wage norms capital accumulation and unemployment a post keynesian view the paper presents a post keynesian view of unemployment it argues first that the effective labour demand need not be downward sloping with respect to real wages and aggregate demand need not be downward sloping with respect to inflation second that there is a broad case for unemployment hysteresis understood as endogeneity of the non accelerating inflation rate of unemployment nairu based on social norms in wage bargaining and on the supply side effects of capital accumulation and third that much as keynes argued capital investment rather than labour market institutions is the key variable to explain changes in aggregate unemployment performance across countries and over time overall the paper advocates a keynesian view of the nairu where effective demand determines unemployment in the short run and the deviation of actual unemployment from the nairu determines the change in inflation in the medium term the nairu is endogenous and follows actual unemployment copyright 2011 oxford university press

a survey of agricultural household models recent findings and policy implications semicommercial farms that produce multiple crops make up a large part of the agricultural sector in developing economies these farms or agricultural households combine two fundamental units of microeconomic analysis the household and the firm traditional economic theory has dealt with these units seperately but in developing economies in which peasant farms dominate their interdependence is of crucial importance researchers have developed models of agricultural households that combine producer and consumer behavior in a theoretically consistent fashion recent empirical applications of these models have extended them and expanded the range of policy issues which can be investigated using this general framework this article reports the results of empirical applications of this model in india indonesia japan the republic of korea malaysia nigeria senegal sierra leone taiwan and thailand it provides a comparative analysis of the policy implications of the approach for such matters as the welfare of farm households the size of marketed surplus the demand for nonagricultural goods and services and for hired labor and the availability of budget revenues and foreign exchange

minimum wage effects on employment and school enrollment we argue in this article that the focus on employment effects in recent studies of minimum wages ignores an important interaction between schooling employment and the minimum wage to study these linkages we estimate a conditional logit model of employment and enrollment outcomes for teenagers using state year observations for the period 1977 to 1989 the results show a negative influence of minimum wages on school enrollment and a positive effect on the proportion of teens neither employed nor in school we further suggest that our results are consistent with substitution by employers of higher for lower skilled teenagers with the displaced teens ending up both out of work and out of school

the minimum wage as a redistributive tool most analyses of the minimum wage focus on its unintended employment consequences the goal of a minimum wage is not of course to reduce employment but to redistribute earnings to low paid workers under what conditions can a minimum accomplish this are those conditions met in economies which otherwise rely extensively on markets to set wages such as the united states which in i994 rejected mandating health benefits that would have effectively raised the minimum or the united kingdom where in i995 the labour party promised a national minimum upon election who pays for the redistribution who benefits the redistributive effects of a minimum wage depend on the labour market and redistributive system in which it operates on the level of the minimum and on its enforcement at best an effective minimum wage will shift the earnings distribution in favour of the low paid and buttress the bottom tiers of the distribution from erosion at worst minimum wages reduce the share of earnings going to the low paid by displacing many from employment neither outcome is certain so that enacting a minimum is a risky but potentially profitable investment in redistribution it is the balancing of risk against gain that makes a minimum so controversial until the i980s i99os competitive labour markets in the united states and united kingdom produced rising real earnings for the low paid and falling earnings inequality so the risk of enacting a national minimum united kingdom or of raising substantially the national minimum united states seemed unnecessary why interfere with the competitive market when it produces socially desirable trends in earnings albeit a bit slower than one might accomplish with a legislated minimum two decades of falling real wages for lower decile workers in the united states and of rising earnings inequality in the united kingdom1 have however put the minimum back in play the job market is not doing much for lower paid workers in the united kingdom virtually all social groups accept the need for some redistribution though they differ on the best way to accomplish such in the united states pressures for tax cuts can be interpreted as a way for employees to gain real wage increases unavailable through the market the consensus favouring redistribution through the earned income tax credit disappeared in the midi 990s rush to reduce federal budget deficits this paper takes as its operating premise the goal of redistributing earnings

effects of the minimum wage on the employment status of youths an update the large decline in the relative value of the minimum wage during the 1980s makes that period a valuable one for identifying the impact of variation in the minimum wage on youth employment this study produces the robust finding that when the experience of the 1980s is included a 10 percent increase in the minimum wage is estimated to reduce teen employment by less than 1 percent the lower end of the range of previous estimates because this small employment effect is offset by a labor force withdrawal effect the study finds no discernible effect on measured unemployment the study also finds no apparent effect of the minimum wage on the employment of young adults aged 20 24

the effects of minimum wages on wage dispersion and employment evidence from the u k wages councils using data on wages council coverage from the united kingdom new earnings survey the authors examine the impact of mandated minimum wages on wage dispersion and employment in the united kingdom in the 1980s they find evidence that a dramatic decline in the toughness of the regulation imposed by the wages councils through the 1980s a decline that is in the level of the minimum wage relative to the average wage significantly contributed to widening wage dispersion over those years there is however no evidence of an increase in employment resulting from the weakening bite of the wages council minimum pay rates instead consistent with the conclusions of several recent u s studies the findings suggest that the minimum wage had either no effect or a positive effect on employment

who minimum wage increases bite an analysis using monthly data from the sipp and the cps 1 introduction neoclassical competitive models of firm behavior predict that wage increases reduce the quantity of labor demanded by firms and holding the wage rate constant that the least valued workers are the first fired or the last hired minimum wage legislation exogenously increases the price of labor and data from periods when the minimum wage changes can be used to empirically test its effect on the employment of vulnerable workers however a new body of research using such data suggests that minimum wage increases do not reduce employment and may even increase it card 1992a b katz and krueger 1992 card katz and krueger 1994 card and krueger 1994 1995 from a theoretical perspective this new economics of the minimum wage has been characterized as an assault on the law of demand ehrenberg 1995 if modest increases in the minimum wage have no employment effects then the appropriateness of this method in helping the working poor is strictly a distributional issue 2 however if minimum wage increases reduce employment and if the jobs lost are concentrated among the vulnerable groups the policy claims to assist then policy makers must consider this unintended consequence hence estimating the elasticity of employment with respect to minimum wage increases is more than simply an empirical test of economic theory in this paper we use monthly data from the survey of income and program participation sipp and the current population survey cps to examine the effect of raising the minimum wage on employment in contrast to much of the new minimum wage literature we find that minimum wage increases significantly reduce employment moreover we find that the elasticity of demand for labor with respect to increases in the minimum wage is greatest for the most vulnerable groups in the working age population young adults who have low levels of education young black adults and teenagers and teenagers we also find that minimum wage increases reduce the overall employment of young adults and teenagers though the estimated elasticities are smaller 2 the new economics of the minimum wage the new minimum wage literature is dominated by studies that find that minimum wage increases have an insignificant or in some cases a positive and significant effect on the employment of young adults and teenagers aged 16 24 or on other subgroups within that population card 1992a b katz and krueger 1992 card katz and krueger 1994 card and krueger 1994 1995 most of these studies have now generated replies arguing that raising the minimum wage significantly decreases employment in these populations neumark and wascher 1992 1994 1996 in press deere murphy and welch 1995 taylor and kim 1995 burkhauser couch and wittenburg in press because these new studies of the minimum wage vary widely in their techniques we focus our discussion on those that use cps data and employ an estimation strategy related to the one we use in this paper neumark and wascher 1992 1994 1996 card katz and krueger 1994 card and krueger 1995 deere murphy and welch 1995 burkhauser couch and wittenburg in press 3 specifically we review studies that use a pooled time series cross sectional approach to estimate the employment effects of minimum wage increases on vulnerable groups such as teenagers with cps data deere murphy and welch 1995 also use pooled repeated cross sectional data from the cps to estimate the impact of minimum wage increases but their specification differs in some important ways from the studies discussed above deere murphy and welch 1995 estimate the effect of minimum wage increases over the period from 1985 through 1993 they construct intervals of monthly data from 1985 through 1993 that begin on the first day of april of each year and end on the last day of match during the following year for each interval they create annual averages of variables

nutrition and labor producvivity in agriculture estimates for rural south india using panel data for rural south india a fixed effects individual wage equation and farm production function are estimated that have calorie intake and nutritional status weight for height of workers as their arguments neither market wages nor farm output are observed to be responsive to changes in the daily energy intake of workers however both are highly elastic with respect to weight for height these results suggest that while the human body can adapt to inadequate nutrition in the short run it cannot adapt as readily to chronic malnutrition that eventually results in loss of weight for height copyright 1988 by mit press

who gets what from minimum wage hikes a re estimation of card and krueger s distributional analysis in myth and measurement the new economics of the minimum wage i ve studied the arguments and the evidence for and against a minimum wage increase i believe that the weight of the evidence is that a modest increase does not cost jobs and may even lure people into the job market but the most important thing is you can t make a living on 4 25 an hour president clinton state of the union address 1995

consumption efficiency and surplus labour abstract if 1 there is a long term relationship between consumption and labour efficiency 2 long employment contracts are possible and 3 production is seasonal a trade off emerges between positive effects of permanent contracts on productivity and the costly seasonal idleness of permanent labour possible outcomes include 1 co existence of casual and permanent contracts with number of workers affecting proportion of permanent to temporary employees but not output classical disguised unemployment 2 exclusively casual employment with output negatively related to workforce leibenstein mazumdar surplus labour and 3 permanent contracts only with open unemployment and a positive relationship between number employed and output the mirrlees bliss stern stiglitz solution conditions are derived for each solution

ethnic networks and access to credit evidence from the manufacturing sector in kenya it is often anecdotally observed that networks can facilitate exchange but there are few empirical studies that explore the significance of such networks in this paper the authors analyze the impact of ethnic networks on access to finance of kenyan firms using an exceptionally rich data set the authors find that ethnicity does not affect access to formal sources of finance but being a member of an ethnic group is significant in explaining access to informal sources of finance like supplier credit the authors interpret these results in terms of information and contract enforcement mechanisms that work within ethnic groups but not across them

schooling training growth and minimum wages we examine how the long run growth performance of an economy is affected by a labor market distortion in our model growth occurs through skill formation and skills are generated through schooling and training of unskilled workers we analyze how a minimum wage legislation affects long ran growth in general the effects are ambiguous the reason is that while a minimum wage discourages training it also encourages schooling the net effect then depends on whether training or schooling dominates the long run increases in labor productivity jel classification i20 j31 o40

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

fiscal stimulus agricultural growth and poverty in asia recent debates on a sustainable recovery of the global economy have tended to overemphasise the savings glut hypothesis and the unavoidable imperative of higher consumption in china and other emerging asian countries that oversaving and not underinvestment is coming in the way of a quicker and more durable recovery is not just simplistic but misleading from a medium term growth perspective for emerging asian countries and other developing countries in this region drawing upon country panel data for developing countries and a subsample of asian countries during the period 1991 2007 this study makes a case for a bold and coordinated fiscal stimulus directed to stimulating agricultural and overall growth and mitigation of poverty and hunger our simulations further suggest that poverty reduction is likely to be larger if the fiscal stimulus is directed to social spending in health and education sectors indeed if our simulations of fiscal impacts have any validity the dire predictions of millions getting trapped in poverty and hunger may turn out to be exaggerated the prospects of a strong recovery led by fiscal stimulus are thus real and achievable

productivity health and inequality in the intrahousehold distribution of food in low income countries a model is formulated incorporating linkages among nutrition labor market productivity health heterogeneity and the intrahousehold distribution of food and work activities in a subsistence economy empirical results based on a sample of households from bangladesh indicate that despite considerable intrahousehold disparities in calorie consumption households are averse to inequality furthermore consistent with the model the results also indicate that both the higher level and greater variance in the calories consumed by men relative to women reflect in part the greater participation by men in activities in which productivity is sensitive to health status copyright 1990 by american economic association

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

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

the distributional and efficiency effects of increasing the minimum wage a simulation the generally accepted goal of minimum wage laws is to alter the distribution of income in favor of low income households however since a minimum wage will also disrupt low wage labor markets causing inefficiencies and imposing costs on some of the same workers the law is intended to help an evaluation of the policy requires a weighing of the distributional benefits against the efficiency costs quantification of these benefits and costs is clearly important to this evaluation while much effort has been devoted to estimating the employment effects of minimum wage laws relatively little work has been done to estimate the distributional benefits our simulations focus on this efficiency equity tradeoff by developing estimates of the impact of an increase in the minimum wage on the level and distribution of real income across households previous work has concluded that minimum wages are not as beneficial in their distributional impact as generally supposed

getting handcuffs on an octopus theoretical work on minimum wage policy emphasizes labor market dynamics but the resulting implications for worker mobility remain largely untested the authors show that in the teenage labor market higher minimum wage standards reduce worker flows and increase job stability furthermore they find that the employment effects of a relatively higher minimum wage vary considerably across markets with different levels of turnover and labor market tightness results help to explain the small effects of minimum wage standards on employment commonly found in the aggregate data and are consistent with labor market models that involve search frictions

the effects of statutory minimum rates of pay on employment in great britain estimates of the employment effects of statutory minimum rates of pay are derived for great britain using a constant elasticity of substitution production function the author estimates the partial elasticities of substitution in those industries covered by statutory minimum rates to be between 0 45 and 0 85 he then develops a bargaining model and estimates that the elasticity of the average wage rate in these industries with respect to the statutory minimum rate is zero for men and between 0 07 and 0 15 for women combining these estimates yields 0 06 as the approximate total employment elasticity of statutory minimum rates copyright 1989 by royal economic society

ambiguity and uncertainty in ellsberg and shackle this paper argues that the similarities between ellsberg s and shackle s frameworks for discussing the limits of the probabilistic approach to decision theory are more important than usually admitted the paper discusses the grounds on which the ambiguity surrounding the decision maker in ellsberg s urn experiments can be deemed analogous to the uncertainty faced by shackle s entrepreneur taking crucial decisions the two authors insights are assessed and special attention is paid to the criteria for decision under uncertainty they put forward the paper establishes a link between ellsberg s and shackle s perspectives and the non additive probability approach of gilboa and schmeidler an approach that offers an alternative to standard probability calculus which can be of use to analyse both ambiguity and uncertainty the comparison between ellsberg and shackle draws on an interpretation of keynes s treatise on probability emphasising keynes s rejection of both well defined probability functions and maximisation as a guide to human conduct it is shown that keynes s viewpoint implies a reconsideration of the boundaries of probability theory that is in the same vein of ellsberg s and shackle s concern in the years of the consolidation of savage s new probabilistic mainstream copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

g e moore and j m keynes a missing chapter in the history of the expected utility model in his posthumous essay my early beliefs john maynard keynes outlined his mental history in the dozen years before the war and asserted their importance to his later life yet despite keynes s assertion of the importance of this part of his mental history to who he was and what he did in 1938 the year the essay was written and two years after he published the general theory there is virtually no treatment in the history of economic thought of this period of his life or of its impact on his economic theory the purpose of this essay is to treat an episode of that period of his life which has particular analytical importance and to suggest some ways in which it might contribute to a clearer understanding of his later work in economics the episode in keynes s early life which the essay examines is his role in g e moore s changing opinion about the importance of rules in ethics in his classic principia ethica 1903 moore had originally asserted that obeying certain rules is a necessary part of ethically correct behavior but in his ethics 1912 he makes exactly the opposite argument saying that individuals are always justified in judging a case for themselves and are under no obligation to follow general rules of conduct in the parlance of modern philosophy moore switched from a rule utilitarian argument to an act utilitarian argument the first four sections of the essay detail the role which keynes played in moore s change of heart the final section discusses how the episode affects our understanding of keynes s work in economics

minimum wages on the job training and wage growth using data from the employment opportunities pilot project we examine the relationships between minimum wages wage growth and on the job training we find that minimum wage jobs exhibit less wage growth than other jobs particularly for men we find no evidence however of a unique minimum wage effect on training opportunities we conclude that indirect methods of proxying training with wage growth can be misleading as they fail to distinguish whether the reduced wage growth of workers on minimum wage jobs results from their receiving less training than other workers or whether it is strictly a result of the wage determination process

the developing world is poorer than we thought but no less successful in the fight against poverty a new data set on national poverty lines is combined with new price data and almost 700 household surveys to estimate absolute poverty measures for the developing world we find that 25 of the population lived in poverty in 2005 as judged by what poverty typically means in the world s poorest countries this is higher than past estimates substantial overall progress is still indicated the corresponding poverty rate was 52 in 1981 but progress was very uneven across regions the trends over time and regional profile are robust to various changes in methodology though precise counts are more sensitive

minimum wage effects throughout the wage distribution this paper provides evidence on a wide set of margins along which labor markets can adjust in response to increases in the minimum wage including wages hours employment and ultimately labor income not surprisingly the evidence indicates that low wage workers are most strongly affected while higher wage workers are little affected workers who initially earn near the minimum wage experience wage gains nevertheless their hours and employment decline and the combined effect of these changes on earned income suggests adverse consequences on net for low wage workers

time series evidence of the effect of the minimum wage on youth employment and unemployment our updated estimates indicate that a 10 percent increase in the federal minimum wage or the coverage rate would reduce teenage 16 19 employment by about 1 percent which is at the lower end of the range of estimates from previous studies because of substantial labor force withdrawal the unemployment effects are practically zero these minimum wage effects differ very little by sex and there is no strong evidence that the effects vary by race the study also finds a significant albeit small unemployment impact for young adults 20 24 and examines the consequences of numerous alternative statistical and mathematical specifications of the estimating model

the economic consequences of reduced uk military expenditure the last few years have seen a variety of proposals for uk disarmament for a re orientation of defence policy towards a less expensive non nuclear stance more commen surate with britain s present economic position in the world unfortunately these proposals become suddenly coy and tentative as they approach the economic implications of their programme in complete contrast to the detailed quantitative calculations they pro vide for other aspects the alternative defence commission 1983 and prins 1983 are typical examples of this the difficulties this lacuna creates are illustrated by the ordeal the labour party faced in the 1983 election campaign they advocated it appears a reduc tion of british defence expenditure which now accounts for just over 5 of gdp to about the european average of around 3 5 but they proved unable to counter the claim of the conservative defence secretary mr heseltine that this policy would cost 400 000 jobs 1 the hesitancy with which proponents of reductions in military expenditure approach the economic consequences is surprising given the near unanimity in the technical litera ture two major studies in the uk eiu 1963 and brown 1964 studies in the us leontief 1965 and a recent survey kennedy 1983 all indicate that disarmament represents an economic opportunity rather than an economic problem nonetheless the tenor of the recent policy literature suggests that it would be useful to provide a detailed assessment of the economic consequences of a reduction in uk military expenditure from 5 to 3 5 of gdp since the results obtained below are broadly in line with those of the studies cited above the contribution of this paper does not lie in the novelty of its conclusion rather it provides a detailed quantitative review of the economic issues cur rently involved in a transition to lower levels of military expenditure since there is a wide literature already available which provides arguments to suggest that such a transition could provide real security benefits the strategic aspects will only be mentioned in passing d smith 1980 and alternative defence commission 1983 provide detail on this

evaluating the econometric evaluations of training programs with experimental data this paper takes the results of an employment and training program thatwas run as a field experiment in which the participants were randomlyassigned into a treatment or a control group and compares these results to the estimates that might have been produced by an econometrician who evaluated the program using the same econometric procedures that have been used in the program evaluation literature this comparison shows that many of these econometric procedures fail toreplicate the experimentally determined results and suggests that researchers should be aware of the potential for specification errorsin other nonexperimental evaluations copyright 1986 by american economic association

the source of optimality in action it is well known that the nature of the information set and the axioms of rational choice are critical in determining the type of ranking on which agents are held to act in economic theory this paper argues that the concept of the optimising agent is also sensitive to the conception of the relation between a ranking of options facing an agent and concrete action what is termed the realisation process three conceptions of the realisation process are examined which are seen to lead to three quite distinct views on the role of agency the enabling conditions under which the concept of the optimising agent may be legitimately applied and the resulting domain of application of optimisation

the impact of labor market regulations the authors investigate the impact of labor market regulations in settings where compliance is incomplete they review some stylized facts about labor market behavior present an analytical model that may explain such behavior and provide a checklist for assessing the distortionary impact of a regulation such as the minimum wage they take as their starting point the limited evidence about the distortionary effects of such regulations and argue that there may be natural limits on the efficiency losses engendered by labor market regulations first the regulations may not be binding at market equilibrium for example minimum wages may be set so low that they are ineffective second even if they are binding the relevant elasticities of supply and demand may be so low that the regulations have little impact on efficiency third even if the regulations are binding and elasticities are sizable compliance may be low the authors argue that the likelihood of compliance will be greatest when the regulations are binding and the relevant elasticities are sizable that is if the distortionary costs of regulations are not rendered insignificant by the first two reasons then the returns to noncompliance will be high and other things being equal employers will evade or avoid the regulations thereby minimizing the imact on efficiency the argument rests on profit maximization subject to a hard budget constraint public enterprises which are not concerned only with profit maximization and often have softer budget constraints than the private sector may be more willing to conform to profit reducing regulations but in this case the authors argue that compliance may reduce already existing efficiency losses

codetermination and the modern theory of the firm a property rights analysis during the postwar period state sponsored codetermination programs have become increasingly important and by now are firmly established in most countries of western europe conventional wisdom suggests that this growth of reform legislation is part of a broad social movement designed to advance industrial democracy and enlarge the power of labor to influence corporate policy certainly there is no doubt that significant institutional change has taken place but since reorganization has been motivated more by political considerations than by any fundamental rethinking of the theory of the firm questions still exist concerning the effects the new system may have on economic behavior there are in fact serious doubts about the efficiency of mandatory codetermination various writers have suggested that the type of codetermination legislation found in europe may force firms to adopt organizational structure that would not be selected voluntarily by wealthwhen workers finance firm specific investments they supply one part of the total capital stock needed by the firm for production it is arguable then that worker investors should be regarded as equity holders and be granted control and income rights in the enterprise this article seeks to explain the property rights structure that such a codetermined firm must possess to be efficient and to determine the conditions under which this organizational form is likely to emerge under a voluntary contracting process compared to a legally mandated codetermined firm of the european type the voluntary variant shows clear superiority specifically it tends to promote productivity enhancing incentives relatively lower transaction costs and a more rational allocation of risk special thanks go to armen alchian who has provided encouragement advice and key ideas concerning the nature of the firm the article was written during my residence at the center for the study of the new institutional economics university of the saarland west germany 1985 financial assistance was received from the deutsche forschungsgemeinschaft and is gratefully acknowledged

the effect of minimum wages on youth employment in canada a panel study previous u s panel estimates of minimum wage effects have been criticized on the grounds that their identification rests on comparisons of low wage and high wage workers using canadian panel data for 1988 90 i compare estimates based on the traditional u s methodology with those based on samples of low wage workers exclusively the results would appear to vindicate the critics the minimum wage effect from the latter approach is virtually zero yet estimates from different subgroups of low wage workers indicate that there is a significant disemployment effect for those with longer low wage employment histories this highlights the heterogeneity within low wage workers and the importance of carefully defining the target group not solely based on workers wages

minimum wages and household poverty general equilibrium macro micro simulations for south africa summary the poverty reducing effects of minimum wages depend on its effectiveness in targeting the poor and the extent to which job losses and price increases offset income gains we develop a general equilibrium microsimulation model to simulate the economywide effects of minimum wages in south africa we find minimum wages lead to a marginal decline in poverty and overall inequality however job losses are more likely to affect the poorest among minimum wage workers while rising production costs reduce overall household welfare the policy is not an effective anti poverty tool in south africa given poor targeting and adverse price effects which are often unaccounted for in policy simulations

minimum wage laws are they overrated l minimum has been fixed in nominal terms at about 55 percent of the current average wage rising wages in the rest of the economy gradually erode the real minimum wage and eventually the process is repeated sometimes the increase in the nominal minimum is accompanied by a permanent reduction in those businesses exempted from the law proposals for a lower minimum wage for young workers or to index the minimum wage to the average wage have been debated but not adopted the minimum wage was last increased to 3 35 in 1981 since then average hourly wages have risen by 25 percent eliminating any momentum for a lower minimum wage for youth but reviving proposals for another increase in the nominal minimum economists are fascinated by the minimum wage because we have strong theoretical predictions about the direction of the effect of the minimum wage on employment and fairly widely accepted methods to estimate the size of that impact it probably didn t hurt that the earliest and later estimates lined up well with the predictions but that is not the only reason for our fascination with the topic depending on whether we include those who say they earn less than the minimum wage minimum wage workers account for 6 to 12 percent of those employed gilroy 1981 p 157 and less than 5 percent of wage and salary income the minimum wage gives economists a relatively rare opportunity to study the impact of an exogenous increase in the price of labor and thus a chance to refine our thinking

the effects of the minimum wage in brazil on the distribution of family incomes 1996 2001 abstract the brazilian economy has long relied on the minimum wage having first implemented a minimum in 1940 shortly after taking office in 2003 brazil s president raised the minimum wage by 20 and promised to double the value of the minimum wage before his term ends in 2006 the usual rationale for minimum wage increases is to bring about beneficial changes in the income distribution by raising incomes of poor and low income families the goal of this paper is to evaluate the efficacy of the minimum wage in brazil in bringing about these changes in the income distribution we examine data drawn from brazil s major metropolitan areas studying the years after brazil s hyper inflation ended the estimates provide no evidence that minimum wages in brazil lift family incomes at the lower points of the income distribution if anything some of the evidence points to adverse effects on lower income families

behind methodological individualism methodological individualism has become a more fashionable slogan for economistsin recent years in specific terms we are being urged to accept a doctrine within whichall explanations of social phenomena have to be couched in terms of statements aboutindividuals however the term has a wide and sometimes ambiguous usage and is beingemployed as a packaging for all kinds of methodological and theoretical prescriptions forexample it has been regarded as a commandment that thou shalt where possible placemacroeconomic statements on firm microeconomic foundations e g blaug 1980 or aninjunction against reckless aggregation particularly in regard to welfare criteria orsocial welfare functions e g kirzner 1980 littlechild 1978 or as an inspiration forrecent theoretical developments in economics with pro market policy conclusions e g furubotn and pejovich 1974 one of the further problems in discussing this topic is that often the term methodo logical individualism carries an ideological charge indeed by both advocates and itsopponents it is too frequently confused with individualism of a political variety however the connection between political and methodological individualism is merely assumed bythese supporters or critics or supported by cursory argument it is never demonstratedwith any rigour although there is a lack of uniformity in the use of the label it is argued here that the keyelement in the classic statements of methodological individualism is a refusal to examinethe institutional or other forces which are involved in the moulding of individual pref erences and purposes we are thus confronted with a remarkable optimism about thepossibility of explanation of social phenomena in terms of individuals but an extremereluctance to give even partial explanations of individual behaviour in social or evenpsychological terms this refusal is both dogmatic and as will be argued below unaccept able on analytical grounds this reduction of explanation and thereby causality solely to individuals has a furtherimplication the explanation of social phenomena proceeds even by a circuitous route

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

minimum wages and teenagers enrollment employment outcomes a multinominal logit model this paper tests the hypothesis that the effect of minimum wage legislation on teenagers education decisions is asymmetrical across family income classes with the legislation inducing children from low income families to reduce their levels of schooling and children from higher income families to increase their educational attainment we use data from the national longitudinal surveys nls and exploit the fact that although the minimum wage is fixed at a point in time its value relative to adult wages varies across areas multinomial logit models of teenagers enrollment employment outcomes are estimated the hypothesis appears to be confirmed for white teens however the evidence for nonwhites is more ambiguous

impact of labor market regulations this article investigates the impact of labor market regulations in a setting with incomplete compliance it takes as its starting point the limited evidence regarding the distortionary costs of labor market regulations and argues that there may exist natural limits to the efficiency losses engendered by such regulations the article reviews some stylized facts regarding labor market behavior presents an analytical model that may explain such behavior and provides a checklist for assessing the distortionary impact of regulations such as minimum wages

a reassessment of the new economics of the minimum wage literature with monthly data from the current population survey we estimate the employment effects of federal minimum wage increases using monthly current population survey cps data from 1979 through 1997 we find that the empirical differences in the new minimum wage literature based on cps data primarily can be traced to alternative methods of controlling for macroeconomic conditions we argue that the macroeconomic controls commonly included in models where no employment impact is found are inappropriate we consistently find a significant but modest negative relationship between minimum wage increases and teenage employment using alternative controls or allowing employer responses to the policy to occur with some delay

the effects of minimum wages on the distribution of family incomes a nonparametric analysis an oft stated goal of the minimum wage is to raise incomes of poor or low income families we present nonparametric estimates of the effects of minimum wages on the distribution of family income relative to needs in the united states although minimum wages increase the incomes of some poor families the evidence indicates that their overall net effect is if anything to increase the proportions of families with incomes below or near the poverty line it would appear that reductions in the proportions of families that are poor or near poor should not be counted among the potential benefits of minimum wages

the microfoundations project in general equilibrium theory the author 1 argues that the long lived microfoundations project based on general equilibrium models has come to an end and 2 shows that non walrasian models intended to provide microfoundations for macroeconomics are inadequate the arguments are derived from the sonnenschein mantel debreu smd demonstration of the arbitrariness of aggregate excess demands in general equilibrium models of the walrasian arrow debreu mckenzie type the issues raised have significance for the proper method of modeling macroeconomic phenomena for instance the smd results have led a growing number of general equilibrium theorists to make assumptions concerning macroeconomic structure in order to analyze other regularities at the macro level these points validate the position that systematic macroeconomic phenomena are intrinsically macroeconomic copyright 1994 by oxford university press

the division of labor need not imply regional specialization the regional specialization of economic activities is generally deemed desirable for three reasons 1 the law of comparative advantage 2 localized economies of scale and 3 knowledge spillovers taking a methodological individualist perspective we claim that 1 the law of comparative advantage while valid for individuals and firms does not necessarily imply regional specialization when regions are viewed as consisting of heterogeneous individuals 2 localized economies of scale are seldom specific to one industry and external in all but the regional level and 3 the study of knowledge spillovers is inconclusive and would benefit from a more disaggregated perspective

do minimum wages fight poverty i introduction one of the most compelling rationales for a national minimum wage floor is to raise the incomes of poor or near poor families with members in the workforce this general point however is often missed in the debates over the merits of a higher minimum wage in contrast to these oft stated distributional goals much of the focus in such debates has been on the employment effects of minimum wages especially among the teenage population in large part this focus is probably attributable to the extensive body of economic research on the effects of minimum wages on employment of low skilled workers however although negative employment effects represent a cost of minimum wages such costs do not necessarily imply that minimum wages constitute bad social policy in particular the employment losses associated with a higher minimum wage may be more than offset by positive effects on low income families especially if minimum wages are a significant factor in helping move families out of poverty 1 this is not to argue that research on employment effects of minimum wages is irrelevant but such research may be more important as a test of the theory of labor demand and as a method of learning how employers and individuals adjust to exogenous wage increases than as a method of assessing the wisdom of the policy in addition we do not mean to suggest that the short run effects of minimum wages on the incomes of poor families should be the sole criterion for evaluating such policies other studies have found evidence suggesting for example that minimum wage increases reduce school enrollment rates and training neumark and wascher 1996a hashimoto 1982 factors that may affect longer run earnings or earnings growth these deleterious longer run effects might offset the benefits of shorter run effects of minimum wages on family incomes nonetheless our perception is that potential increases in the incomes of poor families provide the main motivation for raising the minimum wage making it important to assess the evidence on whether minimum wage increases achieve this goal in this regard there are two questions that pertain to the influence of minimum wages on family incomes generally and on poverty in particular first there is the question of the effects of minimum wages on low wage workers that is do the wage gains received by employed workers more than offset the lost earnings suffered by those who lose or cannot find jobs 2 second there is the question of how minimum wages affect workers in different parts of the family income distribution because many roughly speaking a large minority of minimum wage workers are in relatively affluent families gramlich 1976 card and krueger 1995 burkhauser et al 1996 which workers gain and which lose will have an important influence on the effects of minimum wages on the distribution of family incomes in this article we present evidence on the effects of minimum wages on family incomes focusing in particular but not solely on the effectiveness of minimum wages in reducing poverty using matched march current population surveys cpss we estimate the effects of minimum wages on the probabilities of various transitions in the family income distribution such as transitions into and out of poverty given that federal changes in minimum wages may be confounded with other aggregate level shocks influencing family income we rely heavily on state level changes in minimum wages to identify minimum wage effects in a nutshell our empirical strategy is to compare rates of transition through the family income distribution in states in which minimum wages do and do not increase for example if poor families are more likely to escape from poverty when minimum wages increase in their states of residence we would infer that minimum wage hikes help families move out of poverty on the other hand if transitions in to poverty are more common when minimum wages increase we would infer that the disemployment effects of minimum wages play a dominant role among the low income population

china s exchange rate policy its current account surplus and the global imbalances this article is stimulated by current criticisms of chinese exchange rate policy the concern is really about china s current account surplus the article discusses the factors that determine the surplus and the reasons why the surplus increased sharply from 2005 the international implications of china s surplus and growth are discussed and how it has affected the world real interest rate and through that the us current account deficit the surplus has had various international relative price effects which have produced both gainers and losers finally the surplus played only a small part in determining the world credit crisis

minimum wages globalization and poverty in honduras summary we test whether minimum wage legislation is an effective poverty reduction tool in a poor country trying to stay competitive in the global economy in honduras increases in relatively high minimum wages lead to reductions in poverty especially extreme poverty however the impact is felt only in households with workers in large firms and felt more strongly among those with low wage workers increases in the minimum do not affect poverty in sectors where minimum wages are not enforced or do not apply hence minimum wages can be a poverty reduction tool in the formal sector which competes globally

minimum wages and the incentives for skill formation we show that minimum wages may have beneficial effects on human capital allocation in a situation when the marginal product of skilled labor is shared between firm and worker according to bargaining strength firms prefer more productive workers to less p

the performance of the labor market during recession and structural adjustment costa rica in the 1980s abstract in this paper we trace the evolution of indicators of labor market performance in costa rica throughout the 1980s and examine the special features of the costa rican labor market that influenced the rapid decline 1980 1982 and rapid recovery 1982 1986 of those indicators we find that among other factors legal minimum wages and a large public sector work force were important in influencing these indicators we conclude that recovery and structural adjustment have been relatively successful in costa rica within a system where the labor market functions in an institutional context rather distant from the free market model

the elusive effects of minimum wages the main theme of david card and alan krueger s book myth and measurement the new economics of the minimum wage is that the data do not support the view that minimum wages reduce employment the most important chapter considers data for the fast food industry where it is suggested that recent minimum wage increases may actually have increased employment contrary to the standard theorem that labor demand curves slope down a more reasonable view of the evidence in this book and in many other studies going back to 1915 is that the employment effects of minimum wages are small and difficult to detect in the noisy data available

das maynard keynes problem one of the classic questions in the history of ideas first arose one hundred years ago in germany reading adam smith s two great works the theory of moral sentiments and the wealth of nations late 19th century german economists were struck by an apparent puzzle how could the theorist who made sympathy the mainspring of human action in the first book argue in the second that calculating self interest was the primary motive force thus arose das adam smith problem how could one reconcile the advocate of sympathy with the advocate of self interest the history of the attempts to answer this question is instructive in many ways it is instructive in part as a lesson in the fertility of the history of economic thought as a source of ideas a o hirschman is an outstanding example of an original and creative theorist who has come to fresh insights on the basis of his research on the question see hirschman 1977 1986 the history is also instructive in pointing out the indeterminate nature of the solution to the problem despite the stature of the scholars who have worked in the field and the high quality of their work one must ultimately accept that we shall never know the true answer to the question smith left few papers and the context of his thought is itself a puzzle for us careful reconstruction of the unfolding social cultural and philosophical worlds that smith inhabited would certainly be hallmarks of any acceptable answer to the question but authorities on each of these background areas themselves disagree about what was happening in the worlds in which smith lived reasonable persons must agree to disagree about the answer to the question

employment effects of two northwest minimum wage initiatives i introduction the impact of a minimum wage on employment has long been of interest to economists such as stigler 1946 because it provides a relatively direct test of a conventional theoretical prediction that a binding increase in the minimum wage should reduce employment among low skilled workers although this theoretical prediction has not gone unchallenged as in lester 1946 early empirical work summarized in brown gilroy and kohen 1983 confirmed theoretical predictions using aggregate time series data for young workers which indicated that a minimum wage has a small negative employment effect by 1990 there was general consensus in the profession that minimum wage laws reduced employment among teenage and low wage workers albeit by a small amount ehrenberg 1995 and others have argued that subsequent empirical evidence provides less confidence in both the conventional view that the minimum wage lowers teenage or low skilled employment and that neoclassical theory can account for the relationship between them for example card and krueger 1995 show in a 30 study meta analysis that past time series results are sensitive to the specification and suggest that when appropriately specified the minimum wage has had no significant effects on employment over the last 25 yr alternatively neumark and wascher 1998 find negative employment effects of the minimum wage consistent with structural change using time series data and specifications that do not suffer from the biases present in earlier work cross sectional studies as in currie and fallick 1996 burkhauser couch and wittenburg 2000 and neumark and wascher 2001 also find mixed evidence of employment effects on low wage workers due to the minimum wage thus traditional empirical assessments of the minimum wage yield mixed evidence on the employment impact of the minimum wage the natural experiment methodology was introduced as an alternative to the cross sectional and time series approaches and exploits both the time series wage variation before and after the treatment of a minimum wage increase and the cross sectional wage variation between the treatment state and a control state that did not experience a change in the minimum wage for example card and krueger 1994 analyzed employment growth in 410 fast food restaurants in new jersey and pennsylvania before and after the 1992 minimum wage increase in new jersey from 4 25 to 5 05 they find no evidence linking the increase in the minimum wage to reduced employment in fast food restaurants both when comparing new jersey with pennsylvania and when comparing impacted versus nonimpacted restaurants in new jersey neumark and wascher 2000 reexamine the impact of the 1992 new jersey minimum wage increase using payroll data for hours worked by fast food employees and bureau of labor statistics bls eating and drinking employment data and find that the minimum wage significantly reduced employment in new jersey versus pennsylvania thus even studies that apply similar natural experiment techniques and data for a given minimum wage treatment as in katz and krueger 1992 deere murphy and welch 1995 kim and taylor 1995 and card and krueger 2000 can yield different conclusions regarding its employment effect our empirical analysis exploits a unique natural experiment initiated by oregon and washington voter initiatives that raised the minimum wage over three successive years 1997 1999 in oregon and 1999 2001 in washington by approximately 37 in both states following prior work we focus on the eating and drinking industry sic 58 which is a low wage industry that has been extensively studied in prior work due to an expectation of a binding minimum wage bls wage data available between 1997 and 2001 indicate that the successive minimum wage increases become increasingly binding for most but not all eating and drinking jobs at the lower end of the wage distribution

education and the poverty trap an overlapping generations model is constructed in which individual wealth is related to educational attainment and in which liquidity constraints may induce children to invest in a sub optimal level of education given their ability financing for education is obtained from within the family abilities differ among children and may be related to parental ability stationary state equilibria are found to exist in which children of poorer families are caught in a poverty trap because of an inability to finance their education the role of redistributive policy is studied in this context

minimum wage unemployment and growth abstract this paper shows that in an overlapping generations model with endogenous growth minimum wage legislation does not necessarily has negative consequences on economic performance such legislation can have positive effects on growth by inducing more human capital accumulation more precisely a low demand for unskilled labor induced by a minimum wage may create an incentive for workers to accumulate human capital moreover it is possible that a decrease in the minimum wage lowers the welfare of each agent in the economy

rethinking the role of fiscal policy as recently as two years ago there was a widespread consensus among economists that fiscal policy is not useful as a countercyclical instrument now governments in washington and around the world are developing massive fiscal stimulus packages supported by a wide range of economists in universities governments and businesses why has this change occurred what are the principles for designing a potentially useful fiscal stimulus and what will happen if the current fiscal stimulus fails this abstract was borrowed from another version of this item

is the time series evidence on minimum wage effects contaminated by publication bias i introduction economists often express concern that the journal review process has the unintended effect of biasing published empirical results towards the rejection of economic null hypotheses in favor of statistically significant results that are consistent with economists priors or predictions in other disciplines meta analyses of published papers generally focusing on clinical trials provide some evidence consistent with a bias towards publication of significant results see for example berlin et al 1989 under the reasonable presumption that the parameter of interest such as the effect of a drug should be constant across studies 1 in economics however the parameters of statistical models are more likely to vary across samples especially when the samples cover different time periods because of changed behavior e g lucas 1976 model misspecification or measurement changes the possibility of parameter instability makes it difficult to apply standard meta analysis techniques to the economics literature because these techniques draw inferences regarding publication bias from changes in estimates across samples 2 in this paper we suggest a method of testing the null hypothesis of no publication bias when parameters are changing in particular if there is a specification that is plausibly free of selective specification search then that specification can be used as a benchmark with which to compare changes in estimates across the published studies a statistical test for whether the changes in estimates across the published studies are significantly different from those for the benchmark specification estimated over different sample periods can then be used to assess the evidence of publication bias in the published studies under consideration we apply our approach to the question of whether there is evidence of publication bias in the time series literature on the employment effects of the minimum wage we choose this application for three reasons first the economic impact of the minimum wage is an important issue for policy second widespread interest in this question has generated sufficient research to make the application of meta analysis techniques feasible third it is the topic of one of the rare applications of meta analysis in economics card and krueger 1995a b we show that when we recognize the special complexities associated with meta analysis of studies using time series data the evidence that the minimum wage literature is contaminated by publication bias is much weaker ii evidence of publication bias the approach used by card and krueger to test for publication bias in the minimum wage literature is relatively straightforward first in the absence of publication bias and if parameters are stable then estimated t statistics for employment effects of minimum wages should rise as the sample period is extended more precisely the log of the absolute t ratios should rise one for one with the log of the square root of the degrees of freedom this is closely related to the approach of berlin et al 1989 who test for publication bias in research from clinical trials by asking whether the estimated magnitudes of the effects in published studies are negatively related to sample sizes the intuition is that if only significant results get published the estimated effect will be bigger when it is based on a smaller sample second a tendency for published t statistics for employment effects to be clustered around two can be interpreted as an indication of publication bias using these techniques card and krueger report evidence that is consistent with publication bias in the minimum wage literature focusing on the existing time series studies that use quarterly data they first report that a regression of the log of the absolute t statistics for the estimated minimum wage effects from these studies on the log of the square root of the degrees of freedom yields a negative coefficient estimate rather than the positive coefficient of one implied by the null hypothesis of no publication bias

minimum wages and tipped servers tips allow restaurants to pay servers lower wages as more servers are hired each serves fewer meals and earns less in tips as a result restaurants must pay a higher wage this gives them monopsony power over wages over some range a higher minimum wage should increase employment empirically we found the full reverse c monopsony pattern of employment for restaurants with employment first going up and then down as the minimum wage is increased

deficient foresight a troublesome theme in keynesian economics the fact that john maynard keynes had made a distinguished contribution to the theory of probability 1921 no doubt predisposed many of his readers to imbue with great significance his subsequent remarks on the related topic of uncertainty in economic decision making among those who have provided commentaries on his work there are those who have singled out this uncertainty theme not only for its special importance but also for its potential for analytical subversion the purpose of this paper is to scrutinize the ideas involved in this particular aspect of keynes work together with the lines of argument that have emerged from those commentators who have pursued it the result of this scrutiny will be to call into question the idea that there is anything peculiarly subversive in the analytical consequences of broaching problems of uncertainty in economic decision making i shall argue rather that as an analytical issue it is depending on how it is handled either innocuous or else quite indiscriminately destructive

is the firm an individual this paper shows how three new institutionalist theories try but ultimately fail to support the firm as individual thesis first marx hart s idea of property rights and coase williamson s notion of transaction costs are insufficient to substantiate the market firm dichotomy second hayek s constructionist view presents the firm as opposed to the market as a designed order no different from artifacts such as tables and cars third vanberg s constitutionalist theory also fails to support the firm as individual thesis the paper suggests that the consented goal notion is a fruitful ground upon which to build the firm as individual thesis

the nature of minimum wages and their effectiveness as a wage floor in costa rica 1976 1991 abstract this study describes costa rica s complex minimum wage system and its evolution over 1976 1991 examines the trend in minimum wage to average wage in eight industries and compares the number and characteristics of workers who earn below the minimum wage over these 16 years in the covered and uncovered sectors we conclude that noncompliance is a major problem on average one third of the workers in the legally covered sector earn below the minimum wage over this period moreover the same proportion earns below the minimum wage in the uncovered sectors this evidence indicates that the law may fail its intent of assuring an adequate salary to workers without bargaining power

the employment effect in retail trade of california s 1988 minimum wage increase in this article we study the labor market effect of california s 1988 minimum wage increase in the retail trade industry two different approaches to evaluating the minimum wage effects suggest that the textbook economic analysis of minimum wages pertains employment growth in california s low wage retail trade sector appears to have been tempered by the minimum wage increase

implications for minimum wage policies of an s shaped labor supply curve abstract a model of family labor supply provides a rationale for raising minimum wages when the labor supply response is negative at low wages under those circumstances the labor market can be caught in a malthusian poverty trap of excess supply unemployment overextended workdays child labor and falling wages raising minimum wages may therefore help resorb this excess supply and stabilize the labor market setting a virtuous cycle in motion in a two sector context such a policy would increase wages in both the covered and uncovered sectors evidence from a study of costa rica in particular is consistent with those conclusions

beyond rational expectations a constructive interpretation of keynes s analysis of behaviour under uncertainty this paper suggests that behavior under uncertainty depends not only on rational expectations but also the agent s evaluation of the adequacy of the available evidence on which the expectations are based it is argued that behavioral functions need to be augmented by a credence variable this proposition is derived from keynes s argument in the general theory that investment depends on both the most probable forecast and the state of confidence reflecting the distinction between probability and weight in his a treatise on probability the research implications of the proposed model are indicated copyright 1994 by royal economic society

labor supply the family and poverty the s shaped labor supply curve abstract the canonical model of labor supply is extended to account for subsistence needs and a frequently rigid division of labor within families gender various theories that have been put forward are thus reconciled in particular with respect to the distinct work choices of the poor the model predicts negative labor supply elasticities for secondary workers at low wage rates and positive ones at higher rates but near 0 for primary workers at all levels detailed time allocation data of the rural philippines support these conclusions as well as evidence from other studies including of industrialized countries policy implications are briefly discussed

the equal pay act as an experiment to test theories of the labour market the uk equal pay act of 1970 resulted in a large rise in the relative earnings of women in the early 1970s as this change unlike most wage changes was largely exogenous to employers one can think of this episode as an experiment for testing different theories of the labour market hence study of the effects of the equal pay act should be given considerable weight and is likely to have wider implications about the operation of labour markets most models of the labour market used by economists assume that employment is demand determined at least after a large positive shock to the wage these models would predict that female relative employment should have fallen after the introduction of the equal pay act yet it is hard to find evidence of this this paper argues that female relative employment did not fall because the female labour market is in part monopsonistic

time series minimum wage studies a meta analysis time series minimum wage studies a meta analysis author s david card and alan b krueger reviewed work s source the american economic review vol 85 no 2 papers and proceedings of the hundredth and seventh annual meeting of the american economic association washington dc january 6 8 1995 may 1995 pp 238 243 published by american economic association stable url http www jstor org stable 2117925 accessed 04 11 2011 15 46

the new keynesian view of aggregate demand some reflections from a classical sraffian standpoint the paper argues that the derivation of the aggregate demand curve in the new keynesian literature is insufficient to provide the theoretical ground for the use to which it is usually put namely as a theoretical basis for the claim that long run wage and price flexibility would push a capitalist economy to the full employment or natural level of output it is argued that the derivation solely on the basis of the propositions about optimising household consumption expenditures is insufficient to guarantee a decreasing aggregate demand function without circular reasoning this point is clarified by use of a very simple two commodity production model of long run steady states due to spaventa and nell to guarantee a decreasing aggregate demand function the new keynesian approach must invoke the kinds of propositions used in more traditional derivations propositions which themselves are in question on capital theoretic grounds

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