and one macro commodity to correctly predict the behaviour of the economy at each instant of time the resulting medium run price dynamics is consistent with major stylized facts on business cycles it accounts for an empirical regularity that has been left unexplained by other models and suggests a new relationship between the functional income distribution and the economy s sensitivity to shocks

choice modeling and tests of benefit transfer choice modelling cm is a stated preference technique that is increasingly being used to generate estimates of non market values in cm applications respondents to a survey are presented with several sets of options which contain common attributes but at varying levels and are asked to select their preferred alternative from each set the information provided by respondents choices is used to estimate marginal rates of substitution and hence estimates of value in this paper the results from three separate cm applications are presented estimates are made of the value of improving the quality of wetlands the first two applications focused on the gwydir wetlands in new south wales australia one survey was conducted in sydney a major urban centre and the second was conducted in moree a rural centre close to the gwydir wetlands the third survey which was also conducted in sydney focused on the macquarie marshes another wetland in new south wales an objective of the study was to test the suitability of using cm derived estimates for benefit transfer both across different populations and across different wetlands cm is potentially suited to benefit transfer because it is possible to allow for differences in environmental improvements between sites as well as differences in socio economic characteristics between respondent populations several tests aimed at determining the validity of transfers using cm across sites and populations are presented these include tests of the equality of models implicit prices and estimates of compensating surplus

multinationals multi plant economies and the gains from trade a general equilibrium model of a multinational enterprise based on economies of multi plant operation is developed these economies are modelled as arising from the existence of a joint input whose productivity in each production facility is independent of the number of facilities maintained by a firm the multinational thus offers the world increased technical efficiency by eliminating the duplication of the joint input that would occur with independent national firms since this technical efficiency may come at the expense of increased market power the full determinants of home country host country and world welfare are considered

undominated prices in the three good model abstract any movement away from walrasian prices will make somebody worse off we ask which other prices share this property the paper characterizes the set of such prices called undominated prices for the three good economy output labor and a nonproduced good that is now well known from the work of barro grossman benassy and malinvaud we consider two groups of consumers workers and shareholders we show that under some conditions there exist prices and wages that generate unemployment and are undominated this requires that a workers be poorly endowed with the nonproduced good b there be little substitution in consumption between the produced and the nonproduced good and c the market for the produced good be balanced i e prices equal marginal costs

evaluating the performance of benefit transfer an empirical inquiry abstract benefit transfers are used by public agencies needing information on costs and benefits of policy decisions although scientific debate regarding the validity of benefit transfer is ongoing this article develops a methodology to evaluate the performance of direct benefit transfer and benefit function transfer and applies the methodology to two pairs of similar non market amenities empirical results indicate that benefit function transfer is more robust than transfer of average site benefits our results suggest that the circumstances under which benefit function transfer provides valid policy relevant information may be limited and that errors from applying benefit transfer can be quite large even across seemingly similar amenities

undominated wage rates in a unionized overlapping generations economy abstract an overlapping generations macro model where consumers are divided into workers and capitalists is analysed in each period the wage rate is negotiated between an employers union and a trade union other prices adjust competitively the solution concept used is cooperative the wage rate chosen by unions should be undominated i e there must not exist another wage rate leading to higher utilities for both workers and capitalists the resulting one period equilibria relative pareto optima rpo and also stationary equilibria stationary relative pareto optima srpo are analysed results are that full employment s rpo always exist and in some economies unemployment s rpo also exist sufficient conditions for the latter to be the case are stated and the existence of economies fulfilling these conditions is demonstrated

imperfect competition and fixprice equilibria under consumer aggregation and net substitutes the general question posed here and in a companion paper is under what conditions do models of imperfect competition generate equilibria which are also fixprice equilibria answers to this question are provided for the cournot walras general equilibrium model originated by gabszewicz and vial 1972 and the model of a quantity constraining monopolist due to bohm et al 1983 whereas our earlier paper derived results for other models from gross substitute complement assumptions here we also offer results based on net substitute complement assumptions plus appropriate aggregation of consumers this note thus extends the earlier paper by analyzing different models using different techniques the net substitute complement classification used is the inverse net or hicksian q classification described in section ii for the sake of brevity the discussion of the models in sections iii and iv restricts attention to equilibria where price and consumption vectors are strictly positive notation and definitions are those of the earlier paper cf madden and silvestre 1991 section ii

hysteresis and export targeting abstract a direct and largely untested implication of hysteresis concerns the extent of market entering and leaving in response to large movements in exchange rates this note examines for 359 4 digit u s sic industries data on the distribution of u s exports by country of destination a proxy for the number of markets served from 1978 to 1987 and relates changes in these distributions to overall exchange rate movements we seek to explain differences in the response across industries on the basis of differences in sunk costs the empirical results are generally consistent with the hysteresis approach while in periods of general dollar depreciation firms spread exports more widely across foreign markets this effect is seen to be limited in industries with relatively large distribution and media advertising costs for which much of the costs of establishing export networks may be sunk

market concentration contestability and sunk costs this paper provides an exploratory assessment of the theory of contestability that is based on a diverse sample of industries and introduces a new important determinant of market concentration the results of the paper indicate that the variables determining the degree of contestability of markets are significant correlates of market concentration sunk costs account for a substantial portion of the sample variance of concentration even after technological factors are controlled for copyright 1990 by mit press

voluntary and efficient allocations are walrasian let f be a private ownership economy call an allocation w voluntary for a price vector p if no agent can benefit by trading less at p we prove that under differentiability and interiority if w is voluntary and pareto efficient it is a competitive equilibrium for w perhaps surprisingly production economies where some agents receive profit income require a stronger voluntariness condition than the one sufficient for exchange economies the stronger condition singles out a commodity as a medium of exchange

prospects for the use of choice modelling for benefit transfer abstract many of the earliest studies that sought to test the validity of benefit transfer which typically involved the use of contingent valuation or travel cost applications produced negative findings one of the recommendations from this early testing was to trial alternative methods to produce source studies for benefit transfer including multi attribute techniques subsequently there have been a number of studies conducted that have sought to test the validity of benefit transfer using choice modelling the purpose of this paper is to review these studies and to assess the current state of knowledge regarding the validity of using choice modelling for the purpose of benefit transfer we also describe and consider the merits of an alternative approach for extending the use of choice modelling in benefit transfer bayesian benefit transfer

on the efficiency of fixed price equilibrium abstract we study the efficiency properties of k equilibrium a species of fixed price equilibrium in particular we examine the interrelations among k equilibria and two of its properties order and voluntariness we also consider several alternative concepts of optimality

firm size and foreign operations of multinationals the standard literature on multinationals emphasizes the importance of firm size in explaining foreign direct investment a typical statement for example by caves is that t he relation between direct investment and firm size with other factors held constant has been established statistically 1974 p 280 however descriptions of the role of firm size are often ambiguous as pointed out by hufbauer 1975 and swedenborg 1979 such descriptions do not make a clear distinction between the probability or likelihood that a firm would be a foreign investor and the extent of such investment or as expressed by swedenborg a firm s propensity to operate abroad the share of its production carried on outside its home country a study by horst 1972 which has become the basis for most statements about the importance of firm size dealt only with the probability that a firm would be a foreign investor or more specifically the probability that it would meet the criteria for being considered a multinational firm according to the definition used in the harvard studies including that of having a certain number of overseas operations cf vernon 197 1

a model of imperfect competition with keynesian features the recent literature on the reappraisal of keynes has viewed keynesian equilibria as arising when prices are fixed and effective demands and supplies are equilibrated through the adjustment of quantities one problem with this approach is that it lacks a theory of price determination in particular of why prices are fixed in the present paper we show that a number of keynesian features arise in a model in which prices are fully flexible but where agents have some monopoly power one advantage of this approach is that it provides a theory of the determination of both prices and quantities

fixprice analysis in productive economies abstract the paper compares the definitions of fixprice equilibrium for productive convex economies due to dreze benassy and malinvaud younes it turns out that dreze s resp malinvaud younes notion is the strictest resp least strict one the three notions are however equivalent under smoothness and absence of intermediate goods they are in particular equivalent for the familiar fixprice model with three goods money labor and output studied among others by barro grossman benassy and malinvaud

exchange rate pass through for strategic pricing and advertising abstract this paper builds a model in the new empirical industrial organization framework bresnahan t 1989 industries and market power in schmalensee r willig r eds handbook of industrial organization north holland amsterdam to estimate exchange rate pass through in price and advertising price cost margins market structure and firm conduct are estimated endogenously allowing for precise estimation of the degree of and reasons for incomplete pass through i demonstrate that price and advertising pass through are functions of demand cost and market conduct in the short run in the long run the market conduct and cost technologies are in turn determined by the exchange rate movements 1997 elsevier science b v

imperfect competition and fixprice equilibria when goods are gross substitutes it is possible in principle that the price quantity pair generated by a model of imperfect competition may satisfy the conditions voluntary trading and absence of frictions for a fixprice equilibrium it is shown that imperfect competitors will typically satisfy voluntary trading provided that appropriate gross substitute assumptions are satisfied hence such assumptions are seen to ensure that the solutions of some well known imperfectly competitive general equilibrium models are indeed fixprice equilibria thus bringing together two important traditions in theoretical microeconomics copyright 1991 by the editors of the scandinavian journal of economics

choice experiments site similarity and benefits transfer choice experiments are designed to account for variations in environmental resources and site characteristics as well as potential implications of these variations for willingness to pay as a result choice experiment results may be well suited for benefits transfer it is unclear however whether the flexibility of choice experiments renders the similarity of study and transfer sites less critical for transfer validity drawing from identical choice experiments conducted in different rhode island communities this model assesses the extent to which error in function based benefits transfer is related to the similarity of communities across a variety of observable dimensions results suggest that site similarity at least across some dimensions influences the validity of choice experiment benefits transfers however the use of some measures of similarity as indicators of transfer error may provide misleading results

strategic investments and the development of multinationals a model of multinational behavior is presented in which either the existence or absence of multinationals can be a nash equilibrium outcome the key determinant is the relationship between plant scale economies a force for geographic centralization and multiplant economies plus transport costs leading to multinationality the model predicts that multinational enterprise production arises when firm specific and transportation costs are large relative to plant scale economies the latter are both a technological and a strategic variable in the entry decision copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

determinants of the internationalization of regions the role and effectiveness of public policy measures banno m piscitello l and varum c determinants of the internationalization of regions the role and effectiveness of public policy measures regional studies this paper assesses the role of public policy measures on outward internationalization of regions by including financial and non financial incentives among the determinants of the international competitiveness of regions it is found that the former are important to enhance their active internationalization but that variables related to the knowledge and competence base of regions are even more so financial incentives related to equity participation as well as non financial incentives related to the provision of information come out highly significant in stimulating outward internationalization the empirical analysis is conducted for the twenty italian nuts 2 regions over the period 2003 2008

there may be unemployment when the labour market is competitive and the output market is not is unemployment always caused by union power or more generally downwards rigidity of wages the influential article by hart i 982 says yes there cannot be unemployment unless labour unions prevent wages from falling the more recent papers by d aspremont et al i 984 i989 a b and by dehez i 985 say no unemployment may occur when the labour market is perfectly competitive and the output market is not all this work assumes a fixed labour supply but the more recent models significantly depart from hart s formulation in other respects 2 one may ask which answer is the robust one this paper shows that hart s answer is based on a facilitating assumption on marginal revenue i replace it by a more realistic hypothesis and replicate hart s existence and comparative statics results except that now unemployment may occur when the labour market is perfectly competitive and the output market is not more precisely there can be unemployment at any nonnegative wage and perfect competition in the labour market may generate zero wages and unemployment labour becoming a free good in excess supply a useful costless resource is then wasted away and thus a gross form of inefficiency occurs in hart i982 on the contrary perfect competition in the labour market necessarily yields full employment and pareto efficiency labour does not often become a free good in excess supply in modern industrial economies but this possibility may help explain why labour markets have become noncompetitive wages are positive at an overall walrasian equilibrium but imagine that the output markets become oligopolistic and as a result the perfectly competitive wage drops to zero workers are now severely exploited in the sense of joan robinson i933 ch 25 and pigou i920 because the real wage is lower than the physical marginal product of labour unionisation can then be seen as providing countervailing power in

on the effectiveness of economic policy when competition is imperfect and expectations are rational abstract we study the consequences of imperfect competition in a macro model with only one imperfection that of labor market competition otherwise the model is clean agents are optimizers prices are endogenous and expectations are rational we show that although imperfect competition in itself can explain unemployment as is well known it does not in itself give strong support to the use of traditional fiscal policy in fighting unemployment fiscal policy will almost inevitably have real effects but only through a special effect that may be difficult to control in many cases fiscal policy cannot create full employment and it may very well have perverse effects