purchasing power parity in the long run a cointegration approach this paper utilizes cointegration analysis to examine purchasing power parity relationships over a long time horizon the results indicate that the exchange rate is cointegrated strongly with the wholesale price index ratio and somewhat weakly with the consumer price index ratio the cointegrating coefficient between the exchange rate and the price ratio is close to one when cointegration is confirmed the hypothesis that the real exchange rate follows a random walk is rejected in most cases finally a new test for common trends finds no such common trends in exchange rates or price ratios copyright 1990 by ohio state university press

outsourcing imports and labour demand this paper examines the effects of purchased services and imported intermediate materials on the labour demand for different skills in german manufacturing sectors we derive and estimate a factor demand system based on the generalised box cox cost function nesting both the normalised quadratic and the translog functional form we find that the impacts of output and capital growth are more important in explaining the demand for heterogeneous labour than substitution effects between labour and non labour inputs similarly the increasing use of both imported materials and purchased services is a consequence of output growth rather than input substitution

the effects of shock size and type on labor contract duration empirical studies of the relation between uncertainty and the length of union firm contracts have focused on the effects of inflation money supply or industry specific uncertainty this article describes two extensions of previous work first real aggregate uncertainty arising from oil shocks is incorporated into a contract duration model oil shocks significantly affect contract length in seven of 21 u s manufacturing industries second the model is used to test whether the duration of reopenable bargains is positively related to uncertainty associated with large shocks as has been described in danziger the evidence indicates some qualified support for this proposition

bargaining structure and nominal wage flexibility in a model with hetergenous agents wage setting by monopoly unions and monetary policy conducted by a central bank we show that the duration of nominal wage contracts is u shaped in the degree of centralization with intermediate bargaining systems yielding contracts of shorter duration and thus more flexible nominal wages than both decentralized and centralized systems we also find the degree of heterogeneity in the economy the theoretical predictions of the model are tested on oecd data there is empirical support for the main results regarding contract length while there is less support for the predictions regarding the level of centralization

a reinvestigation of contract duration using quantile regression for counts analysis abstract in this paper a quantile regression for counts model qrcm is used to accommodate the discrete nature of the contract duration variable our results show that important time variant variables behave differently at the tails of the distribution

un cola why have cost of living clauses disappeared from union contracts and will they return 1 introduction one of the major changes in collective bargaining in recent decades has been the gradual elimination of cost of living adjustments colas from union contracts in 1976 61 of union workers covered by major collective bargaining contracts had cola provisions but by the end of 1995 when the u s bureau of labor statistics stopped collecting data on collective bargaining settlements cola coverage had fallen to 22 1 although the decline in cola rates has been studied extensively there is no agreement as to which factors are primarily responsible for this decline one view attributes the elimination of colas or escalator clauses to declines in inflationary uncertainty a second view emphasizes the erosion of union power yet another view focuses on structural shifts in the u s economy previous research has not determined the relative importance of these and other hypotheses another reason to reassess cola determination is that the economy has changed since the early research was completed the bulk of studies to examine cola incidence statistically have relied on sample periods that end in 1982 or earlier 2 since then there have been major changes in union strength inflationary uncertainty and other potential determinants of wage indexation including deregulation of certain industries in addition more than 90 of the decline in cola rates has occurred since 1982 it is worthwhile to determine whether the factors deemed to be important in the early studies are still important we provide a comparison with previous research formally assess the contributions of various factors to the erosion of cola rates and provide insights as to likely changes in cola coverage in the future if inflation picks up and with it inflationary uncertainty 3 will cola rates rise to levels not seen since the 1970s what would be the consequences of a rebound in union power of further economic deregulation of likely industrial and demographic shifts in the economy once the major causes of past changes in cola coverage are understood it becomes possible to project the consequences of changes in key economic variables given the concern in macroeconomics with wage indexation and the linkage between wages and prices gray 1976 fischer 1986 ball and cecchetti 1991 schiller 1997 the extent to which cola coverage responds to economic factors has important implications for the economy underlying the empirical analysis is a pooled cross sectional time series model of cola incidence that accounts for industry fixed effects to estimate the model we assemble a panel data set of cola coverage and an array of characteristics for 32 private sector industries over a 22 year period because cola clauses are multiyear in nature the model also recognizes that the percentage of workers covered by cola clauses in a particular year depends on conditions in both the current year and previous years previewing results we find that the major cause of the decline in cola coverage has been the reduction in inflationary uncertainty second in importance has been the erosion of union power both the percentage of the industry s workforce that is unionized and the estimated union wage premium in the industry are highly significant determinants of cola coverage but because the union wage premium has remained largely intact in most industries changes in the premium are much less important than losses in unionization in explaining the overall decline in cola provisions economic deregulation industrial shifts and an increased presence of women in the workforce have had modest effects on cola rates on the basis of our findings a rebound in inflationary uncertainty to the levels experienced in the 1970s would raise cola coverage by 10 percentage points 2 background for workers in long term contracts colas provide at least partial protection from the consequences of unexpected inflation

potential pitfalls for the purchasing power parity puzzle sampling and specification biases in mean reversion tests of the law of one price the ppp puzzle is based on empirical evidence that international price differences for individual goods loop or baskets of goods ppp appear highly persistent or even nonstationary the present consensus is these price differences have a half life that is of the order of five years at best and infinity at worst this seems unreasonable in a world where transportation and transaction costs appear so low as to encourage arbitrage and the convergence of price gaps over much shorter horizons typically days or weeks however current empirics rely on a particular choice of methodology involving i relatively low frequency monthly quarterly or annual data and ii a linear model specification in fact these methodological choices are not innocent and they can be shown to bias analysis towards findings of slow convergence and a random walk intuitively if we suspect that the actual adjustment horizon is of the order of days then monthly and annual data cannot be expected to reveal it if we suspect arbitrage costs are high enough to produce a substantial band of inaction then a linear model will fail to support convergence if the process spends considerable time random walking in that band thus when testing for ppp or loop model specification and data sampling should not proceed without consideration of the actual institutional context and logistical framework of markets

testing the monetary model of exchange rate determination new evidence from a century of data abstract we test the long run monetary model of exchange rate determination for a collection of 14 industrialized countries using data spanning the late nineteenth or early twentieth century to the late twentieth century interestingly we find support for a simple form of the long run monetary model in over half of the countries we consider for these countries we estimate vector error correction models to investigate the adjustment process to the long run monetary equilibrium in the spirit of meese and rogoff journal of international economics 14 1983 3 24 we also compare nominal exchange rate forecasts based on monetary fundamentals to those based on a naive random walk model

purchasing power parity and unit root tests using panel data abstract this paper reports the results of unit root tests for real exchange rates using a panel framework this panel approach provides greatly improved power compared to conventional univariate time series unit root tests we obtain evidence supporting ppp over the recent flexible exchange rate period for g 6 and oecd countries we show explicitly that failure to find such evidence in previous research was due to the low power of the tests

real exchange rate behavior abstract using random simulations with artificial data with identical sample characteristics to the long sample exchange rate data employed by lothian and taylor lothian j r and taylor m p 1996 the recent float from the perspective of the past two centuries journal of political economy 104 488 509 we show that standard unit root tests have extremely low power over sample sizes corresponding to the recent float the probability of rejecting the null hypothesis when it is false is extremely low with 20 years or even 50 years of data and only reaches an acceptable level over much longer spans

co integration error and purchasing power parity between canada and the united states the concept of cointegration and the associated error correction representation of a dynamic process see r f engle and c w g granger 1987 is applied to the purchasing power parity relationship between canada and the united states the results are supportive of purchasing power parity as a long run equilibrium relationship between the canadian dollar american dollar exchange rate the purchasing power parity relationship is maintained although with different dynamic mechanisms during both fixed and flexible exchange rate regimes

mean reversion in g 10 nominal exchange rates according to conventional wisdom industrial country floating exchange rates contain unit roots sur tests on panels of monthly group of ten g 10 log nominal rates reject the null of unit roots for various samples over the current float with significance levels from 0 5 to 15 on average in out of sample forecasts mean reversion models beat random walks significantly in some forecast periods for monthly data the range of expected usd dem appreciation rates exceeds 15 per year in the mean reversion model mean reversion places strong restrictions on international models over the sample period the g 10 had to run monetary policies consistent with stable long run nominal rates

delays in renewal of labor contracts theory and evidence in many countries an expired labor contract is automatically extended during the often protracted delay before the new contract is signed our theoretical model focuses on macroeconomic factors in explaining the delay it emphasizes the importance of the realized nominal and real shocks and of the levels of nominal and real uncertainty the model is tested using israeli collective wage agreements where long delays are frequent the empirical findings strongly support the theoretical model thus nominal uncertainty is found to increase the delay and real uncertainty to decrease the delay but less in the public than in the private sector

hyperbolic discounting and the phillips curve using a standard dynamic general equilibrium model we show that the interaction of staggered nominal contracts with hyperbolic discounting leads to inflation having significant long run effects on real variables

cointegration tests of the monetary exchange rate model for three high inflation economies tests of cointegration are applied to the monetary model of the exchange rate to determine if the model represents a long run equilibrium relation for three high inflation countries the countries tested are argentina chile and israel each paired with the united states as the base country evidence favorable to cointegration among the variables of the monetary model is found using johansen s maximum likelihood procedure copyright 1994 by ohio state university press

real and nominal exchange rates in the long run an empirical investigation abstract this paper reports on econometric tests of the hypothesis that purchasing power parity holds as a long run relationship using data on eight industrialized countries during the flexible exchange rate period the empirical work proceeds by i testing whether nominal exchange rates and relative price levels are co integrated and ii conducting impulse response analysis of long run exchange rate and relative price level changes to explain the data keynesian models suggest that shocks during the estimation period were due principally to exogenous shifts in aggregate demand while equilibrium models suggest that monetary factors have been relatively more important

on the prevalence of labor contracts with fixed duration the prevalence of labor contracts with fixed duration seems surprising why is a fixed duration preferred to a stochastic duration that depends on the consumer price index in this paper the specification of the contract duration is determined endogenously the wage rate can be indexed to the consumer price index but there is a loss since the indexation must be the same for different types of shocks this loss increases with the variability of the contract duration since the loss due to the contracting cost depends on the expected discounted duration only a fixed duration is chosen copyright 1992 by american economic association

purchasing power parity as a long run relation dickey fuller and stock watson tests of purchasing power parity ppp as a long run proposition are provided within the cointegration framework proposed by granger since different countries use different weights to construct price indices the traditional constraint that the coefficients on the price indices should be unity in the log linear ppp relation is relaxed the absence of a general ppp relation cannot be rejected at most a ppp relation is indicated in five out of fifteen country pairs that are examined even if a long run ppp relation exists it is not found to be useful in predicting future nominal exchange rates which is consistent with efficient speculative markets

non neutral technical change capital white collar and blue collar labor some empirical results abstract the empirical analysis of recent quarterly data for west german industries indicates that technical change is biased in favor of white collar labor and equipment while it is biased against blue collar labor

does the exchange rate follow a random walk a monte carlo study of four tests for a random walk abstract several authors have urged that real and nominal exchange rates follow a random walk conditions under which the exchange rate follows a random walk are reviewed in this paper many of these do not appear to hold therefore the empirical evidence presents a puzzle some evidence suggets the exchange rate follows a random walk while other evidence suggests the opposite should be true this paper attempts to reconcile the evidence it is argued that the tests for a random walk have low power monte carlo evidence on four tests for a random walk is presented that suppors this claim

real shocks efficient risk sharing and the duration of labor contracts it is widely believed that increased uncertainty leads to shorter duration of labor contracts this is indeed also the result obtained in the formal analysis in gray 1978 who concludes that a s expected increased variability regardless of source shortens contract length 1978 p 8 the basic argument is that production is inefficient unless the real wage happens to equate the demand and supply of labor and that the loss due to inefficient production increases with the deviation of the actual real wage from the real wage that would equate the demand and supply of labor it is assumed that the economy is exposed to both aggregate real shocks and nominal shocks but that the wage can only be indexed to the general price level an imperfect signal of the underlying shocks since uncertainty is greater for more distant periods the deviation of the actual real wage from the real wage that would equate the demand and supply also tends to be greater for more distant periods and it follows that the per period expected loss due to inefficient production increases with contract duration consequently increased uncertainty provides an incentive to reduce contract durations the reason contracts do not become arbitrarily short is the existence of a fixed contracting cost that militates against shortening the contract duration the oil price hikes of 1973 and 1978 presumably increased the a priori importance of aggregate real shocks and the efficientproduction hypothesis therefore leads one to expect a decrease in contract durations in the years following the price hikes the empirical fact however is that there has been no such tendency at least not in the united states this is clearly brought out in table i which shows that the average duration of major collective bargaining settlements negotiated in 1972 1987 has remained roughly constant

interrelated factor demands from dynamic cost functions an application to the non energy business sector of the uk economy in this paper we propose a dynamic cost function which allows us consistently to derive a set of dynamic interrelated factor demand equations in the general error correction form introduced by anderson and blundell 1982 this paper expands results recently published in urga 1996 it shows that the derivation of an effective underlying cost function allows us to identify the full set of parameters of the underlying process this does not happen in the standard anderson blundell formulation we report an empirical exercise used to model the so called supply side of the london busines school large scale economic model where we estimate both the set of factor demands and the underlying dynamic cost function for the non energy business sector of the uk economy

real exchange rate behavior the recent float from the perspective of the past two centuries using annual data spanning two centuries for dollar sterling and franc sterling real exchange rates we find strong evidence of mean reverting real exchange rate behavior using simple stationary autoregressive models estimated on prefloat data we easily outperform nonstationary real exchange rate models in dynamic forecasting exercises over the recent float such stationary univariate equations explain 60 80 percent of the in sample variation in real exchange rates although the degree of short run persistence may be high the econometric estimates imply a half life of shocks to the real exchange rate of about 6 years for dollar sterling and a little under 3 years for franc sterling

asymmetric substitutability theory and some applications economists usually describe goods as being either gross complements or gross substitutes yet what is less known is that one good may be a gross substitute for a second good while the second good is a gross complement to the first good this paper shows the existence of asymmetric gross substitutability and shows some potential examples and applications

purchasing power parity in the long run a test of the dollar pound exchange rate 1890 1978 this paper tests the purchasing power parity ppp hypothesis by analyzing t he long run tendency of the dollar pound exchange rate using data sin ce 1890 two different models are considered 1 a na ive model and 2 a modified monetary model the conditions of propor tionality and symmetry cannot be rejected when using the naive model the final results using the monetary model however indicate that t he existence of permanent deviations from ppp cannot be ruled out copyright 1987 by ohio state university press

contract duration evidence from franchising abstract economists generally view standard franchise contracts as efficient while franchisee advocates view them as exploitive consistent with the economic view we find that contract duration is positively and significantly related to the franchisee s physical and human capital investments which are often firm specific in contrast to assertions by franchisee advocates we find that these relations exist in subsamples containing only the most established franchisors as measured by size and experience and that larger more experienced franchisors tend to offer longer term contracts than do newer franchisors our evidence also suggests that there is learning across firms about optimal contract terms

purchasing power parity and cointegration the greek evidence from the 1920s abstract this paper presents empirical evidence which supports the purchasing power parity ppp hypothesis for three bilateral exchange rates involving the greek drachma during the 1920s using the technique of cointegration of economic time series the results are obtained for a period of high money supply growth and a high and variable rate of inflation which gave rise to large differentials in price movements between greece and the other countries the speed at which long run ppp was reached following a shock was 50 per cent per month confirming the results of other studies of ppp over the 1920s and explaining the supportive evidence for long run ppp even though data over a short period were used jel f31

purchasing power parity in developing countries multi period evidence under the current float abstract using panel unit root tests we examine purchasing power parity ppp for us dollar real exchange rates of developing countries during the current floating rate period since evidence of ppp may vary from period to period we examine the data for moving 10 year periods from 1976 85 up to 1990 99 we organize panels based on country characteristics influencing the validity of ppp those characteristics include openness inflation and the level and growth rate of per capita gdp although we find stronger evidence of ppp after 1980 our examination of panel data over 15 10 year periods yields only limited support for ppp

more powerful panel data unit root tests with an application to mean reversion in real exchange rates unit root tests seeking mean or trend reversion are frequently applied to panel data we show that more powerful variants of commonly applied tests are readily available moreover power gains persist when the modifications are applied to bootstrap procedures that may be employed when cross correlation of a rather general sort among individual panel members is suspected copyright 2004 john wiley sons ltd

dissecting the ppp puzzle the unconventional roles of nominal exchange rate and price adjustments the conventional view as expounded by sticky price models is that price adjustment determines the ppp reversion rate this study examines the mechanism by which ppp deviations are corrected nominal exchange rate adjustment not price adjustment is shown to be the key engine governing the speed of ppp convergence moreover nominal exchange rates are found to converge much more slowly than prices with the reversion being driven primarily by nominal exchange rates real exchange rates also revert at a slower rate than prices as identified by the ppp puzzle j econ lit 34 1996 647 c 2003 elsevier b v all rights reserved

early contract renegotiation an analysis of us labor contracts 1970 1995 this article examines the ex post flexibility of us labor contracts during the 1970 95 period by investigating whether unanticipated changes in inflation increase the likelihood of a contract being renegotiated prior to its expiration we find empirical support for this hypothesis specifically our results indicate that renegotiations are triggered principally by large and infrequent price shocks of either sign when combined with evidence that ex ante contract durations are shorter during episodes of increased inflation uncertainty our results suggest that these contracts are flexible both ex ante and ex post to changes in the evolution of inflation

the own wage elasticity of labor demand a meta regression analysis firms labor demand responses to wage changes are of key interest in empirical research and policy analysis however despite extensive research estimates of labor demand elasticities remain subject to considerable heterogeneity in this paper we conduct a comprehensive meta regression analysis to re assess the empirical literature on labor demand elasticities building on 942 elasticity estimates from 105 different studies we identify sources of variation in the absolute value of this elasticity heterogeneity due to the theoretical and empirical specification of the labor demand model different datasets used or sectors and countries considered explains more than 80 of the variation in the estimates we further find substantial evidence for the presence of publication selection bias as estimates of the own wage elasticity of labor demand are upwardly inflated

cointegration how short is the long run abstract when testing for cointegration and faced with short sample periods it is common for researchers to turn to more frequently sampled observations that is to move from annual to quarterly or monthly data in order to increase the number of observations we argue that such a gain in the degrees of freedom is more apparent than real essentially cointegration is a long run concept and hence requires long spans of data to give tests for cointegration much power rather than merely large numbers of observations using monte carlo simulations we demonstrate this for four popular tests for cointegration

stationarity of the european real exchange rates evidence from panel data this paper employs a panel unit root test for the real exchange rates of 13 eu member countries the estimation period covers the ems period from 1980 1 to 1992 2 in contrast with the earlier panel unit root studies concerning purchasing power parity ppp effective real exchange rates are used as a result the non stationarity of the real exchange rate was rejected however the half life of the real exchange rate adjustment turned out to be long potential reasons for this might be the relatively short estimation period and the nature of the data

real exchange rates under the gold standard purchasing power parity is one of the most important equilibrium conditions in international macroeconomics empirically it is also one of the most hotly contested numerous recent studies for example have sought to determine the validity of purchasing power parity using data from the post bretton woods float and have reached different conclusions we assert that most such studies are flawed for two reasons first the post 1973 data contain by definition only a very limited amount of the low frequency information relevant for examination of long run parity second the dynamic econometric techniques used to model deviations from parity are typically quite crude with respect to admissible low frequency dynamics both deficiencies are rectified in the present paper with dramatic results we construct a new data set of 16 real exchange rates covering more than a century of the classic gold standard period and we study deviations from parity using long memory models that allow for subtle forms of mean

arima and cointegration tests of ppp under fixed and flexible exchange rate regimes real exchange rates between the united states and its major trading partners were calculated for the bretton woods and flexible exchange rate periods unit root tests indicate that purchasing power parity performed poorly in both periods tests for cointegration reveal limited instances in which it is possible to estimate the deviations from ppp as an error correcting model the estimated error correcting models indicate that foreign but not u s prices responded to deviations from ppp frenkel s 1981b finding that purchasing power parity ppp worked better during the 1920s than the 1970s caused considerable controversy for example davutyan and pippenger 1985 contend that the socalled collapse of ppp is a result of an increase in the relative importance of real versus monetary shocks they argue that the 1970s as opposed to the 1920s was characterized by real supply shocks and the international coordination of monetary policies the argument is that ppp did not fail rather there was an increase in the volatility of those factors giving rise to deviations from ppp hakkio 1984 reestimated ppp over the 1920s and 1970s using cross country tests i e sure estimates to improve the efficiency of his estimates he was able to support the hypothesis that ppp worked better in the 1970s than in the 1920s on the other hand papers by adler and lehman 1983 dornbusch 1980 frenkel 1981a junge 1985 and krugman 1978 report findings contrary to the ppp hypothesis moreover kenen and rodrik 1986 find that the volatility of real exchange rates has increased throughout the flexible rate period this paper tries to shed some light on the importance and persistence of the observed deviations from purchasing power parity under alternative exchange rate systems while it is interesting to compare ppp in the 1920s versus the 1970s it is equally useful to compare the 1960s versus the 1970s and 1980s if real supply shocks and lack of monetary coordination are characteristic of the latter period ppp should perform better in the 1960s to illustrate the issues involved consider the following econometric model of relative purchasing power

how robust is the capital skill complementarity hypothesis this paper investigates the relation between substitution possibilities in manufacturing production between capital and two labor inputs blue collar and white collar workers griliches found in 1969 that unskilled labor was more easily substituted for by capital than skilled labor griliches called this capital skill complementarity the capital skill complementarity hypothesis has implications for the aggregation of labor inputs as well as for employment of labor categories and income distribution between factors this paper investigates the robustness of the capital skill complementarity hypothesis on swedish data by varying model assumptions concerning economies of scale and technological growth copyright 1992 by mit press

multi country evidence on the behavior of purchasing power parity under the current float abstract using panel data for the united states and 22 other oecd countries for the current float this paper presents evidence that despite substantial short term perturbations purchasing power parity actually performed much better than commonly believed average rates of growth of real exchange rates over long horizons bear little relationship either to average rates of growth of nominal exchange rates or to average inflation differentials thus implying a close to one to one relation between average rates of growth of nominal exchange rates and average inflation differentials panel data variants of standard unit root tests suggest that the real exchange rates of these countries can be characterized as mean reverting

uncertainty and labor contract durations this paper provides an empirical investigation into the relationship between ex ante u s labor contract durations and uncertainty over the period 1970 to 1995 we construct measures of inflation uncertainty as well as aggregate nominal and real uncertainty the results not only corroborate previous findings of an inverse relationship between contract durations and inflation uncertainty but also document that this relationship extends to both measures of aggregate uncertainty we also explore the robustness of this relationship to various measures of inflation uncertainty that have appeared in the literature

panel stationarity tests for purchasing power parity with cross sectional dependence we investigate the purchasing power parity ppp hypothesis for a group of 17 countries using a new panel based test of stationarity that allows for arbitrary cross sectional dependence we treat the short run time series dynamics nonparametrically and thus avoid the need to fit separate and potentially misspecified models for the individual series the statistic is simple to compute and uses standard normal critical values even in the presence of a wide range of different deterministic components we also evaluate the behavior of the test using a factor model to approximate cross sectional dependence and find that it generally improves finite sample performance taken together these features provide a widely applicable solution to the problem of testing for stationarity versus unit roots in macro panel data the test finds significant evidence against the ppp null hypothesis being true even when allowance is made for structural breaks

skills wages and employment in east and west germany fitzroy f and funke m 1998 skills wages and employment in east and west germany reg studies 32 459 467 disaggregated data from 28 two digit manufacturing industries in the east and west parts of unified germany are used to estimate employment for three skill categories of blue collar workers employment elasticities are uniformly higher for unskilled labour the results contradict union claims that wages had little relevance for east german job losses and confirm the capitalskill complementarity hypothesis fitzroy f et funke m 1998 competences salaires et emploi dans l est et l ouest de l allemagne reg studies 32 459 467 a partir des donnees decomposees provenant de vingt huit industries a deux chiffres situees dans l est et l ouest de l allemagne unifiee on fait une estimation de l emploi pour trois categories de competences des ouvriers les elasticites de l emploi s averent uniformement plus elevees pour les ouvriers non qualifies les resultats contredisent les declarations des

a dynamic heterogeneous labour demand model for german manufacturing this paper presents an application of the generalised error correction model gecm for heterogeneous factor demands based on the quadratic cost function using data for 26 west german manufacturing industries over the period 1976 1995 it turns out that less general specifications such as the partial adjustment and the static ar 1 model are rejected furthermore both shortrun and long run labour demands of different skill classes are inelastic unskilled labour is found to have a somewhat higher wage elasticity in absolute terms than medium skilled labour a small part of shift in demand away from unskilled labour can be explained by the substitutability relationship between intermediate materials and unskilled labour between 6 and 13 percent of the observed shift towards high skilled labour can be explained by capital accumulation

a risk sharing view of real wages and contract length this paper models a union and firm choosing between long labor contracts in which wages are predetermined and short contracts in which wages are flexible it is shown that the union strictly prefers short contracts because it dislikes the greater employment volatility in long contracts in contrast the convexity of the firm s profit function leads the firm to prefer the greater uncertainty of long contracts the model predicts that workers are prepared to enter long contracts only if they are compensated with a higher real wage this prediction is tested using a large sample of canadian collective agreements with generally supportive results

cointegration and tests of purchasing power parity nonstationarity in the levels of spot exchange rates and domestic and foreign price indices makes the use of conventional tests of the absolute version of purchasing power parity ppp inappropriate if ppp is true inter country commodity arbitrage ensures that deviations from a linear combination of spot exchange rates and domestic and foreign price levels should be stationary under these conditions exchange rates and price levels should form a cointegrated system we find the null hypothesis of no cointegration cannot be rejected for all five countries thus violating the long run absolute version of ppp

the panel purchasing power parity puzzle does long run purchasing power parity ppp hold over the post 1973 floating exchange rate period panel unit root tests provide evidence of ppp that increases with the number of observations the strengthening of the evidence however is highly cyclical when the dollar appreciates at the end of the sample the evidence of ppp strengthens and when it depreciates the evidence weakens while these patterns cannot be explained by the specifications that are normally used to model real exchange rates the strengthening but not the cyclical pattern can be explained by a specifi cation that incorporates ppp restricted structural change

the effects of railroad development on price convergence among the states of the usa from 1866 to 1906 this study examines the effects of the reduced transaction costs on the price behaviours in the second half of the nineteenth century where declines in transaction costs were mainly caused by railroad development during this period it employs a panel test introduced by levin and lin 1992 on the convergence of wheat and corn prices using a panel of 48 us states from 1866 to 1906 the results show that by decreasing transportation costs railroads played an important role in price convergence among states of the usa for wheat and corn during the postbellum period

wage rigidity collective bargaining and the minimum wage evidence from french agreement data using several unique data sets on wage agreements at both industry and firm levels in france we document stylized facts on wage stickiness and the impact of wage setting institutions on wage rigidity first the average duration of wages is a little less than one year and around 10 percent of wages are modified each month by a wage agreement data patterns are consistent with predictions of a mixture of calvo and taylor models the frequency of wage change agreements is rather staggered over the year but the frequency of effective wage changes is seasonal the national minimum wage has a significant impact on the probability of a wage agreement and on the seasonality of wage changes negotiated wage increases are correlated with inflation the national minimum wage increases and the firm profitability

testing purchasing power parity under the null hypothesis of co integration this paper analyzes monthly data on the exchange rates and price indices of the eleven major industrial countries over the modern period of floating exchange rates it presents tests that are based upon the null hypothesis of cointegration the paper finds evidence that most country pairs not involving north american currencies have exchange rates and price indices that are cointegrated it estimates the error correction representation for the series that are cointegrated and it shows that the dynamic adjustment of the relationship between exchange rates and prices is accomplished almost entirely in the market for foreign exchange copyright 1991 by royal economic society

how sure are we about purchasing power parity panel evidence with the null of stationary real exchange rates this article presents evidence on mean reversion in industrial countries real exchange rates in a setup that accounts naturally for cross sectional dependence is invariant to the benchmark currency and actually tests for the null of interest i e purchasing power parity our results are based on the kwiatkowski et al 1992 test for the stationarity null generalized in a multivariate random walk plus noise model by nyblom and harvey 2000

searching for stationarity purchasing power parity under the current float abstract using panel data methods we investigate long run purchasing power parity by testing for unit roots in real exchange rates of industrial countries under the current float the evidence against the unit root hypothesis is stronger for larger than for smaller panels for monthly than for quarterly data and when the german mark rather than the united states dollar is used as the base currency while we find that accounting for serial correlation considerably weakens the evidence against the unit root null the results as a whole are consistent with long run purchasing power parity

the caring hand that cripples the east german labor market after reunification abstract the caring hand that cripples the east german labour market after reunification the east german labour market has hardly made any progress since german reunification despite massive migration flows and support from the west we argue that east germany is in trouble precisely because of the support it has received this paper explores the phenomenon of the caring hand that cripples arising from bargaining by proxy the adoption of the west german welfare system and the associated employment persistence even the steady decrease of labour cost normalized by productivity since the beginning of the 1990s did not help to kick start the east we suggest that labour force participants fell into traps concerning low skills ageing of the workforce labour saving capital and skills capital underutilization and unemployment arising from the decline of the tradeable sector jel classification e24 j3 and p2 keywords german unification labour market traps and labour markets dennis j snower kiel institute for the world economy dusternbrooker weg 120 24105 kiel germany tel 49 431 8814 235 fax 49 431 8814 501 email dennis snower ifw kiel de

the effects of real and nominal shocks on union firm contract duration abstract the first theoretical works on labor contract length gray 1978 for example emphasized the existence of a negative relation between contract duration and uncertainty in estimating a linear version of gray s contract length model and an alternative model developed by christofides and wilton our empirical results indicate little evidence of a negative relationship between length and uncertainty in the united states furthermore our findings indicate the presence of significant differences across industries at the two digit sic level in the response of bargain duration to uncertainty

evidence on the purchasing power parity in a panel of cities evidence is provided on the ppp hypothesis using a sample of 50 spanish cities for a long time period through the application of panel data unit root tests although results suggest non rejection of the ppp short run deviations as measured by half lives indicate that real factors might be causing a slow rate of convergence to a common price index even in highly integrated economies

the minimum wage from a two sided perspective this paper sheds new light on the effects of the minimum wage on employment from a two sided theoretical perspective in which firms job offer and workers job acceptance decisions are disentangled minimum wages reduce job offer incentives and increase job acceptance incentives we show that sufficiently low minimum wages may do no harm to employment since their job offer disincentives are countervailed by their job acceptance incentives