earnings rents and competition in the airline labor market transformation of the airline labor market continues long after deregulation airline wages changed little immediately following deregulation implying either the absence of regulatory rents or maintenance of product market power and union strength analysis for 1973 1997 however indicates that prior to recent gains the relative earnings of air transport workers decreased markedly during the latter half of the 1980s and early 1990s some of the earnings advantage of airline workers represents returns to occupational skills and worker specific quality labor rents are attributable largely to union bargaining power which in turn is constrained by the financial health of carriers

airport presence as product differentiation there is now widespread recognition that an airline s operation at a given airport greatly affects its competitive position on routes flown out of that airport see m levine 1987 s borenstein 1989 s morrison and c winston 1989 and myself 1989 among many others airlines typically defend any competitive advantage as stemming from the lower costs and better service that are said to be generated by hub and spoke route systems airline critics typically respond that airlines gain market power by dominating individual airports both views are at least plausible huband spoke transportation networks reduce the number of round trips necessary to carry a given number of passengers on a given set of itineraries while increasing the number of passenger miles flown if there are sufficient economies of scale in plane size then the advantages of hubbing can overcome the disadvantage in passenger miles resulting in lower total costs by pooling passengers with different ultimate destinations a hubbed system can also offer more frequent flights than would be economically feasible under a nonstop system it also appears however that airlines gain other advantages from a large presence at an airport incumbent airlines are the major source of financing for many airports and therefore gain a large degree of bureaucratic control over airport operations this control may enable them to block the entry or expansion of rivals airlines with a large presence in a given city also gain advantages from frequent flyer plans and nonlinear travel agent commission schedules see again levine and others if the bureaucratic and marketing advantages of airport presence are sufficient to prevent most attempts at entry then incumbents may gain the ability to exercise traditional market power by restricting output and driving up prices this paper argues that both simple costreducing and naive market power stories are inappropriate for the airline industry i present a model in which consumers are willing to pay a premium for the services of the dominant airline this premium may be related to a number of factors including flight frequency frequent flier miles and travel agent commission overrides this model has the advantage of treating oligopoly product differentiation in an explicit way of treating price as an endogenous variable and of allowing for airport presence to affect both costs and demand

the rising instability of u s earnings the inequality of earnings and of family incomes in the united states has increased since the late 1970s autor katz and kearney 2008 this increase in cross sectional inequality has largely been interpreted as a growing disparity in permanent incomes between those with high incomes and those with low incomes however growing inequality could equally well be a result of growing income instability if workers experience increasingly large fluctuations in earnings from year to year this would also increase the measured inequality of earnings from year to year for example if everyone maintained the same level of permanent income but some experienced a 500 increase in their income in the first year and then a reversal to 500 below their permanent incomes in the following year while an equal number experienced the opposite a drop in income followed by an offsetting rise measured inequality would rise though nothing would have happened to the dispersion of permanent incomes while this example is an extreme one it points to the fact that the large rise in earnings inequality between the 1970s and the 1990s could reflect either a rise in disparity of permanent incomes a rise in earnings instability or some portion of both without longitudinal data it is impossible to distinguish between these two very different explanations for increased cross sectional measures of inequality in this paper we provide longitudinal measures that separate changes in income inequality into changes that permanently change income to new levels and those that only reflect transitory change we refer to the latter as changes in income instability and discuss how the instability of individual earnings and family income in the united states has evolved over the last quarter century

intra firm bargaining under non binding contracts we present a new methodology for studying the problem of intra firm bargaining based on the notion that contracts cannot commit the firm and its agents to wages and employment we develop and analyse a general non cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party equilibrium firm profits are characterizable as both a weighted average of a neo classical non bargaining firm s profits and a generalization of shapley value for a corresponding cooperative game furthermore the resulting payoffs induce economically significant distortions in the firm s input and organizational design decisions

competition privatisation and productive efficiency evidence from the airline industry we use data from the airline industry to examine the extent to which the costs of airline operations are affected by rents accruing to workers and the extent to which these rents depend inter alia upon the degree of competition in the industry our empirical results based on a panel of twelve european and seven major united states airlines confirm that state ownership substantially increases rents to labour while the effects of competition are more subtle and ambiguous airline profits tend to be associated with higher rents to employees the gains from further privatisation and liberalisation may be quite large does competition have significant effects on productive as well as allocative efficiency convincing empirical answers to this question have been hard to find for two reasons first data of the quality required for robust estimation of productive efficiency are only rarely available secondly there is frequently no convincing standard against which the efficiency of an industry or a firm may be compared since when the degree of competition varies many other things such as technology network structures and firm sizes typically vary as well these problems do not automatically make comparison impossible but they compound the need for high quality data one industry which is likely to be well suited to investigating questions of this kind is the international airline industry the industry contains a large number of firms thus ensuring at least enough potential competition to make questions about the effects of competition interesting but the scope for these firms to compete with one another has been influenced to varying degrees over the years by different national and international regulatory regimes in particular deregulation of the united states industry in 1978 provided a kind of natural experiment that has led not only to comparisons of the before and after variety but also to comparisons between the united states industry and that of other global regions notably europe such comparisons are far from straightforward but they are facilitated by the fact that the technology of civil aviation is more or less internationally standardised and by the relatively high quality of available data in the industry

frictional labour mobility we build a dynamic model of migration where in addition to standard relocation costs workers face spatial frictions that decrease their ability to compete for distant job opportunities we estimate the model on a matched employer employee panel dataset describing labour market transitions within and between the 100 largest french cities our identification strategy is based on the premise that frictions affect the frequency of job transitions while mobility costs impact the distribution of accepted wages we find that 1 controlling for spatial frictions reduces mobility cost estimates by one order of magnitude 2 the urban wage premium is driven by better opportunities for local job to job transitions in larger cities 3 migration reduces lifetime inequalities by providing insurance against unsatisfactory initial location draws 4 labour mobility policies based on relocation subsidies are inefficient unlike switching from nationwide to local minimum wages

deregulating european airlines deregulating european airlines francis mcgowan and paul seabright one of the industries with the greatest potential to benefit from the single european market is civil aviation which has been highly regulated by european governments the deregulation of civil aviation in the us since the late 1970s has provided valuable evidence about the nature of the airline industry and its response to the liberalization of conditions of entry by new carriers we examine the us experience and look at the changing regulatory framework for the european industry we also consider the main sources of market failure in air transport the lessons of the us experience are threefold first deregulation can in principle produce major gains to consumers without damaging the long run profitability of carriers by reducing the high costs of operation of european airlines second congestion problems especially the availability of landing slots at airports need to be managed effectively to prevent incumbent carriers squeezing out new entrants we recommend a system of slot auctions to achieve this third in spite of relatively low sunk costs of entry to the industry there remain significant opportunities for the exercise of market power by incumbent carriers deregulation of entry needs therefore to be supplemented by a vigorous competition policy especially with regard to the approval of mergers

american colonial monetary regimes the failure of the quantity theory and some evidence in favour of an alternate view recent developments in monetary economics suggest that the manner in which money is introduced is more important even for price level movements than the quantity of money colonial american experience provides a laboratory for testing this view it is shown that the nature of backing rather than the quantity of money determined its value large secular inflations were ended by changing the nature of backing despite continued large note issues and despite the absence of a metallic standard extremely large note issues and note withdrawals are shown not to have produced inflation currency depreciation or deflation currency appreciation

rent sharing in the european airline industry abstract to the extent that product market competition affects managerial incentives to control costs price cost margins offer a poor guide to the evaluation of market power we propose a method to evaluate simultaneously both market power and its pass through on cost we focus on rent sharing between unions and management as a mechanism through which costs are endogenised we develop and estimate a structural model of competition where wages are endogenously determined in the first stage with a price setting market game following in the second stage this structural model is then estimated using data for 8 european airlines from 1976 1990 we find a strong support for the hypothesis that lax competition induces extensive rent sharing through excessive wages

is the budget deficit too large yes specifically we find that recent spending and taxing policies of the government if continued violate the government s intertemporal budget constraint as a result government spending must be reduced and or tax revenues must be increased these conclusions are based on tests of whether government spending and revenue are cointegrated in addition to examining real spending and revenue we also normalize these variables by real gnp and population for a growing economy these normalized measures are perhaps more pertinent we also test and find support for the hypothesis that deficits have become a problem only in recent years

equilibrium search with continuous productivity dispersion theory and nonparametric estimation in this article we develop an equilibrium search model with a continuous distribution of firm productivity types within a given labor market we characterize equilibrium derive expressions for the endogenous equilibrium wage distributions and characterize the set of wage distributions that can be generated by the model we develop a structural nonparametric estimation method for the productivity distribution we estimate the model using french longitudinal survey data on labor supply and we compare the results with those from a french panel data set of firms the results are informative on the degree to which firms exploit search frictions

the greek stabilization of 1944 46 it is a matter of great contention among economists whether economic stabilization programs can be instituted without imposing high real costs those believing in the core or underlying rate of inflation hypothesis argue that relying only on conventional monetary and fiscal policies will impose high costs the rational expectations proponents on the other hand argue that a convincing antiinflation program will likely minimize these costs as economic agents respond to a genuine regime change or change in the rules under which monetary and fiscal policies are conducted a way of discriminating between these contending views is to examine the stabilization phase of the world s episodes of hyperinflation thus far the work of thomas sargent 1982 on the post world war i experiences in austria hungary poland and germany and william bomberger and myself 1983 on post world war ii hungary have adduced evidence in support of the rationalists view price level stability was achieved rapidly without a prolonged period of high unemployment the greek stabilization of 1944 46 is not so straightforward and as such provides an interesting contrast to the other episodes its unique feature is that price level stability took over a year to achieve following the initial reform of november 11 1944 it was not achieved until in a third reform in early 1946 the greek 1018 1024

testing static oligopoly models conduct and cost in the sugar industry 1890 1914 we explore the widespread methodology of using demand information to infer market conduct and unobserved cost components under the hypothesis of static oligopoly behavior direct measures of marginal cost and conduct indicating small market power serve as benchmarks the more competitive models yield better cost estimates the best cost estimates occur when conduct is estimated as a free parameter which in turn only slightly underestimates our direct measure it also tracks the decline in market power accompanying the industry s structural changes the methodology is largely validated although partial cost information can improve its predictive power conclusions are robust to demand function

panel data estimates of the production function and product and labor market imperfections summary consistent with two models of imperfect competition in the labor market the efficient bargaining model and the monopsony model we provide two extensions of a microeconomic version of hall s framework for estimating price cost margins we show that both product and labor market imperfections generate a wedge between factor elasticities in the production function and their corresponding shares in revenue which can be characterized by a joint market imperfections parameter using an unbalanced panel of 10 646 french firms in 38 manufacturing industries over the period 1978 2001 we can classify these industries into six different regimes depending on the type of competition in the product and the labor market by far the most predominant regime is one of imperfect competition in the product market and efficient bargaining in the labor market ic eb followed by a regime of imperfect competition in the product market and perfect competition or right to manage bargaining in the labor market ic pr and by a regime of perfect competition in the product market and monopsony in the labor market pc mo for each of these three predominant regimes we assess within regime firm differences in the estimated average price cost mark up and rent sharing or labor supply elasticity parameters following the swamy methodology to determine the degree of true firm dispersion to assess the plausibility of our findings in the case of the dominant regime ic eb we also relate our industry and firm level estimates of price cost mark up and extent of rent sharing to industry characteristics and firm specific variables respectively copyright 2011 john wiley sons ltd

job search bargaining and wage dynamics this article constructs and estimates a model of wage bargaining with on the job search to explore three different components of wages general human capital match specific capital and outside options as the workers find better job opportunities the current employer has to compete with outside firms to retain them this between firm competition results in wage growth even when productivity remains the same the model is estimated by a simulated minimum distance estimator and data from the 1979 national longitudinal study of youth the results indicate that the improved value of the outside option raises wages by 14 16 in the first 5 years

liberalizing european airlines cost and factor productivity evidence abstract european countries do not all share the same view concerning the benefits of increased competition among airlines in europe to explain this difference in attitudes the paper presents evidence on differences in costs and global factor productivity between the main european national flag carriers the data reveal a clear distinction between the main european and north atlantic routes unit costs per passenger kilometer are lower in north atlantic routes and unit profits are higher in european routes the first result reflects the economies of scale due to higher distances and traffic density on north atlantic routes the second result is an indication of the lower level of competition between airlines in europe finally tornqvist factor productivity growth indexes 1981 1986 show that the initial gap which existed between these productivity measures at the beginning of the period is shrinking this suggests that the european airline industry is currently in a more favorable situation to support more competition

concentration potential entry and performance in the airline industry airline markets do not satisfy the theoretical conditions for perfect contestability and theory does not indicate which deviations from perfect contestibilty significantly affect performance thus the effect of potential entry on performance in airline markets is explored empirically the best model for explaining fares is found to be one in which the measure of market concentration takes into account not only the number and size distribution of incumbents but also the number of potential entrants not significantly disadvantaged due to economies of scale and scope the hypothesis that all city pair markets are perfectly contestable is rejected coauthors are richard l johnson andrew s joskow gregory j werden and michael a williams copyright 1989 by blackwell publishing ltd

the hungarian hyperinflation and stabilization of 1945 1946 inflation in hungary after world war ii was the most intense on record the reforms of august 1946 were immediately and entirely successful in stabilizing prices this paper describes and analyzes the unique policies and institutions that produced these phenomena despite its severity the hungarian experience was consistent with the less extreme inflation and stabilization experiences examined by sargent price stabilization was accomplished by fiscal rather than purely monetary measures and was paradoxically accompanied by rapid and prolonged money growth

tenure experience human capital and wages a tractable equilibrium search model of wage dynamics we develop and estimate an equilibrium job search model of worker careers allowing for human capital accumulation employer heterogeneity and individual level shocks wage growth is decomposed into contributions of human capital and job search within and between jobs human capital accumulation is largest for highly educated workers the contribution from job search to wage growth both within and between job declines over the fi rst ten years of a career the job shopping phase of a working life after which workers settle into high quality jobs using outside o ffers to generate gradual wage increases thus reaping the bene fits from competition between employers

entry and competitive structure in deregulated airline markets an event study analysis of people express this paper proposes an alternative approach to the study of competitive structure in deregulated airline markets that avoids some of the weaknesses of previous studies this approach uses reactions of incumbent airlines stock prices to announcements of entry by people express to shed light on competitive structure these stock reactions reveal significant route specific profits or sunk costs and also provide evidence on the degree of competitive localization present in the industry the conclusions emerging from this analysis are corroborated by an examination of price sales quantity and schedule changes that followed people express entry

the effects of competition on executive behavior economists presume that competition spurs a firm to be more efficient by forcing it to reduce its agency problems this article investigates this presumption it finds that the effects of competition on executive behavior can be decomposed into four effects each of which is of potentially ambiguous sign theory thus offers no definitive defense of this presumption this article also derives sets of conditions under which increased competition has the presumed effect of reducing agency problems in some sets important conditions are that increased competition reduce the executive s expected income and that agency goods e g shirking be normal goods for the executive the article shows that an increase in the shareholder bargaining strength can both reduce the agency problem and make it more sensitive to competition

capital market imperfections international credit markets and nonconvergence abstract we consider a two country growth model with international capital markets these markets fund capital investment in both countries and operate subject to a costly state verification csv problem investors in each country require some external finance but also provide internal finance which mitigates the csv problem when two identical except for their initial capital stocks economies are closed they necessarily convergemonotonicallyto the same steady state output level unrestricted international financial tradeprecludesotherwise identical economies from converging and poor countries are necessarily net lenders to rich countries oscillation in real activity and international capital flows can occur journal of economic literatureclassification numbers e00 f00 f34 g14

job duration seniority and earnings an important stylized fact about labor markets is that workers with longer seniority with their current employer have higher earnings than other workers with the same total labor market experience this study shows that workers in longer jobs earn more throughout than workers in a series of shorter jobs and that the measured positive cross sectional return seniority is largely a statistical artifact due to the correlation of seniority with an omitted variable representing the quality of the worker the job or the worker employer match the implication is tha t earnings do not in fact rise very much with seniority copyright 1987 by american economic association

search behaviour transitions to non participation and the duration of unemployment using longitudinal micro data on unemployed individuals for 1983 85 a structural job search model is estimated the model allows for transitions from unemployment to nonparticipation an extended version of the model deals with the influence of on the job search and prospective wage increases on search behavior of the unemployed the empirical results show that the probability of accepting a job offer is almost one for most unemployed individuals a large portion of unemployment spells ends in a transition out of the labor force the effects of changes in benefits on duration appear to be extremely small copyright 1990 by royal economic society

dynamic oligopoly behaviour in the airline industry abstract this paper examines the dynamic interaction between united airlines and american airlines on a set of duopoly routes we estimate quarterly conduct parameters or conjectural variations and test constant behaviour bertrand cournot and collusive models we also test two regimeswitching models derived from the green porter price war model one based on reversion to bertrand behaviour during price wars the other on reversion to cournot behaviour the three constant behaviour models are all rejected the regime switching models can both describe the data but the cournot based version is preferred

estimation of a model of entry in the airline industry this paper considers the effect of an airline s scale of operation at an airport on the profitability of routes flown out of that airport the empirical methodology uses the entry decisions of airlines as indicators of underlying profitability the results extend the empirical literature on airport presence by providing a new set of estimates of the determinants of city pair profitability these estimates imply that city pair profits increase in airport presence and decrease rapidly in the number of entering firms the literature on empirical models of oligopoly entry is also extended via a focus on the role of differences between firms

insurance within the firm we evaluate the allocation of risk between firms and their workers using matched employer employee panel data unlike previous contributions this paper focuses on idiosyncratic shocks to the firm which are the correct empirical counterpart of the theoretical notion of diversifiable risk we allow for both temporary and permanent shocks to output and find that firms absorb temporary fluctuations fully but insure workers against permanent shocks only partially risk sharing considerations can account for about 15 percent of overall earnings variability the remainder originating from idiosyncratic shocks to individual workers our welfare calculations indicate that firms are an important vehicle of insurance provision

wages and product market power this paper analyses time series on some 800 british manufacturing companies to address various questions concerning the role of insiders and market power in wage determination the following are the most important results first product market power has a positive impact on wages this impact is enhanced in large firms but is not influenced by union status second while firm specific factors influence wages the size of these effects is not influenced by union status firm size or product market power however product market power reduces the generally strong negative effect of unemployment on wages finally there is no robust evidence of insider power at work in wage setting irrespective of product market position

some colonial evidence on two theories of money maryland and the carolinas recent developments in monetary economics stress the nature of monetary injections emphasizing that they have implications for the relationship between money and prices in contrast traditional approaches posit stable money demand functions that are independent of how money is injected the former approach implies that certain proportionality relations between money and prices need not obtain this permits the two approaches to be empirically distinguished but only if an appropriate experiment is conducted the colonial period is one such experiment colonial evidence suggests that the nature of injections is crucial to the effect on prices of changes in the money supply

managerial incentives and product market competition are imperfectly competitive leibenstein 1966 claims that there may be a substantial amount of x inefficiency where x inefficiency measures the degree to which actual profits depart from the maximum of profits that could be obtained if all operations in the firm were carried out at minimal costs he offers empirical evidence from case studies showing that the welfare loss due to organizational slack is of an order of magnitude bigger than the welfare loss due to monopolistic price distortions on imperfectly competitive markets these results support the common presumption that increasing competition reduces organizational and in particular managerial slack however this early literature does not offer a theoretical explanation for the link between competition and managerial incentives in particular it ignores the fact that managerial incentives can be affected by the design of an incentive scheme in this paper i derive the optimal incentive scheme for a manager as a function of the competitiveness of the environment in which his firm operates the basic impact of increased competition is that it reduces the profits of a firm this has two effects in the model first if a firm has high costs then the reduction of profits may be sufficient to render the firm unprofitable so the probability that it has to be liquidated goes up this unambiguously induces the manager of the firm to work harder for a cost reduction in order to avoid liquidation and to keep his job second the reduction in profits may affect

human capital accumulation and labor market equilibrium the objective of this paper is to analyse an equilibrium search model with on the job search and human capital accumulation in our model wages are disperse because firms pay workers of the same productivity different wages and workers of different productivies earn different wages new entrants to the labour market increase their wages mainly through on the job search as workers gain more experience and move up the offer distribution job to job transitions become less frequent and human capital accumulation dominates wage growth this interaction generates a wage distribution that exhibits a density with a unique mode and a long and decreasing right tail as observed in the data

the cost of job loss this article identifies an equilibrium theory of wage formation and endogenous quit turnover in a labour market with on the job search where risk averse workers accumulate human capital through learning by doing and lose skills while unemployed optimal contracting implies the wage paid increases with experience and tenure indirect inference using german data determines the deep parameters of the model the estimated model not only reproduces the large and persistent fall in wages and earnings following job loss a new structural decomposition finds foregone human capital accumulation while unemployed is the worker s major cost of job loss

some real evidence on the real bills doctrine versus the quantity theory researchers interested in testing between the real bills doctrine and the quantity theory approach to inflation in the face of rapid deficit financing money growth are confronted by an observation equivalence problem this paper identifies a data set which resolves the dilemma and tests the two inflation models the results provide clear evidence supporting the real bills doctrine that the value of assets backing money determines its value over the quantity theory i introduction one of the more interesting developments in monetary theory in the early 1980s was the re emergence of the real bills doctrine the doctrine identifies the value of assets backing the money supply as the prime determinant of the money s value its adherents claim that the monetization of worthless debt is responsible for inflation and not the increase in the money supply itself 1 that is an increase in the money supply will not lead to inflation so long as the money issue is backed by real assets sargent 1982 attributes the ends of four major inflations to exactly this phenomenon 2 in contrast the quantity theory claims that changes in the money supply should have inflationary consequences regardless of its backing the new interest in the old doctrine parallels a quite different line of work centering on what looks like a similar theme this second track focuses too on the rate of inflation and the fiscal wellbeing of the government though here the transmission mechanism from deficit to inflation is rather conventional in this essentially monetarist vision if the deficit is out of control and the monetary authority is to some degree subservient to the fiscal authority there must be some eventual monetization of the resultant debt resulting in inflation to the extent that higher rates of inflation are expected in the future higher rates of inflation may occur now 3 both lines of thought argue that a deficit that is out of control is responsible for inflation it is the transmission mechanism between this excessive deficit and the price level that distinguishes the two models the real bills doctrine proposes a radical departure from traditional monetary theory by suggesting that money is in effect efficiently priced the central bank is seen as being similar to any other financial intermediary purchasing debt and issuing liabilities and those liabilities money are then priced according to the value of the assets they were used to purchase the value of the assets backing the money thus money gets priced efficiently and its value is not determined by its relative or expected relative quantity but rather by the real characteristics of its backing that is ceterus paribus an increase in the money supply will not per se be inflationary the increase in the money supply will only be inflationary if the assets purchased with the money issue are of such low value as to reduce the average value of the assets backing the currency this paper provides some evidence in favor of the real bills vision of price level determination over the quantity theory the next section describes the observational equivalence problem confronting researchers interested in distinguishing between the real bills and quantity theory approach to inflation in the face of rapid deficit financing money growth and the institutional setting which resolves the observational equivalence dilemma section iii describes some tests designed to discriminate between these two hypotheses of the inflation process and their resuits and section iv contains my conclusions ii the observational equivalence of the real bills doctrine and the quantity theory a central theme of both of the real bills and quantity theory hypotheses is that fiscal deficits that are out of control will be inflationary though for very different reasons apart from any insight gained with regard to the inflation process testing the basic proposition that deficits are inflationary is problematic for two reasons first there is the standard problem of government accounting standards and practices in general and consequently of the appropriate definition of the fiscal deficit

airline mergers airport dominance and market power effects of northwestrepublic and twaozark mergers on fares at minneapolisst paul and st louis

hubs and high fares dominance and market power in the u s airline industry this article estimates the importance of route and airport dominance in determining the degree of market power exercised by an airline the results indicate that an airline s share of passengers on a route and at the endpoint airports significantly influences its ability to mark up price above cost the high markups of a dominant airline however do not create much of an umbrella effect from which carriers with smaller operations in the same markets can benefit the article suggests a number of possible explanations for this asymmetry

an equilibrium model of health insurance provision and wage determination we investigate the effect of employer provided health insurance on job mobility rates and economic welfare using a search matching and bargaining framework in our model health insurance coverage decisions are made in a cooperative manner that recognizes the productivity effects of health insurance as well as its nonpecuniary value to the employee the resulting equilibrium is one in which not all employment matches are covered by health insurance wages at jobs providing health insurance are larger in a stochastic sense than those at jobs without health insurance and workers at jobs with health insurance are less likely to leave those jobs even after conditioning on the wage rate we estimate the model using the 1996 panel of the survey of income and program participation and find that the employer provided health insurance system does not lead to any serious inefficiencies in mobility decisions

interfirm mobility wages and the returns to seniority and experience in the united states in this paper we expand on the seminal work of altonji and shakotko 1987 and topel 1991 and reinvestigate the returns to seniority in the united states we begin with the same wage equation as in previous studies we extend the model of hyslop 1999 and explicitly model the participation employment and inter firm mobility decisions which in turn define the individual s experience and seniority we introduce into the wage equation a summary of the workers entire career path the three equation system is estimated simultaneously using data from the panel study of income dynamics psid we find that for each of the three education groups studied the returns to seniority are larger than those previously found in the literature

modelling income processes with lots of heterogeneity all empirical models of earnings processes in the literature assume a good deal of homogeneity in contrast to this we model earnings processes allowing for lots of heterogeneity between agents we also introduce an extension to the linear arma model that allows that the initial convergence

capacity and product market competition measuring market power in a puppy dog industry abstract in this paper we specify and estimate a structural model which accounts for competition in two variables capacity and prices the model has a two stage setup in the first stage firms make capacity decisions followed by a product differentiated price setting game in the second stage since costs are endogenized through the first stage this has important implications for the measurement of market power in the product market in particular simpler one stage specifications would result in a bias in the measurement of market power which can be linked to the taxonomy for two stage games given in fudenberg and tirole 1984 fudenberg d tirole j 1984 the fat cat effect the puppy dog ploy and the lean and hungry look american economic review paper and proceedings 74 361 366 we then estimate this model demand cost short and long run and conduct for the european airline industry using data for the period of 1976 1990 we perform a number of specification tests and reject a simple one stage specification in favor of our two stage set up in particular we find that some degree of market power in the product market exists however market conduct in the two stage set up is significantly less collusive than in the more widely employed one stage specification which is consistent with the direction of bias in puppy dog games this illustrates that collusiveness of firms market conduct in the product market is significantly overestimated whenever capacity competition is not accounted for

identification of search models using record statistics this paper shows how record value theory a branch of statistics that deals with the timing and magnitude of extreme values in sequences of random variables can be used to recover features of the wage offer distribution in conventional search models using national longitudinal survey of youth nlsy wage data i show that the data are not compatible with specifications for the offer distribution characterized by extreme negative skewness in addition i show that my approach can be used to construct a bound on the returns to job seniority my results suggest that job seniority plays only a minor role in the wage growth of the workers surveyed in the nlsy copyright 2008 wiley blackwell

endogenous costs and price cost margins an application to the european airline industry this paper allows for endogenous costs in the estimation of price cost margins in particular we estimate price cost margins when firms bargain over wages we extent the standard two equation set up demand and first order condition in the product market to include a third equation which is derived from bargaining over wages in this way price cost margins are determined by wages and vice versa we implement the model using data for eight european airlines from 1976 1994 and show that the treatment of endogenous costs has important implications for the measurement of price cost margins and the assessment of market power our main result is that observed prices in europe are virtually identical to monopoly prices even though observed margins are consistent with nash behavior apparently costs had been inflated to the point that the european consumers were faced with a de facto monopoly prices

equilibrium wage tenure contracts in this study we consider a labor market matching model where firms post wage tenure contracts and workers both employed and unemployed search for new job opportunities given workers are risk averse we establish there is a unique equilibrium in the environment considered although firms in the market make different offers in equilibrium all post a wage tenure contract that implies a worker s wage increases smoothly with tenure at the firm as firms make different offers there is job turnover as employed workers move jobs as the opportunity arises this implies the increase in a worker s wage can be due to job to job movements as well as wage tenure effects further there is a nondegenerate equilibrium distribution of initial wage offers that is differentiable on its support except for a mass point at the lowest initial wage we also show that relevant characteristics of the equilibrium can be written as explicit functions of preferences and the other market parameters

living by the golden rule multimarket contact in the u s airline industry this paper examines empirically the effects of multimarket contact on pricing in the u s airline industry the analysis of the time series and cross sectional variability of airline fares in the 1000 largest domestic city pair routes reveals the presence of statistically significant and quantitatively important multimarket effects fares are higher in city pair markets served by carriers with extensive interroute contacts these findings are consistent with the claims of industry experts that airlines live by the golden rule i e that they refrain from initiating aggressive pricing actions in a given route for fear of what their competitors might do in other jointly contested routes during his testimony mr steven b elkins senior director of marketing systems development for northwest airlines cited an example in which northwest lowered fares on night flights that were flying with empty seats in a number of routes from minneapolis and upper midwest cities to various west coast cities he said that continental airlines swiftly responded by cutting prices in important northwest markets mr elkins s memo advises northwest pricing analysts we will live by the golden rule in his testimony he explained that the golden rule in that context was that i did not want my pricing analyst initiating actions in another carrier s market like chicago for fear of what that other carrier might do to retaliate wall street journal october 9 1990 p b1

wage differentials employer size and unemployment the unique equilibrium solution to a game in which a continuum of individual employers choose permanent wage offers and a continuum of workers search by sequentially sampling from the set of offers is characterized wage dispersion is a robust outcome provided that workers search while employed as well as when unemployed the unique nondegenerate equilibrium distribution of wage offers is constructed for three cases 1 identical workers and employers 2 identical employers and an atomless distribution of worker supply prices and 3 identical workers and an atomless distribution of job productivities copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

competition in european aviation pricing policy and market structure the purpose of this paper is to analyze the impact of liberal bilateral agreements on some european air routes in terms of price competition and market structure the author proposes a model that explains firms behavior and shows that after the liberalization firms exploit their cost advantages and differentiate their products more but market structure still depends on access to airport facilities and other ancillary services controlled by the flag carriers these results differ from american evidence in that the author finds that the effect of airport presence on prices through lower costs more than offsets the effect through higher perceived quality copyright 1995 by blackwell publishing ltd

an empirical model of wage dispersion with sorting we estimate an equilibrium on the job search model with endogenous search intensity workers differ by skill firms by productivity workers respond to mismatch by intensive search and sorting may result from complementarities in the match level production function the model is estimated on danish matched employer employee data firms are ranked through revealed preference by the fraction of hires that is poached from other firms the poaching rank identification is obtained by firm rank conditional mobility and wage patterns wage variation is decomposed into four sources sorting 40 worker heterogeneity 32 firm heterogeneity 18 and frictional competition 10 a social planner can improve output net of search cost by 1 5 relative to the decentralized solution

on the job search productivity shocks and the individual earnings process individual labor earnings observed in worker panel data have complex highly persistent dynamics we investigate the capacity of a structural job search model with i i d productivity shocks to replicate salient properties of these dynamics such as the covariance structure of earnings the evolution of individual earnings mean and variance with the duration of uninterrupted employment or the distribution of year to year earnings changes specifically we show within an otherwise standard job search model how the combined assumptions of on the job search and wage renegotiation by mutual consent act as a quantitatively plausible internal propagation mechanism of i i d productivity shocks into persistent wage shocks the model suggests that wage dynamics should be thought of as the outcome of a specific acceptance rejection scheme of i i d productivity shocks this offers an alternative to the conventional linear arma type approach to modelling earnings dynamics structural estimation of our model on a 12 year panel of highly educated british workers shows that our simple framework produces a dynamic earnings structure which is remarkably consistent with the data