optimal incentive schemes with many agents the grossman hart principal agent model of moral hazard is extended to the multiple agent case to explore the use of relative performance in optimal incentive contracting under the assumption that the principal chooses incentive schemes to implement agent actions as nash equilibria necessary and sufficient conditions are derived for the optimality of independent contracts of rank order tournaments and for attainability of the first best in this context the relation of the principal s welfare to the correlation between the underlying randomness in outputs of different agents is also investigated finally some problems with the nash equilibrium implementation assumption are discussed in this paper we extend the grossman hart analysis of the principal agent problem to a multiple agent setting in this version of the problem a risk neutral principal is assumed to observe the output or a performance index for each risk averse agent the output of any agent depends on a privately observable action chosen by the agent and an exogenous random variable the realization of which is not observed either by the principal or by the agent before choosing its action we especially focus attention on the role of relative performance evaluation in optimal incentive contracts and the way this depends on properties of the underlying production technology and the joint distribution of the random variables affecting the outputs of different agents in section 2 of the paper we consider the principal s problem of finding an optimal incentive scheme and an action tuple for agents subject to the constraint that the latter be implemented as a nash equilibrium between agents by the chosen incentive scheme where agents must attain at least their reservation utilities a characterization of optimal incentive schemes is derived analogous to the grossman hart characterization for the single agent problem this characterization is then utilized to find sufficient and generically necessary conditions for a optimal contracts for any agent to be independent of the performance of other agents and b optimality of rank order tournaments where payments depend solely on ordinal comparisons of output across agents we then describe a necessary and sufficient condition for the principal to extract maximum advantage from relative performance clauses i e achieve the first best level of expected utility in the multiagent situation an implication of this result is that under fairly weak conditions perfect correlation in the underlying production uncertainties for different agents enables the principal to attain the first best if and only if sufficiently heavy penalties can be inflicted on agents we then enquire what happens in intermediate cases of non perfect correlation it turns out that while in general the principal s welfare is a continuous function of the correlation coefficient it is not always nondecreasing in the latter because the correlation coefficient is not a general measure of association between two random variables but rather a measure of linear association between them

investment spikes new facts and a general equilibrium exploration abstract using plant level data from chile and the u s we show that investment spikes are highly pro cyclical so much so that changes in the number of establishments undergoing investment spikes the extensive margin account for the bulk of variation in aggregate investment the number of establishments undergoing investment spikes also has independent predictive power for aggregate investment even controlling for past investment and sales we re calibrate the thomas 2002 is lumpy investment relevant for the business cycle journal of political economy cx 508 534 model that includes fixed costs of investing so that it assigns a prominent role to extensive adjustment the recalibrated model has different properties than the standard rbc model for some shocks

stopping agents from cheating abstract when a principal hires two or more agents to work in a correlated environment each agent s reward will depend on the other s performance unfortunately with just the usual optimal incentive constrained contracts being offered the agents strictly prefer to play equilibrium strategies other than those desired by the principal they cheat however the principal can use a more subtle contractual mechanism to stop them from cheating at no extra cost this mechanism uses one agent to police the other and exploits certain properties of the optimal contracts

heuristic decision making in network linking abstract network formation among individuals constitutes an important part of many or processes but relatively little is known about how individuals make their linking decisions in networks this article provides an investigation of heuristic effects in individual linking decisions for network formation in an incentivized lab experimental setting our mixed logit analysis demonstrates that the inherent complexity of the network linking setting causes individuals choices to be systematically less guided by payoff but more guided by simpler heuristic decision cues and that this shift is systematically stronger for social payoff than for own payoff furthermore we show that the specific complexity factors value transferability and social tradeoff aggravate the former effect these heuristic effects have important research and policy implications in areas that involve network formation

output dynamics in real business cycles models the time series literature reports two stylized facts about output dynamics in the united states gnp growth is positively autocorrelated and gnp appears to have an important trend reverting component this paper investigates whether current real business cycle rbc models are consistent with these stylized facts many rbc models have weak internal propagation mechanisms and must rely on external sources of dynamics to replicate both facts models that incorporate labor adjustment costs are partially successful they endogenously generate positive autocorrelation in output growth but they need implausibly large transitory shocks to match the trend reverting component in output

fixed costs and long lived investments abstract fixed costs models are difficult to analyze because they feature non degenerate time varying distributions of capital across firms if investments are sufficiently long lived however then the cross sectional distribution of capital holdings has virtually no bearing on the equilibrium and the aggregate behavior of fixed cost models is essentially identical to neoclassical models the findings are due to a near infinite elasticity of investment timing for long lived investments a feature shared by fixed cost models and neoclassical models irrelevance results found in numerical studies of fixed cost models are not parametric special cases but instead are fundamental properties of models with long lived investment goods

rank order contracts for a principal with many agents for a principal with many agents rank order contracts remain incentive compatible even when information about agents performance is known only to the principal because the total payment from the principal to all agents taken together is independent of the outcome that occurs under wider conditions than those considered previously in the literature there is shown to exist a rank order contract equivalent exactly or approximately to any nonlinear piece rate contract under those conditions therefore results that depend on the unenforceability of piece rates under such asymmetric information disappear if rank order contracts can be used in principal agent models compensation paid to agents is based on their outputs because their inputs are not public information in this context information is public if it is verifiable in court so that a contract contingent on it is legally enforceable rank order contracts also called tournaments and contests make each agent s compensation a function solely of the ranking of his output relative to the outputs of other agents in contrast individual piece rate contracts make each agent s compensation a function only of his own output lazear and rosen 1981 green and stokey 1983 and nalebuff and stiglitz 1983 all have results comparing the two when agents actions are not observed by the principal but only for the case in which the principal is risk neutral and the utility function of agents additively separable in income and action the main purpose of the present paper is to show that for the case of a continuum of agents these two kinds of contract are in fact formally equivalent or in some cases approximately equivalent under somewhat more general conditions than those considered so far in the

the role of investment specific technological change in the business cycle this is a quantitative investigation of the importance of technological change speci c to new investment goods for postwar us aggregate uctuations a growth model that incorporates this form of technological change is calibrated to us data and simulated using the relative price of new equipment to identify the process driving investmentspeci c technology shocks the analysis suggests that this form of technological change is the source of about 30 of output uctuations 2000 elsevier science b v all rights reserved

lumpy investment and corporate tax policy in the presence of both convex and nonconvex capital adjustment costs in a dynamic general equilibrium model corporate tax policy generates both intensive and extensive margin effects via the channel of marginal q i ts impact is determined largely by the strength of the extensive margin effect which in turn depends on the cross sectional distribution of firms depending on the initial distribution of firms the economy displays asymmetric responses to tax changes moreover an anticipated increase in the future investment tax credit reduces investment and adjustment rate initially

lumpy investment and the monetary transmission mechanism abstract the lumpy nature of plant level investment is generally not taken into account in the context of new keynesian monetary theory see e g christiano et al 2005 woodford 2005 our main result shows that if this theory is augmented by a standard model of lumpy investment monetary policy shocks lead to large but very short lived impacts on output and inflation in a way that goes against empirical evidence and the consensus view in the literature

pride and prejudice using ethnic sounding names and inter ethnic marriages to identify labour market discrimination labour markets discriminate against workers with particular ethnic sounding names we use non random sorting into interethnic marriage and salient differences between sephardic and ashkenazi surnames to evaluate the causal impact of sephardic affiliation on wages using the 1995 israeli census we estimate the effect of a sephardic sounding surname on wages we first compare the wages of israeli jewish males born to sephardic fathers and ashkenazi mothers sa who are more likely to carry a sephardic surname with the wages of israeli jewish males born to ashkenazi fathers and sephardic mothers as we find that israeli labor markets discriminate based on perceived ethnicity sa workers earn significantly less than their as counterparts we then exploit the custom of women to adopt their husbands surnames to disentangle actual ethnicity from the ethnicity perceived by the market consistent with ethnic discrimination based on surnames we find that it is father in law s ethnicity rather than father s ethnicity that shapes female wage rates finally we find that labor markets discriminate based on surname only when those names provide additional information about ethnicity when ethnicity can be discerned from skin tone surnames do not provide additional explanatory power with respect to wages

network structure and strategic investments an experimental analysis abstract this paper experimentally analyzes the effect of network structures on individuals decisions in a game of strategic substitutes the theoretical basis for our experiment is the model of bramoulle and kranton 2007 as predicted we find that individuals are able to coordinate on equilibria but that coordination strongly depends on the network structure despite frequent coordination failures in graphs of size n 4 equilibrium play seems easier on network architectures with high low density and low high centrality if play converges it almost exclusively does so towards the predicted equilibria theoretical results with respect to welfare are also confirmed next to global graph structural properties we also explore the effects of local and individual factors we find that behavior on networks is affected by the number of direct neighbors but not by individuals risk attitudes apparently the global and the local structure of a network does not leave much explanatory room for individual effects that pertain to risk taking

lumpiness capital adjustment costs and investment dynamics aggregate investment in the us economy displays a hump shaped pattern in response to shocks and the autocorrelation of aggregate investment growth is positive for the first few quarters turning negative for the later quarters this paper shows that this feature of the data is the natural outcome of a two sector consumption investment model designed and calibrated to reproduce plant level evidence on capital accumulation

the effect of link costs on simple buyer seller networks we examine experimentally how link costs affect the formation of links between a single seller and two potential buyers as well as the ensuing bargaining theory predicts that link costs lead to less competitive networks with one link rather than two links and that link costs do not affect the bargaining outcomes conditional on the network we find support for the first but not the second prediction 2 link networks form less frequently when there are link costs given that a 2 link network forms however a seller on average offers a smaller share of the pie to the buyers in the presence than in the absence of link costs this impact of link costs can be explained by a disutility for advantageous inequality on the part of the seller

work quality and optimal pay structure piece vs hourly rates in employee remuneration this paper constructs a model investigating the impact of pay structure on the quantity and quality of work and its welfare implications we prove that a change in pay structure alone could increase the utility of employers given the employees utility level and hence by appropriate income distribution could increase social welfare

nonconvex factor adjustments in equilibrium business cycle models do nonlinearities matter recent empirical analysis has found nonlinearities to be important in understanding aggregated investment using an equilibrium business cycle model we search for aggregate nonlinearities arising from the introduction of nonconvex capital adjustment costs we find that while such costs lead to nontrivial nonlinearities in aggregate investment demand equilibrium investment is effectively unchanged our finding based on a model in which aggregate fluctuations arise through exogenous changes in total factor productivity is robust to the introduction of shocks to the relative price of investment goods

irreversibility and the behavior of aggregate stochastic growth models abstract this paper examines the effects of capital restrictions on aggregate stochastic growth models in a one sector model irreversibility of investment reduces the response of investment to positive shocks to the economy in real business cycle models irreversibility lowers the variation of output investment and hours worked the magnitude of the effects depends on the variance and autocorrelation of productivity shocks in a two sector model constraints on the movement of capital across sectors are more important than depreciation constraints there is evidence that immobility of capital has a significant impact on the sectoral variability of production and hours worked

lumpy investment lumpy inventories the link between the physical micro environment frictions and heterogeneity and the macroeconomic dynamics in general equilibrium macro models is influenced by the details of how exactly general equilibrium closes such a model we make this general observation concrete in the context of the recent literature on how important nonconvex capital adjustment costs are for aggregate investment dynamics specifically we introduce inventories into a two sector lumpy investment model we find that with inventories nonconvex capital adjustment costs dampen and propagate the reaction of investment to shocks the initial response of fixed capital investment to productivity shocks is 50 higher with frictionless adjustment than with the calibrated capital adjustment frictions once inventories are introduced the reason for this result is that with two means of transferring consumption into the future fixed capital and inventories the tight link between aggregate saving and fixed capital investment is broken in contrast in the case the literature has focussed on with only one type of capital good to save and invest in fixed capital investment dynamics are more tightly linked to consumption dynamics which in turn are determined by the euler equation of a representative household which holds regardless of whether fixed capital investment is costly or not

unique implementation of incentive contracts with many agents in this paper we consider the problem of implementation when a principal hires many agents and is not able to monitor their actions we distinguish two cases i when actions are mutually observable among agents ii when actions are not observable at all in i there is a mechanism in which the first best arises as a unique perfect equilibrium in ii we show by two examples that typically there are multiple equilibria if the principal merely offers a set of optimal sharing rules however we prove that the principal can use these optimal sharing rules as a starting point and construct a multi stage mechanism that has a unique second best perfect bayesian equilibrium

a theory of buyer seller networks this paper introduces a new model of exchange networks rather than markets of buyers and sellers it begins with the empirically motivated premise that a buyer and seller must have a relationship a link to exchange goods networks buyers sellers and the pattern of links connecting them are common exchange environments this paper develops a methodology to study network structures and explains why agents may form networks in a model that captures characteristics of a variety of industries the paper shows that buyers and sellers acting strategically in their own self interests can form the network structures that maximize overall welfare

limited farsightedness in network formation pairwise stability jackson and wolinsky 1996 is the standard stability concept in network formation it assumes myopic behavior of the agents in the sense that they do not forecast how others might react to their actions assuming that agents are perfectly farsighted related stability concepts have been proposed we design a simple network formation experiment to test these extreme theories but find evidence against both of them the subjects are consistent with an intermediate rule of behavior which we interpret as a form of limited farsightedness on aggregate the selection among multiple pairwise stable networks and the performance of farsighted stability crucially depends on the level of farsightedness needed to sustain them and not on efficiency or cooperative considerations individual behavior analysis corroborates this interpretation and suggests in general a low level of farsightedness around two steps on the part of the agents

investment adjustment costs an empirical assessment we evaluate empirical evidence for costs that penalize changes in investment using us industry data in aggregate models such investment adjustment costs have been introduced to help account for a variety of business cycle and asset market phenomena so far no attempt has been made to estimate these costs directly at a disaggregated level we consider an industry model with investment adjustment costs and estimate its parameters using generalized methods of moments the ndings indicate small costs associated with changing the ow of investment at the industry level the weighted average of the industry elasticities with respect to the shadow price of capital which depends inversely on the adjustment cost parameter is more than seven times larger than the largest estimate based on aggregate data we examine potential sources which may account for the large industry aggregate dierence overall our results suggest

explaining investment dynamics in u s manufacturing a generalized s s approach we are grateful to olivier blanchard whitney newey james stock an editor three anonymousreferees and seminar participants at brown cepr champoussin chicago columbia econometric society meetings caracas and tokyo efcc harvard impa lse nber princeton rochester site toronto u de chile and yale for their comments financial support to caballero from the national science and sloan foundations and to engel from fondecyt grant 195 510 and the mellon foundation grant 9608 is gratefully acknowledged 2since plants entry is excluded from their sample these statistics are likely to represent lowerbounds on the degree of lumpiness in plants investment patterns 3we use the word project to emphasize the fact that the actual implementation of a projectmay cover more than a year observation realistic time to build aspects of investment are not incontradiction with the view that investment episodes are lumpy in nature 4 see chirinko 1994 for a survey of the empirical investment literature

principles of network development and evolution an experimental study this paper reports on an experimental investigation of the evolution of networks and the individual decision making processes that guide it inasmuch as there is no history of experimental work on network formation part of the paper is devoted to the formulation of problems that can be examined experimentally the results are that networks composed of decentralized decision makers are capable of overcoming complex coordination and learning problems and converge to stationary when it does not occur significant and persistent inefficiencies can result the models of equilibration based on the principle of nash equilibrium are more reliable than models based on the alternative principles of efficiency seeking or focalness of the network configuration however individual decision making within networks is not in accordance with the simple decision rules of nash best response instead we observed complicated strategies that appear to trade short term profits in order to signal to and teach other agents the strategies required for long term profit maximization

equilibria in networks we study a model in which two carriers choose networks to connect cities and compete for customers we show that if carriers compete aggressively e g bertrand like behavior one carrier operating a single hub spoke network is an equilibrium outcome competing hub spoke networks are not an equilibrium outcome although duopoly equilibria in nonhub networks can exist if carriers do not compete aggressively an equilibrium with competing hub spoke networks exists as long as the number of cities is not too small we provide conditions under which all equilibria consist of hub spoke networks

information acquisition and exchange in social networks a central feature of social networks is information sharing the internet and related computing technologies shape the relative costs of private information acquisition and forming links with others this article presents an experiment on the effects of changing costs we find that a decline in relative costs of linking makes private investments more dispersed and gives rise to denser social networks aggregate investment falls but individuals access to investment remains stable due to increased networking the overall effect is an increase in individual utility and aggregate welfare

experiments with network formation abstract we examine how groups of agents form trading networks in the presence of idiosyncratic risk and the possibility of contagion specifically four agents play a two stage finite repeated game in the first stage the network structure is endogenously determined through a non cooperative proposal game in the second stage agents play multiple rounds of a coordination game against all of their chosen neighbors after the realization of a payoff relevant shock while parsimonious our four agent environment is rich enough to capture all of the important interaction structures in the networks literature bilateral marriage local interaction star and uniform matching consistent with our theory marriage networks are the most frequent and stable network structures in our experiments we find that payoff efficiency is around 90 percent of the ex ante payoff dominant strategies and the distribution of network structures is significantly different from that which would result from random play

investment shocks and business cycles abstract the origins of business cycles are still controversial among macroeconomists this paper contributes to this debate by studying the driving forces of fluctuations in an estimated new neoclassical synthesis model of the u s economy in this model most of the variability of output and hours at business cycle frequencies is due to shocks to the marginal efficiency of investment imperfect competition and to a lesser extent technological frictions are the key to their transmission although labor supply shocks explain a large fraction of the fluctuations in hours at very low frequencies they are irrelevant over the business cycle this finding is important because the microfoundations of these disturbances are widely regarded as unappealing

strong and weak links many of the interesting issues in the economics of networks information transmission individual incentives with local externalities investments in connections and the structure of complex networks have to do with the quality of links between individuals entities however most of the research to date has assumed a one zero formulation of connections i argue that it is possible to write down tractable models of quality of links and that analyzing such models yields fresh insights into these issues jel c72 d85 z13

work incentives hierarchy and internal labor markets this paper argues that contracts with payment based on a ranking of employee performance can provide performance incentives even under asymmetric information that prevents payment based on individual performance only being enforceable such contracts also fit with five features of labor markets that have aroused considerable interest 1 hierarchical wage structures 2 internal promotion 3 wage rates that rise with seniority and experience more than productivity 4 the variance of earnings increasing with experience and 5 wage rates attached to jobs rather than individuals with differentials set by administrative procedures rather than by reference to external market wages

is lumpy investment relevant for the business cycle the lumpiness of investment activity at the plant level is a well established fact previous research has suggested that such discrete and occasional adjustments have significant aggregate implications in particular it has been argued that changes in plants willingness to invest in response to aggregate shocks can at times generate large movements in total investment demand in this study i reassess these predictions in a general equilibrium environment specifically assuming nonconvex costs of capital adjustment i derive generalized s s adjustment rules yielding lumpy plant level investment within an otherwise standard equilibrium business cycle model in contrast to previous partial equilibrium analyses model results reveal that the aggregate effects of lumpy investment are negligible in general equilibrium households preference for relatively smooth consumption profiles offsets changes in aggregate investment demand implied by the introduction of lumpy plant level investment as a result

measuring factor adjustment costs i estimate adjustment costs for labor and capital from the euler equations for factor demand for both factors i find relatively strong evidence against substantial adjustment costs my estimates use annual data from two digit industries my results support the view that rents arising from adjustment costs are relatively small and are not an important part of the explanation of the large movements of the values of corporations in relation to the reproduction costs of their capital i investigate the potential effects of three types of specification error 1 aggregation over time 2 aggregation over firms with heterogeneous demand shocks and 3 estimation of a convex adjustment cost technology in the presence of nonconvex discrete adjustment costs i find that the likely biases from these specification errors are relatively small

what does a technology shock do a var analysis with model based sign restrictions abstract this paper estimates the effects of technology shocks in var models of the u s identified by imposing restrictions on the sign of impulse responses these restrictions are consistent with the implications of a popular class of dsge models with both real and nominal frictions and with sufficiently wide ranges for their parameters this identification strategy thus substitutes theoretically motivated restrictions for the atheoretical assumptions on the time series properties of the data that are key to long run restrictions stochastic technology improvements persistently increase real wages consumption investment and output in the data hours worked are very likely to increase displaying a hump shaped pattern contrary to most of the related var evidence results are not sensitive to a number of specification assumptions including those on the stationarity properties of variables

subgame perfect implementation this paper examines the use of stage mechanisms in implementation problems and provides a partial characterization of the set of subgam e perfect implementable choice rules it is shown that in many economic environments virtually an y choice rule can be implemented to illustrate the power of this approach the paper discusses a number of models in which it is possible to implement the first best although it wouldn t have been possible to do so without using stage mechanisms the diversity of these models suggests that subgame perfect implementation may find wide application copyright 1988 by the econometric society

endogenous job contact networks we use the uk quarterly labour force survey to document the presence of two phenomena first a positive correlation between unemployment rate and the proportion of job seekers who use social networks to nd jobs network use second a non monotone relation between unemployment rate and the proportion of recently employed workers who found their job through friends or relatives network productivity this second relation is positive for low levels of unemployment rate while it becomes negative for high levels of unemployment rate existing models of social networks and labor market generally assume that social networks are exogenous this assumption implies a negative correlation between unemployment rate and network productivity we develop a model where social networks are used to collect job oers but workers decide strategically how much to invest in their network we show that equilibrium job contact networks are dense and more productive in transmitting information when labor market turnover is moderate while they are less productive and segmented into clusters for either high or low turnover the equilibrium response of job contact networks to changes in labor market conditions is sucient to generate

bayesian learning in social networks we study the perfect bayesian equilibrium of a sequential learning model over a general social network each individual receives a signal about the underlying state of the world observes the past actions of a stochastically generated neighbourhood of individuals and chooses one of two possible actions the stochastic process generating the neighbourhoods defines the network topology we characterize pure strategy equilibria for arbitrary stochastic and deterministic social networks and characterize the conditions under which there will be asymptotic learning convergence in probability to the right action as the social network becomes large we show that when private beliefs are unbounded meaning that the implied likelihood ratios are unbounded there will be asymptotic learning as long as there is some minimal amount of expansion in observations we also characterize conditions under which there will be asymptotic learning when private beliefs are bounded

network structure in a link formation game an experimental study in this article we use an experiment to evaluate the performance of alternative refinements in a myersonian link formation game with a supermodular payoff function our results show that a non cooperative refinement the global games gg approach outperforms alternative cooperative refinements strong nash equilibrium coalition proof nash equilibrium and pairwise stable nash equilibrium in explaining the observed experimental behavior in the static game of complete information with three players the results are robust to some comparative statics and the gg approach shows a high predictive power under incomplete information however under repeated interaction or with a greater number of players the gg approach loses predictive power but so do the cooperative refinements the results illustrate the importance of coordination failure in practice and the need to design mechanisms to reduce this effect in practical decision making problems jel c70 c92 d20 d44 d82

toward an integrated approach to industry dynamics and labor mobility industrial dynamics and labour mobility are two fields of economic research that have developed fast in recent years but along what are essentially separate lines this paper shows that the processes those two fields deal with can be highly interdependent and demonstrates the usefulness of and the opportunity for an integrated approach to the dynamics of industries and labour mobility it concludes with a list of questions that inform a research agenda dedicated to such approach

optimal incentive contracts with multiple agents abstract a setting in which a single principal contracts with two agents who possess perfect private information about their own productivity is considered with correlated productivities each agent s private information also provides a signal about the other agent s productivity in contrast to the setting in which there is only one agent it is shown that such private information may be of no value to the agents it is only if the agents are risk averse that their private information may allow them to command rents moreover when the agents are constrained only to reveal their private information truthfully as a nash equilibrium the pareto optimal incentive scheme may induce the agents to adopt strategies other than truth telling this leads to the consideration of truth telling equilibria that are not pareto dominated in the subgame played by the agents among all such equilibria the one preferred by the principal restricts one agent to tell the truth as a dominant strategy and the other as a nash response to truth

using trembling hand perfection to alleviate the interlinked principal agent problem for a simple interlinked principal agent problem equilibrium may b e inefficient to the principals when each agent s discrete effort and a common random variable observable to agents but not principals jointly determine the principals payoffs in a moral hazard problem agents may tend to shirk however slight uncertainty about the rationality of other agents strategies can reduce incentives to shirk in particular the trembling hand perfect refinement of nash equilibria can result in more effort and higher payoffs to the principal unfortunately these efficiency gains diminish as additional intermed diate effort levels are added to the model copyright 1988 by the editors of the scandinavian journal of economics

a strategic model of social and economic networks we study the stability and efficiency of social and economic networks when self interested individuals can form or sever links first for two stylized models we characterize the stable and efficient networks there does not always exist a stable network that is efficient next we show that this tension persists generally to assure that there exists a stable network that is efficient one is forced to allocate resources to nodes that are not responsible for any of the production we characterize one such allocation rule the equal split rule and another rule that arises naturally from bargaining of the players

the effects of social networks on employment and inequality we develop a model where agents obtain information about job opportunities through an explicitly modeled network of social contacts we show that employment is positively correlated across time and agents moreover unemployment exhibits duration dependence the probability of obtaining a job decreases in the length of time that an agent has been unemployed finally we examine inequality between two groups if staying in the labor market is costly and one group starts with a worse employment status then that group s drop out rate will be higher and their employment prospects will be persistently below that of the other group

old boy networks as screening mechanisms this paper studies a fulfilled expectations equilibrium in situations in which intermediaries provide personal opinions on the likelihood of success of personnel projects or investments each referee must recommend some candidates from a group of people about whom he has private information the employer uses the recommendations to choose the workers using his expectations about the quality of the recommended and the nonrecommended applicants although the referees use their information strategically the competition among them produces optimal use of the information in the sense that employers make the same choices in equilibrium as they would if they had the same information as the referees

experimental games on networks underpinnings of behavior and equilibrium selection in this paper we describe a series of laboratory experiments that implement specific examples of a general network structure specifically actions are either strategic substitutes or strategic complements and participants have either complete or incomplete information about the structure of a random network since economic environments typically have a considerable degree of complementarity or substitutability this framework applies to a wide variety of settings we examine behavior and equilibrium selection the degree of equilibrium play is striking in particular with incomplete information behavior closely resembles the theoretical equilibrium whenever this is unique when there are multiple equilibria general features of networks such as connectivity clustering and the degree of the players help to predict informed behavior in the lab people appear to be strongly attracted to maximizing aggregate payoffs social efficiency but there are forces that moderate this attraction 1 people seem content with in the aggregate capturing only the lion s share of the efficient profits in exchange for reduced exposure to loss and 2 uncertainty about the network structure makes it considerably more difficult to coordinate on a demanding but efficient equilibrium that is typically implemented with complete information

growing stars a laboratory analysis of network formation abstract efficient information dispersion occurs with star networks where small numbers of agents gather information for distribution to larger groups previous studies have shown that ex ante heterogeneity in payoff incentives among agents is sufficient for reliable star formation goeree et al 2009 using laboratory experiments we show stars reliably emerge among ex ante homogeneous agents under specific institutional environments our results help to explain why star networks emerge frequently among homogeneous groups particularly rural farming communities conley and udry 2010 our findings have implications for developing countries where it is crucial to create mechanisms to promote efficient information sharing

employment wages and alcohol consumption in russia 1 introductionconcerns regarding the relationship between alcohol consumption and labor market productivity are well grounded if problem drinking or alcoholism is considered a disease then it may have depressant effects on labor market productivity causing reductions in employment earnings and other labor market outcomes mullahy and sindelar 1993 1996 kenkel and ribar 1994 however there is a medical literature that documents a u shaped relationship between alcohol consumption and the risk of cardiovascular disease according to this literature moderate drinkers have a lower risk of cardiovascular disease than do either abstainers or heavy drinkers beaglehole and jackson 1992 doll et al 1994 consistent with this evidence several economists have found a positive association between moderate drinking and earnings berger and leigh 1988 french and zarkin 1995 heien 1996 hamilton and hamilton 1997 zarkin et al 1998 macdonald and shields 2001 this article investigates the impact of alcohol consumption on employment and wages in russia the primary contributions of the article are twofold first it enhances the economic literature on the relationship between alcohol consumption and labor market behavior by using data from a longitudinal survey the use of a longitudinal data set enables the estimation of a fixed effects model which helps avoid the potential bias caused by unobserved individual factors not captured in cross sectional models the use of a fixed effects model is an important extension to the literature because the data sets used in previous studies are cross sectional and usually lack adequate variables that could serve as identifying instruments to control for the endogeneity of alcohol consumption 1 furthermore the richness of the data set used in this article allows for the application of three alternative measures of alcohol consumption in the empirical analysis this is important because the relationship between alcohol consumption and labor market outcomes may be sensitive to the alcohol measure that is used the second notable contribution of this article is that it provides the first empirical evidence on the association between alcohol consumption and labor market outcomes in russia excessive alcohol consumption is a widespread problem in russia where per capita alcohol consumption is around 14 liters per year the world health organization who considers 8 liters to be a sign that a country has a critical consumption level for health problems quinn judge 1997 furthermore the dramatic fluctuations in mortality rates experienced in russia over the past 15 years have generated considerable attention to the potential effect of alcohol consumption on the overall health of the russian population it is important to investigate how labor market outcomes would be affected by alcohol consumption in a country which demonstrates such dramatic fluctuations in alcohol consumption and mortality consistent with the previous studies cross sectional results generally support the hypothesis of an inverse u shaped relationship between alcohol consumption and wages and employment results from the fixed effect models are found to be quite different from those of cross sectional models the positive effect of alcohol consumption on employment disappears for both males and females once the individual fixed effects are controlled for the results of the wage model lend support to a small and linear return to alcohol consumption but the effects are significant only at the 10 level the fixed effects estimates are smaller in magnitude and estimated with less precision compared with cross sectional estimates section 2 reviews the previous literature section 3 discusses the conceptual issues and empirical strategy section 4 introduces the data set section 5 provides a discussion of the results and sensitivity analyses section 6 concludes the article

personal networks and nonagricultural employment the case of a farming village in the philippines abstract this article based on an intensive village survey in the philippines analyzes the effects of personal networks on rural villagers access to nonagricultural occupations and the terms of employment given to them a key finding is that personal networks are selectively used to reduce transaction costs and their impacts on employment conditions vary by size and by location of enterprises we find that when villagers are employed in unskilled work at small enterprises those who use family relative networks receive wage premiums however if we limit our sample to small enterprises located near our study village the family relative network premiums become insignificant presumably because of the overriding influence of the community wide network within a narrow local community contrary to the case of small enterprises unskilled workers wages at large enterprises are not much affected by personal networks but are largely determined by years of schooling and work experience the recent developmen

idiosyncratic shocks and the role of nonconvexities in plant and aggregate investment dynamics we examine a model of lumpy investment wherein establishments face persistent shocks to common and plant specific productivity and nonconvex adjustment costs lead them to pursue generalized s s investment rules we allow persistent heterogeneity in both capital and total factor productivity alongside low level investments exempt from adjustment costs to develop the first model consistent with available evidence on establishment level investment rates reassessing the implications of lumpy investment for aggregate dynamics in this setting we find that they remain substantial when factor supply considerations are ignored but are quantitatively irrelevant in general equilibrium the substantial implications of general equilibrium extend beyond the dynamics of aggregate series while the presence of idiosyncratic shocks makes the time averaged distribution of plant level investment rates largely invariant to market clearing movements in real wages and interest rates we show that the dynamics of plants investments differ sharply in their presence thus model based estimations of capital adjustment costs involving panel data may be quite sensitive to the assumption about equilibrium our analysis also offers new insights about how nonconvex adjustment costs influence investment at the plant when establishments face large and weakly persistent idiosyncratic productivity shocks consistent with existing estimates we find that nonconvex costs do not cause lumpy investments but act to eliminate them

the dynamic effects of neutral and investment specific technology shocks the neoclassical growth model is used to identify the short run effects of neutral technology shocks which affect the production of all goods homogeneously and investment specific shocks which affect only investment goods the real equipment price crucial for identifying the investment shocks experiences an abrupt increase in its average rate of decline in 1982 so the analysis is based on a split sample on the basis of the preferred specification the two technology shocks account for 73 percent of hours and 44 percent of output s business cycle variation before 1982 and 38 percent and 80 percent afterward the shocks also account for more than 40 percent of hours and 58 percent of output s forecast errors over a three to eight year horizon in both samples the majority of these effects are driven by the investment shocks