where do we go from here 2 real wages effective demand and economic development a central purpose of this paper is to argue for a more active role for historical analysis in filling out and extending classical theory firstly what is required is a more modern vision of capitalist growth which would not only include such classical variables as the rate of profit and accumulation but also take into account the changing level and composition of the standard of living and how this interrelates with the compositional evolution of the industrial structure including the effect of new technology and changes in industrial organisation such as the development of new industries new products and new systems of marketing the second important need is for a more differentiated class analysis with which to study the growth process this would require a detailed consideration of the historical stratification and re stratification of the working class and would incorporate an analysis of the impact of and the interaction between the evolving industrial and political organisation of labour state policy collective bargaining the restructuring of labour resulting from changing power relations in the market and in the labour process changing technology and industrial organisation these processes have particular relevance in the present context for inter and intra class distribution of income and how this relates to the level and structuring of demand the paper consists of five main sections the first considers representative attempts to incorporate historical processes into theory the second considers the development in the structure of consumption in britain since 1860 the third links changing consumption to the standard of living the fourth examines the relationship between the standard of life and institutional developments in wage determination and in welfare provision and the fifth is a brief attempt to relate these factors to economic development

sources of intra industry wage dispersion how much do employers matter observed human capital explains less than half of wage variation in bls industry wage surveys establishment based wage differentials controlling for occupation account for 20 70 percent of intra industry wage variation this corresponds to a standard deviation in wages of 14 percent of the mean almost as large as interindustry wage variation investigation suggests that establishment wage differentials are not random variations or returns to usual measures of human capital

optimal labour contracts when workers have a variety of privately observed reservation wages if a firm does not know the individual ex post outside opportunities of its contracted workforce then it can use hours wages and redundancy payments to screen them will a second best contract have underemployment inefficiency or overemployment and with a stochastic contract are those workers randomly selected for layoff worse off than their retained colleagues involuntary layoff or vice versa involuntary retention the answers depend on the nature of the workers preferences two polar cases are looked at corresponding to permanent and temporary layoff the former is characterized by overemployment and involuntary retention the latter by underemployment and involuntary layoff also examined are simple contracts where all retained workers are paid a common wage and all laid off workers receive a common redundancy payment handling asymmetric information in stochastic contracts has led to two technical innovations first a number of results are proved even though all the truth telling constraints are explicitly included second a new regularity condition is found under which the local constraints are sufficient to ensure global incentive compatibility at an optimum

miners wages in post war britain an application of a model of trade union behavior the paper studies the determination of wages in the british coal industry a utility maximising model of a trade union is used to represent the behaviour of the national union of mineworkers a non linear structural model is derived and is estimated by full information maximum likelihood the results are quite encouraging there is support for a neo classical demand curve for miners labour and a significant estimate of workers relative risk aversion

implicit contracts moral hazard and unemployment this paper considers a firm whose marginal revenue product of labor is a random variable we derive the form of an optimal long term contract between workers and the firm under the assumption that labor s marginal product is observed by the firm but not by the workers we show that the existence of asymmetric information causes unemployment to be greater than in a situation where information about labor s marginal product is public or where employment is determined in spot markets in particular unemployment can occur when the marginal product of labor exceeds the reservation wage

a multisector model of efficiency wages the pattern of effort and wages is derived in a multisector efficiency wage model firms choose effort endogenously easily monitored or low turnover jobs have high effort and may have low wages in equilibrium empirical wage differentials from a measure of supervision are smaller than observed industry differentials that have been attributed to efficiency wage models and are closer to those predicted by the model workers can search for and avail of on the job offers if sectors grow at different rates or the unemployment rate changes the pattern of wage differentials is unaffected

stock markets banks and growth panel evidence this paper investigates the impact of stock markets and banks on economic growth using a panel data set for the period 1976 98 and applying recent gmm techniques developed for dynamic panels on balance we find that stock markets and banks positively influence economic growth and these findings are not due to potential biases induced by simultaneity omitted variables or unobserved country specific effects

credit market failure intervention do government sponsored small business credit programs enrich poorer areas using local market employment rates as our measure of economic performance we find a positive and significant correlation between the average annual level of employment in a local market and the level of sba guaranteed lending in that local market furthermore the intensity of this correlation is much larger in low income markets indeed our results suggest that this correlation is positive and significant only in low income markets this result has important implications for public policy in general and sba guaranteed lending in particular

wages and employment under trade unionism microeconomic models and macroeconomic applications the first part of this paper is a critical survey of microeconomic research into behavioural models of trade unionism although certain formulations of union objectives and models of wage and employment determination in unionized markets have found favor with economists unfortunately only a little is known about their empirical relevance the second part of this paper deals with the daunting problems of applying these models at the macroeconomic level one such model is estimated with data from sweden s mining and manufacturing sector from 1968 to 1982

infrastructures and productivity in the spanish regions mas m maudos j perez f and uriel e 1996 infrastructures and productivity in the spanish regions reg studies 30 641 649 the aim of this paper is to analyse the role of public capital the types of infrastructures in which it is invested and their territorial distribution in the gains in productivity of the private sector in the spanish regions in the period 1964 91 using panel data techniques to control for unobserved state specific characteristics the results obtained show how the infrastructures most directly linked to the productive process present a significant and positive effect on productivity they also show the importance of the network effect of the infrastructures of a productive nature as well as a decrease in the elasticity associated with such infrastructures as development progresses mas m maudos j perez f et uriel e 1996 les infrastructures et la productivite aux regions espagnoles reg studies 30 641 649 cet article cherche a analyser le role du capital public les

can wage increases pay for themselves tests with a production function efficiency wage theories predict that companies that pay high wages will have higher productivity from high work effort low turnover and other efficiency enhancing effects this paper uses the pims line of business data set to test whether high wage businesses are more productive relative wages were measured by managers assessments of their relative compensation holding worker quality constant a positive relation was found between changes in relative wages and changes in total factor productivity the elasticity of output with respect to wages was of the magnitude predicted by efficiency wage theories also consistent with efficiency wage theories the relationship between changes in wages and changes in productivity was weaker at businesses with high unionization results from two additional data sets imply that high wages are not merely measuring high human capital copyright 1992 by royal economic society

recent trends in aggregate concentration in the united kingdom economy the extent to which large corporations dominate economic activity and the design of ap propriate policies towards them have been the subject of an extensive debate in the uk in recent years trends in concentration in manufacturing have played an important role in fuelling this debate recent studies however suggest that the unprecedented increases in overall or aggregate concentration in manufacturing which took place in the 1960s have not been repeated in the 1970s on the contrary concentration seems to have stabilised or fallen in the first half of the 1970s 1 in our view such estimates are not necessarily a good guide to the size and role of big business in the economy as a whole the discussion needs to be extended beyond the confines of manufacturing non manufacturing activity in the uk in the 1970s accounted for around 70 of gdp and over two thirds of employ ment 2 many of the largest uk companies including the oil companies the clearing banks and insurers and major retailers operate principally outside manufacturing and many of those within manufacturing have substantial non manufacturing interests as their consoli dated annual accounts reveal 3 mergers provide a more dramatic indication of this pattern in 1983 bat industries one of the ten largest industrial companies in the uk made a takeover bid for eagle star the sixth largest insurer whilst this may be an extreme example it is certainly the case that in the 1970s conglomerate mergers have generally become of far greater relative importance than they were in the 1960s 4 our object in this paper is therefore to provide recent estimates of aggregate concen tration which extend beyond manufacturing industry and cover the years 1968 82 this involves major problems because there are no official statistics to guide us we have there fore had to use a variety of published sources principally based on company accounts

pay and employment determination in britain what are labour contracts really like the recent growth of unemployment in western economies has prompted new research on the workings of the labour market there has been much interest in particular in the questions what determines the level of real pay and why is it apparently so insensitive to changes in aggregate demand and unemployment european economists now find it hard to take seriously the notion still taught to many undergraduate that wages are determined by the intersection of demand and supply curves roughly half of all british employees belong to trade unions a much higher percentage have their pay fixed by some kind of collective bargain in this country it is negotiations not impersonal com petitive markets which decide what most of us will be paid the difficult problem is that of how to understand this process or to put it differently of how to think up the right model of the world

industrial relations in britain this work has 17 chapters covering trade unions management collective bargining industrial conflict the labour market labour law and state intervention in industrial relations each chapter is an essay which brings together the most up to date theoretical and empirical work each focuses on trends over the past two or three decades and says something about likely developments over the 1980s the emphasis is on analysis and explanation as well as on description

the causes of unemployment in france a flow approach a flow model is used to identify the causes for rising unemployment in france between 1978 and 1990 two flow equations are estimated as functions of exogenous factors such as aggregate demand factor costs structural shifts and long term factors and then used in simulations for the level of unemployment it is shown that the main reason for high unemployment in france is a slow down in the demand for labour due to high labour and energy costs in the early 1980s and to tight aggregate demand over the whole period change in the labour supply have had an increasing impact in recent years

the political economy of socially irrational products in the past long waves have dissipated themselves in an exhaustion of innovations under spending and or a shortage of labour and ensuing upswings depended upon adjustments in the wage profit relation and a restructuring of the patterns of production and consumption whereas monetarist keynesian and marxist perspectives all focus attention on changes in the distributional or former dimension of the present crisis in this paper i argue that the critical distinguishing feature is grounded more in the latter the intractable character of post world war ii production and consumption the intractability refers to the resilience of the contemporary structure of production and consumption whereas in the past competitive market forces facilitated the restructuring of production and consumption required at the end of a long boom today the economy remains encumbered with a range of investments and product forms entrenched within the social and political order but which are increasingly costly in real terms proposals to resolve these dislocations by government cutbacks and the imposition of selective austerity fail to capture the organisational sources of rising costs and government paralysis even if such programmes were to stimulate a renewed spurt of economic growth they would quickly be accompanied by rising cost pressures and a political backlash for the austerity would be imposed on a populace imprisoned within an expensive infrastructure of consumption and therefore required to maintain a high level of expenditure the task of this paper is to explain the intractable character of the current crisis in terms of the contemporary organisation of consumption and production the argument proceeds in the following order first the politicised market generating irrational patterns of production and consumption in key industries has driven up the cost of living second these patterns of production and consumption once they were embedded in political and social institutions have become highly resistant to the competitive forces which in theory reduce inflationary pressures third the burdens and constraints imposed on the state by the prevailing patterns of production and consumption combine with the relative ineffectiveness of keynesian and monetarist measures to set up the state as a scapegoat for economic irrationalities lodged more deeply in the contemporary structure of production and consumption

challenges facing natural rate theory abstract this paper attempts to test the natural rate hypothesis by looking at historical unemployment data for france the uk and the us we find that the unemployment series can be described as stationary around an infrequently changing mean moreover that the speed of convergence towards mean unemployment is slower when unemployment is high and differs across the three countries the two european countries having more persistence we do not find any evidence that the persistence of a change in unemployment is a function of the size of the change we conclude that the data are consistent with multiple equilibria models where large shocks bring the economy from one equilibrium to another and also with models with a moving natural rate

age size growth and survival uk companies in the 1980s this paper examines growth and survival amongst quoted and unquoted u k companies in the period 1975 85 and compares the results with earlier u k and u s studies an examination of death rates shows that smaller companies had higher death rates but the largest and smallest companies were least vulnerable to takeover careful attention is therefore paid to problems of sample selection bias it is shown that smaller companies grew faster than larger companies that gibrat s law does not hold amongst smaller firms that age is negatively related to growth and that these results are not an artifact of sample selection bias copyright 1994 by blackwell publishing ltd

spatial evolution of population and industry in the united states what features characterize the evolution of the u s urban system in this past century to what extent has the 500 percent increase in national urban population during 1900 1990 been accommodated by growth in numbers versus sizes of cities given the radical changes in the u s economic geography has the relative size distribution of city sizes changed significantly with say strong increases in urban concentration and primacy a popular notion as urbanization slowed after world war ii did fluctuations in city sizes and upward downward mobility of cities dampen as an arthur scale economy framework would predict brian arthur 1990 finally what natural geographic features of a city promote growth how important are climate location neighbor cities and the like an interrelated set of questions concerns the agglomeration and mobility of industrial activity within the set of cities are industries that are subject to greater scale economies both more agglomerated and less mobile for industries that are not subject to scale economies why does agglomeration occur central to answering these questions is measuring the nature and extent of scale economies this paper reports results on these two sets of issues using population census data for 1900 1990 and manufacturers census data for 1963 1992 for a selection of machinery and high tech industries

inefficiency and heterogeneity in turkish banking 1990 2000 recent studies have stressed the importance of privatization and openness to foreign competition for bank efficiency and economic growth we study bank efficiency in turkey an emerging economy with great heterogeneity in bank types and ownership structures earlier studies of turkish banking had three limitations i excessive reliance on cost function frontier analyses wherein volume of loans is a measure of banking output ii pooling all banks or imposing ad hoc heterogeneity assumptions and iii lack of a comprehensive panel data set for proper analysis of productivity and heterogeneity we use an estimation classification procedure to find likelihood driven classification of bank technologies in an 11 year panel in addition we augment traditional cost frontier analysis with a labour efficiency analysis we conclude that state banks are not particularly inefficient overall but that they do utilize labour inefficiently this partially supports recent calls for privatization we also conclude that special finance houses or islamic banks utilize the same technology as conventional domestic banks and do so relatively efficiently this suggests that they do not cause harm to the financial system finally we conclude that foreign banks utilize a different technology from domestic ones this suggests that one should not overstate their value to the financial sector copyright 2005 john wiley sons ltd

a survey of recent developments in the literature of finance and growth this paper provides a survey of the recent progress in the literature of financial development and economic growth the survey highlights that most empirical studies focus on either testing the role of financial development in stimulating economic growth or examining the direction of causality between these two variables although the positive role of finance on growth has become a stylized fact there are some methodological reservations about the results from these empirical studies several key issues unresolved in the literature are highlighted the paper also points to several directions for future research

optimal labour contracts under asymmetric information an introduction the review of economic studies has instituted a new series of lectures to be given annually by a younger british economist at the association of university teachers of economics meetings the choice of lecturer is determined by a panel whose members are currently professors hahn mirrlees and nobay this paper is a revised version of the first lecture in the series it was presented at the aute meeting held at the university of surrey in april 1982 and was refereed in the usual way mak

insider power unemployment dynamics and multiple inflation equilibria this paper incorporates employment dynamics due to insider power into the barro gordon theory of inflation unlike in the static barro gordon case and even though our infinitehorizon model is linear quadratic there can be two markov perfect equilibria so that the same unemployment may correspond to either low or high inflation both equilibrium inflation rates measured per unit of the gap between the insiders and government s employment targets are higher than the corresponding rate in the static case the low inflation equilibrium has intuitive comparative statics properties in that inflation is increasing in insider power and the discount factor but the high inflation equilibrium behaves in the opposite way the highinflation equilibrium can be eliminated by a future precommitment to a fixed inflation regime e g erm but only if this precommitment can be made with certainty contrary to the static model inflation may be lower when the union puts a positive weight on a wage target than when it cares only about employment even when this wage target is consistent with a lower employment level than the employment target

banks regional development disparity and growth evidence from turkey in this paper we analyse the impact of credits provided by banks on provincial growth in turkey where state owned banks have an implicit role of reducing disparity by allocating loans in underdeveloped regions that are ignored by private banks we find a paradoxical effect of state owned banks on regional development their credits contribute significantly to the growth of more developed provinces whereas they fail to encourage the well being of less developed provinces on the other hand credits provided by private banks in general positively impact the per capita real gross domestic product gdp in both developed and less developed provinces contrary to their purpose of existence our results suggest that state owned banks did not reduce economic disparity among turkish provinces in the trade off between growth and income disparity our results suggest that state owned banks should improve their lending behaviour especially in the less developed regions in order to broaden their development role to the whole economy copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

unemployment a survey this paper presents a survey of the economics of unemployment it covers competitive and imperfect competition models the role of different methods of wage determination and explanation of postwar unemployment patterns in the oecd countries copyright 1990 by royal economic society

the wage price spiral this paper rehabilitates the old wage price spiral it shows that after an increase in aggregate demand the process of adjustment of nominal prices and nominal wages results from attempts by workers to maintain or increase their real wage and by firms to maintain or increase their markups of prices over wages under continuous price and wage setting the process of adjustment would be instantaneous under staggering of price and wage decisions the adjustment takes time the more inflexible real wages and markups are to shifts in demand the higher is the degree of price level inertia and the longer lasting are the effects of aggregate demand on output

optimal wage bargains recent attempts to provide a theoretical framework for macroeconomics have focused on the nature of wage employment agreements between firms and workers workers are in general unable to purchase insurance against future income fluctuations on grounds of for example moral hazard and consequently firms may find it profitable to offer workers a contract that provides them with partial insurance as well as employment compensation the seminal papers are those of azariadis 1975 and baily 1974 henceforth a b and a useful survey is provided by azariadis 1981 in their model hiring decisions must be made before uncertainty about product market conditions is resolved if firms are risk neutral and severance payments to the unemployed are disallowed then the optimal contract entails a state invariant real wage and the possibility of ex post involuntary unemployment while this model provides important insights it has been criticized on a number of grounds first akerlof and miyazaki 1980 and pissarides 1981 have pointed out that unemployment can occur in the simple a b model only when the marginal revenue product of labour falls below the reservation wage so that unemployment would also occur in a walrasian model and that in general the level of unemployment will be less than would be experienced in spot markets although it does provide a clue to the involuntary nature of that unemployment second the ad hoc exclusion of payments by the firm to the unemployed can be criticized if these are allowed then the optimal contract involves a topping up of the reservation wage to provide complete income rather than wage stabilization and the ex post efficient level of employment will be sustained these criticisms have prompted a number of authors to examine the implications of assuming asymmetric information about the state of nature an early example of this literature is provided by calvo and phelps 1977 who note that under an a b contract because there is a tendency to overemployment in bad states there will be an incentive for firms to misrepresent the state of nature and lay off more workers than previously agreed but that this incentive may be attenuated by making the wage schedule contingent on the level of employment that is assumed to be observed by workers the properties of these contracts usually depend on the precise assumptions of the model however in some versions unemployment may be greater than would occur in the walrasian model hart 1983 for instance considers a model in which severance payments are allowed but firms as well as workers are risk averse then the optimal contract will involve lower wages in bad states of nature in order to spread risk but the only way this information can be conveyed to workers is by lowering the level of employment the papers by grossman and hart 1981 and by azariadis chari green and kahn and grossman and hart in the symposium in the quarterly journal of economics

employment with asymmetric information in an economy without informational and other distortions entrepreneurs and workers can write labor contracts that support a pareto optimal allocation of resources this paper is an attempt to characterize contracts when enterpreneurs are better informed about the state of nature than are their workers asymmetric information generally results in a suboptimal allocation of both risk and worker effort in particular if consumption and leisure are perfect substitutes employment will be less than fully pareto optimal in all but the most favorable states of nature

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

market power in a non monetarist inflation model for greece a post keynesian inflation model for greece is constructed and tested the model consists of three equations including a cost demand price equation for the gross domestic expenditure deflator cost demand functions have been occasionally estimated in the past the equation presented is a more systematic test since the effect of industry concentration is examined both theoretically and empirically a collective bargaining equation for the first time in greece was simultaneously estimated the role of public deficit was investigated and it was found that this exerts a moderate influence on inflation

do lenders favor politically connected firms rent provision in an emerging financial market corruption by the politically connected is often blamed for economic ills particularly in less developed economies using a loan level data set of more than 90 000 rms that represents the universe of corporate lending in pakistan between 1996 and 2002 we investigate rents to politically connected rms in banking classifying a rm as political if its director participates in an election we examine the extent nature and economic costs of political rent provision we nd that political rms borrow 45 percent more and have 50 percent higher default rates such preferential treatment occurs exclusively in government banks private banks provide no

long term unemployment and the shifting u v curve a multi country study one of the most worrying aspects of the rise in unemployment in the oecd countries since 1980 has been the even more rapid rise in long term unemployment in this paper we investigate this phenomenon in four countries the u k west germany the netherlands and the u s a fig 1 shows recent trends in the ratio of long term to total unemployment for these four countries where long term unemployment is defined as unemployment for more than twelve months in the u k the ratio was only 0 1 in the 1960s and since then there have been three periods when this ratio was in an approximate steady state in 1969 72 around 0 16 0 23 from 1977 79 and 0 4 from 1984 to the present for west germany similar trends have been observed especially since 1975 but with a consistently lower ratio for the netherlands males only the pattern is again similar but with consistently higher ratios which are possibly due to excluding females for the u s a the ratio has been very much lower than the three european countries nevertheless the u s a has in common with the others experienced the same recent dramatic rise in budd levine and smith 1985 a model is presented to explain the duration profile of unemployment in this model a key parameter is the outflow rate from unemployment which can be thought of as the average probability of leaving the register flow data for the u k indicate that this average probability of finding a job within a given quarter is considerably less for the long term than for the short term unemployed the model shows that this differential is crucial for explaining the recent sharp rise in the ratio of long term to total unemployment we believe that this fall in probability is associated with both a reduction

a theory of dual labor markets with application to industrial policy discrimination and keynesian unemployment this paper develops a model of dual labor markets based on employers need to motivate workers in order to elicit effort from their workers employers may find it optimal to pay more than the going wage this changes fundamentally the character of labor markets the model is applied to a wide range of labor market phenomena it provides a coherent framework for understanding the claims of industrial policy advocates it also can provide the basis for a theory of occupational segregation and discrimination that will not be eroded by market forces finally the model provides the basis for a theory of involuntary unemployment

regional finance a survey the role of money and nancial markets in the regional matters 1 economy has been attracting increasing attention in we start with a review of the treatment of money recent years it has been a topic of interest for longer in regional economics and then turn to the much

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

does better nutrition raise farm productivity household level data from sierra leone are used to test whether higher caloric intake enhances family farm labor productivity this is the notion behind the efficiency wages hypothesis which has found only weak empirical support a farm production function is estimated accounting for the simultaneity in input and calorie choice instruments include prices household demographic characteristics and farm assets the latter two sets of instruments are later dropped to explore the robustness of the results to different specifications of exogeneity the exercise shows a highly significant effect of caloric intake on labor productivity providing solid support for the nutrition productivity hypothesis the marginal effect on productivity falls drastically as calorie consumption rises but remains positive at moderately high levels of intake one result is a fall in the effective price of food a decline that is larger for households that consumer fewer calories

modeling employment dynamics with state dependence and unobserved heterogeneity this study extends existing work on the dynamics of labor force participation by distinguishing between full time and part time employment and by allowing unobserved heterogeneity in the effects of previous employment outcomes children and education on labor supply behavior in addition unobserved heterogeneity may feature autocorrelation and correlated random effects the results reveal significant variation in the effects of children and education on labor supply behavior moreover the omission of random coefficients and autocorrelation biases estimates of state dependencies on average temporary shocks that increase the rate of part time employment lead subsequently to lower rates of nonemployment than do shocks that temporarily increase the rate of full time work the article has additional online supplementary material

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

political connection bank credits and growth evidence from turkey the pervasive existence of government owned banks in emerging economies is often justified by their provision of access to credit in remote and underdeveloped regions that are ignored by private banks this paper analyses whether credits provided by government owned and private banks have a significant role in regional growth and whether this role changes in politically connected areas in turkey our findings imply that private banks significantly improve the economic well being in all turkish provinces regardless of their development level or their political connection with the ruling party however credits by government owned banks are found to be positively related to the per capita growth rate only in the less developed provinces that are advocates of the ruling political party and also developed but not politically connected provinces these results suggest that government owned bank credits as implied by the political view are used for funding politically desirable projects or politically connected borrowers

the relationship between inflation and the budget deficit in turkey this article analyzes the empirical relationship between inflation and the budget deficit for the turkish economy by a multivariate cointegration analysis a single equation model shows that the scaled budget deficit as well as income growth and debt monetization significantly affects inflation in turkey the conditional model of inflation is constant and it encompasses a previously estimated model

unemployment compensation and high european unemployment a reassessment with new benefit indicators generous unemployment benefits lie at the heart of the conventional explanation for persistent high unemployment the effects of benefit generosity on work incentives are more ambiguous in a broader behavioural framework in which workers get substantial disutility from unemployment given income and know that unemployment has scarring effects in the future the micro evidence suggests modest effects of changes in generosity but there are reasons to doubt that the impacts on national unemployment rates are consequential the empirical case for the orthodox prediction comes from cross country regressions on the oecd s gross replacement rate grr but the published evidence is mixed and we find little support in the pattern of annual changes in the grr and the unemployment rate for oecd countries over the last three decades we take advantage of new and much improved net replacement indicators from the oecd which show little correlation with either the grrs or with unemployment and employment rates we conclude that the available evidence does not offer compelling support for the conventional view

union wages temporary lay offs and seniority it is widely believed that the seniority system in conjunction with the collective bargaining process contributes significantly to the determination of the unemployment level in unionized sectors causa i empiricism suggests that real wage demands often remain buoyant in these sectors in the face of seemingly high rates of unemployment among union members james medoff 1979 p 380 convincingly documents the evidence that adjustment through lay offs is substantially greater in unionized firms than in comparable non unionized firms the usual but somewhat informal explanation is that the outcome of union voting is greatly influenced by senior workers who are fairly certain that they will not be laid off when normal shifts in the industry s demand for labour occur 2 these inframarginal workers are believed to vote for higher wage settlements than they would if their own jobs were not so secure

the composition of public expenditure and economic growth abstract noting that the literature has focused on the link between the level of public expenditure and growth we derive conditions under which a change in the composition of expenditure leads to a higher steady state growth rate of the economy the conditions depend not just on the physical productivity of the different components of public expenditure but also on the initial shares using data from 43 developing countries over 20 years we show that an increase in the share of current expenditure has positive and statistically significant growth effects by contrast the relationship between the capital component of public expenditure and per capita growth is negative thus seemingly productive expenditures when used in excess could become unproductive these results imply that developing country governments have been misallocating public expenditures in favor of capital expenditures at the expense of current expenditures

empirical tests of efficiency wage models two digit manufacturing industry level production functions are used to test efficiency wage propositions conclusive tests require functional forms which allow differences in elasticities of substitution between observable human capital wage premia and other inputs results demonstrate that unexplained industry wage premia and higher unemployment rates raise productivity wage premia and the human capital wage component cannot be aggregated into a single human capital index nevertheless 88 of the productivity effect associated with industry wages can be tied to observable human capital in the industry with only 12 associated with the wage premium

finance and the sources of growth the authors evaluate whether the level of development in the banking sector exerts a causal impact on economic growth and its sources total factor productivity growth physical capital accumulation and private saving they use 1 a pure cross country instrumental variable estimator to extract the exogenous component of banking development and 2 a new panel technique that controls for country specific effects and endogeneity they find that banks do exert a large causal impact on total factor productivity growth which feeds through to overall gdp gross domestic product growth the long run links between banking development and both capital growth and private savings are more tenuous

does local financial development matter we study the effects of differences in local financial development within an integrated financial market we construct a new indicator of financial development by estimating a regional effect on the probability that ceteris paribus a household is shut off from the credit market by using this indicator we find that financial development enhances the probability an individual starts his own business favors entry of new firms increases competition and promotes growth as predicted by theory these effects are weaker for larger firms which can more easily raise funds outside of the local area these effects are present even when we instrument our indicator with the structure of the local banking markets in 1936 which because of regulatory reasons affected the supply of credit in the following 50 years overall the results suggest local financial development is an important determinant of the economic success of an area even in an environment where there are no frictions to capital movements

the beveridge curve a survey important progress has been made in economists understanding of the beveridge curve from its measurement to its expression in canonical labor market models yet enduring puzzles remain chief among these are the empirical role of vacancies in the recruitment process the amplitude comovement and persistence of cyclical unemployment vacancy dynamics and the sources of lateral shifts in the beveridge curve the synthesis of these themes identifies several priorities for ongoing research including the role of entry costs into vacancy creation in shaping beveridge dynamics the cyclicality of search intensity both off and on the job and its relation to participation and job to job transitions the theory and measurement of mismatch and the sources of hysteresis in unemployment flows