aggregate employment and intertemporal substitution in the uk in this paper the author sets up estimates and tests an explicit model of aggregate labor supply based on the intertemporal substitution hypothesis the model is derived as the optimal decision rule of an infinitely living household maximizing an intertemporal ces utility function over consumption and leisure the evidence suggests that for aggregate employee hours the model is rejected but that for the total number of employees in employment the estimates are broadly consistent with the theory the assumed constant elasticity of substitution is estimated at around 0 2 and this estimate implies a short run real wage and real interest rate elasticity of labor supply of the same order copyright 1987 by royal economic society

non monotonic effects of market concentration on prices for residential solar photovoltaics in the united states abstract emerging renewable energy markets may become more concentrated over time as the most efficient firms accumulate market share the effects of this market concentration on prices are tested using a rich dataset of residential solar photovoltaic pv systems in the united states a novel hypothesis is explored that the effects of market concentration may be non monotonic prices may decline in market concentration due to efficiency gains associated with returns to scale but increase in concentration in already concentrated markets due to increasing market power the results of an econometric model provide evidence to support the non monotonic hypothesis however the data suggest that the relationship between prices and firm scale is nuanced and that both large and small scale pv installers may wield efficiency advantages

unions employment and the inflation tax the main purpose of this paper is to analyse the possible effects of an inflation tax or tax based incomes policy on the employment level in an economy in which trade unions play a central role in wage setting a tax based incomes policy tip has long been advocated in the united states as a means of curbing inflation without disastrous short run consequences for employment advocates of tip see it as an additional force working by incentive rather than regulation which helps to keep down inflationary wage bargains this increases the scope of demand management for maintaining high levels of employment in a relatively non inflationary way however it was not envisaged that tip could have any permanent effect on the long run equilibrium level of employment implicit in this view is the assumption that long run equilibrium employment is determined by a competitive market in the usual walrasian manner furthermore since in such a long run equilibrium the rate of inflation is uniquely determined by the rate of monetary expansion tip has no long run value in curbing inflation either thus the only role possible for tip is as a temporary measure which eases the transition from a short run temporary equilibrium characterised by too much inflation and too little employment to the long run equilibrium characterised by full employment and moderate inflation more recently in britain it has been argued that the scope of an instrument which taxes excessive wage increases is greater than was originally conceived in a series of papers professor layard has put forward the original and provocative idea that british policy makers adopt a form of tip on a permanent basis as this will have a permanent effect on long run employment according to this view even if a temporary incomes policy succeeded in reducing inflation to a constant and moderate level without unemployment being too far above its long run value the amount of unemployment in the long run would be unacceptably high furthermore a permanent tip in some form is the only way to reduce this high long run equilibrium unemployment as layard i982 puts it only a permanent incomes policy can substantially reduce the non inflationary level of unemployment 2 the idea of a permanent tip may seem a somewhat startling and radical proposal to some economists the claim that such a policy can actually increase long run employment even though it obviously adds to employers costs may seem

dynamics of market structure advertising and profitability a var approach the purpose of this study is to provide an econometric characterization of the dynamic interrelationship among structure conduct and performance variables with a vector autoregressive var model particular attention will be given to the causality and response patterns of the variable involved in the light of our desire to ascertain descriptive characterizations of historical behaviour we let the data speak for itself the result suggests a weak realtionship existing between market structure and profitability

theoretical approaches to monetary disinflation abstract during the 1980s many countries adopted tight monetary policies to reduce high inflation rates which were the legacy of the 1970s as inflation threatens to rise at the beginning of this decade this paper provides a survey of the 1980s literature which sought to provide theoretical understandings of how monetary disinflation is achieved four models are presented monetarist neo keynesian new classical and post keynesian each model s explanation of the recession which accompanies the monetary disinflation is outlined as well as possible policy measures to reduce the extent of the recession and to hasten the return to full employment

a re examination of the relationship between industry structure and economic performance the objective of this study is to develop a simultaneous equations model of profitability concentration advertising expenditures and research and development outlays the data used in the estimation are subjected to regression diagnostics in an effort to determine the importance to the estimation results of a subset of the data that can have a disproportionate influence the estimation results especially for the advertising expenditures relationship and the research and development outlays equation do change when a truncated data sample based on the omission of the outliers is used this serves partly to explain why there is some disagreement in the literature on market structure and economic performance with regard to the impact of several economic factors

why is inflation low when productivity growth is high i introduction in the united states since world war ii inflation has been low when productivity growth has been high for example the 1950s and 1960s were a period of low inflation and high productivity growth whereas the 1970s and 1980s were a period of high inflation and low productivity growth the negative correlation between inflation and productivity growth over the years 1949 2000 is much stronger than the correlation between inflation and unemployment i e phillips curve type correlations or the correlation between inflation and growth in monetary aggregates i e quantity theory correlations little research has explored the comovement between inflation and productivity growth the evidence developed herein suggests that the negative correlation reflects the behavior of the federal reserve over the postwar period the federal reserve has not adjusted nominal income growth through changes in the growth of the money supply to changes in trend productivity growth as will be documented such a policy induces a negative correlation between trend productivity growth and inflation as an acceleration in trend productivity growth in the face of constant nominal income growth leads to a deceleration in inflation this focus on monetary policy as the key factor behind medium to long run correlations between inflation and productivity seems more plausible than a focus on peculiarities of phillips curve reduced form relationships because such relationships are plausibly more appropriate guides to the short run dynamics of inflation as a case in point consider the recent shift to inflation targeting monetary policy strategies in the united kingdom and sweden which emphasize the key role that monetary policy plays in the inflation outlook over several years the role of monetary policy in generating the strong correlation between productivity growth and inflation in the medium run is developed in a textbook model based on an expectations augmented phillips curve the model s main empirical predictions are confirmed 1 inflation especially expected inflation should fall when trend productivity growth rises and 2 nominal income and nominal wage growth should not change when trend productivity growth changes the model also implies that productivity growth enters a reduced form phillips curve relationship as a proxy for inflation expectations this implies that traditional estimates of the nonaccelerating inflation rates of unemployment nairu should fall when productivity growth accelerates an empirical regularity that has received a great deal of academic and policy attention in recent years and is typically explained via some type of irrationality perhaps surprisingly these empirically regularities do not rely on the great inflation of 1965 79 when inflation accelerated and productivity growth decelerated recent discussions of phillips curve reduced form relationships have placed a strong emphasis on structural explanations that may explain a link between productivity growth the nairu and hence inflation staiger et al 2001 present evidence that the time series techniques they employ to estimate trend productivity growth and the nairu yield a strong correlation between the nairu and trend productivity growth ball and moffitt 2001 and ball and mankiw 2002 provide a structural interpretation labor market institutions for some reason perhaps irrationality make the real wage aspirations of workers respond very sluggishly with a lag of perhaps 10 years or more to productivity growth and hence an acceleration in productivity growth leads to a prolonged period of downward pressure on labor costs and hence inflation similar reasoning has been used in policy circles for years at the council of economic advisors 1997 2000 and the federal reserve board meyer 2000 reflecting the reasoning in grub b et al 1982 and braun 1984 the focus herein the behavior of policy is consistent with the evidence on inflation productivity growth and empirical estimates of the nairu

price leadership and welfare losses in u s manufacturing comment do economists have to worry about the efficiency losses of imperfect competition textbooks especially tend to conclude that the answer is negative the truth is however that the relevant literature can be divided in two opposing parts of roughly equal size that is clearly an unsatisfactory state and novel contributions employing improved methods are therefore welcome this decade has witnessed an enormous upswing in oligopoly theory the deadweight loss literature has been influenced by that to a minor extent only avinash dixit s and nicholas stern s 1982 algorithms are however notable exceptions another valuable exception is micha gisser s 1986 attempt to apply a price leadership model for predicting the order of magnitude of the loss of consumer surplus in the united states our intention is however to show that a couple of quite reasonable modifications challenge the conclusion of small deadweight losses implied by the latter approach we do not suggest any improvement allowing for the influence of product differentiation and concentration of local markets we only note that the deadweight losses are under rather than overestimated by those omissions our contribution is to show that two other assumptions that appear in gisser s analysis are crucial for the results we find that the ideas of unitary demand elasticity and equal supply elasticity for the leaders and the price taking fringe are questionable we also point out that the output distortion percentage loss of output may be quite large even if the percentage loss of consumer surplus is small this fact seems to be ignored in the literature consider first demand elasticity gisser assumes it to be unity like arnold c harberger 1954 empirical estimates are not necessarily reliable but the fact that they are often below unity should in our opinion be taken seriously see for example m s houthakker and lester p taylor 1966 and for the u s food and tobacco industries emilio pagoulatos and robert sorensen 1986 gisser s technique of predicting welfare losses means that realistic values of demand elasticity and concentration are inserted in a formula that is derived from a theoretical model it is therefore inadequate to limit its applicability to the case of unitary elasticity which appears dubious from an empirical standpoint consider then supply elasticity gisser assumes that both the leading group and the fringe of price taking firms have the same supply elasticity our intention is not to discuss the behavior of firms in detail but we nevertheless find it questionable that firms assume the roles as either active leaders or passive price takers if their technologies are more or less identical why do firms not dominate because they have a larger supply elasticity it could even be considered a styl acting professor department of economics abo akademi the swedish university of turku fanriksgatan 3 sf 20500 turku finland participants in the department s research seminars have delivered useful criticism i thank leila stahl for research assistance remaining errors are my own losses that are less than 1 percent of gnp are reported by arnold c harberger 1954 david schwartzman 1960 frederick w bell 1968 dean worcester 1973 john siegfried and thomas k tiemann 1974 bjmrn wahlroos 1984 and outside the united states wahlroos 1984 finland losses that are larger than 1 percent and usually larger than 3 percent are reported by david kamerschen 1966 and keith cowling and dennis c mueller 1978 for the united states the losses may be large in the uk according to cowling and mueller 1978 and malcolm c sawyer 1980 and in france according to frederick jenny and andre paul weber 1983 simulations in different types of models by abram bergson 1973 j a kay 1983 and g k yarrow 1986 suggest losses that are at least potentially large

interpreting rising concentration the case of beer despite considerable long term progress in distinguishing conceptually between the fact of market power and the calculation of market concentration antitrust claimants the department of justice the federal trade commission ftc and private litigants continue to place substantial emphasis on defining a market computing market shares and calculating measures of concentration the operating supposition is virtually always that monopoly or market power is positively associated with concentration whether other offsetting characteristics are also associated with high concentration ordinarily receives less if any consideration the most often cited consideration weighing against an automatic condemnation of increased concentration say through horizontal merger is that costs market power and concentration may all be jointly related economic analysis suggests that if higher concentration brings with it is caused by or causes lower industry costs then it may also bring positive total benefits even if antitrust concern with industry concentration focuses on market power the ability of firms to restrict output and raise price the brewing industry among others has been a major target of this concern because of its high and rising concentration this paper sketches two alternative explanations for this change in industry structure competitive expansion by the more efficient brewers and anticompetitive exclusion of equally efficient but smaller brewers empirical analysis indicates that competition is the better hypothesis in explaining changes in the structure of the beer market

a neglected welfare cost of monopoly and most other product market distortions abstract a neglected effect of monopoly is the distortion in the quantity of resources supplied monopoly not only affects the economy s output mix it also results in factor prices that are below social marginal value products this latter distortion is shown to be quantitatively important when other policies such as taxes on labor earnings also depress factor prices under plausible conditions the welfare cost due to this distortion of monopoly is shown to be between five and fifteen times larger than the more familiar harberger triangle output mix distortion of monopoly it is suggested that the resource supply effects of many other policies are similarly likely to be more important than their commonly evaluated output market effects

a comparison of oligopoly welfare loss estimates for u s food manufacturing capitalizing on theoretical advances in calculating deadweight welfare losses due to imperfect competition we compare eight empirical estimates for the u s food manufacturing industries the estimates incorporate varying theoretical assumptions about demand supply and firm pricing behavior and utilize various data sources time periods and assumptions about the proper competitive benchmark while the estimates of average allocative losses range widely there is a high degree of congruence in the rankings of economic losses due to market power thus from the perspective of efficient antitrust enforcement the newer theoretical oligopoly approaches and the traditional structure conduct performance models would target similar industries

deadweight loss in oligopoly a new approach ever since harberger s 18 pioneering article researchers have attempted to estimate the welfare loss resulting from the exercise of market power despite nearly four decades of work in this area however surprisingly few researchers disagree with harberger s finding that deadweight loss is quite small while many dispute his claim that deadweight loss in manufacturing amounts to only about 0 1 of gnp few estimates exceed more than 1 3 of the value of output some of the higher estimates moreover include losses of a broader nature than the purely allocative losses on which harberger focuses in this paper i use a generalization of a recent model of oligopoly to estimate the magnitude of deadweight loss in the u s manufacturing sector while the exact magnitude of the losses depends on several parameters the estimates indicate that deadweight loss may be considerably higher than earlier work suggests ranging from roughly 6 10 of the value of shipments if demand is inelastic to over 20 if demand is elastic

measuring advertising intensity and intangible capital in the greek food industry the objective of the present paper is to examine market conduct and its determinants in the greek food industry and to measure how and to what degree the industry and the firm s structural characteristics affect advertising intensity an advertising intensity model giving emphasis to intangible capital is formulated data from icap have been used on a four digit classification for the food industry during the 1990 1997 period the empirical results indicate that intangible capital positively affects the advertising intensity of the firm and plays an important role in strategies that affect total cost demand and structure of the market

is incomes policy the answer to unemployment in western europe unemployment has remained obstinately high ever since 1975 what has prevented governments from reducing it the answer is simple if unemployment were reduced by normal methods inflation would rise it follows that the only way to cut the long run level of unemployment is to find some other way of controlling inflation no such device will be costless but if we could find any method that was less costly than unemployment we ought to adopt it maurice chevalier was asked in later life what he thought of old age it s not so bad he replied when you consider the alternative that was a true economist talking and it is also the spirit in which i shall approach the unhappy choices open to us my argument will proceed roughly as follows first imagine that a costless incomes policy is available then most people would probably agree that if inflation was too high a temporary incomes policy would be a good idea in order to get inflation down but what then when it was down we would still be left with far too high an unemployment rate only a permanent incomes policy can substantially reduce the non inflationary level of unemployment however against these benefits have to be set the costs of an incomes policy a conventional incomes policy which permanently suspended collective bargaining would be out of the question in a free society so we have to have an incomes policy that works by incentive rather than by regulation the best thing would be a tax on wage increases levied on employers and proportional to wage increases above a prescribed norm i shall spend some time discussing this tax using various different models of wage setting to explain how it would have its effect and finally i shall try producing a first draft of the operator s manual

r d market structure and profits a value based approach this paper considers a complex relation among r d market structure and a market value based measure of profits perhaps of greatest interest a positive effect of r d on profits emerges as does a negative r d concentration interaction effect both appear robust and support an intangible capital and rivalrous view of r d despite substantial interest in the question little direct evidence on research and development r d market structure and profits relations has appeared in the literature an important exception to this rule is grabowski and mueller hereafter g m 1978 who reported a strong effect of r d on adjusted profit rate data in addition to an equally strong negative r dmarket concentration interaction effect g m interpret their findings as support for an intangible capital and rivalrous view of r d alternatively they are also consistent with the hypothesis that firms in highly concentrated markets pursue r d less efficiently or take on riskier projects in any event g m s findings seem inconsistent with a view of r d as a barrier to entry see kamien and schwartz 1975 this study extends previous research in at least four respects first we adopt a market valued based measure of profits in order to avoid any bias inherent in accounting profit data due to an expense as incurred rather than capitalization and amortization treatment of r d advertising and similar expenditures second we evaluate simultaneous influences among profits r d advertising and concentration suggested but not tested previously third estimation results are derived using leamer s search technique which illustrates the sensitivity of estimates to alternate model specifications and fourth we consider an n 390 firm fortune 500 sample which is substantially larger than in previous studies including firms responsible for nearly 90 of private sector r d during 1977 estimation results should therefore be broadly indicative of the economic consequences of r d

profitability and product differentiation in greek food industries this paper explains the increasing difference between the profit margins of differentiated and undifferentiated greek food manufacturing industries between 1988 and 1994 using panel data the 2sls results for the fixed effects model show important differences across the high medium and low differentiated industry groups the increasing difference between the margins of the highly differentiated group which includes the most profitable industries and the other groups can be mainly attributed to the greater sensitivity of margins in differentiated industries to advertising and demand changes

advertising concentration and profitability in manufacturing advertising concentration and profitability in manufacturing i introduction economists have devoted much effort to empirically testing the hypothesized relationships between industrial concentration profits and advertising twenty years ago lester telser concluded that there is little empirical support for an inverse association between advertising and competition 1964 later other economists studying the relationship between advertising and concentration discovered a positive correlation between the four firm concentration ratio a measure of industry concentration and advertising intensity 1 strickland and weiss 1976 went further to show that there is a causal relationship between these elements increases in concentration cause advertising to intensify and conversely a rise in advertising intensity causes an increase in the level of concentration in recent years the empirical literature on advertising concentration and profitability has atrophied because of dissatisfaction with its theoretical basis as a new approach i adopt the theory of advertising developed by stigler and becker 1977 and extend it to incorporate the relationships among advertising concentration and profitability i then test its most important implications using data from the 1977 census of manufactures and the detailed input output structure of the u s economy 2 section ii examines the relationship between concentration and advertising intensity conventional theory known as the inverted u hypothesis asserts that advertising is expected to increase with concentration at first but to decrease at very high levels of concentration because collusion to avoid advertising costs becomes easier extending the stigler and becker theory i hypothesize that when concentration increases even if the large firms do not collude and continue to act independently they will eventually decrease their advertising intensity at high levels of concentration provided that the demand curve for the industry s products is relatively inelastic if the industry s demand curve is relatively elastic advertising intensity increases monotonically with concentration at all levels of concentration this hypothesis is supported by the 1977 data taken from the census and the input output structure of the u s economy section iii focuses on the relationship between advertising and profitability according to conventional theories advertising intensity promotes product differentiation leading to higher barriers to entry and higher profit margins in the past researchers e g strickland and weiss 1976 realized that contrary to the implications of barriers to entry theory the coefficient of advertising in a profit margin equation was longer for a sample of industries producing producer goods than for industries producing consumer goods they viewed this result as an anomaly inconsistent with both their theoretical reasoning and with other important empirical results already published i obtain a similar result which i am able to link to a theoretical structure thus contributing to the refutation of the barriers to entry hypothesis i begin by extending the stigler and becker theory to treat advertising and research and development r d as two complementary intangible capital goods the sample is divided into two groups producers of homogeneous goods who spend relatively more on r d and producers of heterogeneous goods who spend relatively more on advertising since we are unable to measure r d costs at the appropriate industry level it is not included among the regression variables if r d and advertising intensity are correlated we should expect the coefficient of advertising in the profitability equation in the homogeneous goods subsample to exceed the coefficient of advertising in the profitability equation in the heterogeneous goods subsample in this case the omission of the r d variable provides an implication for testing the new hypothesis

industrial determinants of anti dumping in brazil protection competition and performance an analysis with binary dependent variable and panel data abstract this article investigates how sectorial characteristics determine the probability of industries receiving an anti dumping ad duty delving into the economic literature on the political economy of protection market competition and trade reform in brazil by focusing on when the ad was granted the article concentrates on the objective economic motivations for an industry to claim protection and which are instrumental to the decision of the trade defense authority the empirical strategy involves a panel of 93 industrial sectors from 1996 to 2007 to create four groups of explanatory variables collective action competition economic performance factors of production trade coefficients reflecting their structural characteristics market competition economic performance and political mobilization the econometric specifications apply binary dependent variable models logit with cluster robust and population averaged error correction the results show that structure of trade imports volume and tariffs economic performance productivity and investments and factor content labor and natural resources influence the probability of the ad political economy characteristics captured by interactive terms are also influential in determining the measure

welfare losses in canadian manufacturing under alternative oligopoly regimes abstract welfare losses are computed for 167 canadian industries using simulations of a general oligopoly model the computations cover a wide range of oligopoly behavior and reveal the implications of different demand marginal cost and conjectural variation elasticities for the case of horizontal cost losses are a maximum of 0 51 percent of gnp under cournot equilibrium and 6 35 percent under a collusion equilibrium in general losses increase as the absolute value of the price elasticity of demand declines and as marginal cost and conjectural variation elasticities increase

disjoint search for the prices of two goods consumed jointly the extensive literature on searching for price information deals almost exclusively with the search for the price of a single good casual empiricism shows that consumers buy more than one good and search for the price of more than one good before any single purchase more importantly not all of these goods are sold at the same store search theory should therefore consider the problem of multiple search in order to determine the robustness of conclusions based on a theory developed from the problem of search for the price of a single good this paper reveals a number of insights that emerge when decisions taken in other markets are made explicit consider the situation facing the builder and designer of a new house among other things the builder must decide on the amount of insulation and the method of heating before construction starts the decision depends on the prices offered hence the builder will search for an acceptable offer when prices are not known with certainty if a low price for heat is found then little insulation is needed because the cost of lost heat is relatively low when relatively little insulation is needed the potential savings from a lower price of insulation are also small therefore the builder may be willing to accept a relatively high price for insulation in the event of costly search and having already found a low price for heat more generally the price that would be accepted in one market depends on what has been found in the other market the influence of one market on another is not clear consider another example when a low price for heating is known the cost in terms of lost heat of windows may be low thus the builder can install more windows at a lower opportunity cost

multiproduct search and the joint search effect abstract this paper presents a sequential search model where consumers look for several products from multiproduct firms multiproduct search can significantly influence firms pricing decisions for example it can make market prices decrease with search costs possible applications of the model are also discussed jel d11 d43 d83

cost competition new evidence on an old issue the relation between cost changes and market share changes is examined for five size ranked cohorts of firms in us manufacturing industries cost reductions are expected to yield market share increases via associated price reductions it was found that this is indeed the case although the realation is not strong a 10 cost reduction produces roughly a 2 market share increase an estimated which for various reason is most likely a lower bound cost reductions are also associated with both price reductions and price cost margin increases

concentration history and market power in us manufacturing industries for a 1963 1992 panel of us manufacturing industries the relationship between seller concentration and both price cost margins pcms and prices is investigated for industries divided by whether concentration has recently increased or decreased regressions of pcm in levels and first differences and price equations in first differences establish that the positive effect of concentration on prices and profits is always weaker in industries where concentration has recently increased and always stronger in industries where concentration has recently decreased these results are attributed to the different endogeneity biases in the two samples increasing concentration industries are more likely the ones where leading firms have lowered prices to gain share while decreasing concentration industries are more likely the ones where smaller firms have lowered concentration by lowering prices an additional conclusion is that the cost reducing effects of changes in concentration are greater for increasing conc

price leadership and welfare losses in u s manufacturing reply a model of price leadership is used to estimate the welfare losses dueto monopoly in u s manufacturing given that the leaders behave independently an hypothesis confirmed empirically the deadweight lossis estimated at 0 114 percent of gnp based on a sample of 445 four digit industries this estimate lends strong support to arnold c harberger s finding of thirty years ago copyright 1986 by american economic association

the assessment productivity and competitiveness in british manufacturing this issue of the oxford review examines productivity and competitiveness in british manufac turing the simplest and most widely used measure of productivity is output per head from this definition sprout at once the horns of a dilemma for an economy facing unemployment on the present scale for a given rate of expansion of output the higher the rate of productivity growth the greater the decline in employment or at least the smaller its growth on the other hand in an economy open to international competition a high rate of productivity growth relative to that of other countries is the long term key to achieving the favourable international competitive po sition necessary to sustain growth and a low level of unemployment

energy prices and productivity growth the sharp decline in economic growth since 1973 presents a problem comparable in scientific interest and social importance to the problem of unemployment in the great depression of the 1930s conventional methods of economic analysis have been tried and have been found to be inadequate this paper outlines a new framework for understanding the slowdown in economic growth we find that the fall in u s economic growth since 1973 has been due to the dramatic decline in productivity growth within the new framework we identify higher energy prices as an important determinant of the productivity slowdown

multi commodity consumer search abstract this paper analyses the optimal search strategy for consumers who wish to purchase several different commodities possibly from several different firms but are not perfectly informed about the prices charged by each firm for every commodity it is shown that in general the optimal search strategy will not possess the reservation property the multi commodity equivalent of a reservation price necessary and sufficient conditions are identified for the optimal search strategy to possess the reservation property and it is shown that a critical sufficient condition is that the indirect utility function is submodular comparative static results are also presented journal of economic literature classification numbers d11 d81 d83

price leadership and dynamic aspects of oligopoly in u s manufacturing this study which covers a sample of 314 four digit industries taken from an exhaustive set of 450 four digit industries shows that increases in concentration associated with rising productivity occur mainly in low concentration industries while decreases in concentration associated with rising productivity occur mainly in high concentration industries the empirical results of this study indirectly lend support to a plausible hypothesis that a small group of firms makes a big impact on the productivity of an initially unconcentrated industry and thereby concentrates it later the small firms imitate the now big firms and concentration goes down while productivity keeps rising

sequential search without reservation price abstract for a consumer who searches sequentially from a known distribution but subject to a budget constraint the optimal search policy does not necessarily have a reservation price and may generate demand curves with positively sloped segments however absence of risk aversion and inferiority is sufficient to avoid these implications

optimal adaptive price search consider the problem of a consumer desiring to buy a good which is sold at a variety of prices such a buyer will be able to obtain a sequence of price quotations from various sellers when should the buyer stop searching for a lower price if he continues he may obtain a lower price but he incurs additional time effort and expense in searching the optimal price search decision is one of balancing the expectation of a possibly lower price obtained by continued search against cumulative costs from search when the prices arise from a known probability distribution the optimal search strategy has certain well defined and desirable properties in the more realistic case that the buyer has only partial information about the price distribution and must update his beliefs after observing prices in the marketplace the problem becomes more complex and search strategies become less well behaved the major purpose of this article is to determine new conditions under which optimal policies have these desirable characteristics in the case where the consumer possesses only incomplete information about the distribution of prices price quotations he receives in addition to providing him with price possibilities provide him with information about that distribution rothschild 151 in citing an unpublished paper of gastwirth has noted that small specification errors for an assumed distribution can lead to substantial changes in expected number of searches and expected cost consequently the assumption of a known distribution of prices can have a profound effect on total cost 1 0022 053 l 8 l 040001 20 02 00 o

productivity in the united states trends and cycles productivity growth in the us has taken a sharp downturn in recent years two experts provide a new body of comparative data on productivity since 1948 by major sector and industry the book analyzes 20 industries to highlight trends and fluctuations in productivity and to provide a better context for the discussion of policy options the authors set forth the causes of productivity advances based on growth accounting for the business economy as a whole they detail interindustry regressions with particular reference to the productivity slowdown since 1966 they look at both the traditional measure of productivity labor output per hour and the more recently developed measure of total factor productivity which takes into account capital as well as labor inputs the quarterly and annual data are used to relate changes to other basic variables such as factor prices unit costs and product prices an appendix presents data for 35 industries 42 references 8 figures 30 tables

the nairu in theory and practice airu stands for the nonaccelerating ine ation rate of unemployment it is beyond dispute that this acronym is an ugly addition to the english language there are however two issues that fail to command consensus among economists which we address in this essay the e rst issue is whether the concept of the nairu is a useful piece of business cycle theory we believe it is and we begin this paper by attempting to explain why in our view the nairu is approximately a synonym for the natural rate of unemployment this concept follows naturally from any theory that says that changes in monetary policy and aggregate demand more generally push ine ation and unemployment in opposite directions in the short run once this short run tradeoff is admitted there must be some level of unemployment consistent with stable ine ation the second issue is why the nairu changes over time and in particular why it fell in the second half of the 1990s this question is more dife cult and the answer is open to debate most likely various factors are at work including demographics and government policies yet one hypothesis stands out as particularly promising e uctuations in the nairu appear related to e uctuations in productivity in the 1970s the nairu rose when productivity growth slowed in the 1990s the nairu fell when productivity growth sped up developing and testing models that explain the links among ine ation unemployment and productivity remains a challenge for students of business cycle theory

welfare changes in the cournot setting with an empirical application to the telecommunications industry i characterize the efficiency of the cournot equilibrium and provide bounds for the loss in consumer surplus producer surplus and welfare when the number of firms in the market changes i only assume that demand is decreasing in price and costs increasing in the quantity produced as long as equilibrium exists i show how price demand and average cost before and after the number of firms in the market changes can be used to compute these bounds i apply these bounds to the portuguese wireline market and conclude that welfare increased significantly when the monopolist was split in 2007

what determines the elasticity of industry demand abstract this paper develops estimates of price elasticity of demand for a sample of u s food and tobacco manufacturing industries and tests a model explaining differences in interindustry elasticity the empirical results are consistent with the hypothesis that demand elasticity is in part determined by the competitive behavior of firms in an industry in particular high advertising expenditures result in lower elasticities of demand other important variables influencing demand elasticity are industry concentration the stage of production the existence of protection from domestic and foreign entry and the extent of new product introduction in a particular market

the role of shocks and institutions in the rise of european unemployment the aggregate evidence two key facts about european unemployment must be explained the rise in unemployment since the 1960s and the heterogeneity of individual country experiences while adverse shocks can potentially explain much of the rise in unemployment there is insufficient heterogeneity in these shocks to explain cross country differences alternatively while explanations focusing on labour market institutions explain current heterogeneity well many of these institutions pre date the rise in unemployment based on a panel of institutions and shocks for 20 oecd nations since 1960 we find that the interaction between shocks and institutions is crucial to explaining both stylised facts

welfare implications of oligopoly in u s food manufacturing a statistical procedure is used to show that increased concentration in u s food manufacturing industries is associated with increased total input productivity a price leadership model is employed in order to estimate total welfare loss if an elasticity of 1 is assumed deadweight loss to society is estimated at 0 5 of food value if an elasticity of 0 5 is assumed total loss to consumers amounts to 6 11 of food value which is 10 billion in 1975 the increase in total factor productivity which is linked to concentration is roughly sufficient to offset the entire loss to consumers

structure conduct and performance a simultaneous equations investigation for the brazilian manufacturing industry the article investigated structure conduct performance scp relationships in the context of the brazilian manufacturing industry in 1996 for that purpose it considered a system with four equations pertaining concentration advertising r d and profitability that was estimated with simultaneous equation models in addition to the usual explanatory variables proxying barriers to entry and demand conditions the article considered organizational practices and incentive schemes variables the evidence indicated an important role for variables related to barriers to entry in affecting market structure an important and nonlinear effect of concentration on advertising a relevant impact of firm size on the propensity to exert r d effort and finally a significant positive impact of concentration on profitability and were similar to the previous evidence for developed countries additionally no important roles were detected for organizational practices and incentive schemes on the scp relationships

is the markup a useful real time predictor of inflation abstract unlike their revised counterparts real time markup data fail to improve the performance of a simple phillips curve inflation forecasting equation and have little predictive power beyond that of survey measures of inflation expectations

how natural is canada s high unemployment rate abstract a reduced form price equation for canada 1956 1984 yields a stable estimate of 4 9 percent for the natural unemployment rate of men aged 25 and over with strong evidence against hysteresis once structural influences are accounted for the resulting profile for the aggregate natural unemployment rate rises smoothly from 5 5 percent in 1961 to a maximum of 8 0 percent in 1977 1978 and then declines rapidly to 6 4 percent in 1985 calculations based on an estimated production structure for the aggregate non energy sector of canada provide additional evidence against the excess real wage hypothesis and for the view that the recent fluctuations in canada s unemployment rate are mostly of the keynesian variety

topics in the oecd phillips curve how strongly have wages and unemployment been related in oecd countries during the postwar period a simple answer is that on average a one percentage point higher rate of unemployment has been associated with a fall of about one percentage point in the rate of nominal wage increase in the current year compared with the rate of increase a year earlier but such a figure needs interpretation and the aim here is to describe wage behaviour in more detail

changes in the cyclical pattern of real wages evidence from nine countries 1955 80 monetary policy in the united kingdom the monetarist vice has gripped the economy even longer and similar deflationary policies have been in effect in other western economies interestingly enough these policies were instituted in the context of a prolonged period of economic decline annual average rates of growth of gross domestic product for nine oecd countries fell from 6 8 to 5 o to 2 6 over the periods i955 66 i966 73 and i973 79 2 similarly unemployment has risen dramatically in the last io years the causes of slow growth and high unemployment are undoubtedly various however it is clear that restrictive macroeconomic policy has played an important role that is the recent situation is at least in part attributable to a deliberate effort to induce an economic slump the task of systematically examining the origins and motivations of this policy still awaits us however this paper presents an account of a general development in the pattern of real wages over the business cycle which is a plausible determinant of current policy the evidence indicates that short run cyclical movements in output no longer exert a determinate influence on real wage growth a development which may have been the impetus for long term deflation this account is based on an econometric study of nine countries over the period i955 80 the study has three noteworthy econometric features the first is that data from the nine countries are combined in a pooled model with homogeneous coefficients the use of a cross national sample ensures against the attribution of general theoretical status to particular empirical findings from a single country 3 second the units of observation are business cycle turning

wage inflation in the united kingdom in britain there is little agreement on what determines the growth of wages or indeed on whether a stable wage equation exists in this paper i try to clarify matters in two ways first i aim to represent the data generation process as faithfully and accurately as possible while using with a few modifications the criteria for model selection advanced in davidson et al 1978 second i use five different measures of the pressure of demand rather than just picking on one particular measure 2 it may be helpful at this stage to summarize very crudely the argument and results in section ii having first set out the framework for the rest of the analysis which relates to the period 1961 i 1980 iv i modify the standard real wage model by proxying the desired level of real wages by a moving average of the past level of real wages it is found that the coefficient on the prevailing real wage is equal but of opposite sign to that on the desired wage thus in the long run inflation is independent of the level of real wages the pressure of demand and incomes policy dummies are both found to be significant one would have expected that in the long run the rate of growth of earnings at given price inflation and pressure of demand would respond to differences in the rate of growth of productivity but over the sample period there was no evidence of this once we allowed for incomes policy which implies considerable rigidity in the target rate of growth of wages the analysis so far includes no specifically expectational variables in section iii i use some survey data on wage expectations which have the advantage of being based on quantitative responses one rationale for having wage expectations in a wage equation might be that in a world of staggered contracts where workers care about relative wages they will take into account what they expect to happen to the wages of other workers when settling now a two equation model for wages and wage expectations is presented in the subsequent section and in most respects the results confirm our conclusions from the previous sections however the preferred specification obtained here which encompasses much of the earlier work and probably constitutes progress is one that we have some doubts about and will it is hoped form the basis for future research in this area

labour surplus as a signal for real wage adjustment austria 1968 1984 unemployment figures for austria have been running well below the oecd average since the late 1960s in fact before 1981 there was hardly any unemployment problem in austria in 1982 and 1983 unemployment rates doubled since then the upward movement has slowed down but there are no indications that austrian unemployment could drop substantially below the 5 per cent level during the second half of the 1980s see figure 1

dominant firms price leadership and the measurement of monopoly welfare losses abstract the possible welfare losses associated with monopoly power have been the subject of numerous studies over a number of decades recent estimates seem to confirm the earliest estimates which suggested that such losses were relatively trivial this paper suggests that the basis of such estimates is questionable in particular it is argued that the familiar dominant firm price leadership model is not well suited to the task of estimating monopoly welfare losses more appropriate assumptions are identified and their implications for assessing the magnitude of potential welfare losses are illustrated

dynamic gains and static losses in oligopoly evidence from the beer industry i introduction more than 40 years ago arnold harberger 1954 estimated the welfare loss due to monopoly in the united states harberger s finding that the welfare loss caused by monopoly is surprisingly small sparked a lively debate that enriched the economic literature enormously the articles by david schwartzman 1960 david kamerschen 1966 frederick bell 1968 dean worcester 1973 and john siegfried and thomas tiemann 1974 constitute but a small sample out of the vast number of studies of this issue later keith cowling and dennis c mueller 1978 found some higher values of deadweight losses ten times as large as harberger s in a subsequent study i was able to lend support to harberger s results by analyzing the interactions between the minority of large firms in an industry that act as independent oligopolists and most of small firms that behave as price takers 1986 the exploration of the dynamic relationship between concentration and prices started with schumpeter 1949 who hailed the entrepreneur who can produce more cheaply make a profit that remains in his pocket until others who follow him copy his model the process eventually results in the annihilation of the surplus over costs when the new business form has become part of the circular flow 1949 133 in a related set of studies demsetz 1973 peltzman 1977 and lustgarten 1979 explored the relationship between concentration ratios and increased efficiencies in manufacturing industries and found them to be positively correlated i could lend support to this conclusion by postulating a dynamic process of cause and effect cast in a price leadership model 1984 in a recent study salinger 1990 concluded from a cross sectional study that large changes in concentration whether negative or positive are associated with price reductions the present paper builds on past research to demonstrate that while innovation may lead to increases in market share and market concentration the price increases that might be expected to follow from increased concentration are likely to be offset by the price decreases that bring the increased concentration into being 1 if so estimating deadweight losses by subtracting the static consumers losses from producers gains is misleading because it ignores intertemporal consumers gains the dynamic link among efficiency falling prices concentration and welfare losses suggests that a very useful method of evaluating an industry s contribution to welfare would be to study its economic history if today an industry is heavily concentrated an appropriate starting point for a historical study would be an earlier year when the industry was still relatively less concentrated this paper presents first a welfare theory of dynamic evolution of an industry that becomes progressively more concentrated over time second an empirical study based on the history of the beer industry that focuses on the calculus of dynamic social gains from technological change and third an examination of a small group of industries that became more heavily concentrated between 1963 and 1982 the last section sets forth the conclusions to be drawn from this research ii dynamic gains and static losses suppose a concentrated industry was unconcentrated 40 years ago the industry s firms were small but not atomistic and they sold their product in nearly perfectly competitive markets practically causing no deadweight losses the dynamic process begins when initially a group of pioneering firms invests in the development of a new technology that reduces costs and by lowering the price to consumers succeeds in increasing its market share the gain to consumers flows directly from this intertemporal decline in price the increase in the share of the innovating firms can initially mitigate the downward pressure on prices but in the long run reversing it is not likely

input price shocks and the slowdown in economic growth the case of u k manufacturing this paper provides a theoretical and empirical analysis of the effects of input price shocks on economic growth with a focus on united kingdom manufacturing in the 1970s the theoretical model predicts a discrete decline in output and productivity after an input price rise and a longer run slowdown in productivity growth real wage growth and capital accumulation these features characterize the united kingdom and most other oecd economies after 1973 the empirical results confirm the important role of input prices in recent u k adjustment but also point to an important role for other supply and demand factors two types of explanations have been offered for the sharp deterioration in u k economic performance in the past decade focusing respectively on demand and supply factors a standard keynesian view holds that macroeconomic demand management has been either too expansionary or too contractionary and that rising unemployment and falling output reflect the burden of anti inflationary policies an alternative view holds that various supply shocks are the main source of the poor output performance in this interpretation higher raw material prices particularly oil competition from the newly industrializing countries nics and perhaps an independent decline in productivity growth all have lowered output growth and raised unemployment

oligopoly power in the food and tobacco industries in this article we estimate and test for the degree of oligopoly power and economies of scale in forty food and tobacco industries using the new empirical industrial organization neio framework and four digit sic data lerner indices and elasticities of scale are compared throughout the entire food and tobacco industries t tests verify that all but three of these industries exert statistically significant degrees of oligopoly power and that over 82 of these industries exhibit nonconstant returns to scale the empirical results also provide estimates of the price elasticities of demand for each industry

the determination of wages employment and work hours in an economy with centralised wage setting sweden 1950 83 a key component of recent explanations for the growth in unemployme nt in western europe is a negative relation between wage rates and employment this paper examines the evidence for such a relationship for swedish manufacturing industry and also investigates the corresponding movements of hours of work the findings form the ingredients of a structural model of the labor market which is estimated using time series observations from 1951 t o 1983 the greater volatility of employment relative to earnings is measured by a specific parameter which in this model relates to the objectives of trade unions copyright 1988 by royal economic society

searching for a will o the wisp an empirical study of the nairu in canada abstract this paper demonstrates the uncertainty surrounding estimates of the non accelerating inflation rate of unemployment nairu a reduced form phillips curve is used to develop a generic model of the nairu which nests competing hypotheses about the specific form of the inflation unemployment relationship empirical results for the canadian economy show that the range of prime age male nairu s generated by statistically satisfactory and economically reasonable estimating equations covers almost the entire range of canadian post war prime age male unemployment experience estimates of the nairu depend heavily on the form of the estimating equation the operational definition of key variables and the data sample period

growth wealth and the natural rate is europe s jobs crisis a growth crisis abstract the effect of faster technical progress is studied in our labour turnover model of the natual rate of unemployment in its closed economy version the model implies that in the limit as the steady growth rate is approached the increase in the rate of progress is neutral for the natural unemployment rate its effects are completely offset by the equal increase in the rate of interest it induces however of two small open economies having the same technology level at some date the one where technical progress has always been and always will be faster will have the lower wealth relative to its wage and a lower wage rate relative to future wage rates both effects operate to reduce the natural rate of unemployment whether this theory based hypothesis will be confirmed empirically is a question needing extensive study but a quick comparison of the g7 countries confirms that the proportionate increase of the unemployment rate in recent decades tended to be greater the more pronounced the productivity slowdown

welfare losses due to market power hicksian versus marshallian measurement this paper warns against the use of marshallian welfare loss in applied analysis of market power we show how to compute the hicksian deadweight loss from an ordinary demand then from an experiment using real data on twenty one sectors of the french food industry we find that the marshallian deadweight loss poorly approximates the exact hicksian measure hence it is advisable to use the latter in applied welfare analysis copyright 2001 oxford university press

inter industry differences in profitability the legacy of the structure efficiency debate revisited this study presents a simple model on the sources of inter industry variation in profitability and tests its empirical implications in order to shed new light on the long lasting debate over industry profitability the model identifies four key factors that jointly influence an industry s price cost margin i the intensity of strategic investment e g r d and advertising ii the skewness of the distribution of market share or market concentration iii the appropriability of strategic investment and iv the extent to which firms market shares are determined by the intensity of their strategic investment these factors are expected to be positively related to industry profitability and our empirical analysis provides supportive evidence the model also suggests that the conventional single dimensional hypotheses on profitability the market power or market structure hypothesis and the efficiency hypothesis are overly simplified more importantly existing empirical results allegedly supporting each of these hypotheses are spurious to the extent that the distribution of firm specific strategic competence reflects firm heterogeneity in efficiency and at the same time underlies the distribution of market share or market concentration copyright 2009 oxford university press

causes of the current stagflation since 1975 labour slack has been unusually high in the oecd countries and yet inflation has not diminished the less favourable mix of unemployment and rate of change of inflation which we call stagflation is explained by a fall in the feasible rate of growth of real wages unmatched by a reduction in the constant term in phillips curve to investigate this mechanism conventional wage and price equations are estimated for 19 countries and then used for simulation stagflation has been caused in roughly equal amounts by rising relative import prices and by the fall in the rate of productivity growth in the basic model the phillips curve is assumed not to adapt to falls in feasible real wage growth but in a final section an adaptive wage equation is estimated which confirms that the process of adaptation is slow

multiproduct pricing in oligopoly abstract this paper proposes a two good model of price competition where some consumers visit all shops and others visit only one we find that information frictions lead to price dispersion when the two goods are complements their prices will tend to be negatively correlated so if one is priced high the other will be discounted this finding is supported by some empirical evidence which suggests that simultaneous price discounts of complements are infrequent if the goods are substitutes their prices will be uncorrelated potentially rationalizing the lack of evidence on their co pricing when selling complements retailers earn higher profits than in the one good model through taxing captive consumers with a high overall price tag and attracting shoppers by pricing one of the goods aggressively bundling practices are thus shown to be detrimental to retailers profits

demographic effects in demand analysis estimation of the quadratic expenditure system using microdata the purpose of this paper is to estimate a complete theoretically plausible system of demand equations on microdata using the rich detail of these data to investigate the impact of demographic variables on demand behavior the system which we estimate is the quadratic expenditure system qes introduced by howe pollak and wales we evaluate four methods for incorporating demographic variables into the demand system three of these procedures imply parameter restrictions while the fourth does not tests on the restrictions imply that for our data unrestricted estimation yields significantly greater explanatory power

profit margins and business cycles in the brazilian industry a panel data study the paper investigates the relationship between profit margins and business cycle in the brazilian industry during the 1992 1998 period taking as reference a dynamic panel data model founded around a conjectural variation framework the empirical results indicate procyclical behaviour of profit margins for the aggregate business cycle but is less clear in the case of sector specific business cycle variables among the most robust results one can highlight the roles of lagged profitability and import intensity and the negligible role of union density schmalensee in 1985 american economic review 75 pp 341 51 outlined three theoretical interpretations associated with the empirical model classical revisionist and managerial econometric tests on the related restrictions do not allow one to exclusively legitimate any of the three interpretations

raw materials profits and the productivity slowdown a factor price frontier framework is used to clarify the analogy of an increase decrease in raw material prices with autonomous technological regress progress factor price profiles are estimated for the manufacturing sector of the united states the united kingdom germany and japan the production model in conjunction with estimates obtained from the factor price frontier attributes much of the slowdown in manufacturing productivity to the rise in relative raw material prices part of the apparent productivity riddle may have to do with the use of double deflated national accounting measures of value added which have an inherent measurement bias

structure conduct and performance a simultaneous equations approach a simultaneous equations framework is used to study the relationship between structure conduct and performance in us manufacturing in the 1980s and 1990s the paper expands on earlier structure conduct performance studies by using a lag structure to signify that structure conduct and performance do not affect one another contemporaneously findings support some aspects of the traditional structure conduct performance model but challenge others first the data suggest that industry structure does not depend on current industry performance second little evidence is found that industry conduct proxied by advertising is affected by industry structure third results show that industry performance does not depend on industry conduct though it is sensitive to industry structure the main findings are that 1 concentration does not depend on firm profitability though profitability depends on concentration 2 advertising follows a process that is independent of the factors considered here and 3 ad

wage rigidity and unemployment in oecd countries real wage rigidity is often blamed for causing unemployment in the wake of adverse real shocks like changes in productivity or the terms of trade likewise nominal wage rigidity is blamed for causing unemployment in the wake of adverse nominal shocks like falls in nominal demand 1 however there has been relatively little systematic discussion of how these concepts should be defined some authors e g sachs 1979 have defined real wage rigidity as the opposite of nominal wage rigidity with the us nominally rigid and europe really rigid 2 the rigidity of european real wages has then been used to explain why europe has experienced a greater increase in unemployment since 1973 than the us but in this discussion real wage rigidity has not been measured in a way which would in fact predict how much unemployment would result from a given real shock the discussion has focused on the degree of nominal inertia in the system but the unemployment cost of real shocks does not depend primarily on the degree of nominal inertia but rather on the effect of unemployment in the phillips curve

wage gaps factor shares and real wages the relationships which link real wages capital intensity and factor shares are tested as a prelude to tests of the relationship between wage rigidities and labour market institutions evidence from seven countries indicates that the evolution of factor shares is well explained by changes in capital intensity which is itself well explained by product wages and technical progress a key implication is that changes in full employment capital labour ratios have been the dominant reason for the longer run decline of profit shares in europe and japan relative to the united states it follows that changes in cyclically adjusted factor shares provide little or no information regarding the gap between the actual real wage and its full employment value

advertising restrictions and concentration the case of malt beverages the relationship between state imposed advertising restrictions and state level market concentration in the malt beverage industry is examined the authors find that the presence of proscriptions on price advertising significantly increases market concentration at the state level both absolutely and relative to a measure of national concentration the evidence also indicates that banning local nonprice advertising in addition to price advertising yields no marginal significant change in either measure of state level concentration analysis of individual brewers market shares suggests that large national brewers gain at the expense of smaller brewers when price advertising is restricted copyright 1995 by mit press

wages and unemployment a general framework these remarks are addressed directly to the question of the relationship between wages and unemployment and provide neither a commentary on nor a critique of the stimulating papers presented by edmond malinvaud and robert gordon they do however bear on a number of the issues raised in those papers professor gordon s contribution takes it as read that the business cycle is the fundamental issue of interest in any discussion of wages and unemployment in spite of his avowed and most welcome intention to avoid looking at the world through u s tinted spectacles this primacy of the business cycle phenomenon is closely related to the american post war experience in britain and to a slightly lesser extent in other european countries the fundamental unemployment problem is the inexorably rising trend upon which the business cycles are superimposed this trend is barely apparent in the united states and consequently causes little concern thus the figures in table i show that in britain male unemployment was more thanfive times higher in the last five years of the seventies than it was in the first five years of the fifties and it seems likely that it will almost double again in the first five years of the eighties the contrast with the united states could hardly be more dramatic another dramatic difference between the united states and britain which emerges strongly in professor gordon s paper is the fact that in the former employment fluctuations at least in manufacturing are strongly related to fluctuations in nominal gnp and this is not true in the latter where it appears that nominal gnp fluctuations are dominated by nominal changes thus it may not be very useful to think of nominal gnp as the exogenous driving force behind fluctuations in the british context where then should we look for an explanation of the growth in unemployment and what is the role of wages many british commentators have noted that along with the rising trend in unemployment there has also been a rising trend in real labour costs relative to output per head thus from i964 to i980 this number has risen in britain by about 35 reflecting a considerable increase in the price of labour relative to what is produced this is the well known argument that unemployment is caused by workers pricing themselves out of a job this is more rational than it sounds because generally speaking it would be employees pricingothers outofa job on the other side of the same coin dr morley in thisjournal in 1979 noted that 88 of the variation in annual british unemployment from 1953 to 1977 could be explained by the pre tax profit share one year lagged thus unemployment appears to be related to the fact that real wages and the real return on capital are simply wrong which relates of course to the extensive analysis provided in m malinvaud s contribution

information multiprice search and cost of living index theory this paper derives the cost of living index of an individual who faces imperfect and costly information about prices traditional cost of living in dexes assume that the consumer passively accepts prices as given the authors derive a multiprice search model in which the consumer choos es the search strategy that minimizes the expected cost of buying a g iven level of utility in contrast to existing search models the mod el allows the consumer to change the allocation of expenditures among goods as information about prices changes and enables them to constr uct a cost of living index for an agent who searches across distribut ions of offer prices unlike traditional cost of living measures that ignore search behavior the searcher s cost of living index depends on search costs copyright 1987 by university of chicago press

rent seeking and the welfare cost of trade barriers this paper estimates the potential social cost of trade barriers using the harberger and the tullock posner approaches for a sample of u s food and tobacco manufacturing industries in addition it tests the relationship between the computed welfare losses and special interest political activity pac contributions if all rents were dissipated through rent seeking the social cost of trade barriers would be about 12 5 percent of domestic consumption and would be particularly large for sugar and milk products where quotas are the main instrument of protection furthermore the results indicate that welfare losses are positively associated with industry lobbying but the strength of such association is strongly dependent on industry concentration

simultaneous equations models of the structure performance paradigm abstract this paper is concerned with determining the dimension of the simultaneous equations model surrounding the basic profits concentration relationship a very general model is considered and then simplified using a simple test for exogeneity and it is concluded that the model is nonlinear in concentration and that simultaneous interaction occurs between profits and foreign competition variables

endogeneity in the concentration price relationship causes consequences and curses the ordinary least squares estimator of the effect of concentration on price is biased for two reasons first performance feeds back into structure causing a simultaneous equations bias second as a function of outputs or revenues measured concentration is correlated with determinants of price that are at best measured with error so measured concentration is correlated with the error term with panel data fixed effects procedures can be combined with instrumental variables to eliminate bias from both sources in concentration price regressions for the airline industry the bias can be substantial and negative copyright 1993 by blackwell publishing ltd

mixed oligopoly and spatial agglomeration abstract we investigate a mixed market where a state owned welfare maximizing public firm competes against profit maximizing private firms we use a circular city model with quantity setting competition in contrast to a pure market case discussed by pal 1998a spatial agglomeration of private firms always appears in equilibrium all private firms locate at the same point and the public firm locates at the opposite side we also find that this equilibrium pattern of the location is second best provided that output of each private firm cannot be controlled by the social planner jel classification h42 l13 oligopole mixte et agglomeration spatiale les auteurs examinent un marche mixte ou une entreprise publique possedee par l etat et cherchant a maximiser le niveau de bien etre est en concurrence avec des entreprises privees qui cherchent a maximiser leurs profits on utilise un modele de cite circulaire ou la concurrence se fait en choisissant la quantite produite en contraste avec le cas du marche parfait discute par pal 1998a l agglomeration spatiale des entreprises privees parait etre en equilibre toutes les entreprises privees se localisent au meme point et l entreprise publique se localise du cote oppose il appert que ce pattern d equilibre de localisation est un equilibre de second ordre compte tenu du fait que la production de chaque entreprise privee ne peut etre controlee par le planificateur social