the labour market in a keynesian economic regime theoretical debate and empirical findings in a keynesian mode of thinking wages become the nominal anchor for the price level because unit labour costs in a closed economy represent the most important factor in determining the price level the second most important driver of price level changes is the exchange rate a positive economic regime includes nominal wage increases according to trend productivity growth as well as the target inflation rate of the central bank discretionary monetary policy geared towards growth and anti cyclical fiscal policy since the early 1990s nominal wages in the usa and the uk have followed this wage norm to a large extent but in germany wages have increased below this norm or even decreased and in japan this effect has been even more extreme overall while japan and germany have suffered from dysfunctional economic regimes leading to low growth the uk and usa have managed a much more positive interaction between wage development monetary policy and fiscal policy copyright the author 2008 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

a day in the city using conjoint choice experiments to model urban tourists choice of activity packages this paper introduces and tests a conjoint choice experiment approach to modeling urban tourists choice of activity packages the joint logit model is introduced as a tool to model choices between combinations of activities and an experimental design approach is proposed that includes attributes from multiple alternatives as well as interactions between attributes of different alternatives tests for possible differences in parameter values for attributes when introduced in different parts of the day are also supported the proposed approach was implemented and tested in a case study on dutch urban tourists choices of activity packages for a weekend in paris shopping and sightseeing were the activities evaluated most positively a number of significant interactions between choices of activities for different parts of the weekend was observed with a general preference for variation in activities and no significant interactions between choices of evening and daytime activities it was found that respondents in the case study did not evaluate activities differently depending on the period of the weekend in which they were introduced

what price drug use the contribution of economics to an evidence based drugs policy abstract this paper presents a review of the recent economics literature in the area of illicit drug use particular attention is paid to the economics of addiction and the rational addiction model the welfare economics framework for analysing the social costs of drug use and the attempts that have been made by economists to evaluate recent or proposed policy interventions a dominant theme in this review is the problem of poor data availability this is particularly true when it comes to implementing the rational addiction model but it is also apparent in the literature on estimating the costs of illicit drug use to society as a whole one of the main conclusions of this review is that until recently public policy has not been particularly influenced by research carried out by economists it is not clear whether this is because economists have had to grapple with inadequate data and hence their conclusions are couched in uncertainty or whether it is because drugs researchers have assumed a very limited role for economists in their analysis

unionisation structures and innovation incentives this paper examines how dierent unionisation structures aect rms innovation incen tives and industry employment we distinguish three modes of unionisation with increasing degree of centralisation 1 decentralisation where wages are determined independently at the rm level 2 coordination where one industry union sets individual wages for all rms and 3 centralisation where an industry union sets a uniform wage rate for all rms while rms investment incentives are largest under centralisation investment in centives are non monotone in the degree of centralisation decentralisation carries higher investment incentives than coordination labour market policy can spur innovation by decentralising unionisation structures or through non discrimination rules

prohibition and the supply of brazilian mahogany we use a unique data set to investigate the economic consequences of banning the harvest and trade of brazilian mahogany because we find strong evidence that mahogany is smuggled out of brazil as other tropical species through formal export mechanisms we are able to construct a time series of quantities and implicit export prices covering both the periods before and after prohibition our finding suggests that a trade ban increases supply and makes the illegal good more affordable our analysis can offer important insights into other illegal markets such as those for narcotics and products manufactured from endangered animal species

the future of the high skill equilibrium in germany is the celebrated german skills system in peril western german employers have cut apprenticeship places since the 1980s while the institutional supports of the high skill equilibrium hse analysed by finegold and soskice oxford review of economic policy 4 3 1988 are threatened the globalization of equity markets menaces the patient capital on which german companies depend lean production techniques have rendered strategies of incremental innovation vulnerable on international markets and german employers and labour face mounting organizational difficulties this article derives implications from the hse model to assess these challenges against existing evidence in fact only the declining capacity of employers associations and unions constitutes an empirically verifiable threat to the german apprenticeship system the magnitude of which depends on questionable assumptions of the hse model of potential future salience though is the growing importance of service sector jobs and the further training system in germany which may eventually undo the political compromise on which the hse has historically rested

rational addiction and the effect of price on consumption legalization of such substances as marijuana heroin and cocaine surely will reduce the prices of these harmful addictive drugs by the law of the downward sloping demand function their consumption will rise but by how much according to conventional wisdom the consumption of these illegal addictive substances is not responsive to price however conventional wisdom is contradicted by becker and murphy s 1988 theoretical model of rational addiction the becker murphy b m analysis implies that addictive substances are likely to be quite responsive to price in this paper we summarize b m s model of rational addiction and the empirical evidence in support of it we use the theory and evidence to draw highly tentative inferences concerning the effects of legalization of currently banned substances on consumption in the aggregate and for selected groups in the population addictive behavior is usually assumed to involve both reinforcement and tolerance reinforcement means that greater past consumption of addictive goods such as drugs or cigarettes increases the desire for present consumption but tolerance cautions that the utility from a given amount of consumption is lower when past consumption is greater these aspects of addictive behavior imply

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

employers and the welfare state the political economic organization of firms and social policy in contemporary capitalist democracies the authors argue that the organization of employers shapes social policy support among firms and in turn affects social policy outcomes specifically the authors argue that the centralization and cohesion of employer groups and economic cooperation across enterprises positively affects social welfare provision empirically the authors assess the impacts of business organization on social welfare effort in 15 developed democracies between the 1970s and 1990s the authors also provide analysis of the impact of employer organization on active labor market policy the authors find that the organization of employers is one of the most important determinants of overall social welfare effort the authors also find that employer organization affects the development of active labor market policies and it influences the degree to which social democratic parties pursue active labor market programs the authors conclude with a discussion of the findings implications for theories of social corporatism and the w

emu and labour market reform needs incentives and realisations despite improving labour market conditions in recent years a number of emu countries still suffer from high and persistent unemployment it could therefore be expected that labour market reform would be given a prominent position on the political agenda the new constraints associated with the common monetary policy only increase the pressure for reform relying on the introduction of the single currency as a trigger for labour market reform may be a risky strategy emu generates a complex set of re optimising strategies of the players on the labour market which makes it difficult to get a clear idea what impact it will have on labour market reform evaluation of recent reform measures does not make one confident either the empirical analysis confirms to some extent the idea that countries with higher unemployment rates have carried out more labour market reform this finding holds however only for countries that do not belong to emu emu countries have on average carried out no more reform than countries outside emu and any link between the initial unemployment level and the labour market reform indicators seems to lack it may become apparent that more reform is needed once the macroeconomic environment becomes more unfavourable

addiction and discounting abstract in 1988 becker and murphy becker g s murphy k m 1988 a theory of rational addiction journal of political economy 96 675 700 launched a theory in which they proposed that the perspective of rational decision making could be applied also to cases of addictive behaviour this paper discusses the theory s assumptions of interpersonal variation and stability in time preferences on the basis of estimates derived from three groups of people with different consumption levels of illegal intoxicants we find that active injectors of heroin and amphetamine have a higher discount rate than a group reporting that they have never used the substances of greater interest though not in accordance with becker and murphy s assumption of stability we also find that the discount rate among active and former users differs significantly these findings raise the question of whether a high time preference rate leads to addiction or whether the onset of an addiction itself alters people s inter temporal equilibrium

mixed signals central bank independence coordinated wage bargaining and european monetary union plans for the european monetary union emu are based on the conventional postulate that increasing the independence of the central bank can reduce inflation without any real economic effects however the theoretical and empirical bases for this claim rest on models of the economy that make unrealistic information assumptions and omit institutional variables other than the central bank when signaling problems between the central bank and other actors in the political economy are considered we find that the character of wage bargaining conditions the impact of central bank independence by rendering the signals between the bank and the bargainers more or less effective greater central bank independence can reduce inflation without major employment effects where bargaining is coordinated but it can bring higher levels of unemployment where bargaining is less coordinated thus currency unions like the emu may require higher levels of unemployment to control inflation than their proponents envisage they will have costs as well as benefits and these will be unevenly distributed among and within the member nations depending on the changes they induce in the status of the bank and of wage coordination

rational addiction with learning and regret we present a theory of rational behavior in which individuals maximize a set of stable preferences over goods with unknown addictive power the theory is based on three fundamental postulates that consumption of the addictive good is not equally harmful to all that individuals possess subjective beliefs concerning this harm and that beliefs are optimally undated with information gained through consumption although individual actions are optimal and dynamically consistent addicts regret their past consumption decisions and regret their initial assessment of the potential harm of the good addict prone individuals who believe it could not happen to them are most likely to be drawn into a harmful addiction

an empirical analysis of alcohol addiction results from the monitoring the future panels in a panel of young adults we find that alcohol consumption is addictive in the sense that increases in past or future consumption cause current consumption to rise the positive and significant future consumption effect is consistent with the hypothesis of rational addiction the long run price elasticity is approximately 60 larger than the short run price elasticity and twice as large as the elasticity that ignores addiction thus a tax hike policy to curtail consumption or abuse may not have a favorable cost benefit ratio unless it is based on the long run price elasticity jel 110

macroeconomic performance and collective bargaining an international perspective this paper critically reviews the research on how collective bargaining systems influence macroeconomic performance in industrialized countries the review considers effects of bargaining level coordination and corporatist institutional arrangements key empirical results turn out to be quite fragile and much of the paper explores issues of measurement and specification that account for the fragility the paper concludes that complementarities between key institutions and between institutions and the economic environment may be more important for macroeconomic performance than the effects of individual institutions and it suggests research strategies

does the organization of capital matter employers and active labor market policy at the national and firm levels does the organization of business matter for social policy development in the advanced capitalist democracies conventional welfare state analysis has given this significant question scant attention we argue however that the representational power of business coordination across business interest units and integration of associations in corporatist policy making forums or what we call the social corporatist organization of business should result in greater support and participation by employers in social policy formation and implementation we test our arguments with models both of 1980 98 pooled time series data on withinand across country variation in spending on active labor market programs and of extensive firm level survey data from denmark and the united kingdom we find that the centralization and coordination of employers as well as the integration of employer organizations in corporatist policy making forums are strongly associated with shares of national income devoted to active labor market policy we find moreover that the degree of employer organization conditions active labor market policy responses to de industrialization and increases in general unemployment at the firm level membership in an employer association has a significant positive effect on employer participation in active labor market programs in corporatist denmark but not in the pluralist united kingdom

rational addiction to caffeine an analysis of coffee consumption it is common knowledge that coffee tea and other beverages that contain caffeine are habit forming a recent medical study confirms that caffeine is strongly addictive with subjects exhibiting syndromes of intoxication withdrawal and dependence strain et al 1994 p 1043 that study concludes that the effect is physiological not just psychological it is of interest to ask whether the addictive nature of the most widely used psychoactive substance in the world is apparent from data on consumption there are several economic models of addiction among them the rational addiction model of becker and murphy 1988 stands out because of its simplicity and consistency with economic theory in this model the utility a consumer derives from consumption depends not only on the quantity c that is consumed but also on the degree of addiction at addiction is a form of human capital taking the form of a possibly harmful rather than beneficial stock variable it is increased as a by product of consumption and it gradually depreciates as time passes thus current consumption affects future choices consuming the good now increases its desirability in the future the becker murphy model is rational and forward looking in that the consumer is aware of these future effects and weighs them in making the current consumption choice this is in strong contrast to models that are based on assumptions of myopia and nonrational behavior an implication of the model is that this forward looking behavior can be detected in the data theory predicts that consumption data

would harassing drug users work when harassed users adopt new ways of transaction supply changes in predictable ways this linkage between demand and supply can explain a number of puzzling consequences of the decriminalization of marijuana and the war on heroin and cocaine

do affluent countries face an incomes jobs tradeoff according to an influential view in the united states pay for less skilledworkers is lowand government benefits are stingy but this facilitates the creation of newjobs and encourages such individuals to take those jobs inmuch of westerneurope relative pay levels are higher for those at the bottom and benefits are more generous but this is said to discourage job creation and job seeking this article offers a comparative assessment of this trade off viewbased on pooled timeseries cross section analyses of 14 countries in the 1980s and 1990s the findings suggest that greater pay equality and a higher replacement rate do reduce employment growth in lowproductivity private sector service industries and in the economy as a whole however these effects are relatively weak the results point to a variety of viable options for countries wishing to maintain or move toward a desirable combination of jobs and equality

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

do drinkers earn less theoretical work by becker and others on human capital led initially to empirical research on the determinates of earnings interest in human capital has now spread to other areas especially health this movement is in conjunction with societal concerns regarding the role of diet and environmental factors on human well being and performance following becker 1 and grossman 9 economists expect to find a significant relationship between health and earnings health aspects of human capital have been extensively explored since the early work of grossman 9 10 good health is both beyond the control of the individual exogenous as a result of genetic factors and random events and controllable endogenous through the regulation of activities such as smoking drinking eating exercise and other informed choices this study examines the relation between earnings and drinking curiously little rigorous empirical work has been done on the relation between earnings and drinking irving fisher s claim to the contrary 1 there is little evidence that prohibition led to substantial if any productivity increases although it is established that excessive drinking leads to poor health the empirical evidence regarding earnings and drinking is mixed and inconclusive according to the u s government abusive drinkers earn less in their biennial reports to congress the national institute on alcohol abuse and alcoholism niaaa estimates the economic cost to society of alcohol abuse approximately half of this cost arises from the estimated loss in earnings productivity due to abusive drinking 2 their approach consists of estimating a wage equation which includes human capital variables as well as a dichotomous abusive drinking variable and quantity of alcohol consumed 3 berger and leigh 3 used a sample selection model to test whether drinkers earned more or less than nondrinkers they divided their sample from the 1972 73 quality of employment survey into two categories drinkers and nondrinkers using a sample selection correction estimator hedonic wage regressions for each category and by sex were estimated they found that drinkers moderate and abusive combined earned more than nondrinkers comparisons were then made between wages from each regression with demographic and human capital variables set at

the nairu in theory and practice airu stands for the nonaccelerating ine ation rate of unemployment it is beyond dispute that this acronym is an ugly addition to the english language there are however two issues that fail to command consensus among economists which we address in this essay the e rst issue is whether the concept of the nairu is a useful piece of business cycle theory we believe it is and we begin this paper by attempting to explain why in our view the nairu is approximately a synonym for the natural rate of unemployment this concept follows naturally from any theory that says that changes in monetary policy and aggregate demand more generally push ine ation and unemployment in opposite directions in the short run once this short run tradeoff is admitted there must be some level of unemployment consistent with stable ine ation the second issue is why the nairu changes over time and in particular why it fell in the second half of the 1990s this question is more dife cult and the answer is open to debate most likely various factors are at work including demographics and government policies yet one hypothesis stands out as particularly promising e uctuations in the nairu appear related to e uctuations in productivity in the 1970s the nairu rose when productivity growth slowed in the 1990s the nairu fell when productivity growth sped up developing and testing models that explain the links among ine ation unemployment and productivity remains a challenge for students of business cycle theory

public sector unions corporatism and macroeconomic performance what accounts for the apparent breakdown of the positive relationship between powerful trade union organizations and macroeconomic performance is corporatism a relic of a different age a luxury o

multiple wage bargaining systems in the single european currency area little attention in the emu literature has been paid to the interaction between central bank monetary rules and systems of collective wage bargaining analytically and empirically coordinated wage bargaining systems respond with real wage restraint to non accommodating monetary policy since wage determination is dominated by collective bargaining in all the emu member states and wage coordination within the member states has grown since 1980 this is a topic of potential importance in particular the replacement of the bundesbank directly targeting german inflation by an ecb targeting european inflation has removed a major institutional support of wage restraint in germany the consequences of this for emu are worked out under two scenarios that inflation expectations will be generated by ecb monetary policy and that they will reflect german inflation outcomes possible institutional developments are discussed including government union bargains the bundesbank has also played a major role in maintaining fiscal rectitude by targeting excess fiscal deficits in germany again its replacement by the ecb targeting if at all european rather than german fiscal policy loosens fiscal constraints for underlying structural reasons therefore it is possible that germany and other emu countries will move to a period of fiscal activism with wage restraint and low inflation purchased through social contract negotiations

the influence of low fare airlines on vacation choices of students results of a stated portfolio choice experiment this paper reports the results of a portfolio model of vacation choices of students the portfolio model concerns the combined choice of destination type transport mode duration accommodation and travel party for vacations in addition to usual transport modes such as airline train bus and car a distinction was made between low fare airlines as these may be especially appealing to students and regular airlines stated choice data were used to estimate the model the attributes of the transport modes were systematically varied in the experiment while respondents were faced with free options for the other choice facets estimation results indicated that the developed model of portfolio choice performs satisfactory in substantive terms it seems that transport mode predominantly influences the portfolio choices the attributes that are significant tend to amplify the specific role of transport modes in general and low fare airlines in particular

are institutional rigidities at the root of european unemployment the netherlands experienced employment growth higher than that in the us and achieved an unemployment rate of less than 3 but germany s unemployment rate remained at high levels a widely held view regards a distorted incentive structure in welfare states as the root of the european unemployment problem but welfare state institutions in the netherlands are more generous than the german ones therefore differences in the incentive structures between the two economies cannot explain the differences in employment success the reasons for this seem instead to be rooted in coordinated monetary wage and fiscal policies in the netherlands while these are incompatible policies in germany copyright 2003 oxford university press

the assessment japan s stagnation can policy revive the economy for a decade now japan has virtually stagnated some blame this on a succession of unfavourable shocks that began with the bursting of the bubble economy more appropriate macroeconomic policies targeting inflation and or the exchange rate could in this view lead to a revival others argue that the country s problems are deeper seated and require major structural reforms many aspects of japan s distinctive economic system should in this view be either jettisoned or profoundly changed it is unlikely that demand management policies can add much to what they have done so far deregulation is needed in many areas and would no doubt help but a wholesale rejection of erstwhile institutions and practices does not seem on the cards and might well be disruptive copyright 2000 by oxford university press

keynesian economic policies for the new millennium in this paper we outline an approach to economic policy in which there is an emphasis on the need for both demand side and supply side policies to secure full employment our approach can be considered keynesian in the sense that its policy implications arise from the perception of the role of aggregate demand in setting the level of economic activity and the lack of automatic forces leading a market economy to full employment our conception of the operations of a market economy is briefly outlined in section 2 this we further elaborate upon in section 3 by considering the constraints on achieving full employment that operate in a market economy this leads into section 4 in which we outline and analyse the nature of keynesian policies relating both to the demand and supply side of the economy the final main section 5 considers some of the constraints and ways of overcoming them on the implementation of the type of keynesian policies which we are advocating there are two key elements of keynes 1936 on which we draw the first is the contention that a laissez faire market economy will not usually generate full employment the obstacles to the achievement of full employment are not some imperfections like monopolistic competition or trade union activity which could potentially be removed through government action cf shapiro 1996 it is rather that a laissez faire market economy would exhibit elements of instability and does not usually generate a level of aggregate demand consistent with full employment the second is that a less unequal distribution of market power income and wealth is another desirable goal in its own right and a vehicle for increasing general prosperity as keynes 1936 remarked the outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes p 372

central banks partisan politics and macroeconomic outcomes what are the implications of the trend toward granting central bank independence for partisan theories of the macroeconomy the conventional view is that parties of the left and right strive to achieve distinctive macroeconomic outcomes when in government however when faced with an independent central bank parties of the left may prove unable to produce their preferred partisan outcomes whereas right parties may be privileged in their ability to pursue their goals moreover granting the central bank independence can be expected to have differing effects depending on whether left or right parties prevail in government these issues are explored with a pooled time series model of inflation and unemployment in 16 organization for economic co operation and development countries from 1961 through 1991 the results support the claim that the effects of partisan government and central bank organization are mutually contingent the pattern of results anticipated by partisan theory only arises where central b

in search of economic well being worker power and the effects of productivity inflation unemployment and global trade on wages in ten wealthy countries theory the theory addresses the forces that determine the real wages which workers receive it is proposed that in the free market system worker power plays a crucial mediating role between economic considerations involving labor supply and productivity and the real wages available to workers in the economy hypotheses in moderate and weak worker power countries real wages will vary inversely with the labor supply in terms of domestic unemployment and international trade in strong worker power countries real wages will vary with changes in productivity and inflation methods separate regression analyses are developed for 10 countries varying in their level of worker power over a 30 year time frame results in moderate and weak worker power countries changes in real wages were best predicted by levels of unemployment and changes in global trading in strong worker power countries changes in real wages were best predicted by changes in productivity and inflation although in one case of a strong worker power country a significant positive association occurred between global trading and real wages

wage setting measures a survey and assessment wage setting has been one of the most heavily studied institutions in the field of comparative political economy over the past two decades and quantitative measures of wage setting arrangements have played a major role in this research yet the proliferation of such measures in recent years presents researchers with a sizable array from which to choose in addition some scholars are rather skeptical about the validity and or reliability of these measures this article offers a survey and assessment of fifteen wage setting measures it attempts to answer questions about 1 how these indicators differ from one another in conceptualization and measurement strategy 2 which are the most valid and reliable 3 the strengths and weaknesses of measures of wage centralization versus those of wage coordination 4 particular countries or time periods for which there are noteworthy discrepancies in scoring 5 how sensitive empirical findings are to the choice of wage setting measure

the economic case against drug prohibition this paper discusses the costs and benefits of drug prohibition it offers a detailed outline of the economic consequences of drug prohibition and a systematic analysis of the relevant empirical evidence the bottom line is that a relatively free market in drugs is likely to be vastly superior to the current policy of prohibition

a discrete choice model of recreational participation site choice and activity valuation when complete trip data are not available abstract a discrete choice model of the demand for site specific recreational activities is developed and estimated it simultaneously predicts both how many trips the individual will take and which site will be chosen on each trip the model is formulated to estimate demand when the data set reports the total number of trips in a given time period but the actual destinations for only a subset of the total the model also includes a correction for sample selectivity bias the application is marine recreational fishing the consumer s surplus associated with any change in supply conditions is derived and used to assess the impact of changes in species availability

labor market effects of marijuana and cocaine use among young men using data on marijuana and cocaine use from the 1984 national longitudinal survey of youth the authors examine the hypothesis that drug use reduces labor market productivity as measured by wages from an analysis that controls for the probability of employment and the endogeneity of drug use they find that although long term and on the job use of marijuana negatively affected wages the net productivity effect for all marijuana users both those who engaged in long term or on the job use and those who did not was positive no statistically significant association was found between cocaine use and productivity

nominal wage stickiness and aggregate supply in the great depression building on earlier work by eichengreen and sachs we use data for 22 countries to study the role of wage stickiness in propagating the great depression recent research suggests that monetary shocks transmitted internationally by the gold standard were a major cause of the depression accordingly we use money supplies and other aggregate demand shifters as instruments to identify aggregate supply relationships we find that nominal wages adjusted quite slowly to falling prices and that the resulting increases in real wages depressed output these findings leave open the question of why wages were so inertial in the face of extreme labor market conditions

unions wages and the common interest three models have dominated recent research on the relationship between labor unions wage behavior and national economic performance a simple linear model a parabolic model and a political model this article argues that an unemployment mediated linear model is theoretically preferable in a context of low unemployment encompassing labor movements can be expected to restrain wage demands whereas localized unions have much less incentive to do so in a context of high unemployment localized unions should exhibit wage moderation and the pressure on encompassing unions to restrain wage demands is further accentuated these four models are assessed as predictors of wage changes inflation and misery index levels for 15 industrialized nations over the periods 1960 1973 1974 1979 and 1980 1990 the linear models outperform the parabolic and political models in each of the latter two time periods for the mid to late 1970s the simple linear model performs best but for the 1980s the unemployment medi

myopia and addictive behaviour we present a theory of addictive behaviour which can account for addicts apparent disregard for the future consequences of their current actions the discounting of future utility is increasing in past consumption indicating increasingly myopic behaviour as consumption increases the intertemporal complementarity generated by the endogenous discounting produces multiple steady states which can account for the simultaneous existence of myopic addicts and non myopic non addicts within a time consiste nt expected utility framework the theory also accounts for the probabilistic incidence of addiction and successful rehabilitation and the possibility of recurrence

partially independent central banks politically responsive governments and inflation theories of central bank independence have more exact implications regarding inflation in different political economic environments than generally understood or empirically examined they imply that inflation in any given country time will be a weighted average of what it would be if the central bank completely controlled monetary policy and what it would be if the government completely controlled it with the degree of central bank independence weighting the former an equation embodying this theoretical expectation is estimated by constrained least squares from a time series cross section of inflation rates in developed democracies since the bretton woods era the results confirm that the antiinflationary benefit of central bank independence is not constant but rather depends on every variable in the broader politicaleconomic environment to which wholly autonomous central banks and governments would respond differently conversely the inflationary impacts of all such political economic variables depend on the degree of central bank independence

gender differences in labor market effects of alcoholism little is known about the role of specific health problems in affecting labor market productivity even less is known about gender differences in the labor market effects of such health problems current knowledge of health effects is based largely on samples composed exclusively of men a common practice in both economics and health research in the latter case even a congressional mandate to incorporate females in study samples is reputed to have had little effect patricia schroeder 1990 in this study we attempt to determine the structure of gender differences in labor market responses to alcoholism we use a relatively new data source that allows such comparisons by gender in a large community based sample previous studies have established that there are significant gender differences in labor market behavior differences in prevalence rates of alcoholism by gender are also well established it is estimated that 3 percent of females are currently suffering from alcoholism and twice that many have exhibited symptoms at some time for males the numbers are 10 and 20 percent respectively there is some medical evidence to indicate that physiologically women and men respond differently to alcohol for example a recent study suggests that women have greater vulnerability to the acute and chronic health conditions associated with alcoholism mario frezza et al 1990

cannabis use and its effects on health education and labor market success cannabis is the most popular illegal drug its legal status is typically justified on the grounds that cannabis use has harmful consequences empirically investigating this issue has been a fertile topic for research in recent times we provide an overview of this literature focusing on studies which seek to establish the causal effect of cannabis use on health education and labor market success we conclude that there do not appear to be serious harmful health effects of moderate cannabis use nevertheless there is evidence of reduced mental well being for heavy users who are susceptible to mental health problems while there is robust evidence that early cannabis use reduces educational attainment there remains substantial uncertainty as to whether using cannabis has adverse labor market effects

the nonneutrality of monetary policy with large price or wage setters monetary rules matter for the equilibrium rate of employment when the number of price wage setters is small even when assuming rational expectations complete information central bank precommitment and absence of nominal rigidities if the central bank is nonaccommodating sufficiently large unions bargaining independently have an incentive to moderate sectoral money wages and thereby expected real wages the result is an increase in the real money supply and hence higher demand and employment this does not hold with accommodating monetary policy since unions wage decisions cannot then affect the real money supply a similar argument holds for large monopolistically competitive price setters

is property crime caused by drug use or by drug enforcement policy the relationships among drug offenses prorperty crime and the allocation of police resources are investigated in a structural model using data from florida countries law enforcement resources are scarce and as efforts to combat drug crime increase the amount of these resources allocated to property crime is reduced this reallocation of police resources results in reduced deterrence for property crime and as a result an increase in these crimes the evidence presented suggests that rising property crimes in florida are at least partially the result of drug enforcement policy

a cross country analysis of the okun s law coefficient convergence in europe the paper examines whether or not evidence is consistent with convergence of the okun s law coefficient olc among several alternative groupings of european economies a two step empirical strategy is employed the first step obtains rolling regression estimates of the olc for individual european countries the second step examines how the cross country variance of the olc evolves over the decade until 2002 in the selected country groupings evidence is found consistent with convergence of the olc among northern european countries and among countries with centralized wage bargaining but an absence of convergence in other country groups

does drug use lower wages this study using microdata from the 1980 and 1984 waves of the national longitudinal survey of youth examines the effects of drug use on wages and employment contrary to most previous researcher

why do people drink tests of the rational addiction model the rational addiction ra model applied to alcoho consumption is tested using 1983 us health interview survey data the ra model yields refutable hypotheses concerning effects of current past and future prices past and future consumption time preference and marginal utility of wealth on addictive good consumption the estimations provide relatively strong support for the ra model past and present consumption had strong positive relationship with current consumption coefficients on past present and future money prices and fines for first oflence drunk driving as a form of price for alcohol consumption were significant and of the predical sign

illicit drug use unemployment and occupational attainment in this paper we use data from the british crime survey bcs to examine the effect of illicit drug use on labour market outcomes we find very little evidence to support any relationship between drug use hard or soft and occupational attainment however we find compelling evidence to suggest that drug use particularly the use of opiates cocaine and crack cocaine is associated with an increased risk of unemployment regardless of age or gender

the demand for cocaine by young adults a rational addiction approach abstract this paper applies the rational addiction model to the demand for cocaine by young adults in the monitoring the future panel the price of cocaine is added to this survey from the drug enforcement administration s system to retrieve information from drug evidence results suggest that annual participation and frequency of use given participation are negatively related to the price of cocaine in addition current participation frequency is positively related to past and future participation frequency the long run price elasticity of total consumption participation multiplied by frequency given participation of 1 35 is substantial

wage rigidity collective bargaining and the minimum wage evidence from french agreement data using several unique data sets on wage agreements at both industry and firm levels in france we document stylized facts on wage stickiness and the impact of wage setting institutions on wage rigidity first the average duration of wages is a little less than one year and around 10 percent of wages are modified each month by a wage agreement data patterns are consistent with predictions of a mixture of calvo and taylor models the frequency of wage change agreements is rather staggered over the year but the frequency of effective wage changes is seasonal the national minimum wage has a significant impact on the probability of a wage agreement and on the seasonality of wage changes negotiated wage increases are correlated with inflation the national minimum wage increases and the firm profitability

the price elasticity of hard drugs the case of opium in the dutch east indies 1923 1938 at the beginning of this century the dutch government controlled the opium market in the dutch east indies nowadays indonesia for several decades this state monopoly was called the opiumregie using information gathered during the opiumregie this paper estimates price elasticities of opium consumption it appears that short term price elasticities of opium use are about 0 7 long term price elasticities are about 1 0

alcohol and earnings does drinking yield a wage premium this paper examines the relationship between alcohol consumption and earnings for prime age males wage differentials for non moderate and heavy drinkers are estimated using a polychotomous choice model which accounts for the endogenous relationship be tween drinking and earnings we find that moderate alcohol consumption leads to increased earnings relative to abstention however heavy drinking leads to reduced earnings relative to moderate drinking heavy drinkers possess flatter age earnings profiles and attain lower returns for higher education than non and moderate drinkers these results are in contrast to previous research on substance abuse which finds no earnings drop off for heavy users

the implications of institutional design for macroeconomic performance reassessing the claims of consensus democracy the choice between a proportional representation pr or plurality based electoral system is commonly assumed to involve a trade off the former is assumed to provide fairer representation but at a

employment unemployment and problem drinking the misuse of alcohol is estimated to result in enormous economic costs composed largely of reduced labor market productivity however there has been debate on this issue the purpose of this paper is to help to resolve this debate by presenting sound structural estimates of the relationship between measures of problem drinking and of employment and unemployment the analysis is based on the 1988 alcohol supplement of the national health interview survey we find that for both men and women problem drinking results in reduced employment and increased unemployment

monetary union and wage bargaining institutions in the eu extrapolating from some member state experiences this article considers the question of how monetary union in the eu is likely to impact the preferences of governments employers and unions regarding the organization of wage bargaining european monetary union involves a decentralization of wage bargaining centered at the national level in relation to monetary policy centralized at the european level drawing on recent literature and on the experience of two member states italy and spain which prior to emu underwent periods of intense bargaining fragmentation the author argues that the imposition of restrictive monetary policy in a fragmented wage bargaining context in which workers nonetheless have substantial bargaining rights tends to have perverse effects these effects ultimately led governments and bargaining actors in italy and spain to seek a reorganization of bargaining that gave national actors greater control over wage setting the article considers to what extent a similar dynamic might play out in the euro zone

habit formation and the theory of addiction in the light of repeated rejections of the hall 1978 version of the life cycle permanent income hypothesis and other empirical puzzles the habit formation hypothesis has increased in popularity since the 1980s however existing formulations of habit persistence do not always perform well empirically this paper pursues two objectives i to outline the habit persistence hypothesis and ii to review the theory of addiction with a focus on issues of relevance to the theory of consumption in the literature on addiction two research traditions are discernible rational addiction and myopic addiction the former approach emphasises forward looking behaviour and defines memory loss as a univariate process the latter relies on multiple objectives and highlights the role of contractual behaviour the paper argues that future research in consumption with habits ought to pay more attention to non separabilities allow for multivariate processes when modelling memory loss and consider rational habit modification

institutions and short run macroeconomic performance abstract this paper reviews the growing interest in institutions it argues that the explanation for this interest is a fresh awareness of how institutions affect economic performance this connection arises because many economic interaction take the form of one or other of three classic games prisoners dilemma coordination and chicken and the outcome in these games and hence performance of the economy is influenced by the institutional context of these interactions the paper provides a detailed illustration of this argument with a survey of the literature which relates unemployment performances to the institutions of wage setting in oecd countries