labor market search and real business cycles nash bargaining vs fair wage abstract this paper modifies the standard labor market search model with nash bargaining for a wage determination scheme which relies on efficiency wage theories more precisely the equilibrium wage rests on the gift exchange motivation it is shown that the combination of search frictions and fair wage hypothesis allows a business cycle model to replicate the dunlop tarshis observation without requiring a second source of impulses

the market for safety regulation and the effect of regulation on fatalities the case of motorcycle helmet laws existing econometric studies of the efficacy of motorcycle helmet laws assume that such laws are exogenously determined and may therefore yield biased results to correct for possible selectivity bias we specify and estimate a self selection model in which the choice of having a helmet law is endogenous our results indicate selectivity bias exists and that if laws were randomly assigned fatality rates for states with helmet laws would on average be less than 1 lower than for states without laws

further evidence on the asymmetric behavior of economic time series over the business cycle evidence has recently been presented by salih neftci to support the hypothesis that recessions in economic activity tend to be steeper and more short lived than recoveries in economic activity that evidence however was confined to the behavior of the unemployment rate in the united states in this paper it is shown that when neftci s methods are applied to analyze the behavior of real gross national product investment and productivity in the united states or when they are used to analyze industrial production abroad the asymmetry hypothesis seems to be less compelling

voting for public goods it is shown that when resources are privately owned the institution of voting is irrelevant to the choice of non exclusive public goods the total bundle of such goods produced by society is the same whether or not minority coalitions are permitted to produce them this is in sharp contrast to the cases of redistribution and of exclusive public goods where public decisions depend strongly on the vote the analytic tool used is the harsanyi shapley non transferable utility value

self enforcing employment contracts and business cycle fluctuations abstract this paper incorporates risk sharing employment contracts into an economy in which matching frictions characterize the labour market and in which agents cannot commit in equilibrium the terms of ongoing contracts are affected by those being negotiated in the job market because contracts must be self enforcing in this context risk sharing implies that hours worked and wages are negatively related while enforcement considerations imply the converse overall the sign of this relationship is ambiguous therefore the existence of such contracts may explain why movements in hours worked appear weakly related to those in real wages in u s aggregate data

agent compensation and the limits of bonding agents in positions of trust may engage in malfeasance which is difficult to detect this paper develops a model in which employers seek to control malfeasance by paying wages contingent on imperfect monitoring and agents may be required to pay entry fees or post bonds we conclude that entry fees which exceed agents assets are ineffective in controlling malfeasance as a result conditions exist in which it is optimal to pay agents more than their opportunity cost such conditions lead to an excess supply of applicants and allow employers to engage in discrimination at zero cost to themselves

evidence and theory on the cyclical asymmetry in unemployment rate fluctuations a number of recent empirical studies have identified the presence of a cyclical asymmetry in unemployment rate fluctuations in particular during a recession the unemployment rate increases sharply while during an expansion the unemployment rate declines only gradually the purpose of this paper is to demonstrate that this cyclical asymmetry can be explained in an empirically plausible manner by the optimal search activities of individuals in the economy

reducing drunken driving which policies are most effective traffic fatalities are the leading cause of accidental deaths and the leading cause of all deaths for people between the ages of 16 and 25 4 a major cause of traffic accidents is drunken driving reed 12 estimates that the annual number of deaths could be reduced by 12 000 if all drunken driving were eliminated recently increased attention has been directed toward finding ways to reduce the incidence of drunken driving this paper evaluates the relative effectiveness of several policies in terms of reduced fatalities these policies include raising the minimum legal drinking age increasing legal sanctions and enforcement and increasing the price and reducing the availability of alcoholic beverages most studies have focused on a single policy studies by cook 3 mccornac 7 and williams et al 16 examined the effect of raising the minimum legal drinking age their results indicate that auto fatalities have fallen in states where the minimum legal drinking age has been increased ross 13 and votey 15 both examined the drunken driving deterrence policies in scandanavian countries ross was unable to show that they had any effect on behavior using a more sophisticated model votey concluded that the severe deterrence policies reduced the incidence of drunken driving cook and tauchen 2 found that increasing taxes on alcoholic beverages reduced consumption and led to fewer auto fatalities and a lower incidence of cirrhosis death

alcohol availability and alcohol related motor vehicle accidents the impact of alcohol availability on alcohol related motor vehicle accidents centres on the sensitivity of consumption to changes in the full price of alcohol the dollar price of alcohol plus the time and travel costs associated with acquiring alcohol reducing the number of licensed alcohol vendors raises the time and travel costs of alcohol if alcohol consumption is responsive to this price increase then drinking and driving may decrease using data on the 254 counties in the us state of texas the results in this paper show that alcohol availability has a significant impact on alcohol related motor vehicle accidents thus alcohol vendor restrictions can be an important policy tool in reducing such accidents

a monetary business cycle model with unemployment abstract to reproduce key features of the post war u s data most monetary business cycle models must assume there are high price markups and that agents have high labour supply elasticities despite the existence of contradictory microeconomic evidence this paper eliminates the need for these assumptions by introducing imperfectly observed effort into a limited participation model the estimated model is better able to capture the sluggish price response to a monetary policy shock than the standard model and is consistent with evidence regarding the qualitative responses of the u s economy to technology shocks fiscal policy shocks and monetary policy shocks

do drinkers know when to say when an empirical analysis of drunk driving this paper presents empirical evidence that an individual s decision to drive while drunk is negatively affected by the expected full price of driving drunk the analysis usa a unique data set containing information on self reported drunk driving matched to state level drunk driving policies as well as to state excise taxes on beer these are hypothesized and found to affect drunk driving further we find interesting racial differences but surprisingly small differences by gender in the effect of socioeconomic and policy variables on drunk driving propensities

deterrence and knowledge of the law the case of drunk driving during the past decade hundreds of new state laws have increased the certainty severity and swiftness of punishment for drunk driving these new laws can deter drunk driving only to the extent people know about them in this empirical paper the role incomplete information plays in an econometric model of drunk driving deterrence is explored little evidence is found that people know the applicable laws in their states however some evidence of rational behaviour is found given their lack of knowledge of these laws it is difficult to reconcile these results with studies that have found drunk driving deterrence effects of more severe penalties more certain penalties or even swifter penalties

can police deter drunk driving economic studies using aggregate data generally find that higher taxes are the most effective policy to reduce drunk driving while criminologists report strong evidence supporting law enforcement measures in policy evaluations this paper evaluates these differing perspectives using the aggregate data that is typically used in the economic literature ols and fixed effects models show that police can affect the probability of arrest for drunk driving and in combination with evidence from dui deterrence experiments this suggests that the failure of economic models to detect deterrence reflects the lack of systematic and sustained police efforts against dui

risk sharing in the business cycle why do all developed economies experience fluctuations in their economic activity the real business cycle rbc literature has provided an answer to this question by demonstrating that a well functioning decentralized model economy subject to exogeneous productivity shocks will behave in a way similar in many respects to the business fluctuations experienced by actual economies kyland and prescott 1982 this is particularly true if one imposes restrictions on the choice set of the representative consumer worker hansen 1985 taking account of demand shocks in the form of variations in government spending further improves the performance of the model christian0 and eichenbaum 1990 should we be content with this answer first we must observe that the set of facts current rbc models are able to replicate is very limited and thus that claims of theoretical success should be proportionately modest danthine and donaldson 1990 second at this level of explanation it is quite likely that the same modest set of facts currently used to define the business cycle will be consistent with models of the economy which are significantly different from the pure walrasian formulations which have predominated to date it is this latter issue tihich we propose to address in this paper our starting point is the observation that all industrial economies have developed institutional and social arrangements designed to improve the distribution of income and risks over what would prevail in walrasian equilibrium trade unions minimum wage laws and unemployment compensation mechanisms are examples of such arrangements and they could be all interpreted as having the objective either of moving the economy away from

current real business cycle theories and aggregate labor market fluctuations hours worked and the return to working are weakly correlated traditionally the ability to account for this fact has been a litmus test for macroeconomic models existing real business cycle models fail this test dramatically we modify prototypical real business cycle models by allowing government consumption shocks to influence labor market dynamics this modification can in principle bring the models into closer conformity with the data our empirical results indicate that it does

unemployment long term employment relations and productivity growth using an effort regulation type of efficiency wage model it is demonstrated that a firm may respond to slackening labor markets by acting to increase the intensity with which workers work the magnitude of this work intensity effect depends on the structure of employment relations where long term employment relations are prevalent the effect of labor market slack on work intensity may be diminished these propositions are tested empirically by estimating the effects unemployment and long term employment have on productivity growth in two digit manufacturing industries copyright 1987 by mit press

foreign direct investment with unemployment and endogenous taxes and tariffs it is well known that high tariffs can induce foreign direct investment or tariff jumping this paper analyzes tariff jumping in the context of a host government which can set specific tariffs and taxes subject to the credibility constraint that the chosen levels be optimal once capital is irreversibly in place the foreign multinational is assumed to choose its location and level of investment strategically taking into account the induced tax and tariff levels in the presence of unemployment the optimal tariff exceeds the optimal tax for any given level of capital investment leading to foreign direct investment

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

why do some goods bear higher taxes than others abstract taxation in an economy containing land and labor is studied the tax system is a compromise based on the relative power of all groups of individuals the model extends one of aumann and kurz in response to the threat of taxation by a majority individuals can evade taxation of their labor time by destroying it but cannot avoid taxation of the land they own one result is that the compromise tax rate on land is higher than that on labor this contrasts with the classical normative result that in order to minimize the efficiency loss this tax rate should be higher

shirking unemployment and aggregate fluctuations empirically real wages exhibit relatively little cyclical variation and a weak cyclical pattern early real business cycle rbc models predict to the contrary large procyclical real wage movements incorporating efficiency wages into a rbc environment would seem promising since one prediction from the efficiency wage literature is real wage rigidity this paper evaluates a common microfoundation for efficiency wages the shirking model with respect to its predictions for real wages within a rbc style model simulations of the model reveal that it can generate dampened but still strongly procyclical real wage behavior

work norms and involuntary unemployment consider the organizational environment of labor management wherein the firm can measure the average performance i e group work norm of its employees but has difficulty in observing the individual worker s performance within the group accordingly the worker s remuneration is based on the observed group norm because of the way in which workers interact among themselves in setting work norms there results an undersupply of effort from a given workforce size furthermore the group work norm is shown to be negatively correlated with the size of the workforce consequently short run unemployment can arise with involuntary features the paper also explores the effectiveness of alternative remuneration schemes in mitigating the inefficiency associated with the group work norm setting

job matching and job competition are lower educated workers at the back of job queues abstract during the cyclical downturn of the 1980s unemployment in the netherlands increased substantially with unemployment rates of lower educated workers increasing more than those of higher educated workers a possible explanation of this phenomenon is job competition between workers with different levels of education another explanation of the diverging unemployment rates is that employers dismiss replaceable lower educated workers before irreplaceable higher educated workers in this paper we scrutinize the job competition explanation our results show that there only is job competition between unemployed workers with an academic and a higher vocational education there is no job competition at lower levels of education

growth and unemployment in a shirking efficiency wage model the relationship between growth and unemployment in a general equilibrium shirking efficiency wage model is explored in contrast to past work on this subject detected shirkers are not dismissed but instead incur a monetary punishment as a result of this modification the model can account for a stable rate of unemployment when there is positive population growth and or technological growth in the economy moreover i show that institutions and policies that limit the ability of firms to punish detected shirkers or restrict their use of discretionary bonuses can increase unemployment and reduce the economy s long run growth rate jel classification e0 j41 croissance et chomage dans un modele de salaires efficients ou certains se derobent a leurs obligations ce memoire explore la relation entre croissance et chomage dans un modele d equilibre general de salaires efficients ou certains se derobent a leurs obligations contrairement a ce qui postule dans certains travaux anterieurs sur le sujet les tricheurs detectes ne sont pas renvoyes mais subissent une penalite monetaire gr ce a cette modification le present modele est capable d expliquer un taux de chomage naturel stable meme quand il y a croissance de la population et ou progres de la technologie dans l economie de plus les resultats suggerent que les institutions et politiques qui limitent la possibilite pour les entreprises de punir les tricheurs ou reduisent la possibilite d offrir des bonis discretionnaires peuvent accroitre le niveau de chomage d equilibre et reduire le taux de croissance a long terme de l economie

the problem of polarization this paper offers a unified political economy explanation of political extremism and moderation regarding income redistribution unlike the standard spatial voting model the explanation herein recognizes that extremists are distinguished not only by their political positions but also by the intensity with which they hold them the paper uses an extension of aumann and kurz s econometrica 45 5 1137 1161 1977 bargaining model to endogenize moderation and extremism in the context of democratic voting the extension shows that low income voters tend to be bolder in their redistributive demands and high income voters tend to be more tenacious in defending them these hypotheses are evaluated empirically using the political action panel study

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

the most beautiful variations on fair wages and the phillips curve this paper explores the connection between inflation and unemployment in two different models with fair wages in both the short and the long runs under customary assumptions regarding the sign of the parameters of the effort function more inflation lowers the unemployment rate albeit to a declining extent this is because firms respond to inflation which spurs effort by decreasing the reference wage by increasing employment thus maintaining the effort level constant as implied by the solow condition a stronger short run effect of inflation on unemployment is produced under varying as opposed to fixed capital given that in the former case the boom produced by a monetary expansion is reinforced by an increase in investment therefore i provide a new theoretical foundation for recent empirical contributions that find negative long and short run effects of inflation on unemployment

wealth and power in a collegial polity this paper considers the reflection of political power upon the distribution of wealth in a collegial polity where political power is unequally distributed power and the economic outcome are both analyzed in terms of the shapley value the more powerful a political agent is the greater is that agent s final wealth as given by the value allocation

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

the economics of vocation or why is a badly paid nurse a good nurse abstract given the longstanding shortage of nurses in many jurisdictions why could not nursing wages be raised to attract more people into the profession we tell a story in which the status of nursing as a vocation implies that increasing wages reduces the average quality of applicants attracted the underlying mechanism accords with the notion that increasing wages might attract the wrong sort of people into the profession and highlights an in efficiency wage mechanism particular to vocations which makes wages sticky up wards the analysis has implications for job design in vocation based sectors such as nursing and teaching

employment fluctuations with downward wage rigidity the role of moral hazard we study the cyclical dynamics of job creation and destruction when workers effort is not perfectly observable the no shirking constraint may amplify fluctuations in hiring by making firms surplus share procyclical and may cause a burst of inefficient firing when a downturn begins but quantitatively it mainly raises the cost of motivating marginal workers in booms since firms cannot commit to keep them in recessions and thereby strongly damps the countercyclical fluctuations in the separation rate this implies a robust beveridge curve but casts doubt on ramey and watson s 1997 contractual fragility mechanism and worsens shimer s 2005a volatility puzzle

are economic time series asymmetric over the business cycle it has long been argued that major cyclical variables such as the unemployment rate display an asymmetric behavior over various phases of the business cycle the paper provides a statistical test for this hypothesis using the framework of finite state markov processes i implement a test to see if the behavior of the unemployment rate is characterized by sudden jumps and slower drops it is argued that the framework provided in the paper can also be used to test other sample path properties of economic time series

unemployment and the efficiency wage hypothesis there has been much recent discussion of the reasons why prices in certain markets and in particular in labour markets may not adjust to eliminate excess supply the absence of speedy adjustment of prices is an essential feature of the recent models of disequilibrium macroeconomics but for the most part no explanation for this absence is provided from within those models one explanation that has been around in the literature for some time and has been receiving increasing attention recently is the efficiency wage hypothesis initially applied to developing economies see leibenstein i957 it has more recently been adapted to developed economies by weiss i 980 and used in the context of a keynesian macroeconomic model by hart i 980 similar concepts have been applied to the credit market by stiglitz and weiss i98i the purpose of the present paper is to explore further the conditions under which the notion of an efficiency wage is applicable and can provide an explanation of involuntary unemployment the essential feature of the efficiency wage hypothesis is that the productivity of a firm s employees increases as their wage is increased at least over an economically relevant part of its range if the wage paid by the firm is denoted by w the number of employees by l and the productivity of each employee by p w where p w o then the effective labour force of the firm e can be represented by

speeding coordination and the 55 mph limit do laws coordinate or restrain a number of recent papers discuss the optimality of the 55 mph national maximum speed limit nmsl and evaluate the tradeoff of timelost vs lives saved resulting from the lowered speed james jondrow et al 1983 dana kamerud 1983 thomas forester et al 1984 these papers all implicitly accept the conventional wisdom speed kills slower is safer this conventional wisdom leads to laws designed as limits on behavior whereas the crucial element is often coordination people need to do the right things at the right time in relation to what others are doing thomas schelling 1978 p 121 there are indeed some traffic laws that establish conventions of expected conduct we ask that motorists drive to the right not because driving on the left is evil but because it is important that the direction of flow be commonly agreed upon likewise traffic lights are best viewed as a coordinating device allowing free flow to alternating lanes of traffic to reduce the confusion and loss of time in unsignalized intersections for peculiar historical reasons speed laws evolved as limits on driver behavior rather than as signaling devices meant to coordinate it guided by the limit rationale police concentrate on those drivers who exceed the legal speed and tend to ignore those drivers who disrupt coordination by traveling much slower than the norm this paper tests these differing views of the law by examining the current effects of the 55 mph nmsl should it be viewed as a coordinating mechanism or a limiting mechanism i measure the effects of limit defying behavior speeding and absence of coordination speed variance on the fatality rate based on analysis of 1981 and 1982 state cross section data i find that there is no statistically discernable relationship between the fatality rate and average speed though there is a strong relationship to speed variance when most cars are traveling at about the same speed whether it is a high speed or a low one the fatality rate will be low presumably because the probability of collision will be low variance kills not speed

canadian jobs and firm size do smaller firms pay less even after controlling for observable workers characteristics and for occupation and industry specific effects a substantial wage differential remains between large and small firms what underlies the remaining wage differential is unclear direct evidence on pension plan coverage and on lay off rates by firm size is inconsistent with the bad working conditions hypothesis the union avoidance hypothesis does not seem to explain an important portion o f the wage differential as suggested by efficiency wage models part of the remaining wage differential may be due to firms heterogeneity similarly perhaps large firms pay higher wages simply partly beca use they employ workers with more unobserved abilities because differen t explanations of the wage differential may lead to different policy implications determining the source of the wage firm size effect is an important question for future research

macroeconomic adjustment with segmented labor markets this paper analyzes the macroeconomic effects of fiscal and labor market policies in a developing economy with an informal sector and a heterogeneous work force a permanent reduction in government spending on nontraded goods leads in the long run to a deprecia tion of the real exchange rate a fall in the market clearing wage for unskilled labor an increase in output of traded goods and a lower stock of net foreign assets a permanent reduction in the minimum wage improves competitiveness and expands the formal sector the effect of changes in unemployment benefits are also analyzed q 1999 elsevier science

unemployment and the business cycle abstract this paper presents a dynamic general equilibrium model where labor effort is imperfectly observable and there is unemployment in equilibrium in contrast to shirking models in the efficiency wage literature detected shirkers are not dismissed instead they face a monetary punishment because they forgo an increase in their compensation estimated versions of the model can generate the high variation in employment and low variation of real wages observed over the business cycle and are consistent with existing qualitative evidence about the responses of the economy to fiscal policy shocks

the accident externality from driving we estimate auto accident externalities more specifically insurance externalities using panel data on state average insurance premiums and loss costs externalities appear to be substantial in traffic dense states in california for example we find that the increase in traffic density from a typical additional driver increases total statewide insurance costs of other drivers by 1 725 3 239 per year depending on the model high traffic density states have large economically and statistically significant externalities in all specifications we check in contrast the accident externality per driver in low traffic states appears quite small on balance accident externalities are so large that a correcting pigouvian tax could raise 66 billion annually in california alone more than all existing california state taxes during our study period and over 220 billion per year nationally

power majority voting and linear income tax schedules abstract we compare the linear income tax solutions of a version of the aumann kurz power and taxes game and the majority voting model we establish that an agent whose type is in the majority receives a lower payoff in this model than in the majority voting model this reflects the possibilities for bargaining and coalition formation considered in the aumann kurz model the solutions of an example are computed and compared with the optimal utilitarian the optimal rawlsian and the majority voting equilibrium linear income tax schedules

shirking in a monetary business cycle model this paper investigates whether a limited participation model with imperfectly observed effort can reproduce the economy s responses to a monetary policy shock without appealing to high labour supply elasticities or high markups the results demonstrate that the presence of imperfectly observed effort in combination with the limited participation assumption allows the model to account for the presence of involuntary unemployment nominal wage rigidity and the observed responses to monetary policy shocks jel clas sification e3 j41

unemployment insurance in a sticky price model with worker moral hazard abstract this paper studies the role of unemployment insurance in a sticky price model that features an efficiency wage view of the labor market based on unobservable effort the risk sharing mechanism central to the model permits but does not force agents to be fully insured structural parameters are estimated using a maximum likelihood procedure on us data formal hypothesis tests reveal that the data favor a model in which agents only partially insure each other against employment risk the results also show that limited risk sharing helps the model capture many salient properties of the business cycle that a restricted version with full insurance fails to explain

involuntary unemployment and worker self selection abstract consider a firm that lacks information about the reservation wage or ability of any specific worker but is aware that workers with higher reservation wages tend to be more able on average we show that under a simple condition that the efficiency wage exceeds the lowest reservation wage the optimal hiring policy for the firm involves 1 no wage discrimination and 2 rationing of jobs when demand for its product is low the result also extends to the case where hours of work are variable provided each worker is most productive when working a strictly positive number of hours per week

efficiency wages deferred payments and direct incentives in agriculture empirical evidence from agricultural labor markets is consistent with efficiency wage theory and inconsistent with several alternative explanations according to this theory the higher wage or deferred payment benefits that direct hire growers pay relative to that of farm labor contractors is an efficiency wage growers use this extra compensation to lower their monitoring expenses and reduce shirking by workers copyright 2002 oxford university press

incentive compatible long term contracts and job rationing this article presents a model in which markets for long term contractual employment coexist with spot markets for labor assuming the absence of third party enforcement wage contracts are required to be incentive compatible as a consequence contract wages yield higher expected utility to the worker than spot market wages so that in equilibrium contractual long term jobs are rationed

wage interdependence through decentralized bargaining abstract the idea that sector specific unions are influenced by the wages obtained by other unions has mainly been used to support the empirical observation that wages are highly correlated among industries the sources of wage interdependence can mainly be found in unions preferences in the nature of technology and in price and demand determination the presence of externalities and of strategic complementarity among unions leads to suboptimal equilibria which generates non desired inflation unemployment and possibly also trade balance deficit this enforces the idea that part of current unemployment can be eliminated by improving the cooperation between social actors

efficiency wage models of unemployment keynesian economists hold it to be self evident that business cycles are characterized by involuntary unemployment but construction of a model of the cycle with involuntary unemployment faces the obvious difficulty of explaining why the labor market does not clear involuntarily unemployed people by definition want to work at less than the going wage rate why don t firms cut wages thereby increasing profits

a model of the natural rate of unemployment since the publication of edmund phelps volume the new macroeconomics has treated the labor market as a dynamic process of rational search by unemployed workers for available vacancies wages are viewed as at least potentially flexible though free contracting between workers and firms may lead to fixed wages in the short run imperfect information is a crucial element of the theory for it implies both a need for contracting and a need for rational search rather than simple market clearing in each period a positive rate of frictional unemployment may exist in equilibrium denoted as the natural rate this unemployment is due to the frictions in the search process and imperfections in information rather than to any deficiency in aggregate demand milton friedman defined the natural rate as the level that would be ground out by the walrasian system of general equilibrium equations provided there is embedded in them the actual structural characteristics of the labor and commodity markets including market imperfections stochastic variability in demands and supplies the cost of gathering information about job vacancies and labor availabilities the costs of mobility and so on p 8 this paper reexamines the micro foundations of the natural rate in a model of labor market equilibrium in which turnover flows and imperfect information are explicitly considered workers may quit their current jobs to enter the unemployment pool in order to search among available vacancies for a more preferred position firms economize on turnover by an appropriate wage policy

implicit contracts incentive compatibility and involuntary unemployment this paper considers the enforceability of employment contracts when employees performance cannot be verified in court so that piece rate contracts are not legally enforceable part i shows that there exists a variety of self enforcing implicit contracts modelled as perfect equilibria in a repeated game and characterizes all the wage and performance outcomes that can be implemented implementation requires a strictly positive surplus from employment the form of the contract depending on how this surplus is divided between firm and employee piece rate contracts and contracts with an informally agreed bonus can be made self enforcing but the use of severance pay and bonding does not extend the set of implementable allocations the resulting contracts resemble actual labor contracts more than do the contracts in standard principal agent models part ii analyses market equilibrium with these contracts also modelled as perfect equilibria in a repeated game and shows that many such equilibria exist unfilled vacancies and unemployed workers can co exist despite the existence of contracts that are potentially mutually beneficial for those jobs that are filled any division of the potential surplus is possible so that the market can have at the same time involuntary unemployment and vacancies that are unfilled despite filled jobs earning positive profits as a criterion for selecting equilibria a notion of renegotiation proofness is applied then either all workers are employed or all jobs filled but any division of the potential surplus is still possible the paper explores what further restrictions on beliefs give rise to a walrasian outcome in which all the potential surplus goes to the short side of the market and to an efficiency wage type outcome in which the potential surplus goes to the long side

labor contracts under asymmetric information when workers are free to quit this paper examines the impact of workers ability to quit on the performance of labor contracts between workers and privately informed firms while the need to induce workers to remain with the firm necessarily lowers total welfare the effect on employment levels is to reduce the magnitude of the inefficiency due to asymmetric information whether this inefficiency is under or overemployment the model predicts that employment distortions increase with the strength of lock in effects on workers a prediction which contrasts with the results of efficiency wage models and which may help in empirical testing of labor contract theory

profit sharing risk sharing and firm size implications of efficiency wages by taking account of output fluctuations this paper constructs a synthesis of profit sharing and efficiency wage models to highlight the role of the risk attitudes of the firm and its employees we show contrary to the traditional efficiency wage theory that in a profit sharing economy unemployment is no longer a necessary device to induce work effort and consequently the labor market equilibrium may be characterized by full employment such a result is more likely to be true when the economy is characterized by small sized firms in addition we also provide a preliminary sketch of the situations in which the firm chooses a profit sharing program or a fixed wage one and discuss how a firm determines its pay parameters and employment in response to output fluctuations

a cost benefit analysis of the 55 mph speed limit this article presents the results of an empirical study which estimates the number of reduced fatalities as a result of the imposed 55 mph speed limit time series data for the us from 1952 to 1979 is employed in a regression model capturing the relation between fatalities average speed variability of speed and the speed limit also discussed are the alternative approaches to valuing human life and the value of time provided is a series of benefit cost ratios based on alternative measures of the benefits and costs from life saving the paper concludes that the 55 mph speed limit is not cost efficient unless additional time on the highway is valued significantly below levels estimated in the best reasearch on the value of time 12 references 1 table