glass ceilings or glass doors the role of firms in male female wage disparities i use canadian linked employer employee data to examine whether women face a glass ceiling in the labour market i also measure the extent to which the glass ceiling comes about because women are segregated into lower paying firms or because they are segregated into lower paying jobs within firms i find clear evidence that women experience a glass ceiling that is driven by their disproportionate sorting across firm types glass doors rather than within firms i find no evidence that these results are supply driven however my results are consistent with predictions of an efficiency wage model where high paying firms discriminate against females

price competition in an inflationary environment we study how inflation and deflation affect firms ability to cooperate in an experimental bertrand duopoly with differentiated products we find that there is significantly less cooperation in the treatments with inflation and deflation compared to the no inflation treatments the difficulties to cooperate affect prices and welfare depending on the market structure inflation and deflation lead to significantly lower real prices and higher welfare

a new theory of corporatism and wage setting abstract the standard view on corporatist institutions for wage setting in many european economies is based of the insider outsider model corporatism is associated with lack of wage flexibility this paper discusses a new approach starting from the importance of nominal contracts the rationale for these contracts is to avoid future bargaining adjusting these contracts ex post to aggregate shocks would raise their efficiency however avoiding the bargaining required for this adjustment was the main reason for negotiating these contracts in the first place this is the fundamental contradiction under corporatism outside institutions can play this role these institutions provide therefore a type of flexibility not available in decentralized economies empirical evidence supports the basic ideas of this model

insider forces in wage determination new evidence for norwegian industries using panel data for norwegian industries we establish a significant permanent relation between industry wages and industry profitability the estimated long run insider weight is above 0 2 and stable both over time and across industries industry wages are significantly affected by aggregate unemployment and the preferred wage equation implies a highly convex wage curve

wage tenure and wage growth variation within and across establishments we estimate employer specific wage tenure and wage growth differentials using a unique bureau of labor statistics establishment survey of full time white collar workers employer wage and tenure differentials conditional on worker characteristics are substantial in these data education potential experience and tenure are highly correlated within an establishment high wage establishments generally employ higher quality workers and the most skilled men and professionals typically work with the most skilled women and nonprofessionals there is significant variation in wage growth rates across employers and high wage growth establishments tend to have longer tenure all else equal

the japanese deflation has it had real effects could it have been avoided has deflation contributed to the long lasting stagnation of the japanese economy could the bank of japan have stopped deflation by implementing a more expansionary monetary policy tentative answers are probably not to the first question and probably yes to the second question it is found that the total cost of deflation over the period 1995 2003 has been close to a 1 1 rate of lost gdp yet on the basis of statistical significance and robustness to specification choices this evidence is not compelling on the other hand the estimated positive linkage between nominal base money growth and inflation is significant and robust even given current economic conditions however in order to be inflationary monetary policy should have been more expansionary than what actually observed even since the launch of the quantitative easing in 2001

the effect of competition on wages and productivity evidence from the united kingdom abstract i examine the impact of competition on wages and productivity using a panel data set of u k manufacturing industries over 1954 1973 the introduction of cartel law in the united kingdom in the late 1950s caused an intensification of price competition in previously cartelized manufacturing industries but it did not affect those industries that were not cartelized the econometric results from a comparison of the two groups of industries before and after the introduction of cartel law provide strong evidence of a negative effect of collusion on labor productivity growth there is no evidence of any effect of collusion on wages these results are robust to controlling for the potential endogeneity of collusion and are further strengthened by a comparison with u s data

rent sharing and collective bargaining coverage evidence from linked employer employee data using a linked employer employee data set this paper analyses the relationship between firm profitability and wages particular emphasis is given to the question of whether the sensitivity of wages to firm specific rents varies with collective bargaining coverage to address this issue we distinguish sector specific wage agreements firm specific wage agreements and wage determination without any bargaining coverage our findings indicate that individual wages are positively related to firm specific rents in the non union sector and under firm specific contracts industry wide wage contracts however seem to suppress firm level rent sharing while pooled ols estimates yield a positive correlation between wages and quasi rents under centralised contracts estimates accounting for unobserved individual and establishment heterogeneity point to a coefficient of zero differenced gmm estimates accounting for the endogeneity of our profitability measure even point to a negative relationship under centralised contracts

insurance within the firm we evaluate the allocation of risk between firms and their workers using matched employer employee panel data unlike previous contributions this paper focuses on idiosyncratic shocks to the firm which are the correct empirical counterpart of the theoretical notion of diversifiable risk we allow for both temporary and permanent shocks to output and find that firms absorb temporary fluctuations fully but insure workers against permanent shocks only partially risk sharing considerations can account for about 15 percent of overall earnings variability the remainder originating from idiosyncratic shocks to individual workers our welfare calculations indicate that firms are an important vehicle of insurance provision

returns to seniority among public school teachers returns to seniority account for a substantial share of public k 12 expenditures over the first ten to 15 years of a career public school teachers enjoy average wage growth at least equivalent to that of other white collar workers explanations for this structure in terms of human capital or costly monitoring lack theoretical and empirical support a steeper wage tenure profile reduces turnover but it is doubtful that the costs of turnover are high enough to make this an optimal use of school resources we conclude that the structure of teacher pay in public education is more consistent with rent seeking than efficient contracting

are workers willing to pay to join a better team using data from the major league baseball free agent market this study is the first to show that the productivity expected of the team a worker will join produces a significant negative compensating wage differential the younger workers in the sample drive this result trading 25 of their wages to join teams with an expected productivity one standard deviation higher this investment can be recouped if a reasonable increase in human capital occurs these results are robust to contract length wage simultaneity and indicate that investment in human capital motivates the observed tradeoff suggesting a new pathway through which human capital accumulation can affect wages reliable measures of workers own past productivity and the productivity expected of a worker s future team provide key advantages to identifying these effects jel j31 j24 m54

updated notes on the interindustry wage structure 1890 1990 the author documents and analyzes changes in wage structure across manufacturing industries over the years 1890 1990 interindustry differentials in wages were highly stable over that period for production workers but much less stable for nonproduction workers interindustry wage patterns were very similar for production and nonproduction workers in 1990 though this similarity dates back only to 1958 although dispersion of wages across industries followed varying trends over the period it was higher in 1990 than at any previous time in this century the variables that have been most strongly correlated with wage growth are productivity growth rising union density rising capital intensity and profit growth

operational asset replacement strategy a real options approach abstract this paper analyses the problem of replacement by investigating the optimal moment of investment replacement in a given tax environment with a given depreciation policy an operation and maintenance cost minimization model based on the definition of equivalent annual cost is applied to a real options paradigm the developed methodology allows for an innovative evaluation of the flexibility of replacement process analysis a new two factor evaluation function is introduced to quantify decisions on asset replacement under a unique cycle environment this study improves upon previous findings in the literature as it accounts for autonomous salvage value processes based on partial differential equations this model achieves a general analytical solution and particular numerical solution the results differ significantly from those observed in one factor models by showing evidence of over evaluation in optimal levels of replacement and by confirming suspicions that different types of uncertainties produce non monotonous effects on the optimal replacement level the scientific contribution of this study lies in new and stronger approaches to equivalent annual cost literature supplying an algorithm for operation and maintenance cost minimization that is conditioned by autonomous salvage value this study also contributes to the real options literature by developing a two factor model with brownian processes applied to asset replacement

the uk capital stock new estimates of premature scrapping in recent years there has been a considerable degree of interest in the measurement of the capital stock with special reference to the degree of premature scrapping of capital equipment that might have occurred it has been argued that this might be one reason for the observed slowdown in productivity growth see e g muellbauer 1984 or baily 1981 others have alleged that there has been a large decrease in manufacturing capacity in the uk since 1980 and that therefore we should not reflate the economy see e g ball 1985 for we run the risk of re igniting inflation the latter view is commonly expressed in the press both by financial commentators and politi cians it is therefore of some importance to assess the extent to which the official stock meas ures are misleading

endogenous costs and price cost margins an application to the european airline industry this paper allows for endogenous costs in the estimation of price cost margins in particular we estimate price cost margins when firms bargain over wages we extent the standard two equation set up demand and first order condition in the product market to include a third equation which is derived from bargaining over wages in this way price cost margins are determined by wages and vice versa we implement the model using data for eight european airlines from 1976 1994 and show that the treatment of endogenous costs has important implications for the measurement of price cost margins and the assessment of market power our main result is that observed prices in europe are virtually identical to monopoly prices even though observed margins are consistent with nash behavior apparently costs had been inflated to the point that the european consumers were faced with a de facto monopoly prices

wages policy and unemployment in australia it is generally accepted among australian economists that high rates of growth of wages at various times over the last decade have made the achievement of full employment and lower rates of inflation more difficult fear of a further acceleration of wage growth has also been a policy constraint it is when one attempts to go further that considerable disagreement becomes evident from a labour market viewpoint there does not seem to be a consensus as to the answers to the two broad questions that should be addressed first how important are wage changes relative to other factors that depress employment and add to the inflation rate second how does government policy impinge on the process that generates wage changes to do justice to both of these in a paper as short as this one is difficult so i shall focus most of the paper on the second question the relationships between government policy and wage changes are particularly important at this time for most of the last decade successive governments have operated a national wages policy which to a large degree has been based on the indexation of wages for past price changes the latest experiment the prices and incomes accord is the centrepiece of the current government s employment and inflation policy and after almost two years of wide community and media support the key principles upon which it is based are suddenly being questioned 1 our prime endeavour therefore will be to build up sufficient understanding of the wage determination process so that some evaluation can be made as to the effectiveness of these national wage policies this turns out to be a remarkably difficult task which generates considerable concern in our mind that the data may not be sufficiently rich to serve as a basis for sound judgments it does appear however that the effect of a given level of unemployment upon wage changes has consistently weakened over the last decade why this should be so is a major unresolved puzzle i offer a loosely constructed theory that is consistent with the facts but it is by no means the only possible explanation section i provides a description of wage setting in australia and some key facts of the economy in section ii the statistical analysis of wage changes focuses on two competing theories one is the phillips curve approach and the other stresses that wage outcomes may be to a significant degree independent of the level of unemployment and may depend instead on utilization rates of labour within the firm section iii considers the efficacy of incomes policies in australia some final comments areoffered in section iv

firmwide versus establishment specific labor market practices we construct a novel data set matching occupational data from separate establishments to the establishments corporate parents in order to study labor market links across establishments within diverse firms we find substantial wage components common to all establishments within firms even after netting out industry and occupation effects however employment changes are localized to establishments the data suggest that internal labor markets of multiestablishment firms are linked throughout their entire organizations but that establishment level demand shocks do not permeate the firm

sectoral shifts and interindustry wage differentials the observed differences in wages across industries may arise from a lack of worker mobility particularly among experienced workers allowing the effects of industry shocks to persist for some time although young workers arbitrage wage shocks they will have little effect on the dispersion of experienced workers wages if young and old workers are poor substitutes in production this explanation is investigated using the five censuses of population between 1940 and 1980 the evidence strongly suggests that differences in pay are not temporary phenomena the data provide some support for the role of human capital and ability

fear unemployment and pay flexibility the paper uses newly available cross section data to study wage determination in the united kingdom in the 1980s the main results are as follows 1 fear of unemployment substantially depresses pay 2 there is some evidence of a wage ratchet whereby rates of pay are more flexible upwards than downwards 3 the unemployment elasticity of pay averages 0 1 and 4 wages are much more flexible in nonunion workplaces than they are in union workplaces copyright 1991 by royal economic society

the innovative behavior of spanish enterprises and its impact on salaries our aim was to analyze the effects of firms innovative behavior on their employees salaries in the spanish manufacturing industry we found a premium in the wage paid by innovative firms regardless of size however when taking company size into account we found that the effect of innovations was greater in small medium enterprises sme contrary to what was expected the inferences of the models estimated suggest that the higher the market concentration the weaker the appropriability regime especially for smes however at the same time a firm s innovations reduce the impact of market concentration on wages making innovating firms more autonomous than non innovating ones even more to be able to innovate firms have to isolate their employees salaries from the product market these results hold regardless of firm s size but have a greater impact on the small medium group of firms finally our analysis backs the assumption that salaries in both large and small medium firms are generated by two distinct economic regimes supporting the proposition that an sme is not simply a scaled down large firm

the swedish third way an assessment of the performance and validity of the rehn meidner model the swedish third way an assessment of the performance and validity of the rehn meidner model

real investment options with multiple sources of rare events abstract we value real investment options when the underlying asset follows a mixed jump diffusion process involving various types sources of rare events jumps these jumps are assumed independent of each other with each type having a log normally distributed jump size and a random poisson distributed arrival time they may represent uncertainties about the arrival and impact on the underlying investment of new information concerning technological innovation competition political risk regulatory effects and other sources an analytic solution is presented for european claims call or put options with multiple sources of jumps a discrete time markov chain methodology implemented within a finite difference scheme is proposed for the valuation of american as well as european options the approach is also applicable to financial options with multiple types of rare events the approach is illustrated through valuing complex real options with compound features involving interactions between optimal investment and subsequent operating decisions specifically we value a growth option and an extension option

replacement decisions with multiple stochastic values and depreciation abstract we develop an analytical real option solution to the after tax optimal timing boundary for a replaceable asset whose operating cost and salvage value deteriorate stochastically we construct a general replacement model from which seven other particular models can be derived along with deterministic versions we show that the presence of salvage value and tax depreciation significantly lowers the operating cost threshold that justifies and thus hastens replacement although operating cost volatility increases defer replacement increases in the salvage value volatility hasten replacement albeit modestly while increases in the correlation between costs and salvage value defer replacement reducing the tax rate or depreciation lifetime or allowing an investment tax credit yield mixed results these results are also compared with those of less complete models and deterministic versions showing that failure to consider several stochastic variables and taxation in the replacement process may lead to sub optimal decisions

union wage differentials product market influences and the division of rents this paper examines the extent to which product market conditions limit the ability of trade unions to establish wage differentials over nonunion pay the mean union pay differential is estimated to be of the order of 8 percent to 10 percent in establishments with some degree of product market power but zero in establishments facing competitive product market conditions when competitive conditions are faced a preentry closed shop and high union coverage of the industry are both required it is estimated that only 5 percent of the establishments in which there are significant differentials over nonunion pay face generally competitive product market conditions copyright 1990 by royal economic society

testing the purchasing power parity through i 2 cointegration techniques this paper contributes to the empirical literature on the purchasing power parity ppp over the post bretton woods period by providing a time series based interpretation of the controversial evidence characterizing the dynamics of real exchange rates it is shown that the persistence of deviations from the ppp between a set of european countries and the united states may be empirically attributed to the presence of i 2 stochastic trends in prices using consumer price indices interestingly the slow adjustment towards the equilibrium can be modelled through integral proportional equilibrium correction models and this evidence can be partly reconciled with theories where the inflation rate reduces the markup of profit maximizing firms acting on imperfectly competitive markets copyright 2005 john wiley sons ltd

wages and profits in manufacturing firms matched panel evidence from brazil we provide evidence about the determinants of the wage structures of developing countries by examining the case of brazil our specific question is whether brazil s dramatic income and wage dierentials can be explained by the division of rents between firms and their employees unlike in competitive labour markets using detailed individual level matched panel data covering a large share of manufacturing firms and more than 30 million workers between 1997 and 2002 we consider the endogeneity of profits by adopting dierent measures of profits and dierent instruments and by controlling for spell fixed eects our results robust to dierent specifications and tests indicate no evidence of rent sharing this conclusion contrasts with findings for most developed countries even those with flexible labour markets possible explanations for the lack of rent sharing include the weakness of labour market institutions the high levels of worker turnover and the macroeconomic instability faced by the country

microdata evidence on rent sharing we examine the effect of firm profits on wages for individual workers while focusing on the empirical complications associated with estimating the extent of rent sharing controlling for worker and firm fixed effects and using several instruments to deal with the endogeneity of profits we report results indicating that ordinary least square ols estimates strongly underestimate the effects of profits on wages moreover the effect of profits on wages are estimated separately for firms with increasing and decreasing profits within a given time period we find a positive and stable effect only in firms with increasing profits this is in line with the idea that falling profits do not lead to wage cuts while increasing profits imply higher wages

do marital status and computer usage really change the wage structure this analysis uses several identification strategies and data sources to control for individual ability and determine the causal effect of marital status and computer usage on wages although data from the cps nlsy and a data set of identical twins show that there are large cross sectional effects of these variables new econometric specifications are applied to these data which indicate that marital status and computer usage are not important causal determinants of earnings even after adjustments are made for measurement error and within twin differences in ability

unions and interindustry wage differentials abstract we investigate the importance of trade unions in collective bargaining in the context of a developing country manufacturing labor market the methodology we adopt to estimate wage differentials follows the method proposed by haisken denew j p and schmidt c m 1997 review of economics and statistics 79 516 521 since it improves on the standard procedure popularized by krueger a b and summers l h 1988 econometrica 56 193 259 our findings indicate that wage dispersion is far greater in the unionized sector of brazilian manufacturing in contrast to evidence from other countries

modeling inflation in australia this article develops an empirically constant data coherent error correction model for inflation in australia the level of consumer prices is a markup over domestic and import costs with adjustments for dynamics and relative aggregate demand we address issues of cointegration general to specific modeling dynamic specification model evaluation and testing parameter constancy forecasting and exogeneity we also test this model against existing models of australian prices this model encompasses but is not encompassed by the existing models

an i 2 analysis of inflation and the markup an i 2 analysis of australian inflation and the markup is undertaken within an imperfect competition model it is found that the levels of prices and costs are best characterized as integrated of order 2 and that a linear combination of the levels which may be defined as the markup cointegrates with price inflation from the empirical analysis we obtain a long run relationship where higher inflation is associated with a lower markup and vice versa the impact in the long run of inflation on the markup is interpreted as the cost to firms of overcoming missing information when adjusting prices in an inflationary environment copyright 2001 john wiley sons ltd

modelling uk inflation 1875 1991 uk inflation has varied greatly in response to many economic policy and exchange rate regime shifts two world wars and two oil crises as well as legislative and technological changes inflation is modelled as responding to excess demands from all sectors of the economy goods and services factors of production money financial assets foreign exchange and government deficits equilibrium correction terms are developed for each of these over the sample indicator variables and commodity prices capture turbulent years variables representative of most theories of inflation matter empirically yielding an eclectic model inconsistent with any single cause explanation copyright 2001 john wiley sons ltd

insider forces and wage determination this paper investigates the relative importance of firm specific factors i e insider forces in wage determination using firm level data on 219 u k companies over 1974 82 it finds that a 1 percent rise in a firm s prices or productivity relative to the aggregate economy leads to a rise in relative wages of 0 1 0 2 percent as a corollary to this outside factors like the aggregate wage and the unemployment rate also play an important role there is evidence for insider based hysteresis effects but these are inversely related to the extent to which firms take national agreements into account copyright 1990 by royal economic society

the rise in unemployment a multi country study one of the most remarkable features of recent economic history has been the remorseless rise in unemployment throughout the industrialized countries however while the trend to higher unemployment is universal the experience of individual countries also differs widely the increase is especially marked within the european community where unemployment rates rival those reached in the interwar years by contrast in the scandinavian countries and japan unemployment is lower and has risen very much less experience in the united states lies somewhere between these extremes and in the last few years unemployment there has fallen sharply

local and central wage bargaining the literature on wage bargaining usually considers either central or local wage bargaining an exception is holmlund 1986 throughout most of the unionized part of the private sector in norway wage bargaining takes place on two levels first centrally and then locally in the economic policy debate it has been argued that this system leads to higher wages and lower employment than bargaining on only one level regardless of whether it is central or local see e g skatnland 1983 in this paper i present a model with wage bargaining on two levels and show that in this system the above argument is proved false we focus on an industry with n identical firms which produce one homogeneous product for simplicity the output price and input prices other than wages are considered given on the central level there is a utility maximizing labor union with a quasi concave utility function increasing in the arguments employment l and total wage vv there is a local labor union in each firm we analyze the system during one period say a year wage setting in this period consists of three stages in the first stage the central labor union sets the tariff wage q unilaterally this follows the monopoly model of e g dunlop 1944 and oswald 1985 in the second stage the firms determine the employment l which prevails until the next period in the third and final stage the local union negotiates with the management of the firm about local wage drift the total wage is w q wage drift the assumption that the firms determine employment prior to wage bargaining is used by e g moene 1987 and horn wolinsky 1985 both the central labor union and the firms know how local wage bargaining functions and can therefore perfectly anticipate what the result

investment under uncertainty the case of replacement investment decisions we analyze the determinants of replacement investment decisions in a contingent claims model with maintenance and operation cost uncertainty we find that the optimal time between replacements is increasing in the volatility of cost the purchase price of a new asset and the corporate tax rate and is decreasing in the systematic risk of cost the salvage value of the asset and the investment tax credit the optimal time between replacements can either increase or decrease with an increase in the depreciation rate extensions of the model to examine the effects of technological and tax policy uncertainty on replacement investment decisions give intuitive but striking results uncertainty about the arrival of a technological innovation that would decrease maintenance and operation cost results in a significant decrease in replacement investment uncertainty in a tax law change that would encourage investment decreases current investment and uncertainty in a tax law change that would discourage investment increases current investment

individual heterogeneity and interindustry wage differentials estimates of interindustry wage differentials are obtained using a fixed effects estimator on a long panel the national longitudinal survey of young men nls after controlling for observable worker characteristics 84 percent of the residual variance of log wages across industries is explained by individual fixedeffects only 16 percent of the residual variance is explained by industry dummies since no controls for specific job characteristics are used job characteristics that vary across industries could potentially explain this rather small residual across industry log wage variance that is not attributable to individual effects clearly then these data do not force us to resort to noncompetitive explanations of interindustry wage differentials such as efficiency wage theory furthermore efficiency wage theories predict that wages in efficiency wage paying or primary industries should be relatively rigid therefore industry wage differentials should widen in recessions however no such tendency is found in the data

market power price adjustment and inflation we study the responses of real and nominal prices to random flutuations in costs and money growth using a monetary search economy in which there are no costs or temporal restrictions on sellers ability to change prices the economy exhibits a form of price stickiness in that the price level may react incompletely to either type of shock as a result of endogenous changes in the average mark up driven by movements in consumers search intensity the average mark up falls as inflation rises a finding consistent with emprical observations as a result of this reduction in market power prices become more responsive to shocks as inflation rises our results are consistent with empirical findings that the degree of price adjustment in response to both cost and money growth shocks is increasing in the average rate of inflation that the variance of inflation increases with its average level and that positive and negative shocks to money growth have asymmetric effects

analytical solution for an investment problem under uncertainties with shocks abstract we derive the optimal investment decision in a project where both demand and investment cost are stochastic processes eventually subject to shocks we extend the approach used in dixit and pindyck 1994 to deal with two sources of uncertainty and we assume that the underlying processes are jump diffusion processes assuming certain conditions on the parameters we are able to derive a closed expression for the value of the firm finally we present comparative statics for the investment threshold with respect to the relevant parameters

wage determination in brazil the growth of union bargaining power and informal employment this article examines wage determination in brazilian manufacturing during the 1980s and early 1990s it presents evidence to show that the reduction in state regulation of collective bargaining has led to the development of a system of wage determination which is increasingly characterised by rent sharing and insider trade union bargaining power real wages appear increasingly inflexible with respect to movements in open unemployment with a large informal sector disciplining formal sector wage bargaining and cushioning the impact of broader labour market conditions an important consequence of this is that the employment costs of a successful counter inflationary strategy may be very severe

pay setting self employment and the unions one of the important influences that has shaped recent labour market policy is the idea that pay should depend on the employer s financial per formance this is believed both by politicians and by businessmen and comes in various guises it was the subject of long debate in the spring issues of the financial times prime minister john major argued that there should be no such thing as automatic pay increases pay must be linked to

consumer search incomplete exchange rate pass through and optimal interest rate policy this paper studies utility maximizing monetary policy in a two country economy with consumer search frictions search frictions provide a microfoundation for incomplete exchange rate pass through and international deviations from the law of one price lop i show that optimal interest rate policy targets deviations from the lop and acts to mitigate the effect of search frictions in a quantitative setting with internationally correlated technology and preference shocks optimal policy generates positive cross country correlation of nominal interest rates

the low skill trap recently it has become popular to argue that certain workers have fallen into a trap in which they have poor skills few job opportunities and a low return on training while others have not this paper demonstrates how such a trap can occur within a simple matching model with rent sharing rent sharing diminishes the worker s incentive to acquire skills however since firms also benefit from training rent sharing likewise induces job creation the subsequent improved matching prospects may offset the initial disincentive to invest however for this mechanism to be effective firms and workers must coordinate their actions if they do not the trap occurs

regional disparities in the unemployment rate the role of the wage setting mechanism in spain 1987 92 bande r fernandez m and montuenga v m 2007 regional disparities in the unemployment rate the role of the wage setting mechanism in spain 1987 92 regional studies 41 the aim of this paper is to show how regional unemployment disparities in spain widen during economic upturns and to provide an explanation of this behaviour the analysis is based on the study of the wage setting mechanism that allows an estimation of the responses of wages to both labour productivity and the general situation of the labour market and an assessment of their impact on the evolution of regional unemployment the results of this estimation at the regional level with manufacturing data confirm the existence of marked differences between industries and between regions these responses these differences can be interpreted as a distinctive wage setting mechanism across industries and regions which may explain the evolution of unemployment rates within the regional labour markets bande r fernandez m et montuenga v

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

gender differences in rent sharing and its implications for the gender wage gap evidence from sweden abstract this study using matched employer employee data analyses gender differences in rent sharing results indicate significantly smaller remuneration from firm profits for women a difference that increases along the wage distribution gender differences in rent sharing explain less than 2 of mean gender wage differentials as differences are found in remuneration from firm profit and not in the mean profit levels of employing firms

the rise of intra occupational wage inequality in the united states 1983 to 2002 wage inequality has increased dramatically in the united states since the 1980s this article investigates the relationship between this trend and occupational structure measured at the three digit level using the current population survey from 1983 to 2002 we find that the direct association between occupations and wage inequality declined over this period as within occupational inequality grew faster than betweenoccupational inequality we estimate multilevel growth models using detailed occupational categories as the unit of analysis to assess how the characteristics of occupations affect changes in mean wages and levels of wage inequality across this time period the results indicate that changes in mean wages across occupations vary depending on the characteristics of individuals in those occupations and that intraoccupational inequality is difficult to predict using conventional labor force data these findings seem largely inconsistent with the common sociological view of occupation as the most fundamental feature of the labor market correspondingly a more comprehensive approach one that incorporates the effects of organizational variables and market processes on rising wage inequality in the new economy is warranted

wages profits and capital intensity evidence from matched worker firm data swedish data on workers matched with firms balance sheet reports are used to examine the relation between wages and firms ability to pay results indicate that experienced and highly educated workers are sorted into profitable firms wages are positively correlated with profits and the capital labor ratio after controlling for worker quality degree of effort supervision job characteristics local unemployment firms employment history and employer size lester s range of pay due to rent sharing is around 12 24 of the mean wage in sweden which is close to the estimates for the united states and united kingdom

imperfectly competitive labour markets and the productivity puzzle abstract we integrate imperfectly competitive labour markets in a dynamic macromodel in accordance with empirical evidence we find that temporary shocks are consistent with little real wage and large employment responsiveness while permanent shocks affect real wages and not employment

firm profitability regional unemployment and human capital in wage determination this paper presents an analysis of wage formation in the norwegian private sector using data for individual workers matched with firm level information and regional unemployment a key issue is to test whether or not firm specific variables affect individual wages after controlling for individual specific factors and working conditions the results imply positive effects of firm specific profitability and firm size the elasticity of wages with respect to value added per worker and firm size is 5 and 3 3 respectively empirical evidence of a downward sloping regional wage curve is also reported while there is no support of the hypothesis of compensating wage differentials since data for three levels of aggregation are used the ols estimates of the standard errors are downward biased therefore results using a random effects model are also reported taking the multi level structure of the data into account

collusion and price rigidity we consider an in nitely repeated bertrand game in which prices are publicly observed and each rm receives a privately observed i i d cost shock in each period we focus on symmetric perfect public equilibria sppe wherein any punishments are borne equally by all rms we identify a tradeoff that is associated with collusive pricing schemes in which the price to be charged by each rm is strictly increasing in its cost level such fully sorting schemes offer efficiency bene ts as they ensure that the lowest cost rm makes the current sale but they also imply an informational cost distorted pricing and or equilibrium path price wars since a higher cost rm must be deterred from mimicking a lower cost rm by charging a lower price a rigid pricing scheme where a rm s collusive price is independent of its current cost position sacri ces efficiency bene ts but also diminishes the informational cost for a wide range of settings the optimal symmetric collusive scheme requires i the absence of equilibrium path price wars and ii a rigid price if rms are sufficiently impatient however the rigid pricing scheme cannot be enforced and the collusive price of lower cost rms may be distorted downward in order to diminish the incentive to cheat when the model is modi ed to include i i d public demand shocks the downward pricing distortion that accompanies a rm s lower cost realization may occur only when current demand is high

rent sharing and collective wage contracts evidence from german establishment level data using german establishment level data this article analyses whether wages respond to firm specific profitability conditions particular emphasis is given to the question of whether the extent of rent sharing varies with collective bargaining coverage in this context two conflicting hypotheses are tested the first one asserts that unions exploit their bargaining power at the firm level and appropriate a larger share of rents than the bargaining parties in uncovered firms the second one states that unions favour a compressed intra industry wage structure and suppress the responsiveness of wages to firm specific profitability conditions the empirical analysis provides strong support for the second hypothesis while pooled ordinary least squares pols estimates yield positive estimates of the rent sharing coefficient in covered establishments dynamic panel data estimates accounting for unobserved heterogeneity and the endogeneity of rents point to a rent sharing coefficient of zero

wages profits and rent sharing the paper suggests a new test for rent sharing in the u s labor market using an unbalanced panel from the manufacturing sector it shows that a rise in a sector s profitability leads after some years to an increase in the long run level of wages in that sector the paper controls for workers characteristics for industry fixed effects and for unionism lester s range of wages is estimated for rent sharing reasons alone at approximately 24 per cent of the mean wage

german and american wage and price dynamics differences and common themes abstract the theoretical section of this paper develops a new nonstructural model of wage and price adjustment that integrates several concepts that have often been treated separately including phillips curve level effects hysteresis change effects the error correction mechanism and the role of changes in labor s share that act as a supply shock the empirical analysis reaches two striking conclusions first during 1973 1990 coefficients in our german wage equations are remarkably similar to those in the u s with almost identical estimates of the phillips curve slope of the hysteresis effect and of the nairu the two countries also share similar inflation behavior in that inflation depends more closely on the capacity utilization rate than on the unemployment rate the big difference between the two countries is that there seems to be no feedback from wages to prices in germany and so high unemployment does not put downward pressure on the inflation rate during the 1970s and 1980s in germany there emerged a growing mismatch between the labor market and industrial capacity so that the unemployment rate consistent with the mean constant inflation utilization rate muru increased sharply while in the u s the muru was relatively stable

shareholder wealth and wages evidence for white collar workers we present empirical evidence on the relationship between individual wages conditional on worker characteristics and equity returns using a unique survey from the bureau of labor statistics equity returns affect the wages only of workers with three or more years of tenure a 4 percent increase in a firm s market value raises pay by 0 3 percent within three years our estimates suggest that each 10 increase in shareholder wealth raises the present value of a firm s wage bill by 1 the elasticity of white collar wages with respect to equity returns is one third smaller than the ceo salary elasticities in our sample

wages and product market power this paper analyses time series on some 800 british manufacturing companies to address various questions concerning the role of insiders and market power in wage determination the following are the most important results first product market power has a positive impact on wages this impact is enhanced in large firms but is not influenced by union status second while firm specific factors influence wages the size of these effects is not influenced by union status firm size or product market power however product market power reduces the generally strong negative effect of unemployment on wages finally there is no robust evidence of insider power at work in wage setting irrespective of product market position

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

insider effects in wage determination abstract the paper attempts to shed new light on the determinants of industry wages by a cross country comparison of wage setting relationships making use of comprehensive and consistent panel data on industries from the early 1960s to the mid 1980s the empirical analysis involves estimations of identically specified industry wage equations for each of five countries sweden norway finland germany and the united states a key finding is that industry wages in the u s are the most responsive to sectoral price and productivity changes by contrast industry wages in the nordic countries are largely unaffected by sectoral conditions the results cast doubt on the competitive model as an accurate characterization of wage setting under decentralization

the effect of tax depreciation on the stochastic replacement policy abstract the optimal replacement policy for an asset subject to a stochastic deteriorating operating cost is determined for three different tax depreciation schedules and a known re investment cost as the solution to a two factor model using a quasi analytical method we find that tax depreciation exerts a critical influence over the replacement policy by lowering the operating cost thresholds although typically a decline in the corporate tax rate increase in any initial capital allowance or decrease in the depreciation lifetime increase in depreciation rate results in a lower operating cost threshold which justifies replacing older equipment these results are not universal and indeed for younger age assets the result may be the opposite an accelerating depreciation schedule may incentivize early replacement in a deterministic context but not necessarily for an environment of uncertainty

rent sharing before and after the wage bill many biases plague the analysis of whether employers share rents with their employees unlike what is predicted by the competitive labour market model using a portuguese matched employer employee panel this article is one of the first to address these biases in three complementary ways 1 controlling directly for the fact that firms that share more rents will ceteris paribus have lower net of wages profits 2 instrumenting profits via interactions between the exchange rate and the share of exports in firm s total sales 3 considering firm or firm worker spell fixed effects and highlighting the role of downward wage rigidity these approaches clarify conflicting findings in the literature and result in our preferred specifications in significant evidence of rent sharing a lester range of pay dispersion of 56 also shown to be robust to a number of competitive interpretations

an investigation into the power of insiders in wage determination abstract this paper is concerned with the role of insider forces in wage determination various union and non union models of wage behaviour are considered and they imply that wages are a convex combination of internal and external factors certain union models also imply a degree of hysteresis data on fourteen british production industries reveal that i insider forces are important ii their importance is directly related to both union power and the degree of monopoly in the product market iii the state of the aggregate labour market is also important and iv hysteresis effects arising from insider power are only significant in a small minority of sectors

the relationship between the markup and inflation in the g7 economies and australia an i 2 analysis of inflation and the markup is undertaken for the g7 economies and australia we find that the levels of prices and costs are best described as i 2 processes and that except for japan a linear combination of the log levels of prices and costs cointegrate to the markup that is integrated of order 1 it is also shown that the markup in each case co integrates with inflation and that higher inflation is associated with a lower markup in the long run

sources of intra industry wage dispersion how much do employers matter observed human capital explains less than half of wage variation in bls industry wage surveys establishment based wage differentials controlling for occupation account for 20 70 percent of intra industry wage variation this corresponds to a standard deviation in wages of 14 percent of the mean almost as large as interindustry wage variation investigation suggests that establishment wage differentials are not random variations or returns to usual measures of human capital

accuracy of response in labor market surveys evidence and implications this paper examines the extent of response errors in labor market survey data and explores the implications of such errors for economic analysis explicitly examined are responses to questions on industry occupation union status hours worked and wages analyses are based on two sources 1 a special supplement to the january 1977 current population survey that obtained data from workers and their employers and 2 an exact match of workers and their employers interviewed in the employment opportunity pilot project survey the dual nature of these surveys provides a basis for analyzing the effect of response error on a variety of economic analyses including the trade off between wages and risk the wage impact of unionism and the sensitivity of wage determination models to alternative responses to earnings questions

stationary equilibrium in a market for durable assets this paper presents a dynamic model of consumer trading on the primary secondary and scrap markets for a stochastically deteriorating durable good in a stationary economy with perfect information and no transaction costs we explicitly model the trading process by tracking each durable from its birth in the primary market through its sequence of owners in the secondary market until its death in the scrap market we prove that a stationary equilibrium exists characterize the distribution of consumer holdings of durables and show that equilibrium asset prices are shadow prices to a particular regenerative optimal stopping problem we show that each heterogeneous agent equilibrium is observationally equivalent to a homogeneous agent equilibrium we derive a differential equation for equilibrium rental rates and a functional equation which links rental rates to asset prices these equations show precisely how the structure of durable prices and rental rates embody the functional form and population distribution of preferences and the technological characteristics of durable goods this abstract was borrowed from another version of this item

environmental taxation and unemployment some evidence on the double dividend hypothesis in europe abstract the employment double dividend hypothesis suggests that an appropriately designed fiscal reform in which emission charges are used to subsidize employers social security contributions may realize at least two relevant policy goals a better quality of the environment and at the same time an increase in employment levels this paper uses a newly developed econometric general equilibrium model for the european union as well as for each member country and presents simulation results up to the year 2010 of the effects of a european carbon tax the revenues from which are recycled to reduce employers social security contributions the results show that recycling carbon tax revenues may provide an employment double dividend only in the short run

work sharing employment and wages the paper analyzes the effects of a reduction in working time on wages and employment with a monopoly union in general it is not clear in which directions these variables move but if employment and working time are perfect substitutes the effects are related to how working time has been determined initially the wage increases if initial working time is smaller than or equal to the trade union optimum whereas the result is unclear when it is larger in this case it is never optimal for a trade union to reduce both the wage and working time in response to a recessionary supply shock the analysis may help to explain varying attitudes towards work sharing in different countries

labour market institutions and economic performance labour markets richard freeman do particular types of labour market institution hold the key to economic success should other countries try to emulate the flexibility of the american labour market or the centralization of swedish style corporatism since 1970 within the oecd there has been a sharp divergence both of economic performance and of indicators of labour market structure the paper uses union density and the degree of wage dispersion across industries to proxy a country s underlying labour market institutions in assessing economic performance it is argued that cross country differences in output growth were much smaller than differences in employment growth for given output growth there is a clear negative relationship between employment growth and real wage growth across countries why do different countries find themselves at different points on this trade off the final part of the paper examines the correlation between indicators of labour market structure and the position on the wage employment trade off it concludes that the degree of wage dispersion across industries is the most important indicator of market structure and that countries with very high or very low dispersion typically the countries with highly centralized or highly decentralized bargaining in the labour market have better employment performance than countries with intermediate degrees of centralization and wage dispersion

rent sharing and wages evidence from company and establishment panels a central question in labor economics and macroeconomics is whether the textbook competitive model provides an adequate representation of the labor market using longitudinal data on companies and establishments this article suggests that it may not as predicted by rent sharing models of the labor market changes in profitability are shown to feed through into long run changes in wages these are not temporary wage effects and are not driven by the unionized workplaces in the data the article s estimates imply that for rent sharing reasons alone lester s range of wages is approximately 16

real wage determination and rent sharing in collective bargaining agreements the microeconomic forces that influence real wages are not fully understood this paper studies pay determination using data on approximately 600 labour contracts it finds that the real wage is an increasing function of past profitability in the employer s industry and a decreasing function of the level of unemployment in the employer s region these results are consistent with rent sharing theories

financial markets and wages we study a labor market equilibrium model in which flrms sign optimal long term contracts with workers firms that are flnancially constrained ofier an increasing wage proflle they pay lower wages today in exchange of higher wages once they become unconstrained and operate at a larger scale in equilibrium constrained flrms are on average smaller and pay lower wages in this way the model generates a positive relation between flrm size and wages using data from the national longitudinal survey of youth nlsy we show that the key dynamic properties of the model are supported by the data jel classiflcation g31 j31 e24

firm specific determinants of the real wage bargaining models suggest that firm specific variables play an important role in wage determination yet previous empirical studies of wage determination have largely ignored these variables the authors analysis of a large panel data set of u s wage contracts suggests that firm specific variables suggested by bargaining models such as the value of sales the capital labor ratio and the financial liquidity of the firm are important determinants of negotiated real wages copyright 1992 by mit press

executive compensation and principal agent theory the empirical literature on executive compensation generally fails to specify a model of executive pay on which to base and test hypotheses regarding its determinants in contrast this paper analy

conditional investment policy under uncertainty and irreversibility abstract an irreversible investment decision such as fixing a defective equipment is considered which in turn is conditional on the profitability and expected life of the entire equipment given the sunk cost of fixing the fault the uncertain costs of waiting and the expected life of the entire equipment the problem is to find the optimal time to fix the fault to minimize the expected total discounted costs the optimal policy is obtained in the optimal stopping context using stochastic dynamic programming techniques and analyzed via the partial differential equation pde it is shown that increasing uncertainty over internal losses as a function of profits and decreasing life expectancy of the entire equipment can significantly increase the optimal stopping barrier

do wages rise with job seniority many previous studies have found a strong positive effect of job seniority tenure on wages this paper re examines the evidence using a simple instrumental variables scheme to deal with the fact that tenure is likely to be related to unobserved individual and job characteristics that affect the wage we use the variation of tenure over a given job match as the principal instrumental variable for tenure the variation in tenure over the job is uncorrelated by construction with the fixed individual and job match specific components of the error term of the wage equation our main finding is that the partial effect of tenure on wages is small and that general labour market experience and job shopping account for most wage growth over a career the strong cross section relationship between tenure and wages is due primarily to heterogeneity bias prior researchers see mincer and jovanovic 1981 bartel and borjas 1981 borjas 1981 cline 1979 and mellow 1981 and many others have established that job seniority has a strong positive relationship with wage rates in a cross section or a cross section time series of individuals in this paper we re evaluate the evidence concerning the partial effects on wages of job seniority tenure and total labour market experience the extent to which wages rise with tenure is important for several reasons first and foremost the wage tenure profile is a fundamental question about the structure of earnings over careers second the wage tenure profile is a key determinant of the extent to which the earnings power of individuals is tied to specific jobs and it is important for assessment of the losses suffered by displaced workers hamermesh 1984 third evidence that wages rise with job tenure has been used to explain the decline in quits with tenure since the wage growth on the current job lowers the probability that the worker will locate a superior alternative a growing theoretical literature surveyed in parsons 1984 has taken the evidence of a strong wage tenure profile at face value and sought to provide an explanation for the relationship the most prominent explanation is the theory of specific human capital oi 1962 becker 1962 mincer 1974 parsons 1972 kuratani 1973 and hashimoto 1980 in which the growth of wages with tenure holding experience constant is attributed to the worker s share of investments in firm specific skills more recently lazear 1981 has presented a supervision model of wage growth in which firms defer compensation as a means of inducing workers not to shirk freeman 1977 and harris and holmstrom 1982 provide an explanation for wage growth based on an insurance motive salop and salop 1976 nickell 1976 and guasch and weiss 1982 present adverse selection models of wage growth in which firms use a wage tenure profile as a

a structured var for denmark under changing monetary regimes using recently developed statistical tools for analyzing cointegrated 1 2 data this article models money income prices and interest rates in denmark the final model describes the dynamic adjustment to short run changes of the process to deviations from long run steady states and to several political interventions it provides new insights about the effects of the liberalization of trade and capital in a small open european economy

do r d tax incentives lead to higher wages for r d workers evidence from the netherlands this paper examines the impact of the dutch r d tax incentive scheme on the wages of r d workers we construct firm specific r d tax credit rates that vary over time following variations in the dutch r d tax incentive program using instrumental variables we estimate a wage sharing model with an unbalanced firm level panel data covering the period 1997 2004 the elasticity of the r d wage with respect to the fraction of the wage supported by the fiscal incentives scheme is estimated at 0 2 in the short run and 0 24 in the long run

machine replacement under evolving deterministic and stochastic costs the infinite horizon cost minimization and the real option stopping problem are used to analyze serial replacement of a single asset under improving technology it is shown that both techniques produce the same equal life replacement policy when exponential technological improvements affect the operating cost and new asset cost in the same way next this result is extended to the stopping problem under evolving stochastic costs under general improving technology the expected asset lifetimes appear to be different for sequential replacement cycles and depend on the future cost evolution numeric experiments are provided and managerial implications of the obtained outcomes are discussed