the measurement and trend of inequality comment in a recent article in this review morton paglin proposes a measure of concentration which he claims will correct the gini ratio for overstatement in populations where each individual may be expected to vary his income or wealth over his life cycle the paglin measure suggests that the gini ratio overstates income concentration in the united states by a third and does not reveal a 23 percent decline in concentration which has occurred between 1947 and 1972 these results are based on an improper decomposition of the gini ratio in this note i decompose the gini ratio to derive the paglin measure it is shown to correct for neither demographic nor life cycle income effects and to understate intracohort income or wealth inequality if properly normalized the paglin measure shows that the gini overstates u s income concentration by 7 percent or less and indicates a decline in u s interfamily income concentration of less than 12 percent four percentage points of this decline are the result of demographic change while less than 7 points comparable to the 5 percent decline of the gini are the result of decreased income concentration within cohorts of family heads decomposition further reveals major changes in the division of income among cohorts and in concentration of income within cohorts these changes compensate each other in the paglin measure the use of which as a measure of income or wealth concentration is not recommended the gini concentration ratio

dynamic matching and evolving reputations this paper introduces a general model of matching that includes evolving public bayesian reputations and stochastic production despite productive complementarity assortative matching robustly fails for high discount factors unlike in becker 1973 this failure holds around the highest lowest reputation agents for high skill low skill technologies we find that matches of likes eventually dissolve in another life cycle finding young workers are paid less than their marginal product and old workers more also wages rise with tenure but need not reflect marginal products information rents produce non monotone and discontinuous wage profiles

experimentation and job choice in this article we examine optimal job choices when jobs differ in the rate at which they reveal information about workers skills we then analyze how the optimal level of experimentation changes over a worker s career and characterize job transitions and wage growth over the life cycle using the dictionary of occupational titles merged with the national longitudinal survey of youth 1979 we then construct an index of how much information different occupations reveal about workers skills and document patterns of occupational choice and wage growth that are consistent with a trade off between information and wages

job matching within and across firms this article proposes a matching model of the labor market in the presence of uncertainty and learning about ability that provides a simple unified framework for analyzing the dynamics of jobs and wages within firms and in the labor market the model allows for different degrees of generality of ability as well as speeds of learning across jobs and firms equilibrium assignments and wages are consistent with a broad range of empirical findings on careers suggest a novel interpretation for well documented patterns and help explain features of careers usually thought difficult to reconcile with the presence of uncertainty and learning

reputation and hierarchy in dynamic models of employment the employment relationship with employees ability and their actions both private information thus combining adverse selection with moral hazard is modeled as a repeated game with self enforcing contracts being perfect bayesian nash equilibria under termination contracts the equilibrium contract structure consists of a hierarchy of ranks finite in number even though ability is continuous reputation acts as an effective device for worker discipline without the need for involuntary unemployment selection by bonding is not in general incentive compatible but selection by promotion of employees through the ranks is many other features correspond to observed employment structures

the economics of rising stars this paper analyzes an occupation in which there is substantial uncertainty about individual performance and past performance is correlated with future outcomes in equilibrium only the young enter the occupation and only the successful stay on the young are numerous and earn incomes well below what their current alternative o ffers success is rare and rewarded highly the implied distribution of earnings must have positive skewness copyright 1988 by american economic association

demographic change and income inequality in the united states 1976 1989 the u s economy experienced significant increases in the degree of income inequality over the past two decades in this paper we consider the effects of race age female headship and college education on the distribution of family income by developing a multivariate methodology that allows us to gauge the influence of one factor while holding other determinants of family incomes constant over the period studied we find that race had only a minor effect on the overall size distribution of income age had a somewhat greater effect than race in contrast the impact of female heads and college education were quite substantial the multivariate estimates reveal that the effects of female heads and college education both increase the gini to a much greater extent than the progressivity of federal income taxes decreases it the effects of college education and female headed families on inequality have grown larger across time while the influence of age has declined we find that the effects of race on inequality have changed little over the 1976 to 1989 period excerpt

comparative advantage learning and sectoral wage determination we develop a model in which a worker s skills determine the worker s current wage and sector the market and the worker are initially uncertain about some of the worker s skills endogenous wage changes and sector mobility occur as labor market participants learn about these unobserved skills we show how the model can be estimated using nonlinear instrumental variables techniques we apply our methodology to study wages and allocation of workers across occupations and industries using individual level panel data from the national longitudinal survey of youth we find that high wage sectors employ high skill workers and offer high returns to workers skills

distributive implications of an aging society abstract the paper reviews recent research on the impact of an aging population on the distribution of income after briefly discussing the demographic conditions responsible for population aging a short account is given of demographic trends in the industrialized world in order to disentangle the many potential channels by which an aging society affects the dispersion of income several levels of aggregation are distinguished the paper differentiates between intra and intergenerational issues between direct and indirect demographic inequality effects and between the distribution of current and lifetime income it emphasizes the critical role of age related redistributive tax transfer systems like public pension schemes and health care systems sources of distributional policy conflicts are identified at both the cross section level and the lifetime level of income inequality the institutional design of intergenerational burden sharing individual disincentive reactions shifts in age income profiles related to cohort size and politico economic repercussions are shown to drive the relation between population aging and income distribution in distinct and partially opposite ways

incentives learning and compensation a theoretical and empirical investigation of managerial labor contracts this article analyzes properties and implications of multiperiod managerial labor contracts under two alternative hypotheses incentives in which productivity depends on unobservable effort and learning in which ability is unknown and is revealed over time shared and conflicting implications of these competing models are developed in terms of experienceearnings profiles and the relation between compensation and performance i empirically examine these theoretical results by using a longitudinal sample of 1 488 chief executive officers followed from 1974 1985 the data yield mixed evidence that generally supports the learning hypothesis over the incentive hypothesis

relative wages wage growth and quit behavior using italian social security records for male workers from a sample of firms in turin from 1981 to 1983 we show that conditional on the worker s own wage the average wage in the establishment for similar workers is negatively related to quits we also find that this variable predicts future wage growth this is consistent with an economic model in which workers compare the longrun value of employment opportunities when making quit decisions

dynamic models for fixed income portfolio management under uncertainty abstract we develop multi period dynamic models for fixed income portfolio management under uncertainty using multi stage stochastic programming with recourse the models integrate the prescriptive stochastic programs with descriptive monte carlo simulation models of the term structure of interest rates extensive validation experiments are carried out to establish the effectiveness of the models in hedging against uncertainty and to assess their performance vis a vis single period models an application to tracking the salomon brothers mortgage index is reported with very encouraging results results that establish the efficacy of the models in hedging against out of sample scenarios are also reported for an application from money management the multi period models outperform classical models based on portfolio immunization and single period models

on the measurement and trend of inequality reply john formby terry seaks and w smith hereafter fss argue that the p gini coefficient is affected by the arbitrary choice of the age grouping to a degree which brings the validity of the age related measure into question fss 1989 p 2 more pointedly with a sufficiently narrow age partition the p curve can always be driven to the l curve convergence of the p gini to a nonzero estimate does not occur p 4 these conclusions i believe result from a misapplication of gastwirth s theorem on disaggregation and a failure to observe statistical rules relating to sample size and sampling error i will show that when these rules are observed the value of the p gini does not converge to zero but properly reflects the relative importance of the nonlife cycle factors affecting the distribution when calculating the traditional l gini the more disaggregation the better the number and accuracy of the sample points are the only consideration since all are thrown into one conceptual box and compared in terms of income size but if we try to identify the factors which account for income inequality in terms of age versus nonage related factors we are setting up two conceptual boxes the age gini and the p gini and we are no longer simply dealing with a gastwirth type problem statistical considerations come into play for example we must have a sufficient number of sample points in each conceptual box in order to give a reliable estimate of the importance of each factor the key allocating device which i employ is the age gini derived from the average age income profile the age gini shows the amount of inequality that would exist if all nonage related sources of inequality were eliminated when calculating this coefficient the means of the age groups are used in order to wash out all random and nonagerelated influences but this separating device works well only if the means are based on large samples otherwise sampling errors create spurious variation and impart an upward bias to the value of the age gini fss p 4 drive the age gini value up to the l gini by increasing the number of agegroups until they equal the number in the sample since the means of the age groups are now based on samples of one they become as erratic as the individual incomes and impart the maximum upward bias to the age gini it is true that the age income profile and the age gini are conceptually refined by using smaller age intervals but unless sample size is large compared to the number of age intervals the gains from conceptual purification will be more than offset by the greater sampling errors of the age means this kind of limitation is shared by many other statistical measures which do not thereby lose their validity or usefulness under what conditions will the true or limiting value of the p gini emerge fss in their footnote 3 state that there is no limiting value other than zero let us test this claim assume we have a scatter diagram of income y and age x and wish to show average income in relation to age we start with a finite number of age groups and plot their mean incomes on the diagram by continuously reducing the age interval and increasing sample size we end up with a curve passing through the true means of infinitely small age intervals this defines the average age income profile since for each person we have data on income and age we can with this curve or an approximation of it calculate the age gini and l gini without grouping for age or income the age income curve allows us to determine the mean income u at any given age and for all persons department of economics portland state university p o box 751 portland or 97207

note a note on the use of the capm as a strategic planning tool a recent paper by naylor and tapon naylor thomas h francis tapon 1982 the capital asset pricing model an evaluation of its potential as a strategic planning tool management sci 28 1166 1173 showed that the capital asset pricing model capm can be an important strategic planning tool but their specific strategic suggestions were incorrect the proper conclusion to draw from the capm is that a company should purchase a business if its expected return exceeds the expected return in equilibrium of a business in the same risk class in the absence of synergy each potential acquisition should be evaluated on its own merit independent of the other businesses in a company s portfolio when all firms are in equilibrium no gain may be made from merger or takeover

the measurement and trend of inequality comment in the september 1975 issue of this review morton paglin posits a new summary statistic the paglin gini which he uses to measure and analyze the level and trend of income inequality in the united states this measure intends to recognize only income differences among families unrelated to the observed age income profile as contributing to meaningful income inequality this is to be contrasted with the standard lorenz gini in which all differences in income among living units contribute to inequality paglin s measure indicates substantially less inequality in the united states than is indicated by the lorenz gini moreover paglin inequality falls considerably in the post world war ii period while other measures indicate very little change in inequality over this period paglin is addressing an important problem for the postwar period when the age distribution the length of time spent in school and the propensity of the young and the old to form their own households have all changed rapidly the trend in the conventional gini coefficient has no obvious normative interpretation however it is often given one unfortunately paglin s proposed index of inequality does not meet its objective and even if it did its normative content would be no clearer than that of the standard measure indeed no single indicator is sufficient to capture trends in normatively relevant inequality without further analysis like any other time series a time series of inequality must be approached with a well specified multivariate model after describing paglin s procedure in the next section we challenge his measure in section ii in section iii paglin s interpretation of policy relevant inequality is questioned and in section iv the implications of the paglin gini for the equity of the transfer system are analyzed section v is a summary of our critique

a theory of trade secrets in firms this article provides a simple theoretical model of trade secrets in hierarchical firms a crucial assumption is that each manager has access to trade secrets pertaining to his own hierarchical level as well as to all lower levels the article explores some implications of this assumption for optimal degree of trade secrets accumulation and protection as well as for the wage structure in firms in addition the model implies that managers may have an incentive to overpay their subordinates and protect their firms trade secrets too much

superstars and mediocrities market failure in the discovery of talent a basic problem facing most labor markets is that workers can neither commit to long term wage contracts nor can they self nance the costs of production i study the eects of these imperfections when talent is industry speci c it can only be revealed on the job and once learned becomes public information i show that rms bid exces sively for the pool of incumbent workers at the expense of trying out new talent the workforce is then plagued with an unfavorable selection of individuals there are too many mediocre workers whose talent is not high enough to justify them crowding out novice workers with lower expected talent but with more upside potential the result is an ine ciently low level of output coupled with higher wages for known high talents this problem is most severe where information about talent is initially very imprecise and the complementary costs of production are high i argue that high incomes in pro fessions such as entertainment management and entrepreneurship may be explained by the nature of the talent revelation process rather than by an underlying scarcity of talent jel d30 j31 j6 m5

a theory of wage and promotion dynamics inside firms we show that a framework that integrates job assignment human capital acquisition and learning captures several empirical findings concerning wage and promotion dynamics inside firms including the following first real wage decreases are not rare but demotions are second wage increases are serially correlated third promotions are associated with large wage increases fourth wage increases at promotion are small relative to the difference between average wages across levels of the job ladder fifth workers who receive large wage increases early in their stay at one level of the job ladder are promoted quickly to the next

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

incentives for information production and optimal job assignment with human capital considerations in this paper we examine the problem of inducing a manager to acquire information which is useful in determining his optimal job assignment but which might also adversely affect his market value we show that spot contracts are optimal and generate the first best effort level when the manager is risk neutral when the manager is risk averse the optimal contact consists either of a partial insurance contract against downward revisions in compensation or a competitive spot contract depending upon the nature of prior information

a dynamic bank portfolio planning model with multiple scenarios multiple goals and changing priorities abstract the paper discusses a practical application of a two stage linear goal programming model to the management of the domestic and foreign currency denominated assets and liabilities of a large bank in finland the planning horizon includes three one year planning periods a number of alternative scenarios are used to describe uncertainty concerning future developments in these periods the scenarios are related to general economic conditions as well as the state of the domestic and foreign financial markets the bank is assumed to have multiple conflicting goals with different and changing priorities the goals deal with expected profits risk liquidity capital adequacy growth customer relationships and several other aspects of the bank s operations

unemployment and interindustry labour mobility in canada in the 1980s the determinants of interindustry mobility of labour and its relationship to the unemployment rate is examined using micro data on canadian workers from 1980 81 1982 83 and 1985 86 it contrasts the implications of the dynamic reallocation model lilien 1982 in which rising aggregate unemployment is due to in creased dispersion in the net hiring rates of firms implying positive covariance of interindustry mobility and unemployment rates with the older keynesian perspective that high unemployment chills labour market mobility implying a neative relationship qualified support is obtained for the chilling model as well as standard results on the role of job tenure hours worked etc the general moral is the cyclical sensitivity of labour market behaviour i e individuals appear to react to the aggregate unemployment rate

superstars and mediocrities a solution based on personal income taxation abstract the markets for talent often produce large income inequality and therefore raise political attention while such inequality can be due to superstar dynamics or factor complementarities tervio superstars and mediocrities market failure in the discovery of talent the review of economic studies 2009 first proposed a market failure that was previously unknown to the literature pointing to long term contracts as a solution i extend the model in tervio 2009 to include personal income tax policy reforms and demonstrate that tax design can be employed as a solution to the market failure when long term contracts are unfeasible with reasonably small enough entry payments that novice workers would sustain to compensate employers for the possibility to be discovered as high talent types both a progressive tax and a tax incentive on entry wages are found effective the tax incentive on entry wages though can be used even with very large deductible entry payments and with overall negative net entry wages

internal and external labour mobility in canada quasi longitudinal canadian microdata was used to compare the movement of individuals between employers with job changes taking place within firms internal mobility is found to be much less common than job changing between firms workers changing jobs within a firm are more likely to be older and have higher wages and longer tenures in the jobs they leave than individuals employers this provides some support for the job matching hypothesis underlying recent research on the causes of individual mobility although it is also clear that workers in large or unionized firms are more likely to have the opportunity for internal promotion while wage gains obtained through internal mobility are smaller than those achieved through external mobility wage levels are higher for individuals moving within the firm it is argued that this observation is consistent with a dual labour markets interpretation of mobility patterns

job mobility in market equilibrium this paper develops a simple stochastic job matching model and uses it to derive a set of testable restrictions on the conditional probability with which a worker will be observed to change jobs over time the restrictions describe the manner in which this probability varies with observable characteristics current wage labour market experience tenure on current job and past mobility econometric methods are also discussed and some illustrative calculations provided

imperfections in labor markets and the scope of the firm abstract results are derived showing how the interaction of adverse selection and worker uncertainty about job preferences creates incentives for firms to offer a wider array of jobs or integrate the equilibrium wage structure is characterized non integrated firms make retention wage offers increasing in ability while integrated firms do not a generalization in which costs to integration are relevant is then suggested results indicate that it is the interaction between adverse selection and uncertain preferences that leads to a second period allocation of workers across jobs that is not first best but is second best they also show why the presence of adverse selection and uncertain preferences create a tendency toward a scope of integration broader than the first best outcome

learning your comparative advantages we introduce an equilibrium labor market model where workers gradually learn about their unobserved production abilities while engaged in a productive activity occupation workers observe their output and extract information that allows them to make inferences about their unobserved aptitudes because workers are learning about themselves their output informs them not only about their productivity in their current occupation but about their likely productivity in other occupations as well as workers acquire more information they self select into the occupations in which they expect to perform best and their wages increase returns to experience here capture improved job selection by workers as they sort through occupations and learn

how many stocks make a diversified portfolio we show that a well diversified portfolio of randomly chosen stocks must include at least 30 stocks for a borrowing investor and 40 stocks for a lending investor this contradicts the widely accepted notion that the benefits of diversification are virtually exhausted when a portfolio contains approximately 10 stocks we also contrast our result with the levels of diversification found in studies of individuals portfolios

wages and job mobility of young workers this paper presents a discrete time version of jovanovic s model of worker firm matching descriptive evidence is presented that supports the notion that unobserved worker firm heterogeneity is an important component in the intertemporal structure of wages for young workers a structural econometric model of wage dynamics under worker firm sorting is developed and estimated finally a formal test of the matching model is carried out and the matching structure on intertemporal covariances of wages is not rejected my results indicate the necessity of jointly considering processes of turnover and wage growth when analyzing the labor market experiences of young workers

through time changes in family income inequality the effect of non synchronous regional growth factors affecting the dynamics of income inequality in the us during the 1948 92 period are examined specifically it extends the work of maxwell who found that through time changes in family income inequality are related to demographic and industry factors and draws upon the insights of other researchers who have recognized that the us national economy is actually a composite of semi autonomous regional economies the results provide strong evidence that family income inequality is related to the pattern of regional economic growth and the relative proportion of unmarried families

to each the same and to each his own a proposal to measure responsibility sensitive income inequality this paper deals with the question of how to incorporate modern responsibility catering egalitarianism into economic theory on the measurement of income inequality i present a particular axiomatic expression of the main aspects of such egalitarianism then to measure offensive inequality separately i construct a norm or reference income distribution based upon the axiomatic model to replace the perfectly equal income distribution that is used as norm by all common inequality measures i defend the use of a particular measure of distributional change to determine the degree of offensive inequality and apply the method to belgian income data

the value of screening mechanisms under alternative insurance possibilities abstract this paper investigates the welfare implications of symmetrical improvements in information and accompanying screening mechanisms which allow for improved matching of individuals to their respective risk classes unlike previous models used to investigate this phenomenon this paper allows for the possibility that individuals differ not simply according to exogenously specified unequal loss probabilities but rather that individuals possess different self protection technologies moreover various insurance contracting possibilities are also considered it is demonstrated that the structural form of the heterogeneity of technologies and the type of insurance contracts available in the market determine in an interactive way the value of information which improves the matching of individuals to risk class

the economic value of stock and call options on the swedish financial market abstract the intense trading activity and the very existence of organized stock option markets suggest that these financial contracts provide noticeable economic benefits as compared to trades on the stock market in this paper we test the efficiency of recursive optimization strategies on a combined portfolio of stocks and call options series listed on the swedish stock market for comparison the same recursive optimization is performed on a portfolio purely consisting of stocks the portfolio efficiency of the recursive optimization strategy is also compared to results obtained with call options using a black scholes strategy

income and wealth inequality and the life cycle a non parametric analysis for china this paper uses the techniques of non parametric density and regression estimation to estimate the chinese age income and age wealth distributions using survey data relating to 1987 although there is evidence of a clear life cycle profile of income earning and wealth accumulation the results suggest that only a small part of observed inequality can be explained by life cycle factors this finding contradicts the results of some other researchers

supply and demand allocation and wage inequality an international comparison an allocation model of workers differentiated by their field of study is developed to test whether international differences in the wage structure can be explained by differences in labour demand and supply in each country the model explicitly takes into account the effects of supply and demand shifts on the allocation structure to disentangle country specific differences in the recruitment for one occupation from real supply demand effects empirical results based on data for nine countries show that cross country differences in wage inequality explain at least two third of the differences in labour demand and supply

human capital job matching and earnings growth between jobs an empirical analysis the process of job matching is complementary to human capital investment in determining earnings growth over the individual job history change in earnings associated with moving between jobs is portrayed as a result of matching in this paper the idea of job matching is refined to distinguish between job matching within firms and job matching across firms the derived hypotheses are supported by empirical results of a causal model which controls for human capital and personal endowment variables

the insurance effect of groups many people belong to groups which partially identify their characteristics this paper argues that when agents are risk averse and where only group characteristics are visible rather than individual characteristics the pareto optimal construction of groups differs in systematic ways from standard notions of how groups should be formed two applications are considered the assignment of workers to jobs where it is shown the optimal contract does not involve maximizing output and accident insurance where the optimal contract does not involve complete insurance many people belong to groups which serve to partially identify otherwise hidden talents or characteristics for example it is possible to find out that certain authors have written an article but their individual contributions are much more difficult to ascertain similarly it may be easy to determine that a worker is a foreman but much more difficult to tell how much better he is than other foremen or that somebody is employed which tells us something about his talents but not whether he is more talented than the average employed person each of these examples illustrates cases where we can see the group to which an agent belongs author foreman employed rather than an individual s characteristics standard notions of efficiency tell us how these groups should be formed academics should write papers together only if their joint product is greater than if they operated separately a worker should be employer as a foreman only if his productivity is higher as a foreman than elsewhere in the organization and so on the principal result of this paper is that when agents are risk averse and where only groups of the type above are visible to some agents rather than individual characteristics these assignment rules may not be pareto optimal instead for example someone who is less competent as a foreman than as an operative may still be employed as a foreman and this yields higher welfare than employing that worker as an operative let me explain the intuition by a simple example assume that workers who join a firm are uncertain of their ability they are risk averse and seek insurance over that uncertainty untalented workers should be fired on standard efficiency grounds as they have higher productivity elsewhere assume that after a period of production information on ability becomes available to the employer and the employee but that other employers must infer this information from whether the

some empirical tests of the theory of arbitrage pricing we estimate the parameters of ross s arbitrage pricing theory apt using daily return data during the 1963 78 period we compare the evidence on the apt and the capital asset pricing model capm as implemented by market indices and find that the apt performs well the theory is further supported in that estimated expected returns depend on estimated factor loadings and variables such as own variance and firm size do not contribute additional explanatory power to that of the factor loadings

the impact of ceo turnover on equity volatility this study investigates the effect on stock price volatility of a significant event in the life of the firm a change in its ceo we find significant long lived increases in volatility following ceo turnover after controlling for firm characteristics and marketwide volatility these increases are larger after forced departures and outside successions following voluntary departures stock prices also respond more strongly to earnings announcements following turnovers these results are consistent with more informative signals of value driving the increased volatility helping resolve two sources of uncertainty possible changes in the firm s strategy and doubt about the successor ceo s ability

vector forecasting and dynamic portfolio selection empirical efficiency of recursive multiperiod strategies abstract in the paper we present a dynamic portfolio selection system the system combines recent results from the domains of time series analysis portfolio theory and multiperiod linear programming under uncertainty the performance of the decision support system is tested empirically against a dynamic super criterion defined in the study we demonstrate that suitable combination of ex ante and ex post information with initial balances for the planning horizon yields better portfolio efficiency through time than a strategy relying purely on ex ante information the system was programmed on abo academy s vax 8800 computer mainly in fortran with access to the imsl library and ifps optimum

older or wealthier the impact of age adjustment on wealth inequality differences in individual wealth holdings are widely viewed as a driving force of economic inequality however as this finding relies on cross sectional data a concern is that older is confused with wealthier we propose a new method to adjust for age effects in cross sections which eliminates wealth inequality due to age yet preserves inequality arising from other factors using a new cross country comparable database we examine the impact of age adjustments on wealth inequality across countries and over time we find that the most widely used method yields a substantially different picture of age adjusted wealth inequality than our method 2011 the editors of the scandinavian journal of economics

matching turnover and unemployment this paper develops the view that workers move into and out of the labor market because of changes in the perceived value of their market opportunities a search model is combined with a matching model to yield movement of workers from job to job and into and out of employment

a new linear programming approach to bond portfolio management this paper derives and tests a new linear programming lp approach to bond portfolio management the model elicits possible tax clientele effects in the pricing of u s gov ernment coupon bonds and simultaneously derives the optimal tax specific bond portfolio analytically the model derives these results by exploiting for a given tax bracket the price differential of an after tax stream of cash flows it accomplishes this objective by purchasing at the ask price underprieed bonds for the specific tax bracket while sim ultaneously selling at the bid price overpriced bonds the model requires that the net cash flow inclusive of purchased and sold bonds be nonnegative at all future dates the problem s formulation standardizes the position taken in each bond to a maximum of one unit one of the model s appealing features is the parsimonious number of required calcu lations only one lp program need be run per tax bracket in addition to obtaining an optimally chosen tax specific bond portfolio the model also measures the after tax term structure of spot u s government interest rates for both tax exempt and taxable investors finally the superior monthly holding period rates of return on the optimal taxspecific bond portfolio demonstrate an important property ofthe model s output

optimality of myopic strategies for multi stock discrete time market with management costs the paper studies multi stock discrete time market models with serial correlations and with some management costs we found a market structure that ensures that the optimal strategy is myopic for the case of either power or log utility function

on employer specific information and internal labor markets the human capital literature of which becker s 2 paper is the seminal work stresses the productivity enhancing effects of schooling and on the job training later work by spence 21 and others emphasizes the fact that it is difficult for employers to ascertain the productivity of potential employees and suggests that activities such as schooling may provide employers with signals as to workers productivities in the signalling literature it is assumed that information generated concerning an individual s abilities is general in that it is known to all potential employers yet the information that an employer gathers concerning his workers abilities is not likely to be completely transferable to other employers as a consequence as rosen 18 249 points out there are limitations on the ability of the price system to achieve efficient assignments if the price system is incomplete there is a role for entrepreneurial activity of assembling an optimal work force this paper analyzes the employment relations that arise when employers information concerning new workers abilities is incomplete until after a period of employment the acquisition of such employer specific information is shown to lead to what has been referred to in the literature as internal labor markets internal labor markets as identified by dunlop 5 32 are the complex of rules which determine the movement of workers among job classifications within administrative units these movements may be transfers promotions demotions or layoffs to the exterior labor markets doeringer and piore 3 emphasize skill specificity and on the job training as the key factors in the emergence of the internal labor market along similar lines williamson wachter and harris 22 point out that job idiosyncracy can result in employment relations with attributes like those of internal labor markets by way of contrast this paper emphasizes the role of employer specific information in generating internal labor markets the theory provides an explanation as to why employers dismiss current employees at the same time that new employees are hired evidence that dismissal rates are not insignificant is presented in section iv the theory also provides a new rationale for long term em

a super criterion for testing portfolio efficiency empirical evidence on finnish stock data abstract in this paper a markovian super criterion is formulated for testing the portfolio efficiency of competing capital market theories the portfolio efficiency of the arbitrage pricing theory apt and the capital asset pricing model capm is tested on finnish weekly price index data over the 1970 1983 time frame the efficiency test results imply that the apt dominates the capm a considerable deviation between the expected pareto frontier and the best expectational frontier according to the apt is observed

sectoral shifts labor market sorting and aggregate fluctuations a model of sectoral reallocation is constructed where intersectoral friction is not caused by search or mobility costs instead a sectoral disturbance has a negative effect on production possibilities because it reduces the value of previous sorting in the labor market in equilibrium a measure of sectoral dispersion is positively correlated with the unemployment rate an increase in the incidence of sectoral disturbances increases unemployment at cyclical peaks and at cyclical troughs copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

education and the allocation of talent i study how education affects the allocation of talent into different sectors of the economy i focus on two forces first education adds to a worker s information capital and thus may change her self confidence second performance contracts give a worker incentives to choose a sector according to her abilities the baseline model predicts that workers with intermediate ability educate while the most able skip education in an extension i compare the u k and the u s bachelor s degrees and moreover discuss hybrid educational systems common in europe that offer both u k and u s types of bachelor s degrees

job matching and occupational choice this paper presents a model of job matching the generalizes the existing literature by allowing for different jobs types or occupations such differences affect the value of job specific experience inducing a career profile where certain types are sampled before others more specifically the analysis shows that it is optimal for the young and inexperienced to gravitate toward jobs exhibiting a certain kind of risk then after deriving the equilibrium job turnover rate for an economy in which people do not switch occupations panel data are used to estimate its underlying parameters the hypothesis that people do not switch occupations is rejected against the alternative that they do thus providing empirical support for the theoretical extension undertaken here

the relative deprivation curve and its applications this article introduces the relative deprivation curve to represent the size distribution of income and wealth the curve has many useful applications in the measurement of poverty and inequality which are explored the methodology developed is then applied to the data obtained from the australian household expenditure survey 1975 1976