monitoring and pay the shirking model of efficiency wages has been thought to imply that monitoring and pay are substitute instruments for motivating workers we demonstrate that this result is not generally true as monitoring becomes cheaper a given effort level will be implemented with more monitoring and less pay but it is typically also optimal to implement a higher effort the article provides conditions under which the latter scale effect dominates the former substitution effect and vice versa if the ease of monitoring varies across occupations the model predicts a nonmonotonic relationship between the wage level and workers rents

one switch utility functions and a measure of risk consider the relative attractiveness to a decision maker of two financial gambles as the wealth of that individual varies it may seem reasonable that either one alternative should be preferred for all wealth levels or that there exists a unique critical wealth level at which the decision maker switches from preferring one alternative to the other decreasing risk aversion is not sufficient for this property to hold we identify the small class of utility functions for which it does we show how the property leads naturally to a measure of risk the results of this paper apply equally well to discounting functions for cash flows one switch discount functions permit at most one change in preference between cash flows as all payoffs are deferred in time

neoclassical and marxian conceptions of production incorporating information deficiencies into the neoclassical paradigm has introduced some broad similarities with the marxian analysis of the labor process both approaches predict the existence of a variety of contractual regimes and that workers with equal productivities can be adjudged unequal in the market place and while the marxian approach sees unemployment as inevitable the new neoclassical models also allow for equilibrium unemployment these similarities and areas of divergence in the assessment of productive efficiency and welfare are explored a crucial difference arises from the individualism of the neoclassical model as opposed to the class approach in the marxian model copyright 1988 by oxford university press

is there a trade off between supervision and wages an empirical test of efficiency wage theory abstract the logic of efficiency wage theory suggests a trade off between wages and supervision this paper reports evidence that high levels of supervision are indeed associated with lower wage levels the empirical investigation centers on the effect that safety supervision by host employers has on the wages of contract maintenance workers in the petrochemical industry this narrow focus is important special institutional features of the contract employment relationship in petrochemicals make it possible to ameliorate econometric problems that may have influenced earlier studies

a portfolio approach to the optimal mix of funded and unfunded pensions abstractin this paper we address the optimal funding of pensions by means of portfolio choice approach considering the unfunded paygo pension system as a quasi asset with hedging and diversif

designing social security a portfolio choice approach public social security systems may provide diversification of risks to individuals life time income capturing that a pay as you go program paygo may be considered as a quasiasset we study the optimal size of the social security program as well as the optimal split between a funded part and a paygo part by means of a theoretical portfolio choice approach a low yielding paygo system can benefit individuals if it contributes to hedge other risks to their lifetime resources moreover a funded part of the social security system can be justified by potential imperfections to the individuals free access to the stock market numerical calculations for sweden norway the us and the uk demonstrate that the optimal size of paygo part of the pension program varies considerably in response to differences in projected growth rates and the correlation between stock returns and growth our calculations suggest that a paygo program has an important role in the three former countries but not in the u k

the missing piece in policy analysis social security reform this lecture discusses the economic losses that result from an unfunded social security retirement system and the potential gain from shifting to a funded system the social security payroll tax distorts labor supply and the form in which compensation is paid although each individual s benefits are linked to that individual s previous payroll tax payments the low equilibrium rate of return inherent in an unfunded system implies a net payroll tax that causes distortions the resulting deadweight loss is 1 of each year s gdp in perpetuity an amount equal to 20 of payroll tax revenue and a 50 increase in deadweight loss of the personal income tax also there is the loss of investment income resulting from forcing employees to accept the low implicit return of an unfunded program rather than the much higher return paid on private saving or in a funded social security program the present value of the annual losses from using an unfunded system exceeds the benefit to those who received windfall transfers when the program began and when it expanded shifting to a funded program cannot reverse the crowding out of capital that has already occurred recognizing the existing unfunded obligation only makes that piece of the national debt explicit but shifting to a funded program limits crowding out of capital formation to the amount that already occurred future increases in annual saving that result from economic growth are able to earn the higher rate of return on real capital the present value of these gains is equivalent to a perpetuity of more than 2 of gdp a year the combi nation of improved labor market incentives and higher real return on saving has a net present value gain of more than 15 trillion an amount equivalent to three percent of each future year s gdp forever this abstract was borrowed from another version of this item

applicant screening and performance related outcomes a fundamental problem faced by employers is how to elicit effort from employees most economic models suggest that employers meet this challenge by monitoring employees carefully to prevent shirking but there is another option that relies on heterogeneity across employees and that is to screen job candidates to find workers with a stronger work ethic who require less monitoring we might therefore expect employers who screen candidates more intensively to monitor them less using data from a national sample of us employers we find that employers who screen applicants more intensively for factors that should predict work ethic also monitor employees less and also make greater use of systems such as teamwork where monitoring by supervisors is more difficult this screening is also associated with higher wages higher employee productivity and lower involuntary turnover rates screening for other attributes such as work experiences and academic performance does not produce these results jel codes m51 m54 j30

strong one switch utility the linear plus exponential utility function has received increasing attention of late as a particularly attractive family for evaluating additive gambles for wealth in addition to its ability to reflect increasing appreciation for money risk aversion and decreasing risk aversion it is consistent with a risk return representation in which return is measured by expected value in this paper we present a new condition strong one switch that characterizes the linear plus exponential family

the power of the states in u s presidential elections the electoral college is a uniquely american political institution yet its impact on both the power of the american states and the relative power of citizens living in different states is not well understood game theorists have broached the state power problem exclusively in terms of the size of each of the states empirical investigators have been less systematic basing their analyses solely on which states have been close in a single election in this paper we present a model of state power which combines the idea of the pivotal player from game theory with an empirical model of state voting in doing so we provide a theoretically derived and empirically meaningful assessment of state power in presidential elections we then trace the implications of the power of the states for the relative power of individual voters finding large disparities between voters from different states

carrots and sticks pay supervision and turnover the efficiency wage model ewm has been advanced as an explanation for large and persistent wage differentials the shirking version of the ewm assumes a trade off between self supervision and external supervision the turnover version assumes turnover is costly to the firm variation across firms in the cost of monitoring shirking or turnover then is hypothesized to account for wage variations across firms for homogeneous workers using a new sample of firm data this paper presents empirical evidence of the trade off of wage premiums for supervisory intensity and turnover little evidence is found to support either version of the ewm

the banzhaf index in representative systems with multiple political parties abstract the proposed modification of the banzhaf index is used to evaluate voter power in representative multiple party i e more than two systems the modified index shows that a voter s ability to affect the outcome of legislative decisions increases asymptotically as the inverse of the square root of the district s population the square root effect thus holds even in cases involving more than two parties journal of economic literature classification numbers c71 d72

optimal supervision intensity collusion and the organization of work the intensity of supervision defined as the proportion of supervisors to bottom rank productive workers differs widely across organizations and nations analysing three monitoring systems that differ in their supervision intensity i show that the possibility of collective shirking arrangements can impose a system dependent limit on the range of implementable performances this brings about a tradeoff in the choice of the monitoring system the system that economizes on incentive costs may implement an inferior range of performances applications of the model generate work disutility ethics and job characteristics based explanations for variations in the intensity of supervision l intensite de supervision definie par la proportion de superviseurs par rapport au nombre de travailleurs productifs de plus bas niveau differe vastement d une organisation a l autre et d un pays a l autre on analyse trois systemes de surveillance qui different par leur degre d intensite de supervision et on montre que la possibilite d arrangements de resquille collective peut imposer des limites a l eventail de performances realisables voila qui met de l avant une relation d equivalence dans le choix du systeme de surveillance un systeme qui economise sur les couts d incitation peut mettre en place un eventail de performance relativement inferieur les applications du modele suggerent des explications fondees sur la desutilite du travail l ethique et les caracteristiques du travail pour expliquer les variations dans l intensite de supervision

the optimal mix between funded and unfunded pension systems when people care about relative consumption the paper studies the optimal portfolio mix between funded and unfunded pension systems when people care about relative consumption in pay as you go systems with fixed contribution rates pensions are tied to wages this lowers the uncertainty of individuals future relative position thereby increasing the attractiveness of unfunded systems the paper shows analytically that the optimal share of funding decreases with the importance of relative standing a calibrated version of the model suggests that the concern for relative standing has also a quantitatively important impact on the optimal share of funding for reasonable assumptions it is typically around 20

rigidities through flexibility flexible labour and the rise of management bureaucracies judging from organisation level survey data we find that organisations employing high shares of flexible workers have higher shares of managers in their personnel this is in line with earlier findings that anglo saxon countries with deregulated labour markets have thicker management bureaucracies than countries with more regulated labour markets of the rhineland style we argue that flexibility in labour markets i e easier firing and higher labour turnover damages trust loyalty and commitment this requires more management and control related research suggests that easy hire and fire is at the cost of organisational learning knowledge accumulation and knowledge sharing thus damaging innovation and labour productivity growth

shapley value for multichoice cooperative games i abstract we extend cooperative games in characteristic function form to multichoice cooperative games in such multichoice games shapley value is extended the explicit formula is given to compute the value american mathematical society classification numbers 90d12 90d40 journal of economic literature classification numbers c71 d46 d61 d72

are employment and managerial control equivalent evidence from an electronics producer abstract transaction cost economics recognizes two alternative forms of governing production and exchange market coordination and managerial control when examining the contractual relationship between firms and workers researchers generally consider employment to represent managerial control this paper tests the assumption that employment is characterized by managerial control using evidence from an electronics producer this paper tests whether factors affecting the employment status of workers such as asset specificity task interdependence and high knowledge requirements also affect the degree to which workers are managerially controlled this research helps explain a number of market organizational and managerial innovations such as employee self management and the use of temporary workers

human resource management and performance in european firms we develop a theoretical framework to examine three hypotheses on the relationship between human resource management hrm practices and organisational performance in european firms the first is that collaborative forms of hrm practice are more strongly associated with superior firm performance than calculative forms the second is that these associations are strongest where national institutional and normative settings support them the third is that employer employee consultative committees and collective payment methods are also associated with superior firm performance the first two propositions are strongly empirically supported as is the third albeit more weakly the implications of the findings for european policy and varieties of capitalism theory are discussed

when labour market rigidities are useful for innovation evidence from german iab firm level data abstract supply side economists made numerous pleas for removing labour market rigidities through structural reforms from a schumpeterian viewpoint however one can argue that labour market rigidities create useful incentives for innovation our estimates on german panel data 2007 2015 support the schumpeterian view using the taxonomy of industries by peneder 2010 we find that evidence of the schumpeterian view is particularly strong in r d intensive manufacturing industries as well as in service industries with high degrees of cumulativeness of knowledge evidence of the schumpeterian view is weaker in low technology industries and in start ups when firms rely more on generally available knowledge rather than on firm specific and tacit knowledge accumulated in the past

a portfolio approach to the optimal funding of pensions abstract fully funded pension systems are advocated for their higher rate of return but this return is typically risky using a simple mean variance model we find that mixed funded unfunded systems are desirable in this setting because they enable risk diversification

after the waste land a democratic economics for the year 2000 this critique of reaganomics attempts to provide alternatives to both the supply experiments of the 1980s and neoliberal strategies of austerity it presents arguments for economic democracy with a worker oriented blueprint for improving productivity growth employment and economic justice

radical political economy and the economics of labor markets this essay is the result of a long process involving many drafts and revisions i am grateful to duncan foley for the careful and constructive criticisms offered throughout the project the following people read the manuscript at different stages and although they often disagreed with me they generously provided helpful comments two anonymous referees for this journal samuel bowles william dickens greg dow robert drago richard edwards kathleen engel richard freeman james galbraith herbert gintis jody hoffer gittel sandfordjacoby tom kochan david levine lisa lynch paul osterman michael piore bob rebitzer gil skilman dan slesnick robert thomas and tsuyoshi tsuru comments from participants in seminars at the massachusetts institute of technology university of massachusetts at amherst and hitotsubashi university are also gratefully acknowledged