on optimal wage indexation when shocks are real abstract this note studies the optimal degree of wage indexation in the presence of real shocks contrary to what is indicated in the literature it is demonstrated that the optimal degree of indexation is not limited to 0 1 but may take any value in

inflation and indexation an empirical approach previous studies have examined various aspects of indexation we can distinguish two major points of interest wage determination and the effects of indexation on macroeconomic fluctuations some scholars have attempted to determine empirically and theoretically the causes of cost of living adjustment cola clauses in wage contracts 3 7 11 the focus in this research is often on major union contracts with wage change a function of both real factors e g the unemployment rate and monetary factors e g past inflation typical results are that past inflation will increase the adoption of indexation while industry specific shocks may cause resistance to indexation in addition kaufman and woglom 7 have shown that current labor market conditions have a significant impact on long term contracts research has also been concerned with the effect of wage indexation on the macroeconomy 1 2 5 6 how can wage indexation schemes be designed so as to alleviate the substantial income redistribution due to inflation and the use of contracts in nominal

real aspects of exchange rate regime choice with collapsing fixed rates abstract typical evaluations of the choice of exchange rate regime examine the performance of the real economy and assume that the regimes last indefinitely in contrast actual regimes are quite transitory this paper examines how the predictions of two popular models for the determination of some real economic variables must be modified when agents rationally perceive that a fixed rate regime will be transitory the models studied are simple stochastic versions of the models in dornbusch 1976 and flood and marion 1982

on the absence of positive wage indexation this paper rationalizes the absence of positive wage indexation in labour contracts that is of indexing provisions that link wage increases to inflation we investigate the equilibrium of a policy game in a stochastic economy in which wage setters and a policy maker interact strategically in order to determine the preferred degree of wage indexation and an optimal stabilization rule respectively our conclusion is that nominal wage rigidity and counterinflationary economic policy represent the best courses of action when price stability is valued and negative responses of contractual wages to price shocks are ruled out under these assumptions moreover the stochastic structure of the economy has no bearing on the optimality of maximal real wage flexibility this paper presents an argument for explaining nominal wage rigidity in labour contracts we investigate the equilibrium of a policy game in a stochastic economy in which wage setters and a policy maker interact strategically in order to determine the preferred degree of wage indexation and an optimal intervention rule respectively our conclusion is that indexing provisions that maximize the flexibility of real wages and counter inflationary economic policy represent the best courses of action for the players in the absence of schemes that create a negative correlation between wage and price movements maximal real wage flexibility is attainable through zero indexation or rigid nominal wages the crucial assumption that drives this result is that some price stability is desirable for the policy maker the introduction of price stability as a goal seems eminently justified from a practical standpoint the federal reserve system s legislative mandate from the federal reserve reform act of 1977 the ongoing debate about the house joint resolution 409 and the delors report which speaks of an unequivocal commitment to maintain price stability as the primary objective of the european system of central banks

stochastic data envelopment analysis a review abstract this paper provides a review of stochastic data envelopment analysis dea we discuss extensions of deterministic dea in three directions i deviations from the deterministic frontier are modeled as stochastic variables ii random noise in terms of measurement errors sample noise and specification errors is made an integral part of the model and iii the frontier is stochastic as is the underlying production possibility set pps stochastic dea utilizes non parametric convex or conical hull reference technologies based upon axioms from production theory accompanied by a statistical foundation in terms of axioms from statistics or distributional assumptions the approaches allow for an estimation of stochastic inefficiency compared to a deterministic or a stochastic pps and for statistical inference while maintaining an axiomatic foundation focus is on bridges and differences between approaches within the field of stochastic dea including semi parametric stochastic frontier analysis sfa and chance constrained dea ccdea we argue that statistical inference based upon homogenous bootstrapping in contrast to a management science approach imposes a restrictive structure on inefficiency which may not facilitate the communication of results of the analysis to decision makers semi parametric sfa and ccdea differ w r t the modeling of noise and stochastic inefficiency the two approaches are in spite of the inherent differences shown to be complements in the sense that the stochastic ppss obtained by the two approaches share basic similarities in the case of one output and multiple inputs recent contributions related to i disentangling of random noise and random inefficiency and ii obtaining smooth shape constrained estimators of the frontier are discussed

inflation and wage indexation with multiperiod contracts this paper deals with the impact of wage indexation on the rate of inflation in two alternative institutional settings simultaneous and overlapping multiperiod contracts the results show that in the case of simultaneous contracts the degree of indexation determines the timing of price changes but not its intercontract magnitude when contracts are overlapping and uniformly distributed over time indexation always increases the absolute rate of inflation and its variability

non parametric productivity analysis with undesirable outputs an application to the canadian pulp and paper industry this article extends the chavas cox approach to non parametric analysis by incorporating undesirable outputs to provide a more complete representation of the production technology inner and outer non parametric technology bounds are constructed the methods are illustrated with application to time series data for the canadian pulp and paper industry conventional measures that ignore changes in pollutant outputs underestimate true productivity growth further there is a large gap between estimates generated with reference to inner and outer bounds to the technology suggesting that researchers need to be aware of the limitations of results derived from analyses relying only on dea methods copyright 2001 oxford university press

on functions quality and timeliness of economic information economic decisions confront more uncertainty as they grow in scope and reach further into the future they are likely to do so increasingly in decentralized economies that expand and diversify the economic incentives to reduce uncertainty and improve predictions and decisions give rise to the demand for large amounts of diverse information this is not a new phenomenon of course but it is revealed more clearly than ever in the present era of great advances in informational technology for now the demand is to a large extent visibly satisfied the knowledge industries or services of inquiring comthe uncertainty about economic information increases with the probability of error in the underlying data and their processing and interpretation many errors cannot be promptly detected and eliminated but can be gradually reduced over time as attested by the revisions in economic statistics this paper presents substantial evidence on the accuracy of provisional estimates of quarterly and monthly changes in 18 important variables measures of several aspects of data quality and of average lags of data release and signal detection are provided for a collection of 110 widely used economic indicators these materials help identify the location of the more serious measurement errors by variables and period and they show that informational lags of 5 and more months are frequent this paper is part of the national bureau of economic research program on economic fluctuations it was presented at the first international symposium on forecasting in quebec city on may 27 1981 and at the ifo institute for economics research in munich on september 23 1981 financial support from the national science foundation and the aid of the graduate school of business of the university of chicago and nber are gratefully acknowledged i am indebted to louis lambros for helpful suggestions and efficient research and to john gould and geoffrey moore for useful comments 1 growth in the modem economy is motivated by the desire to accumulate human and physical resources capital in the most general sense and is accomplished by actions that necessarily have long term consequences the decisions to choose these particular courses of action strategies must therefore be based on similarly long expectations which are fallible as the risk is high so is the premium on any knowledge that might help the decision maker

modeling undesirable factors in efficiency evaluation abstract data envelopment analysis dea measures the relative efficiency of decision making units dmus with multiple performance factors which are grouped into outputs and inputs once the efficient frontier is determined inefficient dmus can improve their performance to reach the efficient frontier by either increasing their current output levels or decreasing their current input levels however both desirable good and undesirable bad factors may be present for example if inefficiency exists in production processes where final products are manufactured with a production of wastes and pollutants the outputs of wastes and pollutants are undesirable and should be reduced to improve the performance using the classification invariance property we show that the standard dea model can be used to improve the performance via increasing the desirable outputs and decreasing the undesirable outputs the method can also be applied to situations when some inputs need to be increased to improve the performance the linearity and convexity of dea are preserved through our proposal

multilateral productivity comparisons when some outputs are undesirable a nonparametric approach multilateral productivity comparisons of firms producing multiple outputs some of which are undesirable are obtained by making two modifications to the standard farrell approach to efficiency measurement the restriction that production technology satisfy strong disposability of outputs is relaxed to allow for the fact that undesirable outputs may be freely disposable and the efficiency measures are modified to allow for an asymmetric treatment of desirable and undesirable outputs performance measures that satisfy these requirements are calculated as solutions to programming problems the methodology is applied to a sample of mills producing paper and pollutants

wage indexation employment and inflation price versus productivity indexing is considered in a model of monetary policy with incomplete information and wage bargaining in a perfectly price indexed economy the inflationary bias due to lack of credibility is eliminated however productivity indexing is more appropriate to dampen macroeconomic fluctuations that are caused by real disturbances we show that productivity indexing alone guarantees both price and employment stability provided the government s reputation is good enough and the union s bargaining power is not too strong this reduces the degree of price indexation as the union becomes weaker and the government s reputation improves productivity indexing is desirable with volatile productivity processes and weak unions jel classification e24 e52

price variability supply side policies and monetary rules wage subsidy policies or demand management are equally effective in stabilizing output about its frictionless level in fischer gray predetermined labor contracts models however if the authorities are also concerned with price variability the optimal monetary rule is unambiguously superior copyright 1987 by the review of economic studies limited

wage and price contracts in a macro model with information costs this paper investigates the efficiency case for fixed price demand side contracts in a fischer gray type of macro model with information costs a simple market clearing macro model with market clearing costs in both labour and goods markets is presented first then predetermined wage contracts into the labour market are introduced contracts involving a demand side rule are compared with the market clearing system as well as alternative contracts based upon either supply side or predetermined quantity rules finally the case where the wage rate and the price level are both predetermined while output is determined by aggregated demand is considered salaires et prix contractuels dans un modele macro e conomique quand des couts d information existent ce memoire examine l efficacite de contrats a prix fixe dans un modele macro economique a la fischer gray quand des cofits d information existent la preniiere section du memoire presente un modele simple qui tient compte explicitement des cofits de l operation du marche tant dans le marche des biens que dans celui du travail la seconde section introduit des salaires contractuels predetermines dans le marche du travail les auteurs comparent les resultats d un tel arrangement dans le cas oii le niveau d emploi est determine par la demande de travail par l offre de travail ou est simplement pre determine la troisieme section examine le cas oiu le taux de salaire et le niveau des prix sont definis contractuellement alors que le niveau de production est determine par la demande agregee in order to explain movements of employment and output over the business cycle much of short run macro economic analysis has been based on the assumption of sticky or predetermined money prices models incorporating sticky prices have also tended to assume demand side quantity rules that is if the wage rate is predetermined employment is assumed to be determined by

optimal wage indexation and monetary policy in an economy with imported raw materials abstract an economy s openness from the input side has important effects on the optimal design of its macroeconomic policies given the exchange rate regime the larger the share of imported raw materials in domestic production the smaller the optimal degree of wage indexation to unanticipated inflation alternatively given the wage indexation parameter the larger the share of imported raw materials in domestic production the smaller the optimal degree of foreign exchange intervention by the monetary authority the more flexible the exchange rate

congestion measurement for regional industries in china a data envelopment analysis approach with undesirable outputs abstract the industry in china has been developing extensively in the last few decades large investments in china s industry may cause congestion because congestion is a widely observed economic phenomenon in such a scenario in order to know the performance and allocate resources well it is necessary for the chinese government to measure congestion of the industry many scholars have studied this topic by means of data envelopment analysis dea however previous studies only pay attention to the framework of desirable outputs in fact undesirable outputs often accompany desirable outputs in production thus in this study a new approach for measuring congestion with undesirable outputs is proposed and applied to analyzing congestion of the industry in 31 administrative regions of china the results show that five regions have congestion in their industry in 2010 besides the regions located in the east of the country perform the best in ecological efficiency followed by regions in central and west china based on these findings this paper proposes some political schemes to improve regional industrial efficiency

differential information and the role for active stabilization policy a comment in a recent paper t m anderson analyzes a new classical model in which demanders and suppliers are differentially informed he claims that a particular feedback monetary policy but not a private indexation rule is able to perfectly stablize the economy the authors show that anderson s private indexation rule is also able to perfectly stabilize the economy copyright 1991 by the london school of economics and political science

stabilization with wage indexation and exchange rate flexibility abstract this survey examines the role of wage indexation and exchange rate policy in dampening fluctuations in output around its target level it is demonstrated that the appropriate choice for wage indexation and exchange rate flexibility is highly sensitive to the nature and the relative importance of the shocks impinging upon the economy as well as to the relevant parameters in the economy moreover the question of the desired flexibility of the exchange rate should be studied in the context of wage indexation and vice versa this interdependence raises the possibility of both policies being complements or substitutes to each other depending on the number of shocks that perturb the economy

the allocation of phd enrolment quotas in china s research oriented universities based on equity and efficiency principles abstractphd enrolment quota allocation proves the key concern for china s universities to promote institutional reform and improve research level and it is often characterized by the zero sum game

indeterminacy and endogenous fluctuations with arbitrarily small externalities abstract in this paper we study the occurrence of local indeterminacy endogenous fluctuations and bifurcations in a simple non monetary 2 period overlapping generations economy in which people do not consume when young with capital labor substitution elastic labor supply and productive externalities we show that in contrast with the local dynamics generated by many one sector models of capital accumulation studied in the current literature local indeterminacy and therefore stationary stochastic equilibria driven by self fulfilling beliefs sunspots as well as multiple stationary equilibria are pervasive phenomena when the elasticity of input substitution is large and when the size of externalities is arbitrarily small we also demonstrate that when externalities are arbitrarily small the cobb douglas production function often used for its analytical tractability in many models is structurally unstable it is always associated with uniqueness of the steady state but any small perturbation of the elasticity of input substitution leads to the existence of two stationary equilibria which may be close to each other with the consequence that the dynamics may be qualitatively very different from those originated in the unit elasticity case journal of economic literature classification numbers e32 c62

on optimal wage indexation the observed practice of contracting for labor services in advance introduces stickiness or friction into the economic system in the presence of monetary and real stochastic disturbances the stability of the levels of employment and output hinges on the nature of the wage contracts in this paper we demonstrate the existence of optimal indexation schemes that are capable of eliminating the aforementioned friction by duplicating the equilibrium that would obtain if labor services were contracted for after the stochastic disturbances were realized

the heterogeneity of labor wage indexation and welfare abstract when disturbances are nominal full indexation seems to be optimal for real disturbances less than full indexation should be used in the indexation literature this general result is obtained by assuming that labor is homogeneous and indexation is applied throughout the economy in the paper we show that some qualifications need to be made when labor is heterogeneous and only a small portion of labor market is covered by indexation

monetary nominal income and exchange rate targets in a small open economy abstract in this paper i examine the properties of monetary nominal income and exchange rate targets as stabilization policies in an open economy perfect capital mobility and a wide variety of transitory random shocks is assumed nominal wages are assumed to have been set in advance of the realization of the shocks none of these rules is in general sufficient to minimize the welfare cost of aggregate fluctations and none necessarily dominates all others under the assumption that monetary control is subject to random errors optimal policy implies reactions to all observable shocks and is characterized by heavy exchange market intervention

nominal budgeting as a stabilization rule the optimal degree of indexation of public spending abstract we analyze here a novel instrument of fiscal policy the degree of adjustment of public spending to price surprises this acts as an automatic stabilizer which fully substitutes for wage indexation partial reliance on nominal budgeting is usually optimal in contrast to the conventional assumption of pegged real government spending unlike what emerges in the wage indexation literature we show that the more pronounced is the relative importance of demand shocks the stronger is the case for lack of indexed public spending we find that a low degree of wage indexation may be the optimal response to government budgets not cast in real terms

wage indexation and exchange market intervention in a small open economy the analysis of this paper stresses the interdependence between wage indexation on the one hand and exchange market intervention on the other as tools of macroeconomic stabilization policy in a small open economy subject to stochastic disturbances it is shown how the choice of eitherpolicy instrument impinges on the effectiveness of the other in particular if the domestic money wage is fully indexed to some weighted average of the domestic and foreign price levels then irrespective of what that chosen weight may be exchange market intervention is rendered totally ineffective insofar as the stabilization of the real part of the domestic economy is concerned likewise if the monetary authority intervenes in the exchange market so as to exactly accommodate for nominal movements in the demand for money thereby rendering the excess demand for money dependent only upon real variables then any form of wage indexation is totally ineffective for the stabilization of the real part of the system in either polar case the respective instrument can stabilize the domestic price level alternative combinations of policy for the stabilization for domestic and foreign disturbances are considered this abstract was borrowed from another version of this item

optimal wage indexation foreign exchange intervention and monetary policy this paper deals with the design of optimal monetary policy and with the interaction between the optimal degrees of wage indexation and foreign exchange intervention the model is governed by the characteristics of the stochastic shocks which affect the economy and by the information set that individuals possess because of cost of negotiations nominal wages are assumed to be precontracted and wage adjustments follow a simple indexation rule that links wage changes to observed changes in price the use of the price level as the only indicator for wage adjustments may not permit an efficient use of available information and may result in welfare loss the analysis specifies the optimal set of feedback rules that should govern policy aiming at the minimization of the welfare loss these feedback rules determine the optimal response of monetary policy to changes in exchange rates interest rates and foreign prices the adoption of the optimal set of feedback rules results in the complete elimination of the welfare cost arising from the simple indexation rule and from the existence of nominal contracts since optimal policies succeed in the elimination of the distortions issues concerning the nature of contracts and the implications of specific assumptions about disequilibrium positions become inconsequential the analysis then proceeds to examine the interdependence between the optimal feedback rules and the optimal degree of wage indexation it is shown that a rise in the degree of exchange rate flexibility raises the optimal degree of wage indexation one of the key conclusions is the proposition that the number of independent feedback rules that govern a policy must equal the number of independent sources of information that influence the determination of the undistorted equilibrium thus it is shown that with a sufficient number of feedback rules for monetary policy there may be no need to introduce wage indexation it is also shown that an economy that is not this abstract was borrowed from another version of this item