the demand for parimutuel horse race wagering and attendance there has been a long history of patron participation in parimutuel horse race wagering and attendance which are major recreational products in consumer budgets in this paper the demand for parimutuel horse race wagering and attendance has been specified and estimated for both thoroughbred and standardbred racetracks in a multistate market area the data are annual over the period 1960 1987 it is found that demand is price elastic in every case racing quality personal income the number of racing days competition from a state lottery and from professional sports baseball basketball football are all significant determinants of these demands both attendance and wagering are found to increase with an increase in racing quality however it seems that the new patrons attracted by quality racing tend to wager less than those who attend regularly the presence of a state lottery is found to have resulted in a substantial loss in attendance as well as in wagering at each of the racetracks this i

europe vs america institutional hysteresis in a simple normative model we show how the differences in us and european institutions can arise in a normative model the paper focuses on the labor market and the government s decision to set unemployment benefits in response to an unemployment shock the government balances insurance considerations with the tax burden of benefits and the possibility that they introduce adverse incentive effects whereby benefits increase unemployment it is found that when an adverse shock occurs benefits should be increased most when the adverse incentive effects of benefits are largest adjustment costs of changing benefits introduce hysteresis and can help explain why post oil shock benefits remained high in europe but not in the us desirable features of the model are that we obtain an asymmetry out of a symmetric environment and that the mechanism yielding hysteresis is both simple requires the third derivative of the utility function to be non negative and self correcting empirical evidence concerning the role of corporatism is discussed

unemployment profit sharing and japan s economic success abstract in this paper we examine the economic effects of profit sharing in a duopoly model where one firm engages in sharing profits with its union while the other firm does not the results show that profit sharing i reduces wages demanded by the unions ii tends to increase employment of the profit sharing firm and to increase employment in the entire industry and iii tends to increase the joint welfare of the profit sharing firm and the profit sharing union these results seem to suggest that the japanese success may be partly attributable to their informal profit sharing scheme

embeddedness cooperation and popular economy firms in the informal sector this paper is motivated by empirical observations on popular economy firms pefs in the informal sector of santiago de chile these are labor managed firms embedded in popular milieu where cooperation between their members plays a central role this paper develops a partial equilibrium microeconomic theory of pefs first it endogeneizes the level of cooperation between the workers second it develops a static and a dynamic model to analyze whether embeddedness influences the behavior of the pef embeddedness is assumed to be captured by three different characteristics suggested by the empirical observations most of them influence the employment and income levels in the pef

foreign capital and the contractionary impact of currency devaluation with an application to jamaica abstract this paper analyses the effects of currency devaluation in a small open economy host to foreign capital using a short run macroeconomic model of the krugman taylor 1978 type it is shown that the presence of foreign capital provides devaluation with an additional contractionary mechanism besides those already identified in the literature the mechanism has its basis on the redistribution of income from wages to profits creasted by devaluation which raises the foreign component of domestic income and tends to reduce gnp and gdp the role of taxation policy in this context is examined finally estimates of the relevant effects are offered for jamaica a small mineral exporter showing that an expansionary effect of devaluation must rely on a relatively high value of the supply elasticity of non mineral exports

group loyalty and the taste for redistribution interpersonal preferences preferences that depend on the characteristics of others are typically hard to infer from observable individual behavior as an alternative approach this paper uses survey data to investigate interpersonal preferences i show that self reported attitudes toward welfare spending are determined not only by financial self interest but also by interpersonal preferences these interpersonal preferences are characterized by a negative exposure effect individuals decrease their support for welfare as the welfare recipiency rate in their community rises and racial group loyalty individuals increase their support for welfare spending as the share of local recipients from their own racial group rises these findings help to explain why levels of welfare benefits are relatively low in racially heterogeneous states

devaluations and aggregate output fluctuations a random coefficient regression model for mexico the goal of this paper is to investigate whether nominal devaluations had real output growth effects in mexico and if so to assess the significance and duration of such effects a random coefficient regression model to evaluate the output growth effects of 1976 1982 and 1986 devaluations using sectoral data from 1970 to 1991 is specified and estimated the results indicate unambiguous short term contractionary effects of devaluations on non agricultural output in mexico in addition it is found that adjustments to imbalances in the external sector invariably came from temporary contractions in the aggregate output rather than significant resource reallocation from the non tradable sector towards the tradable sector several transmission mechanisms that relate nominal exchange rate movements to real output fluctuations are also considered

targeted export promotion with several oligopolistic industries abstract we study export promotion policies in situations where several oligopolistic industries compete for the services of a sector specific factor of production the partial equilibrium argument for strategic subsidies must be modified to incorporate general equilibrium effects working through the factor market we find that these effects generally weaken the case for profit shifting subsidies in a benchmark case with symmetric exporting industries fixed coefficients technologies and an inelastic supply of the specific factor free trade is shown to be optimal

why do people care about social status abstract this paper shows that complementary interaction can induce people to care about social status because it serves as a signal of non observable abilities there is a unique separating equilibrium in which everyone cares about social status in this equilibrium a person s social status perfectly reveals his abilities and everyone matches with a person of like ability the analysis shows that people s instrumental concern for social status has important welfare and policy implications indeed peoples efforts to keep up with the joneses may be welfare enhancing

trade and trade policy with imperfect competition the case of identical products and free entry abstract this paper analyses intra industry trade between economies containing an imperfectly competitive industry in which firms produce a homogeneous output production is subject to increasing returns to scale and there is free entry and exit of firms trade is shown to unambiguously increase welfare by reducing the degree of monopoly in each market and increasing firm size the effects of differences in technology and endowments on the pattern of trade and welfare are examined import tariffs are shown to raise welfare in the country employing the tariff and the welfare implications of various types of industry subsidy are examined

monetary policy and exchange market pressure evidence from sub saharan africa the purpose of this study was to assess the impact of monetary policy on foreign exchange market pressure emp in developing country contexts for some selected countries in sub saharan africa ssa and to measure the ability of monetary policy to significantly address currency pressures that arise from trading on the global market this study was motivated by the fact that most of the ssa countries are developing economies that have negative net export positions and stand to lose significantly from consistently deteriorating foreign exchange position the study therefore employs a dynamic panel model to test the hypothesis that a tighter monetary policy stance lends strength to a currency and vice versa using 20 ssa economies for the period from 1991 to 2010 this study finds a negative and significant relationship between monetary policy and emp implying an easing of emp in the face of contractionary monetary policy the findings also point to significant relations between aggregate output levels o

resistance to reform status quo bias in the presence of individual specific uncertainty comment why do governments so often fail to adopt policies which economists consider to be efficiency enhancing our answer to this question relies on uncertainty regarding the distribution of gains and losses from reform we show that there is a bias towards the status quo and hence against efficiency enhancing reforms whenever some of the individual gainers and losers from reform cannot be identified beforehand there are reforms which once adopted will receive adequate political support but would have failed to carry the day ex ante the argument does not rely on risk aversion irrationality or hysteresis due to sunk costs jel d72 f13 why do governments so often fail to adopt policies that economists consider to be efficiency enhancing this is one of the fundamental questions of political economy the answer usually relies on what may be

wage flexibility in the chinese labour market 1989 2009 abstractwage flexibility in the chinese labour market 1989 2009 regional studies china s bureaucratic wage determination system is gradually being replaced by a market based system leading to a novel version of a dual labour market this paper studies wage flexibility in this dual market its principal findings are as follows wages in both sectors have become less responsive to changes in official registered unemployment with an alternative market based measure of unemployment becoming more relevant there is evidence of convergence of flexibility between the two sectors the wages of women exhibit greater flexibility than those of men and there is evidence of differences in wage flexibility between workers who have urban residential rights and rural migrants

transportation costs and product demand wagering on parimutuel horse racing parimutuel horse race wagering is in many respects like any other economic good but it differs in one important way from a vast majority of them given the present market arrangement this good cannot be transported to the consumer instead the consumer must travel to the production site where the good is consumed as it is produced thus transportation costs must play a crucial role in the demand decision for horse race wagering the consumers incur not only out of pocket expenses for travelling but also the cost of the time required to travel to and to consume the product moreover consumers incur differential costs in obtaining the same product because of their locational differences wagering demands are theorized to be the consequence of the choice of utility maximizing consumers which incorporates this special characteristic of the product models for parimutuel horse race wagering are then estimated both for thoroughbred and for harness horse racing in the state of new jersey it is found that bot

cooperation and political economic performance in affluent democratic capitalism research on comparative political economic performance has traditionally followed two separate tracks one concerned with collective economic gain growth and efficiency and the other focused on distribution and redistribution cooperative institutions offer a key to understanding cross national variation among the affluent capitalist democracies in both facets of political economic performance these institutions cluster along two dimensions neocorporatism and firm level cooperation pooled time series analysis for 18 nations over 1960 89 suggests that 1 neocorporatism is a major source of distributive redistributive policies and outcomes and of several sources of collective gain 2 firm level cooperation is a key contributor to economic growth

international r d rivalry and export market shares of unionized industries some evidence from the us manufacturing sector abstract this paper investigates how union activity that captures r d rents alters the strategic investment behavior of internationally competitive firms the effect of union activity in the spencer b j brander j a 1983 international r d rivalry and industrial strategy review of economic studies 50 707 722 framework is to reduce the firm s strategic investment in r d and its export market share the empirical investigation at the industry level indicates that union activity has a significant and negative impact on r d investment decisions in the us manufacturing sector an important contribution of this work is its attempt to empirically distinguish between strategic and non strategic r d the strategic effect of r d on export market share in an imperfectly competitive product market is a decreasing function of the level of union activity

rent shifting and rent sharing a re examination of the strategic industrial policy problem this paper reexamines the market structure problem in the strategic trade policy literature it is shown that rent sharing between the home union and the home firms raises total home industry rents regardless of whether the international duopoly is cournot or bertrand furthermore home welfare also rises with cooperation if the international industry consists of more than two firms if the industry is faced with entry and if there is domestic consumption this paper shows that rent sharing can be a robust strategic industrial policy and can be interpreted as a solution to the market structure dilemma

nominal wage contracts and the persistent effects of monetary policy we consider an efficiency wage model where wages affect turnover and firms choose optimal labor contracts under uncertainty about demand and productivity we show that there may be an equilibrium with nominal wage contracts where monetary shocks affect output furthermore monetary shocks have persistent effects on output because the previous state of the labor market affects the reemployment probability of quitting workers persistence increases if workers have bargaining power with endogenous policy a credibility problem arises naturally in the model equilibrium inflation increases with persistence but decreases with the natural rate of unemployment for given persistence

social mobility and redistributive politics just like economists voters have conflicting views about redistributive taxation because they estimate its incentive costs differently we model rational agents as trying to learn from their dynastic income mobility experience the relative importance of effort and predetermined factors in the generation of income inequality and therefore the magnitude of these incentive costs in the long run left wing dynasties believing less in individual effort and voting for more redistribution coexist with right wing dynasties this allows us to explain why individual mobility experience and not only current income matters for political attiitudes and how persistent differences in perceptions about social mobility can generate persistent differences in redistribution across countries

the role of shocks and institutions in the rise of european unemployment the aggregate evidence two key facts about european unemployment must be explained the rise in unemployment since the 1960s and the heterogeneity of individual country experiences while adverse shocks can potentially explain much of the rise in unemployment there is insufficient heterogeneity in these shocks to explain cross country differences alternatively while explanations focusing on labour market institutions explain current heterogeneity well many of these institutions pre date the rise in unemployment based on a panel of institutions and shocks for 20 oecd nations since 1960 we find that the interaction between shocks and institutions is crucial to explaining both stylised facts

the macroeconomics of specificity specific quasi rents arise in a variety of economic relationships and are exposed to opportunism unless fully protected by contract rent appropriation has important macroeconomic consequences resources are underutilized factor markets are segmented production suffers from technological sclerosis job creation and destruction are unbalanced recessions are excessively sharp and expansions run into bottlenecks while depending on the shock expansions may require reinforcement or stabilization recessions should typically be softened in the long run institutions may evolve to alleviate the problem by balancing appropriation technology choice will also be affected with the appropriated factor partially excluding the other from production to reduce appropriation

long term unemployment and macroeconomic policy this paper bears a simple double message when incumbent workers have some power in wage determination then a there may be no natural rate of unemployment and b both supply side and demand side policies may have lasting effects on the unemployment rate however our analysis implies that demand side policies in the produet market may be mueh less reliable and opera te through more complex ehannels than the traditional keynesians envisaged

supply side hysteresis the case of the canadian unemployment insurance system abstract this paper presents results from a 1971 natural experiment carried out by the canadian government on the unemployment insurance system at that time the generosity of the ui system was increased dramatically we find some evidence that the propensity to collect ui increases with a first time exposure to the new ui system hence as more individuals experience unemployment their lifetime use of the system increases this supply side hysteresis effect may explain why unemployment has steadily increased over the 1972 1992 period even though the generosity of unemployment insurance did not

the determination of unemployment benefits while much empirical research exists on labor market consequences of unemployment benefits there is remarkably little evidence on the forces determining benefits we present a simple model where workers desire insurance against unemployment risk and benefits increase the unemployment rate we then conduct one of the first empirical analyses of the determinants of the parameters of the benefit system using data for developed countries for 1971 89 controlling for year and country fixed effects and the government s political color we find evidence that the level of benefits falls when the unemployment rate is high this is consistent with wright s tax effect

keynesian issues and economic theory recent research helped in clarifying the nature of short run price and quantity adjustments in keynesian macroeconomic models and the possible causes of a persistent excess labour supply it is argued however that theories involving imperfect competition and real wage rigidities generate classical unemployment where multipliers act through supply side effects while nominal inertia seems to be at the root of truly keynesian multipliers the appraisal also contains a nontechnical presentation of recent models of endogenous expectations driven business fluctuations cycles sunspots monetary policy can then have persistent real effects under complete information money as a sunspot

internal rent seeking works councils and optimal establishment size abstract using a microeconomic model and data from the establishment panel of the german institute for employment research we analyze the optimal establishment size against the background of rent seeking workers and the influence of works councils the theoretical part shows that establishment size has not only a discouragement effect on the level of individual rent seeking but also a quantity effect as the number of rent seekers increases the interplay of both effects together with technological considerations determines whether the employer chooses an inefficiently small or large establishment size introduction of a works council restores efficient establishment size although it is purely used as rent seeking device whether the employer benefits from a works council or not depends on the degree of contract incompleteness and the degree of worker coordination via a works council the empirical part indicates dominance of the discouragement effect over the quantity effect in establishments without works council as theoretically predicted works councils are beneficial by disentangling rent seeking and production issues thus eliminating the influence of the two rent seeking effects

government restrictions and the demand for casino and parimutuel wagering growth in casino wagering in the united states from the mid 1980s forward has been extraordinary over the same period however parimutuel wagering has declined concern for this decline has prompted a number of states to allow parimutuel racetracks to offer casino type gaming devices at their facilities such operations are commonly referred to as racinos if the gaming devices at a racino are under the auspices of a state lottery they are referred to as video lottery terminals vlts separate parimutuel and vlt wagering demand models were estimated for a racino facility a number of restrictions were imposed on the vlt s at the beginning of the study period including number of vlt s type of game and machine maximum bet per play and vlt location the effect of these restrictions on vlt and parimutuel handles was a major focus of this article also of importance was an examination of the relationship between the vlt and parimutuel products relaxation of government restrictions on the vlt s was fo

belief in a just world and redistributive politics international surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate at the same time social ethnographies and experiments by psychologists demonstrate individuals recurrent struggle with cognitive dissonance as they seek to maintain and pass on to their children a view of the world where effort ultimately pays off and everyone gets their just deserts this paper offers a model that helps explain i why most people feel such a need to believe in a just world ii why this need and therefore the prevalence of the belief varies considerably across countries iii the implications of this phenomenon for international differences in political ideology levels of redistribution labor supply aggregate income and popular perceptions of the poor the model shows in particular how complementarities arise endogenously between individuals desired beliefs or ideological choices resulting in two equilibria a first american equilibrium is characterized by a high prevalence of just world beliefs among the population and relatively laissez faire policies the other european equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state more generally the paper develops a theory of collective beliefs and motivated cognitions including those concerning money consumption and happiness as well as religion

job vacancy rates in the firm an empirical analysis this paper presents some evidence on the magnitudes and determinants of job vacancy rates in us firms based on data from a survey in 1980 and 1982 the results show low overall vacancy rates but substantial variation across firms occupations industries and local areas local unemployment unionization and employer size have negative effects on vacancy rates while turnover and sales growth have positive effects the results are generally consistent with the predictions of job matching models

the role of unemployment insurance in an economy with liquidity constraints and moral hazard the potential welfare benefits of unemployment insurance along with the optimal replacement ratio are studied using a quantitative dynamic general equilibrium model to provide a role for unemployment insurance agents in our economy face exogenous idiosyncratic employment shocks and are unable to borrow or insure themselves through private markets in the absence of moral hazard replacement ratios as high as 65 are optimal and the welfare benefits of unemployment insurance are quite large however if there is moral hazard and the replacement ratio is not set optimally but is instead set to an empirically plausible value the economy can be much worse off than it would be without unemployment insurance

up the average cost curve inefficient entry and the new protectionism abstract a two country model is developed in which each country produces one good with increasing returns the goods being perfect or imperfect substitutes with cournot nash behavior and free entry certain restrictive trade policies have effects opposite to their favorable effect under noentry assumptions import tariffs and export subsidies lead to inefficient entry that raises rather than decreases the average production cost of and price charge by the domestic industry with negative welfare consequences we argue that these predictions of our model are closely consistent with extensive canadian data on entry exit and firms responses to trade liberalization

cooperation harassment and involuntary unemployment an insider outsider approach the authors present a theory of involuntary unemployment which explains why the unemployed workers outsiders are unable or unwilling to find jobs even though they are prepared to work for less than the prevailing wages of incumbent workers in siders the outsiders do not underbid the insiders since were the y to do so the insiders would withdraw cooperation from them making their work unpleasant with harassment and thereby reducing the prod uctivity and increasing the reservation wages of the underbidders th e resulting labor turnover costs create economic rent which the insid ers tap in wage setting and as a result involuntary unemployment ma y arise copyright 1988 by american economic association

exploring the political economy of labour market institutions labour markets how reforms took place many economists argue that the european unemployment problem relates to large labour market rigidities this paper argues that many of those inflexibilities and the underlying institutional regulations can be understood as the outcome of political influence by incumbent employees this is because many policies that increase unemployment actually benefit these insiders an empirical investigation of the determinants of labour market institutions demonstrates that the observations are consistent with this view the findings imply 1 higher exposure of the employed to unemployment facilitates a reduction in the level of employment protection 2 unemployment benefits are lower the more employment reacts to wages 3 a higher level of unemployment and the existence of a right wing government slow down the growth rate of the minimum wage giles saint paul

hysteresis in unemployment unemployment has risen sharply in a number of countries and it appears to be becoming more persistent the experience of the 1970s and 1980s showed that adverse unemployment shocks could have long lasting effects with very serious economic and social consequences a key mechanism producing these adverse consequences was hysteresis in unemployment whereby temporary rises in unemployment generated by supply and or demand shocks had permanent or at least very persistent effects clearly it is important to understand how hysteresis mechanisms might operate in order to avoid such adverse outcomes on the other hand experience during the subsequent two decades showed that under more favourable macroeconomic conditions it is possible to observe good hysteresis effects now is a very appropriate time to re visit the issue of hysteresis in unemployment in order to avoid the errors of the 1970s and 1980s and if possible to get hysteresis effects working in a positive direction copyright 2011 oxford university press

social mobility and the demand for redistribution the poum hypothesis this paper examines the often stated idea that the poor do not support high levels of redistribution because of the hope that they or their offspring may make it up the income ladder this prospect of upward mobility poum hypothesis is shown to be fully compatible with rational expectations and fundamentally linked to concavity in the mobility process a steady state majority could even be simultaneously poorer than average in terms of current income and richer than average in terms of expected future incomes a e rst empirical assessment suggests on the other hand that in recent u s data the poum effect is probably dominated by the demand for social insurance in the future everyone will be world famous for e fteen minutes andy warhol 1968

inequality social insurance and redistribution is the political support for welfare policy higher or lower in less egalitarian societies we answer the question using a model of welfare policy as publicly financed insurance that pays benefits in a redistributive manner when voters have both redistributive and insurance motives for supporting welfare spending the effect of inequality depends on how benefits are targeted greater inequality increases support for welfare expenditures when benefits are targeted to the employed but decreases support when benefits are targeted to those without earnings with endogenous targeting support for benefits to those without earnings declines as inequality increases whereas support for aggregate spending is a v shaped function of inequality statistical analysis of welfare expenditures in advanced industrial societies provides support for key empirical implications of the model

testing for time variation in an unobserved components model for the u s economy abstract this paper analyzes the amount of time variation in the parameters of a reduced form empirical macroeconomic model for the u s economy we decompose output inflation and unemployment in their stochastic trend and business cycle gap components with the latter linked through the phillips curve and okun s law a novel bayesian model selection procedure is used to test which parameters vary over time and which components exhibit stochastic volatility using data from 1959q2 to 2014q3 we find substantial time variation in okun s law while the phillips curve slope appears to be stable stochastic volatility is found to be important for cyclical shocks to the economy while the volatility of permanent shocks remains stable

endogenous adverse selection and unemployment insurance in this paper we consider how the presence of private information may explain the failure of the private sector to provide unemployment insurance in particular we show how the interaction of private information regarding employees preferences for work with the unobservable level of effort exerted on the job may explain the absence of private unemployment insurance we also reflect on the implications of our findings for the role of the public sector in providing unemployment insurance

determinants of price adjustment this paper reports results of an empirical study investigating the adjustment speed of prices to change in costs and demand particular emphasis is laid on the impact of concentration on the adjustment speed in addition the effects of the business cycle and capital intensity are considered it shows that concentrated industries tend to adjust prices faster while capital intensity has a negative impact prices are more flexible during an upswing than in times of a recession

the survival of the welfare state this paper provides an analytical characterization of markov perfect equilibria in a model with repeated voting where agents vote over distortionary income redistribution a key result is that the future constituency for redistributive policies depends positively on current redistribution since this affects both private investments and the future distribution of voters the model features multiple equilibria in some equilibria positive redistribution persists forever in other equilibria even a majority of beneficiaries of redistribution vote strategically so as to induce the end of the welfare state next period skill biased technical change makes the survival of the welfare state less likely

product choice for a firm selling related products a parimutuel application this paper provides a framework for analysis of product choice by a multiproduct firm selling several products whose demands are interrelated the decision making process of a racetrack racebook regarding the parimutuel wagering products both number and which ones it should supply is illustrated a racetrack racebook is a business entity which offers its patrons the opportunity to wager not only on live horse racing conducted at the racetrack but also on races simulcast to that racetrack from a variety of racetracks from both in state and out of state locations the demands for these wagering products are interrelated and these interrelationships play a key role in determining the number and which ones of these wagering opportunities that will be supplied based on the experience of a specific racetrack racebook these demand functions are estimated econometrically and the role of these interrelated demands in the supply decision is explored an algorithm is developed to search over all possible pr

are devaluations contractionary in mena countries currency depreciation reduces aggregate supply by raising cost of imported inputs and increases aggregate demand by increasing its net export component depending on the relative strength of the two effects depreciation could be expansionary or contractionary we employ the bounds testing approach to cointegration and error correction modelling to evaluate the effects of exchange rate depreciation on output growth both in the short and in the long run across a sample of mena countries exchange rate fluctuations are found to be important to fluctuations in real output growth in the short run anticipated exchange rate depreciation may induce long run expansionary or contractionary effects on output supply consistent with theory s predictions the expansionary effect of unanticipated depreciation is only transitory on output growth nonetheless unanticipated depreciation is found to have a contractionary effect on output growth in the long run via an increase in the cost of imported inputs

the redistributive roles of unemployment insurance and the dynamics of voting abstract public unemployment insurance is analyzed as the majority voting equilibrium policy of a dynamic stochastic economy abstracting from incentive effects we focus on redistribution some results are because of the distribution of heterogeneous employment opportunities public insurance may be democratically chosen even if complete private markets exist and because of the dynamics even when agents are intrinsically homogeneous the equilibrium benefit level or duration benefit schedule deviates from what has been described as optimal in the literature the effects of differences in the average frequency or duration of unemployment on equilibrium taxes and benefits are investigated with some unanticipated results

insider bargaining power starting wages and involuntary unemployment recent analyses of wage bargaining has emphasized the distinction between insiders and outsiders yet one typically assumes that insiders and recently hired outsiders are paid the same wage we con

the simple macroeconomics of profit sharing this paper is in the spirit of the temporary equilibrium approach to macroeconomics it basically extends that framework to cover a profit sharing system and then compares the macroeconomic characteristics with those of the more familiar wage system a first preliminary step is to demonstrate how a microeconomic model of monopolistic competition can be built up into a junior member of the keynesian macro family the methodology is to create from first principles including a careful formulation of a monopolistically competitive product market structurea natural underpinning for the standard aggregate demand specification the primary goal of the paper is to apply the integrated monopolistic competitionkeynesian type apparatus described above to investigate the macroeconomic properties of a profit sharing economy the existence of a consistent general framework covering both cases invites meaningful comparisons that indicate clearly why an economy based on profit sharing principles possesses natural immunity to stagflation by contrast the wage economya system we have largely accepted without critically examining its macroeconomic consequences is more prone to suffer from unemployment and inflation the policy implications for aggregate demand management in wage and share systems are analyzed and contrasted in writing this paper my philosophy has been to not shirk from using those reasonable parameterizations and functional forms which yield nice crisp results and permit me to focus sharply on the essential logic of basic issues it is certainly possible to present the main results in a somewhat more general formulation as the astute reader will appreciate but i fear only at some cost of distracting attention from those central features i wish to highlight

a dynamic model of union power wages and employment the traditional approach to modelling the effects of trade union power on wages and employment has paid very little attention to how the form of union power affects the outcome in this paper wage and employment determination is considered in a dynamic model where some workers e g non union members continue to work in the event of a dispute to see whether this practice can be justified the predictions of the model are very different from the standard one for example both wages and employment may be a nonmonotonic function of union density the model can also explain situations in which unions are sustainable in the long run

why does unemployment persist the main movements of unemployment correspond to fluctuations in the short run nairu around a stable long term nairu these supply side fluctuations have two main origins i variations in the number of insiders involved in wage setting ii variations in the effectiveness of the unemployed outsiders as potential job seekers the evidence of micro studies suggests that ii is more important than i and this also helps to explain the widespread shift outwards in the u v curve to derive these arguments rigorously the paper presents a simple model of efficiency wages another of collective bargaining and finally a fully dynamic model with labour market flows

repeated games some applications to under cutting and harassment in the labour market this paper consists of some simple applications of the complete information repeated game rg framework to the labour market in many economic and social problems agents participate in an environment for many periods in such contexts one often observes some degree of collusion obeying behavioural norms which are not in the agents immediate interests among agents one explanation of such collusive activities is agents do not deviate from the norm because of the fear of punishment by other players that the deviation might invoke the literature on rgs has tried to model the above explanation of collusive activities within a game theoretic framework the result of the research has been that with the introduction of time many types of activities which may at first seem irrational in terms of selfish utility maximisation such as co operation altruism threats revenge etc can be explained as solutions to some rgs it can be argued that the rg framework has been too successful it can explain too many behavioural rules in fact the folk theorem of repeated games see sabourian 1988b for a survey states that any individually rational payoff of the one shot game can be supported as a nash equilibrium ne in fact as a subgame perfect equilibrium spe of the rg if players do not discount the future the reason for the existence of so many equilibria in rgs is that in such games a strategy is a plan of what to do at every contingency history many norms of behaviour which are not in players immediate interest can be supported as equilibria if players can choose history dependent strategies which punish any player who does not adhere to the norm but why should players in equilibrium choose a history dependent strategy this is even more surpris

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

unemployment in regional labor markets using structural theories to understand local jobless rates in west virginia the author uses a range of structural labor market models to understand differing regional jobless rates in a state affected by pockets of structural unemployment four theories of regional structural unemployment are presented and their hypotheses are statistically evaluated using west virginia county panel data the author then presents case study evidence to compare these statistical results with the realities of the county labor markets both types of empirical evidence suggest that a segmented non market clearing model in which structural unemployment stems from queuing for above market clearing wages in both a high wage primary sector and a lower wage secondary sector can shed the most light on regional unemployment rates in west virginia

the inheritance of inequality how level is the intergenerational playing field what are the causal mechanisms that underlie the intergenerational transmission of economic status are these mechanisms amenable to public policies in a way that would make the attainment of economic success more fair these are the questions we will try to answer

veblen effects in a theory of conspicuous consumption the authors examine conditions under which veblen effects arise from the desire to achieve social status by signaling wealth through conspicuous consumption while veblen effects cannot ordinarily arise when preferences satisfy a single crossing property they may emerge when this property fails in that case budget brands are priced at marginal cost while luxury brands though not intrinsically superior are sold at higher prices to consumers seeking to advertise wealth luxury brands earn strictly positive profits under conditions that would with standard formulations of preferences yield marginal cost pricing the authors explore factors that induce veblen effects and they investigate policy implications copyright 1996 by american economic association

household commodity production and social harassment costs in a seminal article becker 2 suggested that consumer behavior be viewed as a process in which households produce commodities meals plays and so on by combining goods or services food theatre tickets and so on and time households are perceived in that model as utility maximizing producers in effect becker s model demonstrates that money prices of goods or services do not provide sufficient information to explain or predict household choice more specifically money prices of goods or services do not reflect the full costs of household produced commodities because money prices exclude the costs of the household s time spent in the production of such commodities mincer 7 showed that unless the costs of time are considered the income elasticities of demand for different commodities are biased abbott and ashenfelter 1 have established the theoretical conditions for household utility maximizing expenditures of income and time wales and woodland 9 assumed that households maximize utility functions which include leisure and a hicksian composite good the budget constraint is written in terms of wage rates the price of the composite good nonlabor income the total number of hours available and the full income of the household consistent with the becker model kohlhase 5 constructed simultaneous constraints in which the income and time constraints are reduced to a full income constraint under the assumption that households buy back the leisure time and commuting time of market workers at the market wage rates and deacon and sonstelie 4 analyzed a natural situation in which for a short time motorists were faced with a choice between a waiting in line for low priced gasoline or b not waiting and purchasing gasoline of a similar quality at a higher price by surveying customers at one low priced station and at two nearby high priced stations they were able to estimate the costs of time for people in both groups they found that in general estimates of the costs of time were similar to the after tax wages of respondents thereby providing additional evidence that the money price does not always convey sufficient information to predict household choice

wage rivalry and insider outsider relations evidence for skilled and unskilled men in denmark a model with trade union rivalry is used to derive wage reaction functions which are then estimated for skilled and unskilled men in denmark the results show substantial differences in wage determination between the two groups of workers in the short term but once the wage wage spiral starts to operate some of the differences disappear wage setting for unskilled men is subject to insider outsider effects whereas it is uncertain whether wage determination for skilled workers suffers from such imperfections copyright 1992 by the editors of the scandinavian journal of economics