the low skill trap recently it has become popular to argue that certain workers have fallen into a trap in which they have poor skills few job opportunities and a low return on training while others have not this paper demonstrates how such a trap can occur within a simple matching model with rent sharing rent sharing diminishes the worker s incentive to acquire skills however since firms also benefit from training rent sharing likewise induces job creation the subsequent improved matching prospects may offset the initial disincentive to invest however for this mechanism to be effective firms and workers must coordinate their actions if they do not the trap occurs

efficient non contractible investments in large economies abstract do investors making complementary investments face the correct incentives especially when they cannot contract with each other prior to their decisions we present a two sided matching model in which buyers and sellers make investments prior to matching once matched buyer and seller bargain over the price taking into account outside options efficient decisions can always be sustained in equilibrium we characterize the inefficiencies that can arise in equilibrium and show that equilibria will be constrained efficient we also show that the degree of diversity in a large market has implications for the extent of any inefficiency journal of economic literature classification numbers c78 d41 d51

choosy search and the mismatch of talents this article proposes a multi sector matching model where workers have symmetric sector specific skills and the search market is segmented by sector workers choose the range of markets they are willing to participate in i identify a composition externality workers do not take into account the impact of their choice on sector specific mean productivity among the pools of job seekers consequently workers prospect too many market segments and there is room for public policy even when the so called hosios condition holds

the enduring power of coase abstractby many measures ronald coase has been among the most influential economists of the past 60 years why is this so we suggest that coase s work has enduring appeal to and insight for social scientists in part because it addresses the biggest and most important social problems how do we solve governance and coordination problems when limited information common resource issues and public good issues produce conflicts among several people at once any scholar who works on issues of corporate or common pool governance pollution allocation of seats on legislative committees regulation of systemic risk in financial markets provision of military forces patent thickets creation of optimal communications networks regulation of decreasing cost industries or compensation of corporate officers can see his or her work stemming from several of coase s original insights just as john nash s work reshaped economic theory almost every field of economics and political science is shaped by coasean insights

optimal pricing in electrical networks over space and time an electrical system is modelled with a transmission network customers central generators and independent generators the system is subject to stochastic failures and stochastic demand parameters optimal spot prices are derived for the system they vary stochastically with space and time and depend on electrical load flow patterns the price difference between two locations or two voltage levels and the wheeling charge between them will change magnitude and sometimes sign over time as a function of events throughout the network current spatial pricing methods are significantly different from the spot price based methods derived here

the sullying effect of recessions previous work has established that recessions involve a cleansing effect so that in downturns only high productivity jobs remain but empirical evidence suggests job quality is procyclical jobs created in recessions are likely to be low paying and temporary this paper modifies previous models by adding on the job search which leads to an additional sullying effect calibration of the model suggests this offsetting sullying effect is likely to be much larger than the cleansing effect and can account for the procyclical match quality we observe in the data

optimal pricing of non utility generated electric power the importance of an optimal pricing policy for pricing nonutility generated power is pointed out in this paper an optimal pricing policy leads to benefits for all concerned the utility industry and the utility s other customers in this paper it is shown that reliability differentiated real time pricing provides an optimal nonutility generated power pricing policy from a societal welfare point of view firm capacity purchase and hence an optimal price for purchasing firm capacity are an integral part of this pricing policy a case study shows that real time pricing without firm capacity purchase results in improper investment decisions and higher costs for the system as a whole without explicit firm capacity purchase the utility makes greater investment in capacity addition in order to meet its reliability criteria than is socially optimal it is concluded that the nonutility generated power pricing policy presented in this paper and implied by reliability differentiated pricing policy results in social welfare maximizing investment and operation decisions

the tradeoff of the commons under stochastic use abstract we develop a model of scarce renewable resources to study the problem of the commons our model formulation differs from the existing literature in that it assumes the use of the commons to be stochastic in nature one example is microwave spectrum for mobile and wireless communications we investigate three mechanisms of resource allocation free usage the exclusive franchise and a regulated monopoly we show that the welfare tradeoff among these three mechanisms depends on the characteristics of the commons and their usage patterns in particular we find that property rights are not always the best solution we then make four extensions that apply to spectrum allocations

competitive search equilibrium in this paper i construct an equilibrium for markets with frictions which is competitive in the sense that all agents are price takers and maximize utility subject to a set of market parameters i show that the equilibrium allocation is socially optimal i also show how the competitive search equilibrium can be achieved if employers with vacancies can advertise publicly the wages they pay

education ranking and competition for jobs i study workers incentives to invest in general human capital education in the presence of search induced unemployment workers queue for jobs and firms prefer to hire the most productive applicants because of rent sharing as a result an unemployed worker s ranking relative to other job seekers will influence his job finding rate this creates a rat race where workers invest in education partly in order to achieve a better ranking in equilibrium identical workers may have incentives to diversify in terms of education and the investments in education may exceed the socially optimal level

a search theoretic approach to monetary economics the essential function of money is its role as a medium of exchange the authors formalize this idea using a search theoretic equilibrium model of the exchange process that captures the double coincidence of wants problem with pure barter one advantage of the framework described here is that it is very tractable the authors also show that the model can be used to addre ss some substantive issues in monetary economics including the potenti al welfare enhancing role of money the interaction between specializat ion and monetary exchange and the possibility of equilibria with multip le fiat currencies copyright 1993 by american economic association

extending the economic theory of regulation to the form of policy the mutually beneficial connection between industries and the governments that regulate them is the subject of a large literature led by stigler 1971 what has not been studied is how firms choose their desired policies from the set including entry barriers price floors subsidies and demand stimulation we take as given that government and incumbents from the supply and demand for regulation and explore the choice of political product

learning matching and growth we examine an endogenous growth model in which market frictions are an integral part of the economic environment workers invest in education when young which raises their productivity onice employed the level of schooling also acts as a key determinant of the rate of economic growth by influencing workers ability to accumulate additional human capital on the job once schooling is completed workers search for employment the division of the surplus between vacancies and searching workers is characterized as is the optimal level of education the economy may display multiple steady state growth paths

skill mismatch and unemployment in oecd countries marco manacorda this paper uses evidence on employment labour force and wage differentials by education from oecd countries to investigate the characteristics and the consequences of a skill biased shift in the structure of labour demand and supply the empirical analysis shows that there has been some increase in skill mismatch in a few oecd countries over the past two decades but this has not been a generalized phenomenon moreover the rise in mismatch cannot explain much of the rise in unemployment in continental europe while it does explain a significant proportion of the increase in the rate of joblessness in britain

efficient relocation of spectrum incumbents changes in technologies and in consumer demands have made prior radio spectrum allocations far from efficient to address this problem the fcc has recently reallocated spectrum for more flexible use in bands that are partially occupied by incumbent license holders often it is necessary for the new license holder to relocate incumbents to make efficient use of the spectrum regulations structuring the negotiation between incumbent and new entrant can promote efficiency in particular giving the new entrant the right to move the incumbent with compensation can reduce negotiation costs and promote efficiency when there is private information about spectrum values but good public information about the cost of relocating the incumbent we examine the experience of broadband pcs entrants in relocating microwave incumbents we conclude with some remarks on how these ideas might be applied to digital television spectrum

unemployment vs mismatch of talents reconsidering unemployment benefits we develop an equilibrium search matching model with risk neutral agents and two sided ex ante heterogeneity unemployment insurance has the standard effect of reducing employment but also helps workers to get a suitable job we show through calibrations how the mere difference on unemployment insurance when countries experience a common skilled biased technological shock may result in differences in unemployment productivity growth and wage inequality these results are consistent with the contrasting performance of the labour market in europe and the united states in the last twenty five years the model is used to address some political economy issues

administrative creation of property rights to radio spectrum abstract despite the 1934 communication act s ban on private ownership of radio spectrum the law leaves open to the federal communications commission a range of licensing regimes under which the commission may in its discretion grant spectrum users relatively strong or weak property rights to allotted frequencies this article examines numerous administrative decisions by the fcc to demonstrate how regulatory changes have affected the property interests conferred by spectrum licenses focusing on licensees rights to use divide and broker spectrum flexibly and to prevent unauthorized reception of their signals the article discusses the economic and legal significance of those changes and identifies areas for further reform the authors conclude that although important changes remain to be made the fcc has strengthened property interests on both the transmission and receiving ends of licensed frequencies and through the administrative process has eroded the importance of the statutory distinction

an explanation of international differences in education and workplace training abstract we develop a simple search equilibrium model of workplace training and education based on two features first investment in education improves job related learning skills and reduces training costs by firms second firms with vacant skilled job slots can choose between recruitment from the market and training compared to germany and japan the us has both a higher inflow rate into unemployment and a higher efficiency of the matching process while the combined effect of these differences on the share of educated labor is ambiguous the effect on the percentage of firms undertaking workplace training is to unambiguously reduce it

frictional assignment i efficiency abstract this paper examines the two sided matching problem where the agents on each side of the market are heterogeneous and the matching process is time consuming this is cast in a labor market setting where workers of different skills match with different machine qualities i characterize the efficient allocation and then show that it can be decentralized by a market mechanism the efficient assignment is not always positively assortative despite the fact that machine qualities and skills are complementary in production to decentralize the efficient allocation the market mechanism requires the firms to post wages and commit each machine quality to a particular skill implications on wage inequality are briefly examined journal of economic literature classification numbers j31 e24 j64

the rationality of u s regulation of the broadcast spectrum in his classic 1983 technologies of freedom ithiel de sola pool so elucidated the prevailing wisdom concerning broadcast licensure in the united states while the key legal questions surrounding this institution involve important first amendment questions hence pool s scarcity analogy to paper ink and presses economists and other policy analysts have often remarked on the more general incongruity in federal licensing while spectrum is regulated on the physical scarcity premise it is awarded to private users on a no fee basis thus conferring significant economic rents on private parties at substantial opportunity cost to the fisc moreover federal communications commission fcc 2 policies have openly sought virtually throughout the agency s entire life span to restrict broadcast licenses and competition for broadcasters particularly cable television to far below the quantity technically available 3 the

the effects of macroeconomic conditions at graduation on overeducation this article shows that unfavorable economic conditions at graduation decrease the likelihood of a good job worker match over a worker s subsequent career mismatch is quantified in terms of overeducation by both industry and occupation the german socio economic panel and region level unemployment rates from 1994 to 2012 are used instrumental variables estimates account for endogenous graduation timing a single percentage point increase in regional unemployment causes an increase in the probability of overeducation of 1 6 1 7 percentage points for university graduates effects for technical tertiary education and apprenticeship graduates are smaller labor market entry conditions affect workers for up to 9 years after graduation jel j23 j22 e32 i23

wholesale marginal prices in competitive generation markets wholesale marginal electricity prices are being used in several actual competitive generation markets worldwide both to remunerate generators and to charge consumption these prices must account not only for energy but also for guarantee of supply in the long and the short term this paper a provides a sound conceptual and quantitative foundation for wholesale pricing based on generation services where any existing restrictions in operation or planning in real power markets are accounted for b clearly establishes the relationship between short term marginal costs long term marginal costs and optimal wholesale electricity prices and c identifies the reasons for mismatches in cost recovery with marginal generation prices the theoretical results are verified with a detailed realistic power system model

reliability differentiated real time pricing of electricity optimal resource planning and power dispatch models from a societal welfare point of view imply an optimal pricing policy which is referred to here as reliability differentiated real time pricing or in short reliability differentiated pricing this pricing scheme combines real time pricing and priority pricing with reliability differentiation based on consumer outage costs this pricing policy is analyzed the model used in the analysis is developed with particular emphasis on consumer behavior and welfare effects the implications of the model for the pricing of spinning reserve and firm capacity as well as for revenue reconciliation are examined it is concluded that such a pricing scheme will in general result in greater attainable welfare than either the real time pricing or priority pricing paradigms moreover it results in the maximum attainable welfare for the system with revenue reconciliation and provides an optimal pricing scheme for spinning revenue and firm capacity

6 revenue effects and information processing in english common value auctions an experiment analyzing behavior in english common value auctions is reported english auctions raise more revenue than first price auctions only when bidders do not suffer from a strong winner s curse agents employ other bidders dropout prices along with their private information as nash bidding theory predicts however a simple and natural signal averaging rule which does not require recognizing the adverse selection effect of winning the auction better characterizes the data than the nash rule monte carlo simulations using fiml estimates of the signal averaging rule predict a number of data characteristics not directly employed in the estimation procedure copyright 1996 by american economic association

the determinants of prices in the fcc s 700 mhz spectrum auction this article examines the prices paid for 700mhz licenses in recent federal communications commission auctions econometric modelling confirms the presence of economies of scale and scope in wireless spectrum valuations that is higher prices are recorded for areas with large populations whilst lower prices are realized for geographically large areas also smaller geographic license areas appear to meet bidders demand more effectively and licenses in areas with high incomes are sold at higher prices not surprisingly more strict deployment requirements and the presence of harmful technical interference reduce prices also paired spectrum receives higher prices than unpaired spectrum interestingly high minimum opening bids and upfront deposits are associated with higher prices finally competitive bidding places upward pressure on prices

efficiency of investment in human and physical capital in a model of bilateral search and bargaining a matching model is used to analyze the effect of search frictions on incentives to invest in human and physical capital equilibrium involves inefficient low levels of investment the source of the inefficiency cannot be attributed solely to either search or bargaining schemes that assist matching are pareto improving while the ratio of workers to firms remains fixed intermediaries that pay owners according to the amount of capital carried into the market are able to generate efficient outcomes such intervention may not eliminate inefficiencies when the ratio is endogenized policy implications include encouragement of investment even while abstracting from growth this paper examines investment in human and physical capital in an environment with explicit frictions in particular i analyze a random matching model where workers must search for employers and vice versa but one that is generalized beyond the previous literature to include ex ante investments on both sides of the market 2 the model generates equilibria with inefficiently low levels of investment to identify the source of the inefficiency its robustness to variations in the environment is considered i also analyze a generalized version of the model in which individuals can choose whether to invest in physical or human capital i e whether to become employers or workers the model predicts that the

are the unemployed unemployable abstract this paper develops a matching model of the labor market under wage rigidity when hiring decisions are irreversible there are two types of workers the skilled and the unskilled the model is used to analyze whether technological advances may have increased unemployment it is shown that it is likely to be so if they are associated with an increase in the productivity and or the supply of skilled workers relative to unskilled workers these effects are stronger when hiring decisions are more irreversible

holdups and efficiency with search frictions a natural holdup problem arises in a market with search frictions firms have to make a range of investments before finding their employees and larger investments translate into higher wages in particular when wages are determined by ex post bargaining the equilibrium is always inefficient recognizing that capital intensive production relations have to pay higher wages firms reduce their investments this can only be prevented by removing all the bargaining power from the workers but this in turn depresses wages below their social product and creates excessive entry of firms in contrast to this benchmark we show that efficiency is achieved when firms post wages and workers can direct their search toward more attractive offers this efficiency result generalizes to an environment with imperfect information where workers only observe a few of the equilibrium wage offers we show that the underlying reason for efficiency is not wage posting per se but the ability of workers to direct their search toward more capital intensive jobs

preemptive patenting and the persistence of monopoly this article takes a different tack and inquires whether institutions such as the patent system create opportunities for firms with monopoly power to maintain their monopoly power the results apply to other situations such as brand identification spatial location and capacity expansion which share the characteristic that early or preemptive actions may lower the returns to potential competitors

the impact of corruption on consumer markets evidence from the allocation of second generation wireless spectrum in india abstracttheoretical predictions of the impact of corruption on economic efficiency are ambiguous with models allowing for positive negative or neutral effects while much evidence exists on levels of corruption less is available on its impact particularly its impacts on consumer markets this paper investigates empirically the effect of the corrupt sale of spectrum licenses to ineligible firms on the wireless telecommunications market in india i find that the corrupt allocation had at worst no impact on the number of subscribers prices usage revenues competition and measures of quality i argue that the market based transfer of licenses to competent firms other than the original awardees combined with fierce competition in the telecommunications sector may have mitigated potential deleterious impacts of corruption on consumers these results suggest that the original corrupt allocation did not matter which provides support for the coase theorem

auctions markets and spectrum ownership comment on moreton and spiller abstract in their empirical study of the personal communications service auctions patrick s moreton and pablo t spiller have shown that the bidder behavior is consistent with most economists conceptions of competitive markets moreton and spiller also presented evidence that firms competing in these auctions were able to aggregate licenses thus offering some vindication for those economic theorists who championed simultaneous multiple round auctions on these issues their study brings new data to bear on important questions about auction design and public policy moreton and spiller however do not examine the costs of the secondary market in reallocating license blocks and its relationship to the exposure problem develop a specific model of government regulation or consider the effects of block size on bidding behavior these omissions limit the inferences and conclusions they claim for their study

excess worker reallocation workers face a trade off between macroeconomic and individual incentives to work in different occupations industries namely between search frictions and personal comparative advantages workers endowed with heterogeneous multi dimensional skills search for jobs that require different skill combinations in equilibrium specialized individuals contact few selected types of vacancies where they are likely to be hired those with weak comparative advantages are seldom chosen among competing applicants thus seek any job type in a tight labour market comparative advantages dominate waiting costs offsetting labour mobility across industries occupations excess worker reallocation is lower and matches are more successful consistently with direct and indirect evidence

implementing a market based spectrum policy abstract the spectrum auctions were a step toward the herzel coase vision of a flexible and efficient market for spectrum this article examines what remains to be done spectrum must be unbundled from broadcast and transmission facilities the commoditization of spectrum will facilitate standardization price discovery and open access to diverse users a liquid secondary spectrum market will lower transactions and entry cost making telecommunications markets contestable auctions should be used to elicit a supply of spectrum from licensees as well as to allocate it to new users in closing the spectrum commons congress granted use to a privileged few unbundled spectrum property rights commoditization and open markets will give the public access to this public resource

new zealand spectrum policy a model for the united states abstract in 1989 the new zealand government began to auction management rights to the electromagnetic spectrum using sealed bid second price vickrey auctions subsequently the united states began to auction spectrum through ascending bid multiple round auctions although students of auction processes find the latter type of auction to be the more efficient form i find that the prices realized in the new zealand cellular auctions are very similar to those realized in the u s personal communications services auctions after adjusting for differences in demographics the flexibility of the new zealand management rights should theoretically allow the winning bidders to find the highest valued use for the spectrum but many of the auctioned rights remain unused several years later a country as small as new zealand simply cannot be as innovative in finding new uses for the spectrum because of the large initial costs of developing the requisite equipment for using it

property rights and wireless license values abstract while extending the scope of spectrum property rights promotes efficiency such reforms are often deterred by equity concerns theoretically however the windfalls may be negative relaxing license restrictions may increase profits by allowing enhanced productivity yet liberalization across a class of licensees can reduce the expected profits by increasing competitiveness this article examines license value changes for regimes that decisively shift toward private property rights in radio spectrum by analyzing the average prices paid in international cellular phone license auctions during 1995 2001 this unique data set encompasses 1 365 licenses assigned by competitive bidding in 38 auctions held in 24 countries licenses awarded by regimes with more expansive spectrum property rights generated winning bids that were 61 percent lower adjusting for other factors this evidence reverses the equity argument against liberalization over the policy margin studied and is consistent with coase s view

transmission analysis by nash game method this paper describes an open access transmission method for maximizing profits in a power system the proposed method is based on the nash bargaining game for power flow analysis in which each transaction and its optimal price are determined to optimize the interests of individual parties transmission losses are considered by the proposed method and test cases and results are discussed to present the merits of the proposed method

adaptability productivity and educational incentives in a matching model abstract we study the connections between the labour market and the education sector in a matching framework with ex post wage bargaining workers have multidimensional skills and the search market is segmented by technology education is a time consuming activity and determines jointly the scope or adaptability and intensity or productivity of individual skills we establish three main results first unemployment provides incentives to schooling by raising the need for adaptability second private returns to productivity are below social returns but no hold up phenomenon is involved third due to wage and congestion externalities private returns to adaptability exceed social returns as a consequence both over and under education may take place in equilibrium

the determinants of price in 3g spectrum auctions this article examined the empirical relationship between prices paid for national 3g wireless licenses when spectrums were sold by auction the reduced form modelling approach was based on the prem

assigning property rights to radio spectrum users why did fcc license auctions take 67 years abstract while leo herzel 1951 and ronald coase 1959 persuasively argued for auctioning licenses issued by the federal communications commission fcc not until 1993 did the u s congress grant the fcc authority to assign wireless operating permits via competitive bidding why were auctions with obvious efficiency and equity advantages so long in coming why were comparative hearings in the public interest first abandoned as assignment tools in 1981 not for auctions but for lotteries and why were radio and tv licenses pointedly excluded from auctions four factors the special interest of regulators in influencing broadcasting content the limits placed on explicit program regulation by the u s constitution the recent increase in the relative economic importance of nonbroadcast wireless services and the agency problem embedded in central planning are used to explain both the political stability of economically inefficient licensing methods and recent reforms

optimal abolition of fcc spectrum allocation ronald coase based his 1959 call for spectrum markets on theoretical conjecture today abundant evidence supports his case targeted liberalization in cellular markets as contrasted with regulatory planning of the digital tv transition and other traditional policies suggest enormous efficiency gains are available from wider use of the price system with exclusive frequency rights assigned to owners markets widely reconfigure spectrum use coordinating complex spectrum sharing resulting social gains include increased consumer surplus from enhanced technological innovation and wireless service competition a social bonus arrives in the benefits associated with wider scope for free speech yet the administrative allocation system continues to distribute rents and garner political support liberal reforms in contrast produce large but broadly dispersed efficiency gains and are undersupplied this paper proposes an incremental extension of property rights in spectrum to move beyond the current rent seeking equilibrium eliminating the federal communications commission s centralized spectrum allocation process and with it an attractive nuisance generating anticonsumer outcomes