capital utilization and habit formation in a small open economy model this paper shows the effects of endogenous capital utilization and habit formation in consumption on the predictions of a small open economy model calibrated to canada capital utilization improves the fit of the model by increasing the volatility of output investment and hours worked while habit formation improves the fit of the model by improving the dynamic properties of consumption and the current account it is also shown that while shocks to the world interest rate sometimes improve the fit of the baseline model they do not improve the fit of the model with capital utilization and habit formation jel classification e32 f32 utilisation du capital et formation d habitudes dans un modele de petite economie ouverte ce memoire etudie les effets de l utilisation endogene du capital et de la formation d habitudes de consommation sur les previsions d un modele de petite economie ouverte calibre pour le canada l utilisation du capital ameliore l ajustement du modele en accroissant la volatilite de l output de l investissement et des heures travaillees alors que la formation d habitudes ameliore l ajustement du modele en ameliorant les proprietes dynamiques de la consommation et du compte courant on montre que si des chocs affectant les taux d interet au niveau mondial ameliorent parfois l ajustement du modele de base ils n ameliorent pas l ajustement du modele quand il y a utilisation de capital et formation d habitudes

agenda restrictions in multi issue bargaining abstract we study a bilateral multi issue bargaining procedure with complete information and endogenous agenda in the procedure proposals must be made on only one issue at a time although the proposer can choose which issue to bring to the table when bargaining frictions are small there is a large multiplicity of equilibrium agreements including ones with delay however equilibrium payoffs cannot be made arbitrarily small perpetual disagreement cannot be supported in equilibrium this multiplicity contrasts with the uniqueness found in the literature for a procedure where offers can be made in any subset of remaining issues

involuntary unemployment in economies with efficient risk sharing abstract we study economies where employment lotteries determine random layoffs and incomes for employed and unemployed agents allocate risk efficiently we ask for which specifications are unemployed agents worse off a situation we call involuntary unemployment we show unemployed agents are worse off iff an exogenous increase in wealth decreases aggregate unemployment in a monetary economy we show that in equilibrium the unemployed are worse off iff high inflation implies high unemployment our model also generates nominal wage stickiness as an equilibrium phenomenon but neither involuntary unemployment nor nominal stickiness implies these economies are operating inefficiently or are out of equilibrium

contracts as a barrier to entry it is shown that an incumbent seller who faces a threat of entry into his or her market will sign long term contracts that prevent the entry of some lower cost producers even though they do not preclude entry completely moreover when a seller possesses superior information about the likelihood of entry it is shown that the length of the contract may act as a signal of the true probability of entry

one to many bargaining when pairwise agreements are non renegotiable abstract we study a model where a central player the principal bargains bilaterally with each of several players the agents to create and share the surplus of a coalitional game it is known that if the payments that were previously agreed with each of the remaining agents are renegotiated in case any bilateral negotiation permanently breaks down then the shapley value is the unique efficient and individual rational outcome consistent with bilateral nash bargaining here we show that when instead the agreed payments cannot be renegotiated the outcome is also unique but it now coincides with the nucleolus of an associated bankruptcy problem we provide a strategic foundation for this outcome then we study how such renegotiation affects the principal s payoff according to the properties of the surplus function we find for example that renegotiation benefits the principal when agents are complements and it hurts him when they are substitutes situations with respectively increasing and decreasing marginal contributions

investment specific shocks and external balances in a small open economy model we set up a standard small open economy business cycle model driven by govern ment spending shocks neutral productivity tfp shocks and investment specific shocks the model is calibrated to quarterly canadian data and its predicted moments and sample paths are compared with their canadian counterparts we find that the model captures the dynamics in investment and in the trade balance better than special cases of the model where either one of the productivity shocks is omitted more specifically the model matches the variance of the trade balance output ratio its correlation with output and its autocorrelation it also matches the output investment correlation jel classification f41 e32

the rising instability of u s earnings the inequality of earnings and of family incomes in the united states has increased since the late 1970s autor katz and kearney 2008 this increase in cross sectional inequality has largely been interpreted as a growing disparity in permanent incomes between those with high incomes and those with low incomes however growing inequality could equally well be a result of growing income instability if workers experience increasingly large fluctuations in earnings from year to year this would also increase the measured inequality of earnings from year to year for example if everyone maintained the same level of permanent income but some experienced a 500 increase in their income in the first year and then a reversal to 500 below their permanent incomes in the following year while an equal number experienced the opposite a drop in income followed by an offsetting rise measured inequality would rise though nothing would have happened to the dispersion of permanent incomes while this example is an extreme one it points to the fact that the large rise in earnings inequality between the 1970s and the 1990s could reflect either a rise in disparity of permanent incomes a rise in earnings instability or some portion of both without longitudinal data it is impossible to distinguish between these two very different explanations for increased cross sectional measures of inequality in this paper we provide longitudinal measures that separate changes in income inequality into changes that permanently change income to new levels and those that only reflect transitory change we refer to the latter as changes in income instability and discuss how the instability of individual earnings and family income in the united states has evolved over the last quarter century

make and buy balancing bargaining power abstract we analyze the optimal procurement of labor which can be supplied either internally based on wage negotiations or acquired at terms negotiated with an external subcontractor the novel feature of our model is that the subcontractor s bargaining power is a function of the proportion of output outsourced we demonstrate analytically how multiple sourcing emerges as an organizational mechanism to balance cost advantages associated with outsourcing against a subcontractor s increased bargaining power we find that the optimal proportion of outsourcing is lower with sequential negotiations than with simultaneous negotiations if the supplier to first negotiate can foreclose subsequent negotiations

risk taking global diversification and growth this paper develops a continuous time stochastic model in which international risk sharing can yield substantial welfare gains through its effect on expected consumption growth the mechanism linking global diversification to growth is an attendant world portfolio shift from safe low yield capital to riskier high yield capital the presence of these two types of capital captures the idea that growth depends on the availability of an ever increasing array of specialized hence inherently risky production inputs calibration exercises using consumption and stock market data imply that most countries reap large steady state welfare gains from global financial integration copyright 1994 by american economic association

endogenous incomplete contracts a bargaining approach in this paper we argue that by modelling the contracting process as a bargaining game one can endogenize the choice between complete and incomplete contracts this point is demonstrated within a stylized model in which agents can allocate an endowment stream either via a once for all bargain over the entire stream a long term contract or through a series of bargaining rounds a short term contract within this structure short term contracts arise as equilibrium outcomes under very general conditions because a short term contract implies reduced bargaining costs for one of the agents in essence reduced transaction costs produce a short term contract jel classification l14 c78

on the role of confidentiality and deadlines in bilateral negotiations abstract the preference between public and private negotiations for a buyer who sequentially visits two sellers is examined it is shown that the buyer weakly prefers private negotiations so as to create strategic uncertainty about the trade history with substitute goods such uncertainty is valuable only when price offers have short deadlines that prevent a head to head competition with complementary goods strategic uncertainty is valuable to the extent that price coordination becomes a concern for sellers which is likely to be the case when sellers possess high bargaining powers their price offers have short deadlines and or goods are weak complements sellers strategic deadline choices as well as their incentives to disclose information about negotiations are also investigated

intra firm bargaining under non binding contracts we present a new methodology for studying the problem of intra firm bargaining based on the notion that contracts cannot commit the firm and its agents to wages and employment we develop and analyse a general non cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party equilibrium firm profits are characterizable as both a weighted average of a neo classical non bargaining firm s profits and a generalization of shapley value for a corresponding cooperative game furthermore the resulting payoffs induce economically significant distortions in the firm s input and organizational design decisions

multifirm unions and the incentive to adopt pattern bargaining in oligopoly abstract this paper develops a model of wage bargaining between an industry wide trade union and firms in an oligopoly and considers the circumstances under which the union prefers pattern bargaining that is negotiating contracts in a sequential manner to simultaneous bargaining with the firms the paper goes on to consider the importance of the bargaining order in pattern bargaining when the firms are asymmetric the analysis shows that the union gains by first targeting a firm which is in a relatively weak bargaining position i e impatient to settle or a firm with relatively large profits

payoff uncertainty bargaining power and the strategic sequencing of bilateral negotiations this article investigates the sequencing choice of a buyer who negotiates with the sellers of two complementary objects with uncertain payoffs the possibility of inefficient trade may generate strict sequencing preference the buyer begins with the weaker seller if the sellers have diverse bargaining powers and with the stronger one if both sellers are strong bargainers this sequencing is likely to increase the social surplus moreover the buyer may find it optimal to raise her own acquisition cost by committing to a minimum purchase price or outsourcing the first and second mover advantages for the sellers are also identified

frictional labour mobility we build a dynamic model of migration where in addition to standard relocation costs workers face spatial frictions that decrease their ability to compete for distant job opportunities we estimate the model on a matched employer employee panel dataset describing labour market transitions within and between the 100 largest french cities our identification strategy is based on the premise that frictions affect the frequency of job transitions while mobility costs impact the distribution of accepted wages we find that 1 controlling for spatial frictions reduces mobility cost estimates by one order of magnitude 2 the urban wage premium is driven by better opportunities for local job to job transitions in larger cities 3 migration reduces lifetime inequalities by providing insurance against unsatisfactory initial location draws 4 labour mobility policies based on relocation subsidies are inefficient unlike switching from nationwide to local minimum wages

modelling the sectoral allocation of labour in open economy models indivisible labour is not the only type of nonconvexity affecting labour supply decisions another type of nonconvexity arises in economies with sectors whenever individuals can work in only one sector at a time i introduce this restriction into an open economy model with a tradeable and a nontradeable sector and i use lotteries to convexify the consumption possibilities set this approach implies that the aggregate elasticity of labour supply becomes infinite i compare the performance of the model with an analogous model in which the labour supply elasticity is finite i find that the infinite labour supply elasticity helps explain the persistence of net exports however all the other consequences of the labour supply elasticity for the model implied second order moments depend on whether the pricing assumption is producer currency pricing pcp or local currency pricing lcp

bargaining piecemeal or all at once perfect information rubinstein style bargaining models are used to explore questions about multiple issue bargaining is it ever sensible to offer on only a subset of the issues being bargained what is the effect of limiting offers so that they must cover all issues we conclude that in realistic settings the answer to the first question is yes and that restricting offers to those covering all issues may be harmful to one or both parties

equilibrium search with continuous productivity dispersion theory and nonparametric estimation in this article we develop an equilibrium search model with a continuous distribution of firm productivity types within a given labor market we characterize equilibrium derive expressions for the endogenous equilibrium wage distributions and characterize the set of wage distributions that can be generated by the model we develop a structural nonparametric estimation method for the productivity distribution we estimate the model using french longitudinal survey data on labor supply and we compare the results with those from a french panel data set of firms the results are informative on the degree to which firms exploit search frictions

optimal timing of decisions a general theory based on continuation values abstract by extending a methodology dating back to jovanovic 1982 we develop a comprehensive theory of optimal timing of decisions based on continuation value functions and operators that act on them rewards can be bounded or unbounded one advantage of this approach over standard bellman methods is that continuation value functions are smoother than value functions another is that for a range of problems the continuation value function exists in a lower dimensional space than the value function we exploit these advantages to obtain a range of new results on optimality optimal behavior and efficient computation

rent shifting and the order of negotiations abstract when two sellers negotiate terms of trade with a common buyer the order in which the negotiations occur can affect the buyer s payoff this suggests that the buyer may have preferences over which seller to negotiate with first we find that when the efficient outcome calls for the buyer to purchase from only one seller the buyer weakly prefers to negotiate first with the inefficient seller and when the efficient outcome calls for the buyer to purchase from both sellers the buyer prefers to negotiate first with the seller that has less bargaining power or offers a smaller stand alone surplus all else being equal these conclusions hold whether or not penalty clauses are feasible

multi issue bargaining with endogenous agenda abstract the first part of this paper shows that in a noncooperative bargaining model with alternating offers and time preferences the timing of issues the agenda matters even if players become arbitrarily patient this result raises the question of which agenda should come up endogenously when agents bargain over a set of unrelated issues it is found that simultaneous bargaining over packages should be a prevailing phenomenon but we also point to the possibility of multiple equilibria involving even considerable delay journal of economic literature classification number c78

international evidence on the historical properties of business cycles we contrast properties of real quantities with those of price levels and stocks of money for ten countries over the last century although the magnitude of output fluctuations has varied across countries and periods relations among real quantities have been remarkably uniform properties of price levels however exhibit striking differences between periods inflation rates are more persistent after world war ii than before and price level fluctuations are typically procyclical before world war ii and countercyclical afterward fluctuations in money are less highly correlated with output in the postwar period but are no more persistent than in earlier periods jel e32 e31

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

job search bargaining and wage dynamics this article constructs and estimates a model of wage bargaining with on the job search to explore three different components of wages general human capital match specific capital and outside options as the workers find better job opportunities the current employer has to compete with outside firms to retain them this between firm competition results in wage growth even when productivity remains the same the model is estimated by a simulated minimum distance estimator and data from the 1979 national longitudinal study of youth the results indicate that the improved value of the outside option raises wages by 14 16 in the first 5 years

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

the employment effect of reforming a public employment agency by how much does an increase in operating effectiveness of a public employment agency pea and a reduction of unemployment benefits reduce unemployment using a recent labour market reform in germany as background we find that an enhanced effectiveness of the pea explains about 20 of the observed post reform unemployment decline the role of unemployment benefit reduction explains just about 5 of the observed decline due to disincentive effects resulting from the reform the reform of the pea could have had an even higher impact on unemployment reduction if there had been less focus on long term unemployed workers

tenure experience human capital and wages a tractable equilibrium search model of wage dynamics we develop and estimate an equilibrium job search model of worker careers allowing for human capital accumulation employer heterogeneity and individual level shocks wage growth is decomposed into contributions of human capital and job search within and between jobs human capital accumulation is largest for highly educated workers the contribution from job search to wage growth both within and between job declines over the fi rst ten years of a career the job shopping phase of a working life after which workers settle into high quality jobs using outside o ffers to generate gradual wage increases thus reaping the bene fits from competition between employers

informality over the life cycle abstract in developing countries informality is mainly concentrated among younger and older workers and low skilled workers in this study we propose a dual labor market theory that highlights how frictions and taxation in the formal sector and educational choices interact to shape the informality rate over the life cycle we develop a life cycle model with search frictions skill heterogeneities and endogenous educational choices we carry out a numerical analysis and show that our model reproduces remarkably well the life cycle patterns of informality non employment and formal employment in argentina we analyze several public policies and show that an educational grant reduces both informality and non employment and may be fully financed by the extra tax revenues generated by the increase in formal employment and wages lowering taxes may achieve similar results but is detrimental to the government budget despite increasing the base on which they are levied

earnings losses and labor mobility over the life cycle an extensive empirical literature has documented that workers with high tenure suffer large and persistent earnings losses when they get displaced we study the reasons behind these losses in a tractable search model with a life cycle dimension endogenous job mobility worker and match heterogeneity the model reconciles key characteristics of the u s labor market large average transition rates a large share of stable jobs and the earnings losses from displacement we decompose the earnings losses and find that only 50 result from skill losses endogenous reactions and selection account for the remainder our findings have important implications for the welfare costs of displacement and labor market policy

multilateral bargaining and downstream competition we examine multilateral bargaining in vertical supply relationships that involve an upstream manufacturer who sells through two competing retailers in these relationships the negotiations are interdependent and bargaining externality may arise across the retailers in addition the timing by which the manufacturer negotiates with the retailers becomes important in simultaneous bargaining the retailers negotiate without knowing if an agreement has been reached in the other retail channel whereas in sequential bargaining the retailer in the second negotiation is able to observe whether an agreement was reached in the first negotiation we show that simultaneous bargaining is optimal for the manufacturer when the retail prices and profitability are similar and sequential bargaining is preferred when the dispersion in the retail prices is sufficiently large as a result of ex post renegotiations the manufacturer may strategically stock out the less profitable retailer who charged a relatively low retail price and exclusively supply only the retailer who charged a relatively high retail price and maintained high channel profitability moreover ex post multilateral bargaining can buffer downstream competition and thus lead to positive retail profits even in markets that are close to perfect competition

inferring labor income risk and partial insurance from economic choices this paper uses the information contained in the joint dynamics of individuals labor earnings and consumption choice decisions to quantify both the amount of income risk that individuals face and the extent to which they have access to informal insurance against this risk we accomplish this task by using indirect inference to estimate a structural consumption savings model in which individuals both learn about the nature of their income process and partly insure shocks via informal mechanisms in this framework we estimate i the degree of partial insurance ii the extent of systematic differences in income growth rates iii the precision with which individuals know their own income growth rates when they begin their working lives iv the persistence of typical labor income shocks v the tightness of borrowing constraints and vi the amount of measurement error in the data in implementing indirect inference we find that an auxiliary model that approximates the true structural equations of the model which are not estimable works very well with negligible small sample bias the main substantive findings are that income shocks are moderately persistent systematic differences in income growth rates are large individuals have substantial amounts of information about their income growth rates and about one half of income shocks are smoothed via partial insurance putting these findings together the amount of uninsurable lifetime income risk that individuals perceive is substantially smaller than what is typically assumed in calibrated macroeconomic models with incomplete markets

job duration seniority and earnings an important stylized fact about labor markets is that workers with longer seniority with their current employer have higher earnings than other workers with the same total labor market experience this study shows that workers in longer jobs earn more throughout than workers in a series of shorter jobs and that the measured positive cross sectional return seniority is largely a statistical artifact due to the correlation of seniority with an omitted variable representing the quality of the worker the job or the worker employer match the implication is tha t earnings do not in fact rise very much with seniority copyright 1987 by american economic association

employment time and the cyclicality of earnings growth abstract we study how the distribution of earnings growth evolves over the business cycle in italy we distinguish between two sources of annual earnings growth changes in employment time number of weeks of employment within a year and changes in weekly earnings changes in employment time generate the tails of the earnings growth distribution and account for its procyclical skewness in contrast the distribution of weekly earnings growth is close to symmetric and stable over the cycle this suggests that studies of earnings risk should carefully model the employment margin to avoid erroneous conclusions on the nature and magnitude of risks underlying individual earnings we show that the combination of simple employment and wage processes is enough to capture the complex features of the earnings growth distribution

learning the ropes general experience task specific experience and the output of police officers abstract we estimate the role that law enforcement officer experience has on the probability of punishment using a unique data set of tickets issued by the idaho state police linked to human resource records all else equal officers issue fewer tickets earlier in their career than later in their career quasi exogenous shocks to an officer s task specific experience generated by law changes cause a temporary reduction in the frequency with which a subset of troopers use those laws creating disparities in the likelihood that individual citizens are cited for law violations the reduction in ticketing in response to a law change is largest for newer troopers and law changes later in a trooper s career have a smaller effect on his use of that law

search behaviour transitions to non participation and the duration of unemployment using longitudinal micro data on unemployed individuals for 1983 85 a structural job search model is estimated the model allows for transitions from unemployment to nonparticipation an extended version of the model deals with the influence of on the job search and prospective wage increases on search behavior of the unemployed the empirical results show that the probability of accepting a job offer is almost one for most unemployed individuals a large portion of unemployment spells ends in a transition out of the labor force the effects of changes in benefits on duration appear to be extremely small copyright 1990 by royal economic society

on modelling the natural rate of unemployment with indivisible labour this analysis investigates modelling the natural rate of unemployment in settings where labour s utilization has some lumpy aspect to it specifically the introduction of various nonconvexities into tastes and technology lead to unemploy ment in general equilibrium equilibria can emerge where 1 those currently unemployed have higher probabilities of being unemployed in the future than those currently employed 2 some agents are jobless while others work overtime and 3 seniority rules seemingly arise whereby old workers cannot be laid off so long as either new workers are being hired or some workers are doing overtime the relative welfare levels of employed and unemployed agents are analysed

the timing of contracting with externalities abstract this paper endogenizes the timing of bilateral contracting between one principal and multiple agents in the presence of externalities contracting simultaneously with all agents is optimal for the principal if externalities become weaker the more an agent trades if instead externalities become stronger sequential negotiations might benefit the principal as they lower the agents outside options under some linearity conditions the principal s preferences with respect to different timings of contracting are opposed to their efficiency ranking

break up fees and bargaining power in sequential contracting abstract when a buyer negotiates in sequence with two potential sellers of a good the outcome of each negotiation depends on all three players bargaining powers assuming all parties are symmetrically informed we find that the first seller s payoff is increasing in his own and the second seller s bargaining power on the other hand the second seller s payoff is decreasing in the first seller s bargaining power and in some cases also in his own bargaining power we characterize when contracts will contain break up fees all results extend to the case of a seller negotiating in sequence with two buyers

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

straight time and overtime in equilibrium abstract we formulate an equilibrium model of straight time and overtime wages by imposing restrictions on agents consumption sets and using a commodity space that includes employment lotteries we extract some time series implications from a linear quadratic approximation to our model evaluated at particular parameter values we use our model informally to interpret some features of observed time series for wages and employment

unemployment fluctuations over the life cycle abstract in this paper we show that i the volatility of worker flows increases with age in us cps data and ii a search and matching model with life cycle features endogenous separation and search effort is well suited to explain this fact with a shorter horizon on the labor market older workers outside options become less responsive to new employment opportunities thereby making their wages less sensitive to the business cycle their job finding and separation rates are then more volatile along the business cycle the horizon effect cannot explain the significant differences between prime age and young workers as both age groups are far away from retirement a lower bargaining power on the youth labor market brings the model closer to the data

a dynamic small open economy model with involuntary unemployment it is well known that real business cycle small open economy soe models rely on greenwood hercowitz and huffman 1988 preferences to match the countercyclical trade balance observed in open economies as well as other second moments while standard preferences a la king plosser and rebelo 1988 are commonly labelled ineffective owing to their inability to yield the countercyclical trade balance in this paper i show that an soe model with standard preferences and involuntary unemployment with efficient risk sharing can obtain a countercyclical trade balance and match main empirical regularities in small open economies il est bien connu que les modeles de cycles d affaires reels dans une petite economie ouverte peo comptent sur des preferences a la greenwood hercowitz et huffman 1988 pour etre compatibles avec la balance commerciale contre cyclique observee dans les economies ouvertes ainsi que sur d autres second moments alors que les preferences standards a la king plosser et rebelo 1988 sont considerees comme ineffectives a cause de leur inhabilitea engendrer la balance commerciale contre cyclique dans ce texte l auteur montre qu un modele de peo avec preferences standards et chomage involontaire et partage efficient du risque peut engendrer une balance commerciale contre cyclique et s arrimer aux principales regularites observees dans les petites economies ouvertes

endogenously chosen boards of directors and their monitoring of the ceo author s hermalin benjamin e abstract this paper develops a model in which the effectiveness of a board s monitoring of the ceo depends on the board s independence the independence of new directors is determined through negotiations implicit or explicit between the existing directors and the ceo the ceo s bargaining position and thus influence over the board selection process depends on an updated estimate of the ceo s ability based on prior performance many empirical findings about board structure and performance arise as equilibrium phenomena in this model we also explore the implications of this model for proposed regulations of corporate governance structures please contact the program in law and economics at boalt hall school of law uc berkeley berkeley ca 94720 for a copy of this paper

opportunism in multilateral vertical contracting nondiscrimination exclusivity and uniformity comment an input supplier selling to competing downstream firms would benefit from publicly committing at the outset to all contracts efficient commitment however would require complete contracts the authors study instead bilateral contracting without commitment regarding others terms each firm then fears that the supplier might opportunistically renegotiate another s contract to increase bilateral profit at the firm s expense the authors show that nondiscrimination clauses generally cannot curb such third party opportunism even with symmetric firms to reassure firms crude forms of commitment may be adopted this could explain the pervasiveness of exclusivity arrangements and the striking uniformity and intertemporal rigidity of franchise contracts copyright 1994 by american economic association

human capital accumulation and labor market equilibrium the objective of this paper is to analyse an equilibrium search model with on the job search and human capital accumulation in our model wages are disperse because firms pay workers of the same productivity different wages and workers of different productivies earn different wages new entrants to the labour market increase their wages mainly through on the job search as workers gain more experience and move up the offer distribution job to job transitions become less frequent and human capital accumulation dominates wage growth this interaction generates a wage distribution that exhibits a density with a unique mode and a long and decreasing right tail as observed in the data

the cost of job loss this article identifies an equilibrium theory of wage formation and endogenous quit turnover in a labour market with on the job search where risk averse workers accumulate human capital through learning by doing and lose skills while unemployed optimal contracting implies the wage paid increases with experience and tenure indirect inference using german data determines the deep parameters of the model the estimated model not only reproduces the large and persistent fall in wages and earnings following job loss a new structural decomposition finds foregone human capital accumulation while unemployed is the worker s major cost of job loss

do technology shocks lead to a fall in total hours worked this paper contributes to the debate initiated by gali in 1999 i provide a theory with capital income taxation labor hoarding as well as long run shifts in the social attitudes to the workplace modelled as leisure at the workplace to argue that there are other shocks that may influence labor productivity in the long run i introduce medium run identification and show it to be superior to long run identification or standard short run identification when applied to artificial data with u s data and medium run identification i find the robust result that technology shocks lead to a hump shaped response of total hours worked which is mildly positive following a near zero initial response jel e32 e24 c32 c15 copyright c 2004 the european economic association

ranking firms using revealed preference this article estimates workers preferences for firms by studying the structure of employer to employer transitions in u s administrative data the article uses a tool from numerical linear algebra to measure the central tendency of worker flows which is closely related to the ranking of firms revealed by workers choices there is evidence for compensating differentials when workers systematically move to lower paying firms in a way that cannot be accounted for by layoffs or differences in recruiting intensity the estimates suggest that compensating differentials account for over half of the firm component of the variance of earnings

immigrant job search assimilation in canada immigrant assimilation is a major issue in many countries while most of the literature studies assimilation through a human capital framework we examine the role of job search assimilation to do so we estimate an equilibrium search model of immigrants operating in the same labour market as natives where newly arrived immigrants have lower job offer arrival rates than natives but can acquire the same arrival rates according to a stochastic process using canadian panel data we find substantial differences in job offer arrival and destruction rates between natives and immigrants that are able to account for three quarters of the observed earnings gap the estimates imply that immigrants take on average 13 years to acquire the native search parameters due to immigrants facing much lower on the job offer arrival rates than natives the model predicts that earnings growth through job search is minimal for immigrants prior to their job search assimilation

news and business cycles in open economies we study the effects of news about future total factor productivity tfp in a small open economy we show that an open economy version of the neoclassical model produces a recession in response to good news about future tfp we propose an open economy model that generates comovement in response to tfp news the key elements of our model are a weak short run wealth effect on the labor supply and adjustment costs to labor and investment we show that our model also generates comovement in response to news about future investment specific technical change and to sudden stops

an equilibrium model of health insurance provision and wage determination we investigate the effect of employer provided health insurance on job mobility rates and economic welfare using a search matching and bargaining framework in our model health insurance coverage decisions are made in a cooperative manner that recognizes the productivity effects of health insurance as well as its nonpecuniary value to the employee the resulting equilibrium is one in which not all employment matches are covered by health insurance wages at jobs providing health insurance are larger in a stochastic sense than those at jobs without health insurance and workers at jobs with health insurance are less likely to leave those jobs even after conditioning on the wage rate we estimate the model using the 1996 panel of the survey of income and program participation and find that the employer provided health insurance system does not lead to any serious inefficiencies in mobility decisions

interfirm mobility wages and the returns to seniority and experience in the united states in this paper we expand on the seminal work of altonji and shakotko 1987 and topel 1991 and reinvestigate the returns to seniority in the united states we begin with the same wage equation as in previous studies we extend the model of hyslop 1999 and explicitly model the participation employment and inter firm mobility decisions which in turn define the individual s experience and seniority we introduce into the wage equation a summary of the workers entire career path the three equation system is estimated simultaneously using data from the panel study of income dynamics psid we find that for each of the three education groups studied the returns to seniority are larger than those previously found in the literature

modelling income processes with lots of heterogeneity all empirical models of earnings processes in the literature assume a good deal of homogeneity in contrast to this we model earnings processes allowing for lots of heterogeneity between agents we also introduce an extension to the linear arma model that allows that the initial convergence

identification of search models using record statistics this paper shows how record value theory a branch of statistics that deals with the timing and magnitude of extreme values in sequences of random variables can be used to recover features of the wage offer distribution in conventional search models using national longitudinal survey of youth nlsy wage data i show that the data are not compatible with specifications for the offer distribution characterized by extreme negative skewness in addition i show that my approach can be used to construct a bound on the returns to job seniority my results suggest that job seniority plays only a minor role in the wage growth of the workers surveyed in the nlsy copyright 2008 wiley blackwell

equilibrium wage tenure contracts in this study we consider a labor market matching model where firms post wage tenure contracts and workers both employed and unemployed search for new job opportunities given workers are risk averse we establish there is a unique equilibrium in the environment considered although firms in the market make different offers in equilibrium all post a wage tenure contract that implies a worker s wage increases smoothly with tenure at the firm as firms make different offers there is job turnover as employed workers move jobs as the opportunity arises this implies the increase in a worker s wage can be due to job to job movements as well as wage tenure effects further there is a nondegenerate equilibrium distribution of initial wage offers that is differentiable on its support except for a mass point at the lowest initial wage we also show that relevant characteristics of the equilibrium can be written as explicit functions of preferences and the other market parameters

efficiency risk aversion and portfolio insurance an analysis of financial asset portfolios held by investors in the united kingdom using data for the united kingdom the author shows that investors in six different wealth ranges hold mean variance efficient portfolios of financial assets this result permits him to estimate coefficients of relative risk aversion for investors in each wealth range the author finds that these coefficients are much higher than most previous studies have found this implies that investors 1 are unwilling to hold risky assets unless they are compensated with a sufficiently high risk premium and 2 are willing to pay for portfolio insurance the general nonavailability of portfolio insurance in the united kingdom appears to indicate a supply side rather than a demand side failure copyright 1996 by royal economic society

reexamination of real business cycles in a small open economy standard dynamic small open economy models have predicted a counterfactual perfectly positive correlation between output and hours worked over the business cycle in addition this class of models exhibits a weak internal propagation mechanism to address these anomalies this paper incorporates intertemporally non separable labor supply and variable capital utilization into the canonical mendoza 1991 model with adjustment costs of net investment our analysis shows that a dynamic technology shock driven small open economy model with internal habit formation in labor hours and endogenous capital utilization is able to account for the main real business cycle regularities of canada after 1981

buyer power and intrabrand coordination we analyze the competitive effects of vertical contracts in a contracting situation where rival retailers offer contracts to a manufacturer in contrast to bernheim and whinston 1998 who study the situation in which competing manufacturers offer contracts to a common retailer we find that two part tariffs even if contingent on exclusivity or not do not suffice to implement the monopolyoutcome richer arrangements including e g conditional fixed fees and upfront payments are thus required to internalize all contracting externalities the welfare implications are ambiguous on the one hand richer contracts ensure that no efficient retailer is excluded on the other hand they allow firms to maintain monopoly prices despite intrabrand competition simulations suggest that the latter effect may be more significant

wage differentials employer size and unemployment the unique equilibrium solution to a game in which a continuum of individual employers choose permanent wage offers and a continuum of workers search by sequentially sampling from the set of offers is characterized wage dispersion is a robust outcome provided that workers search while employed as well as when unemployed the unique nondegenerate equilibrium distribution of wage offers is constructed for three cases 1 identical workers and employers 2 identical employers and an atomless distribution of worker supply prices and 3 identical workers and an atomless distribution of job productivities copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

wages and the value of nonemployment nonemployment is often posited as a worker s outside option in wage setting models such as bargaining and wage posting the value of nonemployment is therefore a key determinant of wages we measure the wage effect of changes in the value of nonemployment among initially employed workers our quasi experimental variation in the value of nonemployment arises from four large reforms of unemployment insurance ui benefit levels in austria we document that wages are insensitive to ui benefit changes point estimates imply a wage response of less than 0 01 per 1 00 ui benefit increase and we can reject sensitivities larger than 0 03 the insensitivity holds even among workers with low wages and high predicted unemployment duration and among job switchers and recently unemployed workers the insensitivity of wages to the nonemployment value presents a puzzle to the widely used nash bargaining model which predicts a sensitivity of 0 24 0 48 our evidence supports wage setting models that insulate wages from the value of nonemployment

an empirical model of wage dispersion with sorting we estimate an equilibrium on the job search model with endogenous search intensity workers differ by skill firms by productivity workers respond to mismatch by intensive search and sorting may result from complementarities in the match level production function the model is estimated on danish matched employer employee data firms are ranked through revealed preference by the fraction of hires that is poached from other firms the poaching rank identification is obtained by firm rank conditional mobility and wage patterns wage variation is decomposed into four sources sorting 40 worker heterogeneity 32 firm heterogeneity 18 and frictional competition 10 a social planner can improve output net of search cost by 1 5 relative to the decentralized solution

on the job search productivity shocks and the individual earnings process individual labor earnings observed in worker panel data have complex highly persistent dynamics we investigate the capacity of a structural job search model with i i d productivity shocks to replicate salient properties of these dynamics such as the covariance structure of earnings the evolution of individual earnings mean and variance with the duration of uninterrupted employment or the distribution of year to year earnings changes specifically we show within an otherwise standard job search model how the combined assumptions of on the job search and wage renegotiation by mutual consent act as a quantitatively plausible internal propagation mechanism of i i d productivity shocks into persistent wage shocks the model suggests that wage dynamics should be thought of as the outcome of a specific acceptance rejection scheme of i i d productivity shocks this offers an alternative to the conventional linear arma type approach to modelling earnings dynamics structural estimation of our model on a 12 year panel of highly educated british workers shows that our simple framework produces a dynamic earnings structure which is remarkably consistent with the data