restaurant prices and the minimum wage in this paper we examine the effect of the minimum wage on restaurant prices we contribute both to the study of economic impact of the minimum wage and to the study of microeconomic patterns of price stickiness for this purpose we use a unique data set of individual price quotes collected to calculate the consumer price index in france and we estimate a price rigidity model based on a flexible s s rule we find a positive and significant impact of the minimum wage on prices the effect of the minimum wage on prices is however very protracted a change in the minimum wage takes more than a year to fully pass through to retail prices

retrospectives eugenics and economics in the progressive era during the progressive era eugenic approaches to social and economic reform were popular respectable and widespread this essay documents the influence of eugenic ideas upon american economic reform especially in the areas of immigration and labor reform and tries to illuminate something of its causes and consequences

the highs and lows of the minimum wage effect a time series cross section study of the canadian law we examine the effects of minimum wage legislation in canada over the period 1975 93 for teenagers we find that a 10 increase in the minimum wage is associated with roughly a 2 5 decrease in employment we also find that this result is driven by low frequency variation in the data at high frequencies the elasticity is positive and insignificant the difference in the elasticity across the bandwidth has implications for the interpretation of employment dynamics as a result of minimum wage policy and experimental design in minimum wage studies it also provides a simple reconciliation of the new minimum wage research which reports very small negative or positive elasticities

the new institutional economics this outstanding book presents new original contributions from some of the world s leading economists including ronald coase douglass c north masahiko aoki oliver e williamson and harold demsetz it demonstrates the extent and depth of the new institutional economics research programme which is having a worldwide impact on the economics profession

status seeking income taxation and efficiency abstract it is well known that status seeking produces distortions in consumption competition to achieve status leads to over consumption of those goods which confer status it has been found that taxing such goods may even lead to pareto improvements in this paper we extend a model of status which relies on a signalling equilibrium approach to include the individual labour supply decision and an income tax we show that a pareto improving income tax can exist even with the simplest tax benefit scheme a number of results follow the model is extended to a two period analysis to accommodate the reputation building element of status achievement without altering the conclusions

group loyalty and the taste for redistribution interpersonal preferences preferences that depend on the characteristics of others are typically hard to infer from observable individual behavior as an alternative approach this paper uses survey data to investigate interpersonal preferences i show that self reported attitudes toward welfare spending are determined not only by financial self interest but also by interpersonal preferences these interpersonal preferences are characterized by a negative exposure effect individuals decrease their support for welfare as the welfare recipiency rate in their community rises and racial group loyalty individuals increase their support for welfare spending as the share of local recipients from their own racial group rises these findings help to explain why levels of welfare benefits are relatively low in racially heterogeneous states

towards an economics of well being there is growing concern that presently dominant frameworks in economics no longer provide a way of adequately addressing and analysing the problems of today s globalising and rapidly changing world this article makes a number of fundamental proposals about how we might reframe economics to move it towards a clearer focus on human well being it develops arguments for a change in the basic ontological proposition and for the need to see the economy as an instituted process of resource allocation from this viewpoint economics is then the study of resource allocation decisions and processes and the forces that guide these from a human perspective it is about understanding who gets what under what conditions and why the paper argues that a pluralist approach to understanding the economy is necessary for political analytical and technical reasons drawing on a range of contributions to heterodox economics the paper argues that if we are to understand current crises and challenges then our understanding of resource allocation in society must have a broader scope than is present in mainstream economics it proposes a rethinking of economic agency and provides a critique of rational behaviour that is founded in shifting the emphasis from a narrow conception of welfare to well being acknowledging human well being as a multidimensional concept the relationship between the well being of the person and the collective is reconsidered and the methodological implications for the issue of aggregation are discussed the article seeks to serve as a point of departure for formulating new research questions exploring the relationships between human well being and economic development and analysing economic behaviour and interactions in such a way as to bring us closer to peoples realities on the ground

belief based refinements in signalling games abstract there are many economic problems which when modelled as games of incomplete information give rise to many sequential equilibria severely limiting the usefulness of the model there has recently been a large literature devoted to refining the set of equilibria in order to reduce this multiplicity by restricting the set of admissible disequilibrium beliefs this paper argues that the logical foundations of some refinements and the equilibria they focus on are problematic and further proposes an alternative refinement that avoids the difficulties we also provide an existence theorem covering a broad class of signalling games often studied in economics journal of economic literature classification numbers c72 c70 d82

signaling and indirect taxation commodities communicate we investigate optimal indirect taxation when both the intrinsic qualities of goods and signaling motivate consumption choices optimal indirect taxes are introduced into a monotonic signaling game we provide sufficient conditions for the uniqueness of the d1 sequential equilibrium strategies in the case of pure costly signaling signaling goods can in equilibrium be taxed without burden when commodities serve both intrinsic consumption and signaling optimal taxes are characterized by a ramsey rule which deals with distortions resulting from signaling

europe s tired poor huddled masses self selection and economic outcomes in the age of mass migration during the age of mass migration 1850 1913 one of the largest migration episodes in history the united states maintained a nearly open border allowing the study of migrant decisions unhindered by entry restrictions we estimate the return to migration while accounting for migrant selection by comparing norway to us migrants with their brothers who stayed in norway in the late nineteenth century we also compare fathers of migrants and nonmigrants by wealth and occupation we find that the return to migration was relatively low 70 percent and that migrants from urban areas were negatively selected from the sending population keep ancient lands your storied pomp cries she with silent lips give me your tired your poor your huddled masses yearning to breathe free the wretched refuse of your teeming shore send these the homeless tempest tost to me i lift my lamp beside the golden door emma lazarus 1883

the minimum wage restaurant prices and labor market structure using store level and aggregated consumer price index data we show that restaurant prices rise in response to minimum wage increases under several sources of identifying variation we introduce a general model of employment determination that implies minimum wage hikes cause prices to rise in competitive labor markets but potentially fall in monopsonistic environments furthermore the model implies employment and prices are always negatively related therefore our empirical results provide evidence against the importance of monopsony power for understanding small observed employment responses to minimum wage changes our estimated price responses challenge other explanations of the small employment response too

using regional variation in wages to measure the effects of the federal minimum wage the imposition of a national minimum wage standard provides a natural experiment in which the treatment effect varies across states depending on the fraction of workers initially earning less than the new minimum the author exploits this fact to evaluate the effect of the april 1990 increase in the federal minimum wage on teenagers wages employment and school enrollment comparisons of grouped and individual state data confirm that the rise in the minimum wage increased teenagers wages there is no evidence of corresponding losses in teenage employment or changes in teenage school enrollment

employment effects of minimum and subminimum wages panel data on state minimum wage laws using panel data on state minimum wage laws and economic conditions for the years 1973 89 the authors reevaluate existing evidence on the effects of a minimum wage on employment their estimates indicate that a 10 increase in the minimum wage causes a decline of 1 2 in employment among teenagers and a decline of 1 5 2 in employment for young adults similar to the ranges suggested by earlier time series studies the authors also find evidence that youth subminimum wage provisions enacted by state legislatures moderate the disemployment effects of minimum wages on teenagers

optimal income tax in the presence of status effects abstract the existence of distortions from individuals competing to attain social status by using consumption signals justifies some measure of income tax as a counter acting distortion the question posed here is whether it also constitutes a reason for a more progressive income tax schedule the answer is found to be broadly negative if progressiveness is interpreted as a more convex tax schedule unless the rich are more concerned with status seeking than the poor on the other hand status seeking makes the optimal tax schedule steeper so that redistribution is increased essentially the analysis of status seeking based on a signaling approach confirms and strengthens the existing view of an optimal tax schedule and can be incorporated into the diamond american economic review 88 1998 83 95 approach

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

the minimum wage and the employment of youth evidence from the nlsy using panel data on individuals from the national longitudinal survey of youth we find that employed individuals who were affected by the increases in the federal minimum wage in 1979 and 1980 were about 3 percent less likely to be employed a year later even after accounting for the fact that workers employed at the minimum wage may differ from their peers in unobserved ways

social status in economic theory social distinction or status is an important motivation of human behaviour this paper provides a selective survey of recent advances in the economic analysis of the origins and consequences of social status concerns first a selection of empirical research from a variety of scientific disciplines is discussed to underpin the further theoretical analysis i then consider the origins and determinants of tastes for status discuss the endogenous derivation of such preferences for relative standing and assess the different formalizations of these preferences subsequently the consequences of preferences for status are studied for a variety of problems and settings the last section discusses a number of implications of status concerns for normative economics and public policy

a simple model for merit good arguments abstract in this paper we examine a way of representing merit goods by allowing governments to apply a specific form of correction to consumers preferences the model builds upon an approach to the analysis of taste and quality change due to fisher and shell we look at the first best allocation of resources where this is done we also consider second best policies in which the government must charge the same price to all consumers of the merit good and when optimal lump sum transfers are not available

human development and economic sustainability abstract this paper attempts to integrate the concern for human development in the present with that in the future in arguing for sustainable human development it appeals to the notion of ethical universalism an elementary demand for impartiality of claims applied within and between generations economic sustainability is often seen as a matter of intergenerational equity but the specification of what is to be sustained is not always straightforward the addendum explores the relationship between distributional equity sustainable development optimal growth and pure time preference

externalities and optimal taxation this paper reexamines the optimal tax design problem income and commodities in the presence of externalities the nature of the second best and the choice of the tax instruments are motivated by the informational structure in the economy the main results are i environmental levies linear or nonlinear differ in formula from pigouvian taxes by the expressions for the optimal tax on private goods ii externalities do not affect commodity tax formulas linear and nonlinear for private goods iii externalities do not affect the income tax structure if commodity taxes are nonlinear and affect it if commodity taxes are linear and iv a general income tax plus strictly pigouvian taxes are sufficient for efficient taxation if individuals of different types have identical marginal rates of substitution at any given consumption bundle

gifts of the immigrants woes of the natives lessons from the age of mass migration in this article i jointly investigate the political and the economic effects of immigration and study the causes of anti immigrant sentiments i exploit exogenous variation in european immigration to u s cities between 1910 and 1930 induced by world war i and the immigration acts of the 1920s and instrument immigrants location decision relying on pre existing settlement patterns i find that immigration triggered hostile political reactions such as the election of more conservative legislators higher support for anti immigration legislation and lower redistribution exploring the causes of natives backlash i document that immigration increased natives employment spurred industrial production and did not generate losses even among natives working in highly exposed sectors these findings suggest that opposition to immigration was unlikely to have economic roots instead i provide evidence that natives political discontent was increasing in the cultural differences between immigrants and natives results in this article indicate that even when diversity is economically beneficial it may nonetheless be socially hard to manage

direct versus indirect taxation the design of the tax structure revisited this article studies the optimal direct indirect tax mix problem when individuals differ in several unobservable characteristics productivity and endowments it presents general expressions for the optimal commodity tax rates and proves that contrary to atkinson and stiglitz s 1976 result differential commodity taxation remains a useful instrument of tax policy even if preferences are separable between labor and produced goods when cross substitution effects are zero the expressions resemble traditional many households ramsey rules in a cobb douglas illustration where endowments differ only in good 1 interpreted as wealth the tax on good 2 provides an indirect way to tax the unobservable wealth

on limiting the market for status signals abstract in many societies individuals care how others view them in their efforts to impress such individuals engage in consumption signals which attempt to establish higher levels of status than their true status type this leads to an inefficiency which offers the possibility of a pareto improving tax policy the impacts of tax policy and benefits on the signalling equilibrium are considered

the impact of immigration why do studies reach such different results we classify the empirical literature on the wage impact of immigration into three groups where studies in the first two groups estimate different relative effects and studies in the third group estimate the total effect of immigration on wages we interpret the estimates obtained from the different approaches through the lens of the canonical model to demonstrate that they are not comparable we then relax two key assumptions in this literature allowing for inelastic and heterogeneous labor supply elasticities of natives and the downgrading of immigrants downgrading occurs when the position of immigrants in the labor market is systematically lower than the position of natives with the same observed education and experience levels downgrading means that immigrants receive lower returns to the same measured skills than natives when these skills are acquired in their country of origin we show that heterogeneous labor supply elasticities if ignored may complicate the interpretation of wage estimates and particularly the interpretation of relative wage effects moreover downgrading may lead to biased estimates in those approaches that estimate relative effects of immigration but not in approaches that estimate total effects we conclude that empirical models that estimate total effects not only answer important policy questions but are also more robust to alternative assumptions than models that estimate relative effects

is more always better a survey on positional concerns abstract we use survey data to provide some empirical information about concerns regarding relative standing respondents chose between a world where they have more of a good than others and one where everyone s endowment of the good is higher but the respondent has less than others questions asked about education attractiveness and intelligence for one s child and oneself income vacation time approval and disapproval from a supervisor and papers to write half of the respondents preferred to have 50 less real income but high relative income concerns about position were strongest for attractiveness and supervisor s praise and weakest for vacation time

the effect of the minimum wage on the fast food industry using a longitudinal survey of fast food restaurants in texas the authors examine the impact of recent increases in the federal minimum wage on a low wage labor market less than 5 of fast food restaurants were using the new youth subminimum wage in july august 1991 even though the vast majority paid a starting wage below the new hourly minimum wage immediately before it became effective although some restaurants increased wages beyond the level needed to comply with higher minimum wages in both 1990 and 1991 those federal minimum wage increases greatly compressed the distribution of starting wages in the texas fast food industry two findings at variance with conventional predictions are that 1 employment increased more in those firms likely to have been most affected by the 1991 minimum wage increase than in other firms and 2 price changes were unrelated to mandated wage changes

measuring future grandparents preferences for equality and relative standing individuals aversion to risk and inequality and their concern for relative standing are measured through experimental choices between hypothetical societies it is found that on average individuals are both fairly inequality averse and have a strong concern for relative income the results are used to illustrate welfare consequences based on a utilitarian swf and a modified crra utility function it is shown that the social marginal utility of income may then become negative even at income levels that are far from extreme

the minimum wage do moderate increases in the minimum wage reduce employment if not do they nevertheless raise wages to examine these questions we apply techniques of time series analysis and systems estimation that are commonly used in macroeconomics and finance to five panels of data that contain between 11 and 34 low wage industries our answers are no and yes respectively we find that increases in the federal minimum wage between 1947 and 1997 have raised average wages in many of these industries especially the lowest wage ones the effect on employment however is mixed and typically nonsignificant even when average wages have risen

ethnic diversity and preferences for redistribution in recent decades the immigration of workers and refugees to europe has increased substantially and the composition of the population in many countries has consequently become much more heterogeneous in terms of ethnic background if people exhibit in group bias in the sense of being more altruistic to one s own kind such increased heterogeneity will lead to reduced support for redistribution among natives this paper exploits a nationwide program placing refugees in municipalities throughout sweden during the period 1985 94 to isolate exogenous variation in immigrant shares we match data on refugee placement to panel survey data on inhabitants of the receiving municipalities to estimate the causal eects of increased immigrant shares on preferences for redistribution the results show that a larger immigrant population leads to less support for redistribution in the form of preferred social benet levels this reduction in support is especially pronounced for respondents with high income and wealth we also establish that ols estimators that do not properly deal with endogeneity problems as in earlier studies are likely to yield positively biased i e less negative eects of ethnic heterogeneity on preferences for redistribution

is the new immigration really so bad this article reviews the recent evidence on us immigration focusing on two key questions 1 does immigration reduce the labour market opportunities of less skilled natives 2 have immigrants who arrived after the 1965 immigration reform act been successfully assimilated overall evidence that immigrants have harmed the opportunities of less educated natives is scant on the question of assimilation the success of the us born children of immigrants is a key yardstick by this metric post 1965 immigrants are doing reasonably well even children of the least educated immigrant origin groups have closed most of the education gap with the children of natives

the political economy of the us mortgage default crisis we examine the effects of constituents special interests and ideology on congressional voting on two of the most significant pieces of legislation in us economic history representatives whose constituents experience a sharp increase in mortgage defaults are more likely to support the foreclosure prevention act especially in competitive districts interestingly representatives are more sensitive to defaults of their own party constituents special interests in the form ofhigher campaign contributions from the financial industry increase the likelihood of supporting the emergency economic stabilization act however ideologically conservative representatives are less responsive to both constituent and special interests jel d72 g21 g28

an empirical equilibrium search model of the labor market in structural empirical models of labor market search the distribution of wage offers is usually assumed to be exogenous however because in setting their wages profit maximizing firms should consider the reservation wages of job seekers the wage offer distribution is essentially endogenous we investigate whether a proposed equilibrium search model in which the wage offer distribution is endogenous is able to describe observed labor market histories we find that the distributions of job and unemployment spells are consistent with the data and that the qualitative predictions of the model for the wages set by employers are confirmed by wage regressions the model is estimated using panel data on unemployed and employed individuals we distinguish between separate segments of the labor market and we show that productivity heterogeneity is important to obtain an acceptable fit to the data the results are used to estimate the degree of monopsony power of firms further the effects of changes in the mandatory minimum wage are examined

immigration wages and compositional amenities economists are often puzzled by the stronger public opposition to immigration than trade since the two policies have symmetric effects on wages unlike trade however immigration changes the composition of the local population imposing potential externalities on natives while previous studies have focused on fiscal spillovers a broader class of externalities arise because people value the compositional amenities associated with the characteristics of their neighbors and co workers in this paper we present a new method for quantifying the relative importance of these amenities in shaping attitudes toward immigration we use data for 21 countries in the 2002 european social survey which included a series of questions on the economic and social impacts of immigration as well as on the desirability of increasing or reducing immigrant inflows we find that individual attitudes toward immigration policy reflect a combination of concerns over conventional economic impacts i e on wages and taxes and compositional amenities with substantially more weight on composition effects most of the difference in attitudes to immigration between more and less educated natives is attributable to heightened concerns over compositional amenities among the less educated

immigrant group size and political mobilization evidence from european migration to the united states immigration to democratic nations generates new groups of potential voters this paper investigates how the electorate share of immigrant groups influences their likelihood of becoming politically mobilized focusing on the mechanism of coalition formation with the democratic party using newly assembled data on ethnic enclaves in american cities at the start of the twentieth century i show immigrants were more likely to mobilize politically as their share of the local electorate grew larger this effect is driven by political mobilization in voting districts where the democratic party likely needed an immigrant group s vote to win elections i also consider the shape of the electorate share effect showing it is nonlinear and consistent with a political economy model of coalition formation

the effects of minimum wages on employment theory and evidence from britain recent work on the economic effects of minimum wages has stressed that the standard economic model where increases in minimum wages depress employment is not supported by empirical work in some labor markets we present a general theoretical model whereby employers have some degree of monopsony power which allows minimum wages to have the conventional negative impact on employment but which also allows for a neutral or positive impact studying the industry based british wages councils between 1975 and 1992 we find that minimum wages significantly compress the distribution of earnings but do not have a negative impact on employment

immigration and inequality immigration is often viewed as a proximate cause of the rising wage gap between highand low skilled workers nevertheless there is controversy over the appropriate theoretical and empirical framework for measuring the presumed effect and over the precise magnitudes involved this paper offers an overview and synthesis of existing knowledge on the relationship between immigration and inequality focusing on evidence from cross city comparisons in the u s while some researchers have claimed that a cross city research design is inherently flawed i argue that the evidence from cross city comparisons is remarkably consistent with recent findings based on aggregate time series data in particular cross city and aggregate time series comparisons provide support for three key conclusions 1 workers with below high school education are perfect substitutes for those with a high school education 2 high school equivalent and college equivalent workers are imperfect substitutes with an elasticity of substitution on the order of 2 3 within education groups immigrants and natives are imperfect substitutes together these results imply that the average impacts of recent immigrant inflows on the relative wages of u s natives are small the effects on overall wage inequality including natives and immigrants are larger reflecting the concentration of immigrants in the tails of the skill distribution and higher residual inequality among immigrants than natives even so immigration accounts for a small share 5 of the increase in u s wage inequality between 1980 and 2000

optimal redistributive taxation when government s and agents preferences differ abstract paternalism merit goods and specific egalitarianism are concepts we sometimes meet in the literature the thing in common is that the policy maker does not fully respect the consumer sovereignty principle and designs policies according to some other criterion than individuals preferences using the self selection approach to tax problems developed by stiglitz stiglitz j e 1982 self selection and pareto efficient taxation journal of public economics 17 213 240 and stern stern n h 1982 optimum taxation with errors in administration journal of public economics 17 181 211 the paper provides a characterization of the properties of an optimal redistributive mixed tax scheme in the general case when the government evaluates individuals well being using a different utility function than the one maximized by private agents