trade and protection in vertically related markets abstract we consider home country tariff and subsidy policies in a setting where a home firm is partially dependent on a foreign vertically integrated firm for supplies of a key input the firms are cournot competitors in the home market for the final product we show that a tariff on final product imports may cause the foreign vertically integrated firm to reduce the price charged for the input under circumstances where a simple monopoly supplier of the input would increase its price supply conditions for the input significantly affect whether imports of the input should be taxed or subsidized

backfiring tariffs in vertically related markets abstract this paper examines the effects on the domestic economy of domestic tariffs imposed on an intermediate good or a final good in vertically related markets which are characterized by cournot oligopolies tariffs could lead a foreign firm to enter or exit from the domestic final good market some of our results are counter intuitive it is particularly shown that tariffs on the intermediate good which induce the entry could harm domestic intermediate good producers and or benefit domestic final good producers and that tariffs on the final good which induce the exit could harm both domestic intermediate good and final good producers

wage and technology dispersion this paper explains why firms with identical opportunities may use different technologies and offer different wages our key assumption is that workers must engage in costly search in order to gather information about jobs stigler 1961 in equilibrium some firms adopt high fixed cost high productivity technologies offer high wages and fill job openings quickly other firms adopt less capital intensive technologies and offer low wages hiring mostly uninformed workers in equilibrium the amount of wage dispersion leaves workers indifferent about whether to gather information and the fraction of informed workers leaves firms indifferent about their wage and technology choice we show that worker search which would appear to be a rent seeking activity in partial equilibrium may be efficiency enhancing in general equilibrium

the private sector in agricultural research systems will it fill the gap abstract this article examines whether the private sector can fill the gap of declining public research in developing countries economic theory suggests private for profit research will focus on areas where returns to research are appropriable and reasonable profits are generated actual private for profit research activities concentrate on countries and industries with large markets appropriable returns strong science infrastructure and favorable government policies governments and donors can promote private research by easing constraints to private entry and operations but if governments stop funding research on public goods and technologies with limited market potential the private sector is unlikely to fill the gap completely

complicated dynamics in a flow model of the labor market abstract we develop a worker flow model with a nonlinear and endogenous outflow rate from unemployment inconsistent claims on the output lead to changing inflation rates which feedback on job offers through the real money supply via simulations one can show that the nonlinear outflow rate causes asymmetric adjustment of unemployment to the equilibrium rate of unemployment in addition and depending on the parameters the equilibrium rate of unemployment may also become locally unstable then there is a downward sloping phillips curve but no trade off between unemployment and inflation in the short run as there is none in the long run

the workers value of the remaining employment contract duration this paper introduces and applies a method for estimating workers marginal willingness to pay for job attributes employing data on job search activity worker s willingness to pay for the remaining duration of the employment contract is derived we provide evidence that workers attach substantial value to the remaining contract duration a temporary worker with a remaining contract of 6 months is willing to pay about 10 of the wage to increase the contract by one month

an empirical test of the theory of on the job search preunemployment search is the fundamental labor market process generating beneficial effects of advance notice yet theory indicates that workers receiving notice may not search whereas others may search even without advance notice our weighted results

job matching and the wage distribution this paper brings together the microeconomic labor and the macroeconomic equilibrium views of matching in labor markets we nest a job matching model a la jovanovic 1984 into a mortensen and pissarides 1994 type equilibrium search environment the resulting framework preserves the implications of job matching theory for worker turnover and wage dynamics and it also allows for aggregation and general equilibrium analysis we obtain two new equilibrium implications of job matching and search frictions for wage inequality first learning about match quality and worker turnover map gaussian output noise into an ergodic wage distribution of empirically accurate shape unimodal skewed with a paretian right tail second high idiosyncratic productivity risk hinders learning and sorting and reduces wage inequality the equilibrium solutions for the wage distribution and for the aggregate worker flows quits to unemployment and to other jobs displacements hires provide the likelihood function of the model in closed form

inflation and unemployment the world economy today is vastly different from the 1930s when seymour harris the chairman of this meeting infected me with his boundless enthusiasm for economics and his steadfast confidence in its capacity for good works economics is very different too both the science and its subject have changed and for the better since world war ii but there are some notable constants unemployment and inflation still preoccupy and perplex economists statesmen journalists housewives and everyone else the connection between them is the principal domestic economic burden of presidents and prime ministers and the major area of controversy and ignorance in macroeconomics i have chosen to review economic thought on this topic on this occasion partly because of its inevitable timeliness partly because of a personal interest reaching back to my first published work in 1941

decentralization and transfer pricing under oligopoly this paper presents a simple model of a partially decentralized multinational firm mnf in competition with a rival firm it is shown that transfer pricing can be used as a rent shifting device by the mnf to compete with the rival this arises because the mnf headquarters uses the transfer price to manage different subsidiaries the specific value of the transfer price chosen by the mnf depends on whether the rival firm produces the intermediate good the final good or both and whether the rival is integrated or not in particular both decentralization and competition with a fully integrated rival result in lower transfer prices

trade liberalization and strategic outsourcing this paper develops a model of strategic outsourcing with trade liberalization in the intermediate product market a domestic firm may choose to purchase a key intermediate good from a more efficient foreign producer who also competes with the domestic firm for a final good this has a strategic effect on competition unlike the outsourcing motivated by cost saving the strategic outsourcing has a collusive effect that could raise the prices of both intermediate and final goods trade liberalization in the intermediate good market has a very different effect compared with trade liberalization in the final good market d 2003 elsevier b v all rights reserved

the relative effects of employed and unemployed job search a lthough many early models of job search assumed that job seekers were unemployed economists have come to recognize the importance of on the job search mattila 1974 for example found that roughly 60 of quitters experienced no unemployment between jobs implying that the majority of voluntary job changers engaged in on the job search the choice of search mode i e employed vs unemployed search has been modelled in the theoretical search literature barron and mccafferty 1977 burdett 1978 however there have been no attempts to estimate empirically the determinants of this choice 2 some researchers have however examined the resulting wages associated with these two types of search and found a greater wage return to employed than to unemployed search mattila 1969 black 1980 however because voluntarily unemployed search involves forgoing income burdett 1978 while employed search does not abstracting from voluntary reductions in hours incomemaximizing job seekers would never quit to search unless the expected net return to unemployed search exceeded that for employed search thus the previously mentioned empirical findings at first glance might appear to contradict the assumption of income maximization by job seekers because some workers do quit into unemployment 3 in this paper it is argued that previous attempts to compare the returns of employed and unemployed job search suffer from a selectivity problem specifically searchers who accept offers without experiencing any unemployment are likely to have unobservable variables such as informal job contacts and ability which will raise the relative return to employed search compared to that of voluntarily unemployed job seekers 4 providing an explanation for higher wages for on the job searchers than for unemployed searchers this paper estimates the relative wage effects of employed and unemployed search and the determinants of the choice of search mode i e employed vs unemployed search unlike earlier work mattila 1969 black 1980 the previously mentioned selectivity problems are accounted for this is the first attempt to estimate the determinants of choice of search mode 5 without adjusting for selectivity bias as regards employed vs unemployed search it is found that employed search is associated with greater expected wage offers than unemployed search controlling for measurable personal characteristics however accounting for selectivity the expected wage offer given unemployed search is greater than that given employed search finally the greater is the difference between the expected offer given unemployed and that given employed search the more likely one is to choose unemployed search these findings suggest that quitting to search unemployed may be a wealth maximizing decision received for publication november 5 1980 revision accepted for publication august 17 1981 university of illinois at urbana champaign and arizona state university respectively professor low is partially supported by a faculty grant from the graduate college at arizona state university the authors thank francine blau wallace hendricks and two anonymous referees for comments and suggestions i for a summary of this literature see lippman and mccall 1976 2 barron and mccafferty 1977 do estimate an aggregate time series model of the log of the proportion of quits entering unemployment as a function of the vacancy rate proxied by the help wanted advertising index however such a model ignores search that does not lead to quits and does not include variables beyond the vacancy rate that influence an individual s choice of search mode i it is also possible that the forgone earnings due to unemployed search could in principle be less than the possible savings in direct search costs due to unemployed search relative to employed search see burdett 1978 in this case a lower wage return to unemployed search could imply that quitting was based on income considerations further individuals may have quit for nonwage reasons 4 black 1980 found that other things equal those who planned to seek new employment but did not quit had significantly lower wage growth than those who did not plan to search and did not quit this finding strongly suggests the likelihood of a selectivity bias black 1980 p 227 black s 1976 1980 data the michigan panel study of income dynamics psid for his work on employed search did not allow him to distinguish employed and unemployed search

job competition and the wage curve longhi s job competition and the wage curve regional studies the wage curve literature consistently finds a negative relationship between regional unemployment rates and regional wages the most widely accepted theoretical explanations interpret the unemployment rate as a measure of job competition this paper proposes new ways of measuring job competition alternative to the unemployment rate and finds that the negative relationship still holds when job competition is measured following the job search literature while for men the wage impact of the theoretically based measures of job competition is rather similar to the wage impact of the unemployment rate for women the difference is substantial longhi s la competition pour l emploi et la courbe des salaires regional studies la documentation sur la courbe des salaires affirme systematiquement que le taux de chomage regional est en correlation faible avec les salaires regionaux les explications theoriques les plus recues considerent le taux de

on the determinants of uk unemployment and the great recession analysing the gross flows data this article provides a detailed analysis of the gross worker flows data in the united kingdom between 1997 and 2010 with particular emphasis on the 2008 2009 recession and its aftermath utilizing flows data from the labour force survey lfs the dominant macroeconomic factors driving unemployment in the united kingdom before during and after the recessionary period are identified amongst the salient findings of this article is a striking decline in job to job movements throughout and beyond the recent recession this discovery adds a new dimension to the existing literature in this field

institutions and the r d of gm crops abstract this paper analyzes how different institutional structures shape the research and development r d of genetically modified crops gm crops whether this r d is conducted within companies cooperatives or public research organizations both publicly and privately funded r d is expected to influence the type of crops and traits that are developed and therefore the effects on society and ecosystems that potentially could follow from the use of gm crops this issue is analyzed empirically by statistical analysis of 1323 notifications for field trials with gm crops that have been submitted under two eu directives in seven european countries the results show that the type of r d organization influences the traits and crops that are developed companies are more likely to submit notifications that concern gm crops that secure the potential for profit than are other types of r d organizations while r d organizations that are purely publicly funded are more likely to submit notifications that only concern biosafety research than are cooperatives and companies consideration of the environment food safety and food security might justify institutional reforms of r d of gm crops this might include increased public funding combined with changes in intellectual property rights

vertical foreclosure and international trade policy international differences in the cost of production of a key intermediate product can mean that a domestic firm is dependent on supplies from a foreign vertically integrated firm this paper considers the incentives for the foreign firm and foreign country to supply the domestic firm when the firms compete in a cournot or bertrand market for the final product the vertical supply decision is significantly affected by domestic supply conditions for the input and a domestic tariff on final product imports optimal policy by the exporting country may require a tax on both exports or a subsidy on both exports countries that are dependent on imports of a key intermediate product or raw material from a dominant world supplier are often concerned about the price and the availability of imports a notable current example involves the computer industry japanese suppliers with the help of the japanese government recently restricted the exports of dram semiconductors substantially raising their price these suppliers control about 80 of the market for semiconductors and the higher prices and shortage in supply have forced u s producers of computers to curtail production and increase prices vertically integrated japanese firms such as toshiba and n e c have benefitted both from increased profits in the export market for semiconductors and from the improvement in their competitive position in the market for final computers as this example indicates the price and availability of imported supplies can depend on both public and private incentives in the exporting country in this paper we first examine the private incentives for a vertically integrated firm to export an intermediate product to a higher cost rival lowering its rival s costs the exporting firm may choose vertical foreclosure thus fully cutting off supplies we then consider the public interest of the exporting country does the exporting country gain by encouraging the export of the intermediate product or alternatively might government foreclosure occur the government is in a position to affect the quantity of exports of both the input and the final product by an appropriate choice of export tax and subsidy policies

job search by employed and unemployed youth analysis of data from the new youth cohort of the national longitudinal survey yields evidence that young unemployed job seekers chose higher levels of search effort as measured by number of methods used and time spent per method and lower reservation wages relative to offered wages than did comparable employed job seekers in 1981 these differences in search choices at least partly explain differences in search outcomes between the two groups unemployed searchers apparently were more likely than employed searchers to gain new employment and the wages they obtained were slightly lower the author argues that the greater search effort by unemployed job seekers is due to the higher costs of search they bear because of foregone earnings

migration intentions in the u k which households want to migrate and which succeed the authors extend their earlier study of the impact of the council housing system on migration in the united kingdom in particular they examine the hypothesis that individuals differ in various unobserved ways and that personal characteristics that result in individuals becoming tenants may also discourage migration data are from the general household survey for 1973 and 1974 and pertain to both migration intentions and past migration the extent to which house tenure and other household characteristics affect the probability that a household embarking on a housing search will be successful in realizing its migration intentions is explored in addition the importance of both individual and aggregate local unemployment in determining migration intentions is discussed

efficient learning and job turnover in the labor market this article nests a continuous time learning model a la jovanovic journal of political economy 92 1984 108 22 into a directed on the job search framework we prove that the socially efficient allocation is separable that is the workers value functions and optimal controls are independent of both the distribution of workers across their current match qualities and the unemployment rate we characterize the dynamics of job transitions in the efficient allocation furthermore when the matching technology is linear our numerical results show that increasing the vacancy creation cost and the speed of learning have ambiguous effects on the unemployment rate and aggregate job transition

toward a theory of induced institutional innovation in this paper we elaborate a theory of institutional innovation in which changes in the demand for institutional innovation are induced by changes in relative resource endowments and by technical change we illustrate from agricultural history how changes in resource endowments and technical change have induced changes in private property rights and in the development of non market institutions we also consider the impact of advances in social science knowledge and of cultural endowments on the supply of institutional change in a final section we present the elements of a model of institutional innovation that maps the relationships among resource endowments cultural endowments technology and institutions

an empirical investigation of the returns to job search the assumption of diminishing returns to job search plays a crucial role in the search model presented recently in this review by john seater this assumption is justified by noting that spatial aspects of the search process cause diminishing returns since travel time required to search firms in a circular area increases faster than the area to be searched besides being an important property of a class of theoretical models returns to search may partly explain the paradox of an approximately forty hour workweek contrasted with a seven hour search week see john barron and wesley mellow p 396 the interaction of diminishing returns to and positive costs of search may result in an optimal allocation of search time of only a few hours per week in this paper i examine whether the assumption of diminishing returns to job search can be supported by the data following seater the returns to search are measured by the number of firms contacted and the focus is on the ability of unemployed individuals to translate search time into employee contracts returns to search are evaluated by noting whether the production process exhibits diminishing returns with respect to the input variable

modeling earnings dynamics in this paper we use indirect inference to estimate a joint model of earnings employment job changes wage rates and work hours over a career we use the model to address a number of important questions in labor economics including the source of the experience profile of wages the response of job changes to outside wage offers and the effects of seniority on job changes we also study the dynamic response of wage rates hours and earnings to various shocks and measure the relative contributions of the shocks to the variance of earnings in a given year and over a lifetime we find that human capital accounts for most of the growth of earnings over a career although job seniority and job mobility also play significant roles unemployment shocks have a large impact on earnings in the short run as well as a substantial long term effect that operates through the wage rate shocks associated with job changes and unemployment make a large contribution to the variance of career earnings and operate mostly through the job specific error components of wages and hours

competition between employed and unemployed job applicants swedish evidence we use the swedish applicant database to investigate empirically whether being unemployed per se reduces the probability of getting contacted by a firm all searchers looking for a new job are invited to submit their personal details to this database over the internet since we have access to exactly the same information as the firms we can minimize the problems associated with unobserved heterogeneity our results show that an unemployed applicant faces a lower contact probability than an otherwise identical employed applicant thus supporting the notion that firms view employment status as a signal of productivity

worker flows job flows and unemployment in a matching model abstract standard matching models of unemployment generate far too little volatility in unemployment and vacancies relative to the variation in the shock variables shimer 2005 showed that in us data the vacancy to unemployment ratio is about 26 times more volatile than the standard model predicts he identified the flexibility of wages as the key issue and triggered a heated debate on possible improvements of the core model to accommodate these empirical facts in this paper we first document shimer s facts for the uk and find them to be qualitatively similar to us facts we then develop and calibrate a model based on the mortensen and pissarides approach that increases the volatility of the v u ratio 20 fold compared to the standard framework the key features of our model relate to the job creation decision by firms and the search options of workers we allow these to search whilst employed and firms to re advertise jobs that have been quit from this leads us to use a different job creation process whereby potential vacancies or job ideas arise at a finite rate per period over a range of idiosyncratic productivities calibrating the model to uk data we show that it delivers volatility in unemployment and vacancies much closer to though still not as large as that observed for the uk whilst retaining the standard wage determination process

on the job search some empirical evidence from britain abstract this paper considers evidence from the labour force survey concerning job search by employed workers the unconditional probability of observing on the job search is decomposed into the product of two constituent probabilities upon which maximum likelihood estimation is performed the analysis facilitates the identification of who searches and whether search takes place in work or from unemployment temporary or part time employment encourages continued search by men but not women skilled workers search more than the unskilled and demonstrate a preference for employed search inter industry wage relativities encourage search on the job job tenure is a significant determinant of the quality of a job match and the subsequent likelihood that on the job search is undertaken employed job seekers adopt search strategies that are more readily integrated into a working environment

an empirical model of employed search unemployed search and nonsearch the 1969 1971 national longitudinal surveys data on young men were used to study the employed worker s choice among employed search unemployed search and not searching for a new job we assume that an unobserved variable search intensity governs this choice such that unemployed search involves a greater intensity than employed search which of course is associated with greater intensity than nonsearch the principal results are that current wages seniority collective bargaining coverage employment outside construction and employment by government are each ceteris paribus negatively associated with search intensity further each of these variables lowers the probability of not searching and raises the probabilities of employed and unemployed job search

bargaining sorting and the gender wage gap quantifying the impact of firms on the relative pay of women there is growing evidence that rm specic pay premiums are an important source of wage inequality these premiums will contribute to the gender wage gap if women are less likely to work at high paying rms or if women negotiate worse wage bargains with their employers than men using longitudinal data on the hourly wages of portuguese workers matched with balance sheet information for rms we show that the wages of both men and women contain rm specic premiums that are strongly correlated with employer productivity we then show how the impact of these rm specic pay dierentials on the gender wage gap can be decomposed into a combination of bargaining and sorting eects consistent with the bargaining literature we nd that women receive only 90 of the rm specic pay premiums earned by men notably we obtain very similar estimates of the relative bargaining power ratio from our analysis of between rm wage premiums and from analyzing changes in

how large are search frictions textabstractthis paper presents strong evidence for the concavity of wages in job and worker characteristics by adding second order terms to a mincerian earnings function for 6 oecd countries under a standard normality assumption this concavity cannot be attributed to unobserved components in those characteristics an assignment model with search frictions provides a parsimonious explanation for our findings this model yields two restrictions on the coefficients which fit the data very well the impact of search frictions on wages is large our results relate to the literature on industry wage differentials on structural identification in hedonic models and on wage posting versus nash bargaining in search models

on the job search and precautionary savings in this paper i develop and estimate a model of on the job search in which risk averse workers choose search effort and can borrow or save using a single risk free asset i derive the implications for optimal savings behavior in this environment and relate this to the frictions that characterize the endogenous earnings process implied by on the job search savings behavior depends in a very intuitive way on the rate at which offers are received the rate at which jobs are destroyed and a worker s current rank in the wage distribution the implication is that workers who are identical in terms of preferences and opportunities have substantially different savings behavior depending on their history and current position in the wage distribution the mechanism that generates the substantial differences in savings behavior in the model is the dynamic of the wage ladder resulting from the search process there is an important asymmetry between the incremental wage increases generated by onthe job search climbing the ladder and the drop in income associated with job loss falling off the ladder the behavior of workers in low paying jobs is primarily governed by the expectation of wage growth while the behavior of workers near the top of the distribution is driven by the possibility of job loss the distributions of earnings wealth and consumption implied by the model suitably aggregated align reasonably well with the data with the notable exception of implying substantially less concentration of wealth among the richest one percent of the population in this paper i develop and estimate a model of on the job search in which risk averse workers choose search effort and can borrow or save using a single risk free asset i derive the implications for optimal savings behavior in this environment and relate this to the frictions that characterize the endogenous earnings process implied by on the job search savings behavior depends in a very intuitive way on the rate at which offers are received the rate at which jobs are destroyed and a worker s current rank in the wage distribution the implication is that workers at different point in the wage distribution have substantially different savings behavior resulting in wealth dispersion that is much greater than earnings dispersion the mechanism that generates the high degree of wealth dispersion in the model is the dynamic of the wage ladder resulting from the search process there is an important asymmetry between the incremental wage increases generated by on the job search climbing the ladder and the drop in income associated with job loss falling off the ladder this feature of the model generates differential savings behavior at different points in the earnings distribution the behavior of workers in low paying jobs is primarily governed by the expectation of wage growth while the behavior of workers near the top of the distribution is primarily driven by the possibility of job loss the wage growth expected by low wage workers combined with the fact that their earnings are not much higher than unemployment benefits causes them to dissave as a worker s wage increases the incentive to save increases the potential for wage growth declines and it becomes increasingly important to insure against the large income reduction associated with job loss the fact that high wage and low wage workers have such different savings behavior leads to a wealth distribution that is much more unequal 1

rent shifting export subsidies with an imported intermediate product abstract this paper examines the implications of foreign or domestic imperfect competition in intermediate goods supply for strategic trade policy assuming cournot competition an export subsidy aimed at shifting rents from foreign to domestic final good producers may also shift rents to foreign suppliers weakening the incentive for the subsidy however the incentive for a subsidy tends to increase if the intermediate good industry is purely domestic or if the industry is purely foreign but the subsidy reduces the price of the imported input alternative rent shifting policies a production subsidy and an import tariff applied to the input are also considered