returns to foreign languages of native workers in the european union most of the literature on returns to languages is concerned with immigrants the authors study which uses the european community household panel survey for the period 1994 2001 infers returns to non native languages by native workers in nine countries of the european union the study differs from other studies that deal with the same issue in three respects first instead of using a dummy for each language they use the ratio of the population not proficient in a given country s national language and compare the results with the more traditional approach using dummies second they correct for time independent measurement errors in self reporting and find that the resulting iv estimates are much larger than those obtained by ols they also suggest that there is little room for time persistent errors and heterogeneity and that therefore their estimates should suffer ostensibly little from unobserved ability biases finally they estimate iv quantile regressions to illustrate how returns to languages vary at different points of the distribution of earnings

the effects of shock size and type on labor contract duration empirical studies of the relation between uncertainty and the length of union firm contracts have focused on the effects of inflation money supply or industry specific uncertainty this article describes two extensions of previous work first real aggregate uncertainty arising from oil shocks is incorporated into a contract duration model oil shocks significantly affect contract length in seven of 21 u s manufacturing industries second the model is used to test whether the duration of reopenable bargains is positively related to uncertainty associated with large shocks as has been described in danziger the evidence indicates some qualified support for this proposition

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

delays in renewal of labor contracts theory and evidence in many countries an expired labor contract is automatically extended during the often protracted delay before the new contract is signed our theoretical model focuses on macroeconomic factors in explaining the delay it emphasizes the importance of the realized nominal and real shocks and of the levels of nominal and real uncertainty the model is tested using israeli collective wage agreements where long delays are frequent the empirical findings strongly support the theoretical model thus nominal uncertainty is found to increase the delay and real uncertainty to decrease the delay but less in the public than in the private sector

the effects of incomes policies on the frequency and size of wage changes theoretical models accounting for variations in the rate of wage or price inflation rarely take explicit account of the costs of altering money wages or prices and yet these models are often evaluated in terms of their correspondence with data that presumably reflect the existence of such costs at least until the more inflationary experiences of the 1970s the normal situation in british and american manufacturing industry was for wage rates to be adjusted no more frequently than once a year even when there were indications of substantial inflationary pressures the recognition of this point has induced economists to incorporate in some fashion the varying time pattern of wage settlements into their fitted models of wage inflation but all have taken this pattern as exogenously determined 2 by contrast this paper considers the determinants of the probability of a new wage settlement in addition to the determinants of the size of the wage change conditional upon a new settlement taking place this distinction between the occurrence of an event and the extent of the occurrence has been investigated in the literature on the demand for durable goods e g cragg 1971 on labour force participation and hours of work e g heckman 1974 and on the choice of transport modes e g domencich and mcfadden 1975 but with few exceptions it has been neglected in empirical work on wage inflation 3 yet the distinction is an important one with immediate relevance to the evaluation of the effects of incomes policies on the course of wage inflation the typical procedure in this literature is to regress some aggregate index of wage changes on dummy variables that indicate the presence or absence of incomes policies but this procedure does not make full use of information about the form of these incomes policies that is incomes policies have sometimes taken the form of specifying a permissible ceiling on wage increases in which case they are designed to affect the extent of occurrence of the event but not the occurrence of the event on other occasions incomes policies have operated by postponing the implementation of new wage settlements in which case they are directed towards the occurrence of the event one purpose of this paper is to re evaluate the effectiveness of incomes policies by making use of information both on the frequency of wage settlements and on the size of wage changes when a settlement takes place

inflation and labor market adjustment the implications of downward nominal and ex ante real wage rigidity and of wage contracting for the dispersion of relative wage changes in the presence of price inflation are examined rigidity implies that unexpected inflation will raise the variability of relative wage changes contracting implies unexpected inflation reduces variability using data on manufacturing industries for 1955 81 and on private nonfarm industries for1965 81 these hypotheses are studied the dispersion in relative wage cnanges is reduced by greater price inflation most of the reduction is a response to unexpected inflation expected inflation has little impact on dispersion these findings hold for subperiods within the sample and are robust to different choices of measures of price expectations including those of the livingston survey the survey research center household data and arma forecasts they stand in striking contrast to the commonly accepted result that price inflation is associated with greater dispersion of relative price changes they suggest that inflation reduces the ability of relative wages to signal disequilibria among labor markets this abstract was borrowed from another version of this item

why u s wage and employment behavior differs from that in britain and japan if a poll were to be conducted among american academic economists to select the most mystifying economic phenomenon of our time surely the sticky nominal wage rate would emerge at or near the top of the list the slow and partial response of the nominal wage rate to changes in aggregate nominal spending has been a central postulate of macroeconomic theory for the past 45 years from keynes general theory down to the standard postwar textbook keynesian paradigm to the more modern fixed wage price models of robert barro and herschel grossman i976 and edmond malinvaud i977 unwilling passively to accept nominal wage rigidity as an unexplained assumption many labour market theorists have followed the lead of costas azariadis i975 and martin baily i974 in building models to explain rigid wages and layoff unemployment as the rational outcome of a profit maximising calculus as i pointed out in an early critique of the azariadis baily model i976a their assumptions cannot explain cycles in employment but rather why workers would want fixed incomes i e a fixed wage rate and fixed employment soon thereafter barro i977 went one step further and argued that contract theory is a facade which cannot explain why workers would choose a rigid wage and variable employment in preference to the classical equilibrium quantity of employment that equates the marginal product of labour with the marginal value of time now an examination of the evidence has led me to the realisation that rigid wages cannot provide the underpinnings for a universally valid theory of the business cycle simply because wages are not universally rigid i document below with postwar quarterly data that the share of fluctuations in the manufacturing wage bill taking the form of nominal wage changes as compared to changes in hours worked is five to ten times greater in britain and japan than in

samuelson and neoclassical economics this is not a festschrift but a study of the prodigious samuelson phe nomenon his history making contributions to and impact on the econom ics of our age and the intricate often perplexing and divergent trends in modern economics all intensely controversial subjects that will be argued scrutinized and periodically reassessed by economists of various strands and traditions for years to come for as samuelson wrote of pigou immortality does have its price a scholar with such an out standing body of contributions must expect other men to swarm about it 1966 p 1233 subject it to scholarly scrutiny and challenge it although paul samuelson was 65 on may 15 1980 and our best wishes go out to him for long life and continued enrichment of economics this is neither a birthday party nor a gathering of only the good fairies for as he himself has said of marx a great scholar deserves the compliment of being judged seriously and critically 1972 p 268 in accordance with the rule of roman law audiatur et altera pars i have invited representative scholars of widely divergent perceptions to offer their critical evaluation of the age of samuelson while the response was by and large gratifying some scholars were unable to meet the deadline ix x preface and with much compunction i have had to expand my own essays to partly fill the gaps

incomes policy and wage differentials periodic incomes policies have by now become a feature of most western economies it has also become clear that there is a trade off between the features of an incomes policy that make it initially acceptable and the features that make it ultimately effective for example most british incomes policies of the 1970s have provided higher permissible proportionate wage increases for low wage than for high wage workers as we argue in section ii below the primary advantage and perhaps cause of such policies is that they can more readily secure the ex ante support of a majority of workers for any specified overall increase in the wage bill or inflation target if they are effective however such policies also result in the narrowing of wage differentials and this results in new problems some economists consider such wage equalization the inevitable cost that an economy must bear for the sake of an effective incomes policy others believe the arbitrary narrowing of wage differentials creates industrial relations problems that ultimately cause the incomes policy to fail in either case it is important to know how much equalization has been caused by the actual incomes policies and how this compares with what would have been expected from strictly adhered to policies in consequence the first and major part of this paper contains a simple analysis of the movement of differentials in britain in the last decade most incomes policies have been explicitly equalizing but how much equalization occurred compared with the equalization that would have occurred if the policies had been explicitly adhered to we show that the 1973 formula of 1 plus 4 per cent was associated with the full equalizing effect it implied but the 1975 6 a week was largely submerged in other changes and was associated with less than a third of the equalization implied by the formula indeed such mild equalization as occurred between 1975 and 1977 may be explained partly by the lower inflation rate which reduced that part of the inequality of instantaneous earnings that is caused by different groups of workers settling at different times of year against this higher unemployment may have been tending to increase inequality at the same time in 1974 threshold payments were associated with an effect of about one half of their predicted level the main force that offset the equalizing nature of the threshold formula and the 6 a week was we believe the pressure of employers bidding up the relative earnings of the more skilled workers having looked at the overall picture we then examine more closely which groups have gained and lost from recent changes in relative wages and what equalization has occurred within the different groups the groups are defined by occupation and by collective agreement our general conclusion is that however finely the labour force is subdivided equalization between groups has played a very small role in the overall equalization and the main changes

the endogeneity between language and earnings international analyses this study is concerned with the determinants of dominant language fluency its effects on earnings and its endogeneity with earnings among immigrants dominant language fluency is hypothesized to

the impact of controls on wage contract duration incomes policies invariably arouse considerable opposition it is claimed that they are costly to administer that by tinkering with relative prices they riddle the economy with inefficiencies and that they politicise economic life it is also argued that where controls do have an impact on wage rates and prices a point which is by no means universally conceded agents are driven to costly behaviour designed to neutralise effective wage and price ceilings e g wage drift and quality changes it is fair to say however that most of the empirical work on incomes policies has been directed rather narrowly at the question of whether controls affect wage rates earnings or prices somewhat off the beaten track has been the interesting paper by pencavel i982 in which he argued that the existence of costs in revising wage rates calls for a distinction between the frequency and magnitude of wage revisions pencavel i982 also argued that wage controls are sometimes directed toward postponing wage increases in which case they affect the frequency of wage change while at other times they specify permissible ceilings on wage increases designed to affect the magnitude of wage adjustments however even this paper deals with wage issues broadly defined there has been little work done on the impact of controls on other aspects of labour market behaviour the purpose of this paper is to explore the impact of canada s recent experiment with controls on wage contract duration this long neglected variable has received theoretical attention in a number of recent papers including fischer i977 who argued that in a world of overlapping contracts monetary policy is effective despite rational expectations gordon i982 who considered the implications of contracting arrangements for wage flexibility and gray i978 and canzoneri i980 who explored the impact of uncertainty on contract duration an empirical paper by christofides and wilton i983 b confirmed gray s i978 and canzoneri s i980 conclusion that inflation uncertainty reduces the length of wage contracts however no one appears to have examined carefully the impact of controls on this important

educational expansion skills diffusion and the economic value of credentials and skills examining the economic value of education has been a central research agenda of social scientists for decades however prior research inadequately accounts for the discrepancy between educational

contract duration evidence from franchising abstract economists generally view standard franchise contracts as efficient while franchisee advocates view them as exploitive consistent with the economic view we find that contract duration is positively and significantly related to the franchisee s physical and human capital investments which are often firm specific in contrast to assertions by franchisee advocates we find that these relations exist in subsamples containing only the most established franchisors as measured by size and experience and that larger more experienced franchisors tend to offer longer term contracts than do newer franchisors our evidence also suggests that there is learning across firms about optimal contract terms

early contract renegotiation an analysis of us labor contracts 1970 1995 this article examines the ex post flexibility of us labor contracts during the 1970 95 period by investigating whether unanticipated changes in inflation increase the likelihood of a contract being renegotiated prior to its expiration we find empirical support for this hypothesis specifically our results indicate that renegotiations are triggered principally by large and infrequent price shocks of either sign when combined with evidence that ex ante contract durations are shorter during episodes of increased inflation uncertainty our results suggest that these contracts are flexible both ex ante and ex post to changes in the evolution of inflation

determinants of contract duration in collective bargaining agreements the author develops a model incorporating variables that previous studies have hypothesized as determinants of labor contract duration then empirically tests the model using a data set containing

endogenous contract structure and monetary policy abstract we analyze the co determination of monetary policy and the labor contracts chosen by members of the public who can either fix or index their nominal wages fixed nominal wages allow the central bank to offset productivity shocks while the public fix nominal wages in response to the central bank offsetting shocks so there is an equilibrium in which realistically nominal wages are fixed and shocks offset a result which holds in single as well as in multi period games in addition there may be equilibria in which agents index their nominal wages and the central bank optimally responds by stabilizing price in contrast to conventional models the ramsey rule may be implemented in a finitely repeated game the central bank does not deviate for fear that agents would change their labor contracts such that the central bank s least favored equilibrium will subsequently be played

literacy and labour market outcomes self assessment versus test score measures this paper looks at the determinants of literacy and the relation between literacy and labour market outcomes while focusing on comparisons of self assessment versus test score measures of literacy the test score measure performs considerably better than the self assessments when literacy is treated as an outcome variable in terms of the overall fit of the model and the specific coefficient estimates with the self assessments sometimes actually generating wrongly signed parameters the test score measure also performs much better as an explanatory variable in the employment models with the self assessment variable generating significant underestimates of the effects of literacy on the probability of being employed finally the test score is also superior in the income models although the self assessment measure is at least a reasonably good performer in this regard suggesting that the main results reported in much of the existing literature based on such measures should perhaps be taken as good re

the determinants of contract length an empirical analysis based on canadian micro data abstract recent theoretical work on the determinants of wage contract length focuses on inflation uncertainty as an explanatory variable additional to the more traditional variable of transactions costs this paper analyses the empirical determinants of contract duration using a large sample of contract data and confirms the conclusions reached in the theoretical literature

returns to foreign languages of native workers in the eu most papers on returns to languages are concerned with immigrants we use the european community household panel survey echp to infer returns on non native languages by non immigrants in nine countries of the european union we differ from the few other studies that deal with the same problem in three respects first we correct for time dependent measurement errors in self reporting as suggested by dustmann and van soest and find that the resulting iv estimates are much larger than those obtained by ols we also suggest that there is little room for time persistent errors and heterogeneity and that therefore our estimates should not suffer from the other usual biases secondly instead of using a dummy for each language we use the ratio of the population that is not proficient in a language in each country considered finally we estimate instrumental variable quantile regressions to illustrate how returns to languages vary at different points of the distribution of earnings

uncertainty and labor contract durations this paper provides an empirical investigation into the relationship between ex ante u s labor contract durations and uncertainty over the period 1970 to 1995 we construct measures of inflation uncertainty as well as aggregate nominal and real uncertainty the results not only corroborate previous findings of an inverse relationship between contract durations and inflation uncertainty but also document that this relationship extends to both measures of aggregate uncertainty we also explore the robustness of this relationship to various measures of inflation uncertainty that have appeared in the literature

formation of price and cost inflation expectations in british manufacturing industries a multi sectoral analysis the process by which agents form expectations on price and cost inflation is investigated measures of expectations of these series derived from qualitative survey responses in nine industrial sectors covering u k manufacturing between 1972 and 1989 are described and the rationality of these expectations tested rationality is not rejected in many sectors and the evidence against rationality much weakened in other sectors if tests take into account a particular form of conversion error the possible effect of aggregation bias in the tests is noted as rationality is rejected with more confidence with aggregated data than when the sectoral data is considered individually copyright 1994 by royal economic society

the economics of immigration this literature review concerns the impact of immigration on the economy of the host country focusing on the experience of the united states the emphasis is on the period from the 1970s to the 1990s the author shows that research earlier in this period generally concluded that the economic effects of immigration were positive but that more recent research on later migrations have generally concluded that immigration may be having an adverse effect on the earnings of native unskilled workers and be placing an increased burden on welfare programs the importance of such economic analysis for the formulation of appropriate migration policies is stressed

on the role of green taxes in social accounting this paper addresses social accounting numerically in a dynamic generalequilibrium model the main purposes are to study i whether emissiontaxes based on static willingness to pay information can be used to improvethe welfare level and ii whether these taxes provide close enoughapproximations of the correct pigouvian emission tax to be useful in thecontext of social accounting the results indicate that if environmentalquality is relatively linear with respect to pollution the approximation ofthe pigouvian emission tax will bring the economy close to the sociallyoptimal solution and at the same time provide a close approximation of thevalue of net investments in environmental capital

on the welfare significance of green accounting as taught by parable abstract green nnp is a national accounting concept that subtracts off from gnp not just depreciation of capital but also depletion of environmental assets for a time autonomous technology green nnp has a rigorous welfare interpretation as an exact measure of the economy s future power to consume the present paper extends the standard framework to cover the case of labor augmenting technological progress for this special case of time dependence a powerful conceptual parable applies it is as if the conclusion from a simple minded welfare story told by the standard neoclassical one sector growth model covers a far more general situation involving any number of different types of capital any convex production possibilities set and fully optimizing behavior implications and applications are discussed

inflation and labour market adjustment the uk experience in this paper the author considers a proposed method for testing for the presence of keynesian rigidities in the wage adjustment process but illustrates that if any other factors exist that may cause noninstantaneous wage adjustment then this method cannot be applied further he presents evidence that for the united kingdom at least a wage setting process that allows for these factors will provide a reasonable explanation of the influence of inflation on labor market adjustment over the period 1963 79 copyright 1988 by the london school of economics and political science

the effects of real and nominal shocks on union firm contract duration abstract the first theoretical works on labor contract length gray 1978 for example emphasized the existence of a negative relation between contract duration and uncertainty in estimating a linear version of gray s contract length model and an alternative model developed by christofides and wilton our empirical results indicate little evidence of a negative relationship between length and uncertainty in the united states furthermore our findings indicate the presence of significant differences across industries at the two digit sic level in the response of bargain duration to uncertainty