what is the optimal immigration policy migration jobs and welfare abstract we study the immigration policy that maximizes the welfare of the native population in an economy where the government designs an optimal redistributive welfare system and supplies public goods we show that when the government can design different tax systems for immigrants and natives free immigration is optimal it is also optimal to use the tax system to encourage the immigration of high skill workers and discourage that of low skill workers when immigrants and natives must be treated alike banning low skill immigration and allowing free immigration for high skill workers is optimal however there might be no high skill immigration when heavy taxes are levied on all high skill workers both natives and immigrants

can falling supply explain the rising return to college for younger men a cohort based analysis although the college high school wage gap for younger u s men has doubled over the past 30 years the gap for older men has remained nearly constant in the united kingdom and canada the college high school wage gap also increased for younger relative to older men using a model with imperfect substitution between similarly educated workers in different age groups we argue that these shifts reflect changes in the relative supply of highly educated workers across age groups the driving force behind these changes is the slowdown in the rate of growth of educational attainment that began with cohorts born in the early 1950s in all three countries

measuring human capital in the labor market the supply of experience in 8 oecd countries abstract to investigate the evolution of the supply side of the labor market i derive a methodology to measure an important component of the human capital level of the workforce the experience of the labor market based on the perpetual inventory method a stock of experience is estimated for eight oecd countries it appears that during the last three decades the oecd labor markets have faced a decline in the supply of experience by the labor market participants with a minimum in the early 1980s for most countries and a recovery in the 1990s some implications regarding relative wages relative unemployment and schooling are discussed

selection investment and women s relative wages over time in theory growing wage inequality within gender should cause women to invest more in their market productivity and should differentially pull able women into the workforce our paper uses heckman s two step estimator and identification at infinity on repeated current population survey cross sections to calculate relative wage series for women since 1970 that hold constant the composition of skills we find that selection into the female full time full year workforce shifted from negative in the 1970s to positive in the 1990s and that the majority of the apparent narrowing of the gender wage gap reflects changes in female workforce composition we find the same types of composition changes by measuring husbands wages and national longitudinal survey iq data as proxies for unobserved skills our findings help to explain why growing wage equality between genders coincided with growing inequality within gender

changes in returns to education in latin america the role of demand and supply of skills using micro data for the urban areas of argentina brazil chile colombia and mexico the authors document trends in men s returns to education during the 1980s and the 1990s and estimate the role of supply and demand factors in explaining the changes in skill premia they propose a model of demand for skills with three production inputs corresponding to workers with primary secondary and university level education further the authors demonstrate that an unprecedented rise in the supply of workers having completed secondary level education depressed their wages relative to workers with primary level education throughout latin america this supply shift was compounded by a generalized shift in the demand for workers with tertiary education

an experiment on learning with limited information nonconvergence experimentation cascades and the advantage of being slow abstract we present the results of an experiment on learning in a continuous time low information setting for a dominance solvable version of a cournot oligopoly with differentiated products we find little evidence of convergence to the nash equilibrium in an asynchronous setting characterized by players updating their strategies at different frequencies play tends toward the stackelberg outcome which favors the slower player convergence is significantly more robust for a serial cost sharing game which satisfies a stronger solution concept of overwhelmed solvability as the number of players grows this improved convergence tends to diminish seemingly driven by frequent and highly structured experimentation by players leading to a cascading effect in which experimentation by one player induces experimentation by others these results have implications both for traditional oligopoly competition and for a wide variety of strategic situations arising on the internet

risk aversion in a dynamic asset allocation experiment we conduct a controlled laboratory experiment in the spirit of merton 1971 in which subjects dynamically choose their portfolio allocation between a risk free and risky asset using the optimal allocation of an investor with hyperbolic absolute risk aversion hara utility we fit the experimental choices to characterize the risk profile of our participants despite substantial heterogeneity decreasing absolute risk aversion and increasing relative risk aversion are the predominant types we also find some evidence of increased risk taking after a gain finally the session level risk attitudes show a different profile than the individual descriptions of risk attitudes

a stochastic equilibrium model of internet pricing abstract perhaps the greatest technological innovation of the next several decades will be universal access and utilization of the internet already congestion is becoming a serious impediment to efficient utilization we introduce a stochastic equilibrium concept for a general mathematical model of the internet and demonstrate that the efficient social welfare maximizing stochastic allocation of internet traffic can be supported by optimal congestion prices we further demonstrate that approximately optimal prices can be readily computed and implemented in a decentralized system by constructing a large computer simulation model we also address the alternative of building excess capacity to avoid congestion

quantile selection models with an application to understanding changes in wage inequality we propose a method to correct for sample selection in quantile regression models selection is modeled via the cumulative distribution function or copula of the percentile error in the outcome equation and the error in the participation decision copula parameters are estimated by minimizing a method of moments criterion given these parameter estimates the percentile levels of the outcome are readjusted to correct for selection and quantile parameters are estimated by minimizing a rotated check function we apply the method to correct wage percentiles for selection into employment using data for the uk for the period 1978 2000 we also extend the method to account for the presence of equilibrium effects when performing counterfactual exercises

inequality aversion and efficiency with ordinal and cardinal social preferences an experimental study abstract in this paper we report on a series of free form bargaining experiments in which two players have to distribute four indivisible goods among themselves in one treatment players are informed about the monetary payoffs associated with each bundle of goods in a second treatment only the ordinal ranking of the bundles is given we find that in both cases inequality aversion plays a prominent role in the ordinal treatment individuals apparently use the ranks in the respective preference orderings over bundles of goods as a substitute for the unknown monetary value allocations that distribute the value money or ranks respectively most equally serve as natural reference points for the bargaining processes frequently such equal split allocations are chosen by our subjects even though they are pareto dominated whether a pareto optimal allocation is chosen or not depends on whether or not it is a pareto improvement relative to the equal split reference allocation we find less pareto damaging behavior due to inequality aversion in the ordinal than in the cardinal treatment

communication and coordination in a two stage game we study the impact of communication on behavior in a two stage coordination game with asymmetric payoffs we test experimentally whether individuals can avoid a head to head confrontation by means of coordinated strategies in particular we analyze whether and how quickly a conflict avoidance take turn strategy can emerge first our results show that players learn to solve the conflict by choosing opposite options at both stages of the game second many adopt a take turn strategy to sustain coordination over time and alleviate the inequality induced by the asymmetry of payoffs third communication increases the likelihood of conflict resolution even when a single pair member has the right to communicate

changes in male labor supply and wages in the 1980s both wages and labor supply of poorly educated men fell substantially relative to those of educated men some observers have interpreted this positive association between changes in w

forward induction in the battle of the sexes games this paper provides experimental evidence on forward induction as a refinement criterion in the basic extensive form one of the two players chooses to play a battle of the sexes game or to receive a certain payoff according to forward induction choosing to play the game is a signal about intended action though the presence of the outside option changes play we find only limited support for the forward induction hypothesis the effects of the outside option also reflect the creation of a focal point through the asymmetry created by offering the outside option to one of the two players jel c72

continuous time repeated games in this paper the authors develop a model of strategic behavior in continuous time games of complete information which includes conventional repeated games in discrete time as a special case the model developed here admits a very large class of strategies that allows one to extend the repeated game model to continuous time the set of equilibria in this game may be large in many cases equal to the feasible individually rational set of payoff s the authors also study the restriction of renegotiation proofness in this framework and apply these results to a cournot duopoly example copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

migration theories and evidence an assessment abstract this paper presents a critical survey of theories of migration their welfare and policy implications and their empirical relevance we also develop some extensions to the theory beginning with the harris and todaro ht model in particular the ht model is extended to examine risk averse behaviour within families where the migration of members of families serves to diversify risk the welfare implications of the individual migration decision and government intervention in the form of employment subsidies are examined recent evidence on international migration is presented it is shown that migration does not flow automatically in response to wage differentials characteristics of migrants and the process of self selection are found to be important determinants of the rate of migration

against the wind bargaining recentralisation and wage inequality in norway 1987 91 in the late 1980s norway s labour market experienced similar supply and demand shifts for skills to other countries but unlike other oecd nations norway s wage setting system became more centralised the pay distribution in norway became more compressed at the bottom from 1987 to 1991 while low wage workers in other countries lost ground relatively using norwegian microdata for 1987 and 1991 i found that changing labour market prices helped cause this wage compression further the less educated had declining relative overall employment but increasing relative public sector employment both possible labour market responses to the wage compression

technology and the us labor market evidence from the sectoral and regional decomposition of the change in the us workforce skill mix abstract researchers have found indirect evidence supporting the role of technology in changing the workforce skill mix in the us by decomposing the change in the skill mix into within between industry components this paper provides additional support for the role of technology by extending the decomposition analysis into both the sectoral and the regional dimensions

real wages over the business cycle evidence from panel data one topic on which keynes did not disagree with classical economists was the cyclical behavior of real wages keynes 1936 as well as various classical writers predicted that real wages should move countercyclically quoting the general theory p 17 in general an increase in employment can only occur through the accompaniment of a decline in real wages thus i am not disputing this vital fact which the classical economists have rightly asserted as indefeasible this prediction is based on the premise of competition and a given short run capital stock increases in employment then correspond to more intensive use of capital and through diminishing product lower real wages for this reason evidence by dunlop 1938 and tarshis 1939 that real wages move procyclically was viewed as paradoxical both dunlop and tarshis based their findings on an observed positive correlation between real and money wages which given the procyclical movement of money wages implies a positive correlation between

an evolutionary interpretation of van huyck battalio and beil s experimental results on coordination this paper proposes an adaptive interpretation of the results of some recent experiments with repeated tacit coordination games these experiments revealed several behavioral regularities including a systematic discrimination between strict nash equilibria in certain games that appear to be driven by strategic uncertainty and are not explained by traditional equilibrium refinements the observed patterns of discrimination correspond closely to predictions based on maynard smith s notion of evolutionary stability an adaptive model in the spirit of the evolutionary dynamics but recognizing the important differences between learning in human populations and evolution promises to yield a unified explanation of the results journal of economic literature classification numbers 020 026

efficiency equality and labeling an experimental investigation of focal points in explicit bargaining we investigate schelling s hypothesis that payoff irrelevant labels cues can influence the outcomes of bargaining games with communication in our experimental games players negotiate over the division of a surplus by claiming valuable objects that have payoff irrelevant spatial locations negotiation occurs in continuous time constrained by a deadline in some games spatial cues are opposed to principles of equality or efficiency we find a strong tendency for players to agree on efficient and minimally unequal payoff divisions even if spatial cues suggest otherwise but if there are two such divisions cues are often used to select between them inducing distributional effects jel c78 d63 d83 in the strategy of conflict thomas c schelling 1960 pp 53 67 74 proposes the hypothesis that the outcomes of bargaining problems can be systematically influenced by incidental details or as they would now be called properties of framing or labeling these labeling properties or cues have no direct relationship to payoffs and are not represented in standard game theoretic models but they nevertheless provide a means by which players can coordinate their expectations although much of his theoretical analysis and all of his informal experiments are concerned with simultaneous move games without communication schelling claims that this hypothesis applies to explicit bargaining with full communication and enforcement he acknowledges that communication provides mechanisms for coordination that are not present in his simple experiments but still argues that framing properties can remain significant in explicit bargaining most subsequent bargaining theory has not used this idea but if real world bargaining is substantially affected by payoff irrelevant cues a satisfactory theory of bargaining needs to take account

regional labor markets and the determinants of wage inequality from 1972 to 1990 the united states experienced the largest increase in wage inequality of any developed country the spread in log wages between the 90th and 10th percentiles of the male wage distribution increased by about 60 points and inequality increased within virtually every demographic or skill category of the labor force see chinhui juhn et al 1993 various explanations have been offered including changes in the relative demand for skill intensive goods international trade immigration of less skilled workers and increased labor force participation of women yet attempts to quantify the relative importance of these factors have not met with much success this leaves skill biased technical change as the residual claimant that rationalizes the data this paper uses regional differences in the evolution of wage inequality to provide new evidence on the determinants of relative wages using a model of factor demand in geographic markets i isolate contributions of i changing skill ratios in the labor force ii increased participation of women iii technical change and iv changes in the industrial composition of labor demand the data indicate that changing skill ratios and women s labor supply have affected the wages of low skilled men in the west the data indicate that increased immigration of less skilled hispanic and asian workers has adversely affected the wages of natives causing a greater increase in inequality there than in any other region of the country i modeling wage inequality in regional markets

a continuous dilemma we study prisoners dilemmas played in continuous time with flow payoffs accumulated over 60 seconds in most cases the median rate of mutual cooperation is about 90 percent control sessions with repeated matchings over eight subperiods achieve less than half as much cooperation and cooperation rates approach zero in one shot sessions in follow up sessions with a variable number of subperiods cooperation rates increase nearly linearly as the grid size decreases and with one second subperiods they approach continuous levels our data support a strand of theory that explains how capacity to respond rapidly stabilizes cooperation and destabilizes defection in the prisoner s dilemma jel c72 c78 c91

sustainable management of renewable resources an experimental investigation in continuous time abstractthis study addresses one of the most basic questions in renewable resource management the ability of economic agents to exploit a renewable resource in an efficient and sustainable manner in a laboratory experiment subjects are presented with renewable resource extraction problems where optimal management will lead to a stable steady state a test of sustainability of the extraction practices shows that extraction behaviour results in steady states only 56 of the time the mode of the steady state distribution coincides with the optimal steady state extraction the trade off between accruing a higher payoff in the present and sustaining the resource for future exploitation leads to suboptimal behaviours such as initial overextraction of the resource compared to the optimal extraction policy costly downward adjustment of the extraction later in time and settling down for lower long run resource and extraction the suboptimal behaviours lead to 17 loss in efficiency on average in terms of th

semiparametric estimation of selection models some empirical results among the central theoretical developments in the econometric analysis of nonexperimental microeconomic data has been the analysis of selectivity bias following the work of james heckman 1974 statistical techniques were developed in the 1970s to consistently estimate the parameters of these models one potential drawback to the application of these techniques is their sensitivity to the assumed parametric distribution of the unobservable error terms in the model in recent years a number of estimation methods for selection models have been developed which do not impose parametric forms on error distributions these methods are termed semiparametric since only part of the model of interest the regression function is parametrically specified while the statistical theory of these semiparametric estimators has received much attention practical applications of the methods are lacking an exception being the paper by joel horowitz and george neumann 1987 in this paper we use semiparametric methods to reanalyze data on the labor supply of married women first studied by thomas mroz 1987 using parametric methods the object of this reanalysis is to determine whether mroz s results are sensitive to his parametric assumptions

separating the hawks from the doves evidence from continuous time laboratory games human players in our laboratory experiment received ow payos over 120 seconds each period from a standard hawk dove bimatrix game played in continuous time play converged closely to the symmetric mixed nash equilibrium under a one population matching protocol when the same players were matched in a two population protocol with the same bimatrix they showed clear movement towards an asymmetric and very inequitable pure nash equilibrium of the game these ndings support distinctive predictions of evolutionary game theory

payoff assessments without probabilities a simple dynamic model of choice abstract we develop a model which reflects the tendency of people to simplify the decision problems they face the decision maker chooses among alternate strategies only on the basis of the payoff she assesses she would obtain from them and these assessments do not explicitly take into account her subjective judgements regarding the likelihood of alternate states of the world at each stage the decision maker chooses the strategy that she assesses to give the highest payoff she updates her assessments adaptively we show that such behavior leads to maxmin choices we also consider the decision maker who experiences shocks journal of economic literature classification numbers c7 d8

rational expectations and the aggregation of diverse information in laboratory security markets the idea that markets might aggregate and disseminate information and also resolve conflicts is central to the literature on decentralization hurwicz 1972 and rational expectations lucas 1972 we report on three series of experiments all of which were predicted to have performed identically by the theory of rational expectations in two of the three series one in which participants trade a complete set of arrow debreu securities and a second in which all participants have identical preferences double auction trading leads to efficient aggregation of diverse information and rational expectations equilibrium failure of the third series to exhibit such convergence demonstrates the importance of market institutions and trading instruments in achievement of equilibrium

interpreting aggregate wage growth the role of labor market participation a new and easily implementable framework for the empirical analysis of the relationship between aggregate and individual wages is developed aggregate real wages are shown to contain three important bias terms one associated with the dispersion of individual wages a second deriving from compositional changes in the selected sample of workers and a third reflecting the distribution of working hours their importance for interpreting the path of aggregate wages and of the returns to education for recent experience in britain is highlighted a close correspondence between the estimated biases and the patterns of differences shown by aggregate wages is established

forward looking behavior in hawk dove games in endogenous networks experimental evidence abstract we conduct an experiment in continuous time every subject can change her links to others and her action in a hawk dove game which she plays bilaterally with each of her linked partners at any time we hypothesize that norms exist regarding who establishes and thus pays for links and that players take these norms into account when deciding on their strategy for such limitedly forward looking players who consider others linking reactions we introduce a strategy adaptation rule anticipatory better reply rule abr and a related stability criterion reaction anticipatingly stable ras our data support our assumption on linking reactions subjects seem to take these reactions into account when deciding to switch from hawk to dove abr behavior however better reply behavior is prevalent when short term profits allure ras configurations occur more often than nash equilibria of the base game however with respect to stability they perform similar

immigrants minorities and labor market competition this paper investigates the extent of labor market competition among immigrants minorities and the native population an analysis of 1980 u s census data reveals that immigrants tend to be substitutes for some labor market groups and complements for others the effects of shifts in immigrant supply on the earnings of native born men are however very small on the other hand increases in the supply of immigrants do have a sizable impact on the earnings of immigrants themselves an increase of 10 percent in the supply of immigrants for example reduces the immigrant wage by about 10 percent

that s how we roll an experiment on rollover risk abstract we design a continuous time experiment to study how different short term credit maturities interact with the state of the economy we find that when the economy is in a boom long maturities stabilize the credit market yet when in a downturn such maturities increase the likelihood of credit freezes this result has important regulatory implications as it suggests that a policy aimed at reducing maturity mismatch in short term credit markets might backfire during a recession

does distance reflect more than transport costs we decompose the effect of distance on intercity retail price dispersion in us into transport and non transport cost components we find that distance contains more information than transport costs care should be taken in interpreting distance effect as transport costs only

equilibrium selection with coupled populations in hawk dove games theory and experiment in continuous time abstract standard one and two population models for evolutionary games are the limit cases of a uniparametric family combining intra and intergroup interactions our setup interpolates between both extremes with a coupling parameter for the example of the hawk dove game we analyze the replicator dynamics of the coupled model we confirm the existence of a bifurcation in the dynamics of the system and identify three regions for equilibrium selection one of which does not appear in common one and two population models we also design a continuous time experiment exploring the dynamics and the equilibrium selection the data largely confirm the theory

the hidden winners of renewable energy promotion insights into sector specific wage differentials abstract in light of germany s energy system transformation this paper examines differences in employment structures and wage differentials between renewable energy establishments and their sector peers to do so we have developed a novel data set by linking company level information from the german renewable energy federation with administrative establishment level data from the institute for employment research descriptive evidence shows significant differences in wages and several other characteristics between renewable energy establishments and their sector peers our estimates give evidence that human capital and other establishment level characteristics mostly explain the wage differential among manufacturers and energy providers however we find a persistent renewable energy wage premium of more than ten percent in construction installation activities and architectural engineering services we interpret this premium as a positive indirect effect of the promotion of renewable energies for the benefit of employees in renewable energy establishments within these two sectors

gender differences in accepting and receiving requests for tasks with low promotability abstract gender differences in task allocations may sustain vertical gender segregation in labor markets we examine the allocation of a task that everyone prefers be completed by someone else writing a report serving on a committee etc and find evidence that women more than men volunteer are asked to volunteer and accept requests to volunteer for such tasks beliefs that women more than men say yes to tasks with low promotability appear as an important driver of these differences if women hold tasks that are less promotable than those held by men then women will progress more slowly in organizations jel i23 j16 j44 j71 m12 m51

decisions among defaults and the effect of the option to do nothing prior reviews have focused on if leadership literature pays homage to levels of analysis our purpose is to take stock of how well and in what ways levels issues are implemented in theory and hypotheses formulation construct conceptualization measurement and data analysis to illustrate these notions we provide an in depth review of 163 multi level empirical leader member exchange lmx and vertical dyad linkage vdl studies published between 1972 and 2012 our findings indicate that the volume of multi level studies in lmx has drastically increased recently and the majority of these studies cast theory and hypotheses at the same level with regard to alignment of levels of theory hypotheses with measurement and with data analyses however roughly one out of two published studies suffers from misalignment of levels most of this misalignment occurs in studies where the dyad level of analysis a key component of lmx is an explicit or implicit focus we conclude with a discussion of the implications for the lmx literature and present recommendations to guide multi level leadership research

collusion as public monitoring becomes noisy experimental evidence this paper uses laboratory experiments to test the implications of the theory of repeated games on equilibrium payoffs and estimate strategies in an infinitely repeated prisoners dilemma game with imperfect public monitoring we find that subjects payoffs i decrease as noise increases and ii are lower than the theoretical maximum for low noise but exceed it for high noise under the assumption that the subjects strategy uses thresholds on the public signal for transition between cooperation and punishment states we find that the best fitting strategy simply compares the most recent public signal against a single threshold

egalitarianism and efficiency in repeated symmetric games abstract we analyze the symmetric equilibria of repeated symmetric games where there is a conflict of interests over equilibria the battle of the sexes or the hawk dove game are key examples if one restricts attention to symmetric equilibria efficient equilibria must be egalitarian for finitely repeated games and generic discount factors there is a unique outcome path which ensures efficiency within the class of symmetric equilibria this is also true for the infinitely repeated games if the players are sufficiently impatient journal of economic literature classification numbers c72 c73

trends in quality adjusted skill premia in the united states 1960 2000 this paper presents new evidence that increases in college enrollment lead to a decline in the average quality of college graduates between 1960 and 2000 resulting in a decrease of 8 percentage points in the college premium the standard demand and supply framework katz and murphy 1992 card and lemieux 2001 can qualitatively account for the trend in the college and age premia over this period but the quantitative adjustments that need to be made to account for changes in quality are substantial furthermore the standard interpretation of the supply effect can be misleading if the quality of college workers is not controlled for to illustrate the importance of these adjustments we reanalyze the problem studied in card and lemieux 2001 who observe that the rise in the college premium in the 1980s occurred mainly for young workers and attribute this to the differential behavior of the supply of skill between the young and the old our results show that changes in quality are as important as changes in prices to explain the phenomenon they document

a comparison of international income inequality an ordered probit model analysis in this study the ordered probit model with marginal effect was applied to examine the key elements that influence changes in the gini levels the empirical results indicated that export incentives and poverty have a positive impact on the gini levels moreover the marginal effect revealed that export incentives increase income inequality for countries with higher inequality and reduce inequality for those countries with a relatively even income distribution likewise the study found that the asian pacific economic cooperation apec and the eu countries move from inequality to equality more efficiently than countries in the latin american integration association laia

the effect of income taxes on household income research on the distribution of income during the 1980s has identified a trend towards increasing inequality which may be the continuation and acceleration of trends spanning several decades this paper explores to what extent behavioral responses to the tax changes during the 1980s may also explain the rising inequality the 1986 tax reform act is used as a natural experiment to explore the roles played by both taxes and a variety of nontax factors our principal finding is that both tax rates and nontax factors appear to have had significant effects on relative income growth during the late 1980s

gender and the new inequality explaining the college non college wage gap the new inequality is often characterized by the increasing wage gap between workers with a college education and those without yet although the gap in hourly wages between college educated and non college educated women is high and rising the topic has been overshadowed by research on gender inequality and wage inequality among men using the 1990 5 percent public use microdata samples independent sources of macro data and controls for individual human capital characteristics i examine the association between the college non college wage gap and key aspects of local economic conditions for women and men while the college non college wage gap among women is comparable in size to the gap among men significant gender differences emerge in the underlying sources of high wage gaps in over 500 labor markets across the united states compared with men flexible and insecure employment conditions e g joblessness casualization and immigration are more important in fostering high wage gaps among women than are technology trade and industrial composition the prevailing explanations of rising wage inequality over time based on these gender differences i reconsider the debate on labor market restructuring and inequality and discuss a new analytical focus on differences in within gender inequality

the changing distribution of male wages in the uk this paper uses microeconomic data from the u k family expenditure surveys fes and the general household surveys ghs to describe and explain changes in the distribution of male wages since the late 1970s wage inequality has risen very fast in the u k and this rise is characterized both by increasing education and age differentials we show that a large part of the changes in the u k can be summarized quite simply as increases in eduction differentials and a decline of growth of entry level wages which persist subsequently this fact we interpret as cohort effects we also show that like in the u s an important aspect of rising wage inequality is increased within group wage dispersion finally we use the ghs to evaluate the role of alternative education measures

generalised taylor and generalised calvo price and wage setting micro evidence with macro implications the generalised calvo and the generalised taylor models of price and wage setting are unlike the standard calvo and taylor counterparts exactly consistent with the distribution of durations observed in the data using price and wage micro data from a major euro area economy france we develop calibrated versions of these models we assess the consequences for monetary policy transmission by embedding these calibrated models in a standard dynamic stochastic general equilibrium model the generalised taylor model is found to help rationalise the hump shaped and persistent response of inflation without resorting to the counterfactual assumption of systematic wage and price indexation

changes in the distribution of male and female wages accounting for employment composition using bounds this paper examines changes in the distribution of wages using bounds to allow for the impact of nonrandom selection into work we show that worst case bounds can be informative however because employment rates in the united kingdom are often low they are not informative about changes in educational or gender wage differentials thus we explore ways to tighten these bounds using restrictions motivated from economic theory with these assumptions we find convincing evidence of an increase in inequality within education groups changes in educational differentials and increases in the relative wages of women

the effects of health wealth and wages on labour supply and retirement behaviour this paper estimates a life cycle model of labour supply retirement and savings behaviour in which future health status and wages are uncertain individuals face a fixed cost of work and cannot borrow against future labour pension or social security income the method of simulated moments is used to match the life cycle profiles of labour force participation hours worked and assets that are estimated from the data to those that are generated by the model the model establishes that the tax structure of the social security system and pensions are key determinants of the high observed job exit rates at ages 62 and 65 removing the tax wedge embedded in the social security earnings test for individuals aged 65 and older would delay job exit by almost one year by contrast social security benefit levels health and borrowing constraints are less important determinants of job exit at older ages for example reducing social security benefits by 20 would cause workers to delay exit from the labour force by only three months

cooperation in the finitely repeated prisoner s dilemma more than half a century after the first experiment on the finitely repeated prisoner s dilemma evidence on whether cooperation decreases with experience as suggested by backward induction remains inconclusive this paper provides a meta analysis of prior experimental research and reports the results of a new experiment to elucidate how cooperation varies with the environment in this canonical game we describe forces that affect initial play formation of cooperation and unraveling breakdown of cooperation first contrary to the backward induction prediction the parameters of the repeated game have a significant effect on initial cooperation we identify how these parameters impact the value of cooperation as captured by the size of the basin of attraction of always defect to account for an important part of this effect second despite these initial differences the evolution of behavior is consistent with the unraveling logic of backward induction for all parameter combinations importantly despite the seemingly contradictory results across studies this paper establishes a systematic pattern of behavior subjects converge to use threshold strategies that conditionally cooperate until a threshold round and conditional on establishing cooperation the first defection round moves earlier with experience simulation results generated from a learning model estimated at the subject level provide insights into the long term dynamics and the forces that slow down the unraveling of cooperation

the decline of welfare benefits in the u s the role of wage inequality welfare benefits in the u s have experienced a much studied secular decline since the mid 1970s we explore a new hypothesis for this decline related to the increase in wage inequality in the labor market and the decline of real wages at the bottom of the distribution we posit that voters prefer benefits which are tied to low skilled wages we test the hypothesis using a 1969 1992 panel of state level data an additional contribution of our analysis is the use of general social survey data on voter preferences for welfare which we combine with current population survey data to determine the voter in each state who has the median preferred welfare benefit level our analysis reveals considerable evidence in support of a role for declining real wages in the decline of welfare benefits

trade liberalization and the inter industry wage premia the missingf role of productivity the literature concerning the effect of tariffs on the inter industry wage premium has not addressed the role of total factor productivity tfp in determining both the wage premium and tariffs this omission not only overlooks an important determinant of wage premium but also invalidates the use of the pre reform tariff level as an instrument for the change in tariffs based on an analysis of colombian data i find that including tfp in the estimated model of the effects of tariffs on the wage premium leads to a 41 decrease in the effect of tariffs on the inter industry wage premium relative to the model that omits tfp more specifically a 10 percentage point decrease in tariffs reduces the wage premium by 1 01 whereas a 10 increase in tfp raise wage premium by 1 6 this finding suggests the importance of using policies that boost productivity to offset the effect of tariffs on the wage premium

self selection and the distribution of hourly wages this article formulates and estimates alternative equilibrium models of industrial wage determination and self selection in explaining industrial wage differentials we find that it is important to account for heterogeneous sector specific skills and self selection decisions by agents concerning their sector of employment the classical roy model is rejected so is an efficiency units model of the labor market a revised roy model that accounts for comparative advantage in the choice of industrial sectors and choice between market and nonmarket work is much more successful in explaining cross section wage distributions and their evolution over time

a representation theorem for guilt aversion guilt aversion has been shown to play an important role in economic decision making in this paper we take an axiomatic approach to guilt by deducing a utility representation from a list of easily interpretable assumptions on an agent s preferences it turns out that our logarithmic representation can mitigate the problem of multiplicity of equilibria to which psychological games are prone we apply the model in three well known games and show that its predictions are consistent with experimental observations

the economics of immigration this literature review concerns the impact of immigration on the economy of the host country focusing on the experience of the united states the emphasis is on the period from the 1970s to the 1990s the author shows that research earlier in this period generally concluded that the economic effects of immigration were positive but that more recent research on later migrations have generally concluded that immigration may be having an adverse effect on the earnings of native unskilled workers and be placing an increased burden on welfare programs the importance of such economic analysis for the formulation of appropriate migration policies is stressed

aggregation bias in elasticities of substitution and the minimum wage paradox while the employment effects of minimum wages are usually reported to be small suggesting low substitutability between skill types direct estimates suggest a much larger degree of substitutability this article argues that this paradox is largely due to a bias induced by the aggregation of skill types into broad categories an assignment model is applied where skilled workers have a comparative advantage in complex jobs the implied pattern of substitutability reveals the sources of the bias estimation results for the united states show elasticities of complementarity to be underestimated by up to a factor 2 5 the methods laid out likewise can be applied to other markets where different quality types are close substitutes such as the housing market

rational cooperation in the finitely repeated prisoner s dilemma experimental evidence this paper presents experiments designed to examine the sequential equilibrium reputation hypothesis in the finitely repeated prisoner s dilemma the authors test the hypothesis by controlling the subjects ability to build reputations and by manipulating their beliefs that their opponent is irrational or altruistic the responses of subjects strongly support the sequential equilibrium prediction the results also suggest an important role for homemade altruism that is a natural tendency to cooperate that subjects bring to the experiment from the outside the authors find that there may be no difference between the beliefs that an opponent is altruistic and the actual chance it is so copyright 1993 by royal economic society

are college graduates more responsive to distant labor market opportunities abstract are highly educated workers better at locating in areas with high labor demand to answer this question i use three decades of u s census data to estimate a mcfadden style model of residential location choice i test for education differentials in the likelihood that young workers reside in states experiencing positive labor demand shocks at the time these workers entered the labor market i find effects of changes in state labor demand on college graduate location choice that are several times greater than for high school graduates nevertheless medium run wage effects of entry labor market conditions for college graduates equal or exceed those of less educated workers

endogeneity in semiparametric binary response models this paper develops and implements semiparametric methods for estimating binary response binary choice models with continuous endogenous regressors it extends existing results on semiparametric estimation in single index binary response models to the case of endogenous regressors it develops a control function approach to account for endogeneity in triangular and fully simulataneous binary response models the proposed estimation method is applied to estimate the income effect in a labor market participation problem using a large micro data set from the british fes the semiparametric estimator is found to perform well detecting a significant attenuation bias the proposed estimator is contrasted to the corresponding probit and linear probability specifications jel c14 c25 c35 j22

differences in metropolitan and nonmetropolitan u s family income inequality a cross county comparison abstract u s family income inequality is examined using 1990 cenus of population data for the 3109 counties and independent cities in the 48 contiguous states use of counties as the unit of analysis extends previous research on u s income inequality that relied on national state or metropolitan level data in addition including both metropolitan and nonmetropolitan counties allows us to determine whether income inequality differs between them after controlling for a variety of labor market demographic and regional characteristics as another innovation we also consider whether counties that experienced recent structural changes in industry composition have higher income inequality

real time tacit bargaining payoff focality and coordination complexity experimental evidence we conduct a bargaining experiment where interaction is tacit and payoffs are earned and cumulated in real time we test hypotheses about the interaction between the focal properties of payoffs and the complexity of coordinating on an intertemporal behavior that achieves them the general finding is that when a payoff focal outcome requires a complicated coordination scheme bargainers tend to settle on a simpler and sometimes inefficient behavior

labor market institutions and wage inequality the authors investigate how labor market institutions such as unemployment insurance unions firing regulations and minimum wages have affected the evolution of wage inequality among male workers results of estimations using data on institutions in eleven oecd countries indicate that changes in labor market institutions can account for much of the change in wage inequality between 1973 and 1998 factors found to have been negatively associated with male wage inequality are union density the strictness of employment protection law unemployment benefit duration unemployment benefit generosity and the size of the minimum wage over the 26 year period institutional changes were associated with a 23 reduction in male wage inequality in france where minimum wages increased and employment protection became stricter but with an increase of up to 11 in the united states and united kingdom where unions became less powerful and in the united states minimum wages fell

a reputation refinement without equilibrium the economic literature concerning agents reputations has grown steadily since the seminal work of kreps milgrom roberts and wilson 2 early work focused on how incomplete information leads to equilibria that are vastly different but more intuitive than those possible in the complete information game recently however game theorists have been studying how incomplete information might refine the set of equilibria 3 one important class of games is that in which a single long run agent plays a simultaneous move stage game with a sequence of opponents each of whom plays only once yet observes all previous play fudenberg and levine 1989 study the reputation of the long run player in this type of game they argue that the most reasonable equilibrium is the one which the long run player most prefers their intuition is sustained when one perturbs the game with the stackelberg strategy fudenberg and levine show that in the perturbed game the equilibrium payoffs of the long run player are bounded below by a number that converges to the stackelberg payoff

the evolution of cooperation in infinitely repeated games experimental evidence 1 for example in infinitely repeated prisoner s dilemma games with patient agents both cooperate and defect may be played in equilibrium even though the theory of infinitely repeated games has been used to explain cooperation in a variety of environments no definitive solution has been provided to the problem of equilibrium selection when both cooperation and defection are possible equilibrium outcomes which one should we expect to prevail previous experimental evidence has shown that subjects often fail to coordinate on a specific equilibrium when they play a small number of infinitely repeated games some subjects attempt to establish cooperative agreements while others defect but how would behavior evolve as subjects learn from previous repeated games would cooperation prevail when it can be supported in equilibrium or will subjects learn

the effect of male wage inequality on female age at first marriage a model in which women search for husbands characterized by their wages predicts increasing within group male wage inequality raises the expected value of continued marital search and so lowers female marriage propensities using 1970 1980 and 1990 census data i test this hypothesis within geographically racially and educationally defined marriage markets the estimates suggest rising male wage inequality accounted for 7 to 18 of the decline in the propensity to marry between 1970 and 1990 for white women and more educated black women growing wage inequality appears to have had little effect on the marriage behavior of less educated black women

factor proportions and relative wages the supply side determinants of wage inequality supply side factors may contribute to rising wage inequality first certain changes in the supply of skills allegedly exacerbate wage inequality women s increased labor force participation and increased immigration are the leading candidates both allegedly reduce the wages of less skilled men however immigration s impact on wage inequality has been minor and the effects of women s participation is inconclusive second in evaluating the likelihood that human capital investment will mitigate future inequality evidence suggests that rising returns to education have increased the proportion of young people attending college limiting the growth of inequality among high wage workers

who benefits from local oil and gas employment labor market composition in the oil and gas industry in texas and the rest of the united states abstract this paper examines local labor market outcomes from an oil and gas boom we examine two main outcomes the probability of employment and the log wages of workers employed outside the oil and gas industry for texas and the rest of the united states across gender race and ethnicity we find that men and women gain employment in the oil and gas industry during booms but such gains are much larger for men and are largest for black and hispanic men we also find positive income spillovers for workers in other industries that are similar in magnitude across demographic groups

labor earnings in one company towns theory and evidence from kazakhstan one company towns characterized by the presence of a large employer in a local labor market are a frequent legacy of state led development strategies how will downsizing or closing unprofitable state owned enterprises affect these towns this article develops a simple model combining monopsony power in the labor market with a keynesian closure of the product market and uses it to interpret the findings of previous studies the article evaluates the impact of the company s employment level on the town s labor earnings in kazakhstan where one company towns are still prevalent the evaluation is based on data from the 1996 living standards measurement survey the results show that labor earnings in the town decrease roughly 1 5 percent when the share of its population working for the company decreases 1 percent the results are robust to changes in the definition of labor earnings and to the inclusion of a variety of other community characteristics in the analysis these results and the theoretical model are combined to evaluate the welfare impact of company downsizing and consequently to derive the optimal extent of labor retrenchment

equilibrium and migration in dynamic models of housing markets abstract this paper presents a model of a regional housing market where households choose among competing employment opportunities offered by cities within a given system the equilibrium requirement imposed in the model requires that households be indifferent among all locations both within their current city and other cities within the region rather than in terms of exogenously determined utility or populations this construction allows the characterization of equilibrium in terms of potentially observable variables related to household income given that equilibrium can be defined in this more general manner it is natural to identify ways in which the predictions will differ from those generated by existing models capozza and helsley s j urban econ 28 1990 180 203 model of land conversion is evaluated in this context in this setting the option value associated with the ability to delay development depends directly on the degree to which the income processes are correlated across cities also increased idiosyncratic income risk does not necessarily lead to larger option values

theory and misbehavior of first price auctions recent experimental evidence appears to reject simple nash equilibrium models of bidding behavior in first price auctions the author presents a methodological critique of this evidence existing tests have concentrated on deviations of subjects from predictions in the message space of the action bid deviations the author suggests that it is more natural to evaluate subject behavior in expected payoff space he concludes that the evidence against the simple models is not significant enough to warrant their rejection copyright 1989 by american economic association

focal points in tacit bargaining problems experimental evidence we use a new experimental design to test schelling s hypotheses about the nature and effectiveness of focal points in tacit bargaining problems in our design as in many real world bargaining problems each player s strategies are framed as proposals about what part of a stock of valuable objects she is to take and there are payoff irrelevant cues which define relations between players and objects in line with schelling s hypotheses we find that such cues serve as powerful focal points their presence increases efficiency even in games where there is no efficient and equal division and induces systematically unequal payoff distributions

the dynamics of coalition formation a multilateral bargaining experiment with free timing of moves abstract we experimentally investigate behavior in a finitely repeated coalition formation game played in continuous time subjects interact in groups of three bargaining over the distribution of payments which occur at regular time intervals during a given interval payments occur if and only if a majority is in agreement about their allocation aside from these rules we purposefully impose little structure on the bargaining process we investigate the frequency and stability of different types of agreements as well as transitions between them two thirds of payments involve divisions where one player receives nothing almost half of which are equal splits of the entire surplus between two players the most stable division is the three way equal split transitions between agreements are frequent and are generally consistent with myopic payoff maximization in the sense that subjects do not accept short term losses we also find that transitions between coalitions are not markovian in particular players more often forgo short term gains in order to remain in a coalition if it has proven stable in the past

on the political economy of immigration and income redistribution in this article we analyze an economy in which agents vote over immigration policy and redistributive tax policy we show that natives preferences over immigration are influenced by the prospect that immigrants will be voting over future tax policy we also show that changes in the degree of international capital mobility the distribution of initial capital among natives the wealth or poverty of the immigrant pool and the future voting rights and entitlements of immigrants can have dramatic effects on equilibrium immigration and tax policies finally we provide some empirical support for the model s predictions