when today s rewards are tomorrow s endowments the effects of inequality on social competition abstract in this paper we study the role of inequality in a model of repeated social competition where endowments the resources used in the competition and rewards the resources obtained as prizes are connected because the rewards of today s competition determine the endowments of tomorrow s competition we find that the harshness of social competition is maximal for an intermediate level of inequality and that increasing or decreasing inequality beyond that level monotonically mitigates social competition up to completely eliminating it at the extremes if social competition is wasteful utilitarian welfare is maximized in case of equality a greater uncertainty about the connection between today s rewards and tomorrow s endowments mitigates social competition finally there emerge concerns for others resources that are downward and not upward with the value of high social standing which changes non monotonically in the resources of those with lower standing

group loyalty and the taste for redistribution interpersonal preferences preferences that depend on the characteristics of others are typically hard to infer from observable individual behavior as an alternative approach this paper uses survey data to investigate interpersonal preferences i show that self reported attitudes toward welfare spending are determined not only by financial self interest but also by interpersonal preferences these interpersonal preferences are characterized by a negative exposure effect individuals decrease their support for welfare as the welfare recipiency rate in their community rises and racial group loyalty individuals increase their support for welfare spending as the share of local recipients from their own racial group rises these findings help to explain why levels of welfare benefits are relatively low in racially heterogeneous states

asymmetric information multiperiod labor contracts and inefficient job separations economists have for some time been telling the world and each other that in a dynamic economy some labor turnover is to be expected and is in fact efficient however there is a pervasive feeling that not all of the observed turnover is efficient the dilemma of course is to provide satisfactory reasons why inefficient turnover should occur with optimizing rational economic agents in light of this problem recent developments in implicit contract theory 1 4 5 have begun to focus on the idea that in a world of uncertainty asymmetric information and moral hazard problems may prevent efficient fully enforceable contingent claims contracts from developing in particular the asymmetric information i e firms privately observe their profits and workers privately observe their alternatives and moral hazard problems make efficient turnover unlikely because parties making separation decisions have neither all available relevant information nor have an incentive to use this information to make an efficient decision while this investigation into the ramifications of asymmetric information has yielded new insights analysis in previous studies has been limited to models in which separations occur only in the final period of the model in this paper a simple multiperiod model is developed in which separations may occur in each of several successive periods the multiperiod specification enables us to distinguish between temporary and permanent separations and to focus attention on the potential for inefficient separations induced by asymmetric information problems in an intertemporal setting in an intertemporal model in which separations may occur in any one of several successive periods intertemporal allocation problems arise because compensation in a given period plays an allocative role not only in that particular period but also in all periods prior to that period that the terms of compensation may play a multiple intertemporal role in allocating labor has been recognized previously in other contexts for instance this argument has been used to explain the observed occurrence of rising wage profiles with tenure in the presence of such factors as worker shirking or firm specific skill acquisition 2 9 in this asymmetric information setting intertemporal allocation problems

a model of educational investment social concerns and inequality we consider a model in which educational investments entail productivity gains signaling power and social status the latter depends on the agent s relative achievement in one of three dimensions innate skills level of schooling and income we study the three scenarios separately and characterize the conditions under which social concerns increase or decrease educational and income inequality inequality increases decreases if education lowers the stigma suffered by low skilled workers less more than it boosts the prestige enjoyed by high skilled workers we discuss the expected results of some policies in light of these findings

job matching and on the job training conventional analysis predicts that workers pay part of their on the job training costs by accepting a lower starting wage and subsequently realize a return to this investment in the form of greater wage growth missing from the conventional treatment of on the job training is a discussion of the process by which heterogeneous workers are matched to jobs requiring varying amounts of training this matching process constitutes a key feature of the on the job training model presented in this article and tested with a unique data set containing extensive information concerning on the job training employer search wages and wage and productivity growth

the social basis of interdependent preferences abstract most economists are sympathetic to the idea that concerns for relative position are an important aspect of many economic problems there has traditionally been a reluctance to include such concerns primarily because models that included them often allow such a broad range of behavior that there are few if any restrictions on equilibrium behavior and hence such models would have little or no predictive power in this paper we discuss how reduced form models may naturally give rise to utility functions that depend in part on relative standing there are several advantages of modelling concern for relative standing in reduced form utility functions even when there is no similar concern in the deep preferences it provides structure and constraints on the way that relative standing affects utility and further it can yield testable implications about the way that changes in the underlying environment affect the concern for relative standing we discuss the advantages and disadvantages of modelling social concerns in this way and provide examples that illustrate how concerns for relative standing can affect savings investment and labor choice decisions

information aggregation failure in a model of social mobility abstract i study a model in which high and low income voters must decide between continuing with a status quo policy or switching to a different policy which is more redistributive under the status quo policy low income voters may get an opportunity to become high income earners such opportunities are expected to arise infrequently so in expectation these voters prefer the more redistributive policy nevertheless there is an equilibrium in which the vast majority of them cast their ballots in favor of re electing the less redistributive status quo although these voters are fully strategic and correctly assess their chances for upward mobility they vote exactly as if they are naive voters who over estimate their chances of becoming rich as the size of the electorate grows the status quo policy can be re elected with certainty and the election fails to fully aggregate information

involuntary employment in contracts with risky job search involuntary employment in contracts with risky job search the implications of partially insurable job search risk for incentive compatibility in a standard contracting framework are explored when unemployment spells provoke job search workers face risk in spell duration and reemployment wages when search effort is not variable contracts including unemployment insurance will yield involuntary employment when search effort is diminished by ui benefits firms shift some compensation back to wages increasing the relative attractiveness of employment the analysis begins with a theorem on incomplete insurance by imai geanakoplos and ito 1981 for which a simple proof and economic intuition are provided i introduction in seminal models of contingent labor contracts azariadis 1975 and baily 1974 sought to explain the behavior of wages and employment over the business cycle much of the subsequent literature for example grossman and hart 1983 and hart 1983 has been devoted to exploring the impact of asymmetric information on such properties of contracting equilibria as over or underemployment wage flexibility and whether or not utility falls when a worker is fired this paper looks at the effects on contingent labor contracts of the asymmetry in risk faced on the one hand by workers who being laid off when the contract is implemented experience job search risk which is partially uninsured due to asymmetric information and on the other hand by workers who retaining their jobs return to a known status quo for the rest of the period in most contingent contracting models all relevant information about the prevailing state of nature is revealed at once and wage and employment levels are then determined once the contract is implemented there is no residual uncertainty this sequence of events agreement upon a contingent contract resolution of uncertainty determination of wages and employment is a reasonable approximation to the experience of workers who retain their jobs since they know their wages and their working conditions workers who are laid off however often face considerable risk over the effectiveness of job search and the terms of future employment this creates an asymmetry in the riskiness of the ex post outcomes of the contract job retention means no more uncertainty within the period while layoff entails further within period risk associated with job search and reemployment while severance pay or unemployment benefits can reduce some of the uncertainty associated with job loss they will not generally provide complete insurance this is because the intensity of job search and the arrival of job offers are private information since the firm cannot verify for example the intensity of job search it will insist that the worker bear some of the risk associated with the search s outcome this is a standard principal agent problem see for example shavell 1979 equilibrium labor contracts will therefore offer workers a gamble between job retention with no residual risk and layoff with some uninsured job search risk 1 this asymmetry in residual risk affects the contingent contracts workers enter into for example if workers feel more comfortable facing a given risk when their incomes are higher the residual risk associated with layoff may lead them to accept lower contingent wages in the employed state in exchange for greater severance pay when laid off a problem with this kind of modification of the standard contract i e one with no residual risk is that if enough compensation is shifted into the unemployed state expected utility may actually be higher for laid off workers than for those who are retained this is a situation with voluntary layoffs and involuntary employment at prevailing wages retained workers would rather be laid off if workers can increase their chances of being fired by behaving unproductively involuntary employment contracts may be unenforceable

the excess sensitivity of layoffs and quits to demand excessive layoffs in bad times and excessive quits in good times both stem from the same weakness in practical employment arrangements the specific nature of worker firm relations creates a situat

majority voting with single crossing preferences we clarify and extend a number of sufficient conditions for the existence of a majority voting equilibrium on one dimensional choice domains these conditions variously stated in the previous literature all impose order restrictions on voter preferences for instance monotone marginal rates of substitution which we show to imply or be equivalent to a general ordinal version of the single crossing condition this simple property is economically intuitive and easily checked in applications this ease of application is demonstrated through an examination of voting models of redistributive income taxation and trade union bargaining behaviour

salience and consumer choice we present a theory of context dependent choice in which a consumer s attention is drawn to salient attributes of goods such as quality or price an attribute is salient for a good when it stands out among the good s attributes relative to that attribute s average level in the choice set or more broadly the choice context consumers attach disproportionately high weight to salient attributes and their choices are tilted toward goods with higher quality price ratios the model accounts for a variety of disparate evidence including decoy effects and context dependent willingness to pay it also suggests a novel theory of misleading sales

firm specific training layoffs and unreliable workers firm specific training layoffs and unreliable workers 1 introduction early work in implicit contract theory argues that a long term relationship between a worker and a firm evolves due to the risk sharing nature of the implicit contract between a risk averse worker and a risk neutral firm some authors have criticized this initial argument see for example haltiwanger 1983 feeling that a long term relationship between a worker and a firm and the terms of an implicit contract between the two in large parts is explained via hiring costs training costs and the like this is the approach taken in the early work of becker 1975 oi 1962 and the most recent work of jovanovic 1979a these latter explanations are also appealing because long term relations between a worker and a firm are typically characterized by quits that decline with tenure and wages that increase with tenure as discussed in mortensen 1988 explanations of these phenomena fall into two categories job search theories or job training theories job search theories stress that there is a match specific component to the productivity of any worker firm match that a good match will result in a long term relationship explains why wages are positively correlated with tenure to explain a rising wage profile within a given match requires that the firm and the worker learn about the quality of their match over time a good match will be a long term one and the wage will rise over time as the match is discovered to be a good one jovanovic 1979b and barron and loewenstein 1985 model such a learning process job training theories maintain that long term relationships with rising wages exist because of firm specific training that increases with tenure again see jovanovic 1979a as an example this paper integrates these two theories in this paper firm specific training evolves as an increasing function of a worker s tenure with a firm this is so because there is a positive probability that a worker is unreliable in that he will be searching for another employer the firm being unable to identify in advance which workers are unreliable will update its prior belief as to a worker s reliability as a function of the worker s tenure the total level of training at any point in time will be an increasing function of this updated belief thus learning about the quality of a match an aspect of the job search theories plays an important role in explaining the level of firm specific training this learning process can also play a role in determining optimal layoffs if an unreliable worker is more likely to receive an acceptable outside offer when the worker is laid off than when he is employed the firm can use layoffs to elicit information about the worker s reliabiliy based upon this fact layoffs may occur even when the worker s marginal product exceeds his value of leisure before discussing the model in detail one crucial assumption deserves comment unlike previous work such a salop and salop 1976 enforceable self revealing contracts are ruled out by assumption thus the firm here cannot commit itself to a wage contract promising low wages initially in exchange for high wages as job tenure increases which contract would attract only reliable workers this assumption is of course a polar extreme but as such is consistent with more recent work in contract theory which investigates the terms of self enforcing contracts see for example holmstrom 1983 the idea is to provide a comparison with contracts in an idealized economy with no enforcement problems this assumption is justified if the cost of writing a legally enforceable contract is prohibitive or if as suggested in charmichael 1984 reputational forces are insufficient to deter a firm from cheating although workers here are risk neutral the model could be amended to include risk averse agents

global property investment and the costs of international diversification there is a trade off between the costs and benefits of international diversification this paper shows that the costs for property investors can be reduced substantially through investments in public real estate companies which concentrate on their local domestic market we compare the performance of 18 international operating property companies over the sample period 1984 through 1995 with the performance of property companies operating on their domestic market we find that the international companies underperform the domestic companies we also find this difference is not due to factors such as transaction costs leverage and currency

social mobility and redistributive politics just like economists voters have conflicting views about redistributive taxation because they estimate its incentive costs differently we model rational agents as trying to learn from their dynastic income mobility experience the relative importance of effort and predetermined factors in the generation of income inequality and therefore the magnitude of these incentive costs in the long run left wing dynasties believing less in individual effort and voting for more redistribution coexist with right wing dynasties this allows us to explain why individual mobility experience and not only current income matters for political attiitudes and how persistent differences in perceptions about social mobility can generate persistent differences in redistribution across countries

capital market integration in the pacific basin region an impulse response analysis abstract we examine the extent of capital market integration in a group of pacific basin countries following the deregulation of their markets and explore whether the financial influence of japan in the region has overtaken that of the us looking at long run comovements of real interest rates through the use of cointegration and using impulse response analysis to examine the speed of adjustment of real interest rates to long run equilibrium following a shock in one of the markets which is another indicator of the degree of capital market integration we find that these countries are closely linked with world financial markets and more so with japan than with us

how did distributional preferences change during the great recession abstract to better understand how support for redistributive policies is shaped by macroeconomic shocks we explore how distributional preferences changed during the recent great recession we conducted identical modified dictator games during both the recession and the preceding economic boom the experiments capture subjects selfishness the weight on one s own payoff and equality efficiency tradeoffs concerns for reducing differences in payoffs versus increasing total payoffs which we then compare across economic conditions subjects exposed to recession exhibit greater selfishness and higher emphasis on efficiency relative to equality reproducing recessionary conditions inside the laboratory by confronting subjects with possible negative payoffs weakly intensifies selfishness and increases efficiency orientation bolstering the interpretation that differing economic circumstances drive our results

individual preferences for political redistribution what drives people s support of governmental reduction of income inequality we employ data from a large international survey in order to evaluate the explanatory power of three competing forces referred to as the homo oeconomicus effect the public values effect and the social rivalry effect the empirical analysis reveals that at the aggregate level all three effects play a significant role in shaping individual preferences for political redistribution attitudes of citizens in formerly socialist countries turn out to differ from those of western citizens in a systematic way 2002 elsevier science b v all rights reserved

modelling price movements in housing micro markets identifying long term components in local housing market dynamics this study identifies housing sub markets micro markets that may be price leaders within local housing market areas and relates their performance to potentially relevant economic factors this ca

is there job lock evidence from the pre hipaa era we estimate discrete time hazard models of employment duration and standard logarithmic wage equations using the 1987 and 1990 panels of the survey of income and program participation sipp to examine the phenomenon of job lock we test for job lock using differences in differences approaches among those with and without employer provided health insurance and family members with and without health problems we find no statistically significant evidence of job lock on employment duration or wages using this approach we do find some evidence of shorter employment spells for those with employer provided health insurance and spouse provided health insurance and longer employment spells for those with employer provided health insurance and large families others have interpreted these findings as evidence of job lock however the wage equation results using these measures are not consistent with job lock although anecdotal evidence makes it clear that some workers have been locked into less than optimal jobs because of the combination of health problems and employer provided health insurance our results do not suggest that this phenomenon is pervasive in the u s economy

international transmission mechanisms and contagion in housing markets this paper explores international transmission mechanism and its role in contagion effect in the housing markets across six major asian cities the analysis is based on the identification of house price diffusion effects through a global vector autoregressive gvar model estimated using quarterly data for six major asian cities hong kong tokyo seoul singapore taipei and bangkok from 1991q1 to 2011q2 the empirical results indicate that the open economies heavily relying on international trade such as singapore japan tokyo taiwan taipei and thailand bangkok show positive correlations between the economy s openness and house prices which is consistent with the balassa samuelson hypothesis interestingly some region specific conditions also appear to play important roles as determinants of house price movements which may be driven by restrictive housing policies and demand supply imbalances such as singapore and bangkok these results are reasonably robust across several model specifications the findings bear significant implications for formulation of investment strategy and public policies

belief in a just world and redistributive politics international surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate at the same time social ethnographies and experiments by psychologists demonstrate individuals recurrent struggle with cognitive dissonance as they seek to maintain and pass on to their children a view of the world where effort ultimately pays off and everyone gets their just deserts this paper offers a model that helps explain i why most people feel such a need to believe in a just world ii why this need and therefore the prevalence of the belief varies considerably across countries iii the implications of this phenomenon for international differences in political ideology levels of redistribution labor supply aggregate income and popular perceptions of the poor the model shows in particular how complementarities arise endogenously between individuals desired beliefs or ideological choices resulting in two equilibria a first american equilibrium is characterized by a high prevalence of just world beliefs among the population and relatively laissez faire policies the other european equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state more generally the paper develops a theory of collective beliefs and motivated cognitions including those concerning money consumption and happiness as well as religion

the distinguishing characteristics of temporary and permanent layoffs this paper develops a theory of layoffs in an intertemporal setting in which job separations may occur in each of several successive periods theoretical analysis of temporary layoffs in previous studies has been limited to models in which the layoffs occur only in the final period of the model this multiperiod implicit contract framework enables us to identify distinguishing characteristics of temporary and permanent layoffs that were heretofore blurred or distorted in previous contract analyses

social limits to redistribution in many countries equality of political rights including the right to vote over taxes and transfers goes along with substantial inequality of economic conditions this observation lies at the root of one fundamental issue in political economy one about the factors that limit the extent of redistribution in democracies the conventional economic wisdom on this issue can roughly be summarized by two arguments firstly redistributive taxation may be limited by various kinds of incentive costs of taxation as e g in james a mirrlees 1971 kevin w s roberts 1977 dennis n epple and thomas romer 1991 and thomas piketty 1995 secondly redistribution may be dampened by the lobbying activity of high income groups and by various imperfections inherent to the political process that determines the tax system as e g in gary s becker 1983 and john e roemer 1995 while both arguments offer illuminating insights into the phenomenon of redistribution they are also based on a very crude description of human behavior one which ignores social motivations of action both in the economic and the political sphere the present paper develops an explanation that takes such motivations into account specifically it shows that limits to redistribution may arise when economic inequality has an informational value for social decisions our approach is based upon the following observation many goods and decisions that heavily affect an individual s quality of life are not allocated or made through markets but through social interactions thomas scitovsky 1976 for instance although people have strong preferences over how they are treated by others and over whom they mate with these things are not the object of market transactions a number of sources of satisfaction like conversation dinners and parties playing with others and being observed and admired are nonmarket goods for which a keen social competition between individuals often develops as shown by harold cole et al 1992 the existence of social rather than market competition for some goods can endogenously generate a concern for relative position in the income distribution when information about relative income is private individuals become interested in the observable consumption differentials between them and their social competitors since consumption differentials are influenced by redistributive taxation the political attitudes of people toward redistribution will be shaped by its expected impact on social competition in some identifiable environments this concern for social success may be the crucial factor that limits the extent of redistribution desired by a majority of voters specifically while the middle class may obtain economic benefits from a large amount of redistributive taxation it may oppose an equalization of living standards since this would harm its social success the fear of losing social status in favor of the poor induces the middle class to enter a political alliance with the rich which supports conservative taxation programs in the sociological literature scholars of voting behavior have often suggested that the need for social recognition plays a crucial role in shaping political attitudes seymour m lipset 1967 pointed out that white collar workers tend to be socially valued similarly as those higher in the system and although their income may be only slightly larger than that of manual workers white collars are much more likely to corneo department of economics university of osnabruck rolandstrasse 8 d 49069 osnabruck germany cesifo munich and cepr london gruner department of economics university of mannheim d 68131 mannheim germany iza bonn and cepr london we would like to thank emmanuelle auriol dieter bos peter funk mike hout olivier jeanne peter jonas georg noldeke thomas piketty regis renault john roemer jens weidmann and three anonymous referees for insightful comments and suggestions we have also benefited from the comments of participants at workshops and conferences in barcelona bonn davis jena maastricht magdeburg mannheim montreal munich rotterdam silvaplana tel aviv tilburg toulouse and warwick at which we presented earlier versions of this work financial support from the deutsche forschungsgemeinschaft sfb 303 at the university of bonn is gratefully acknowledged

running to keep in the same place consumer choice as a game of status if individuals care about their status defined as their rank in the distribution of consumption of one positional good then the consumer s problem is strategic as her utility depends on the consumption choices of others in the symmetric nash equilibrium each individual spends an inefficiently high amount on the status good using techniques from auction theory we analyze the effects of exogenous changes in the distribution of income in a richer society almost all individuals spend more on conspicuous consumption and individual utility is lower at each income level in a more equal society the poor are worse off

on imperfect evaluation and earning differentials this paper investigates the relationship between the technology for evaluating performance and optimal contract choice specifically the paper examines the different compensation packages that arise when occupations differ in evaluation technology workers are risk averse work effort is endogenous and there exists asymmetric information in occupations in which it is less difficult to measure output it is shown that compensation is more closely tied to output the implications for work effort the sorting of workers by ability and average compensation are developed analysis of a new data set confirms our predictions concerning earning differentials and wage growth the powerful 1 6 million member national education association and other teacher organizations have traditionally fought the notion of rewarding better teachers with more money arguing that there is no objective way to measure a teacher s competence and that it would lead to favoritism and bad morale time june 20 1983

economic and social class voting in a model of redistribution with social concerns we investigate how concerns about social status may affect individuals preferences for redistribution in our model agents are heterogeneous across two dimensions productivity and social class and an individual s social status is de ned as his relative standing in terms of a weighted average of these two components the weight on each component depends positively on its standard deviation redistribution thus simultaneously affects labor supply and the weights that determine social status as such taxation not only redistributes resources from the rich to the poor but also becomes a way of preserving or modifying social status thus individuals who have the same productivity but belong to different social classes support different tax rates we characterize the equilibrium of the political game as the solution of a system of non linear equations and identify the interclass coalition of voters who support the equilibrium tax rate

growing up in a recession does the historical macroeconomic environment affect preferences for redistribution we find that individuals who experienced a recession when young believe that success in life depends more on luck than effort support more government redistribution and tend to vote for left wing parties the effect of recessions on beliefs is long lasting we support our findings with evidence from three different datasets first we identify the effect of recessions on beliefs exploiting time and regional variation in macroeconomic conditions using data from the 1972 2010 general social survey our specifications control for nonlinear time period life cycle and cohort effects as well as a host of background variables second we rely on data from the national longitudinal survey of the high school class of 1972 to corroborate the age period cohort specification and look at heterogeneous effects of experiencing a recession during early adulthood third using data from the world value survey we confirm our findings with a sample of 37 countries whose citizens experienced macroeconomic disasters at different points in history

the origins of inequality insiders outsiders elites and commoners hereditary economic inequality is unknown among mobile foragers but hereditary class distinctions between elites and commoners exist in some sedentary foraging societies with agriculture such stratification tends to become more pronounced we develop a model to explain the associations among productivity population property rights and inequality using malthusian dynamics we show that regional productivity growth leads to enclosure of the best sites first creating inequality between insiders and outsiders hereditary elite and commoner classes subsequently arise at the best sites food consumption becomes more unequal and commoners become poorer these predictions are consistent with a wide range of archaeological evidence

social mobility and the demand for redistribution the poum hypothesis this paper examines the often stated idea that the poor do not support high levels of redistribution because of the hope that they or their offspring may make it up the income ladder this prospect of upward mobility poum hypothesis is shown to be fully compatible with rational expectations and fundamentally linked to concavity in the mobility process a steady state majority could even be simultaneously poorer than average in terms of current income and richer than average in terms of expected future incomes a e rst empirical assessment suggests on the other hand that in recent u s data the poum effect is probably dominated by the demand for social insurance in the future everyone will be world famous for e fteen minutes andy warhol 1968

structural breaks and diversification the impact of the 1997 asian financial crisis on the integration of asia pacific real estate markets abstract currently there exists relatively little research on the influence that the 1997 asian financial crisis has had upon capital flows within the property market and the associated long run implications of it this paper examines the impact that the crisis has had upon the integration and dynamic links between a number of asia pacific real estate markets the results show that asia pacific property markets are integrated despite a structural shift occurring at the time of the crisis these results are a particularly important finding for fund managers concerned with the impact of globalization on the performance of their real estate portfolios showing that in the asia pacific region diversification benefits are actually less than that suggested by an analysis incorrectly ignoring the crisis

a model of focusing in economic choice we present a generally applicable theory of focusing based on the hypothesis that a person focuses more on and hence overweights attributes in which her options dier more our model predicts that the decisionmaker is too prone to choose options with concentrated advantages relative to alternatives but maximizes utility when the advantages and disadvantages of alternatives are equally concentrated in intertemporal choice because the relative concentrations of an option s costs and benets can be dierent from the perspective of a single period and the perspective of the entire choice problem the decisionmaker often exhibits a form of time inconsistency she is present biased when the costs of current misbehavior are distributed over many future dates such as in harmful consumption but future biased when the benet of many

common trends and convergence south east asian equity markets 1988 1999 abstract this paper uses two different estimation approaches to demonstrate that equity markets in south east asia have shown signs of converging during the 1990s according to the haldane and hall economic journal 101 436 443 1991 method of measuring convergence a subset of asian markets had converged by mid 1997 this process appears to have been abruptly halted and somewhat reversed by the recent financial crisis we find that in general there are two common trends present in the eight asian equity market indices modeled here and also two trends when the us market is additionally included in a johansen var

ideology tactics and efficiency in redistributive politics we model the electoral politics of redistribution when voters and parties care about inequality in addition to their private concerns for consumption and votes respectively ideological concerns about income redistribution lead each party to adopt a general proportional income tax adjusted to appeal to the ideological leanings of high clout groups with disproportionately many swing voters which the parties also ply with pork barrel projects our results relate to director s law which says that redistributive politics favors middle classes at the expense of both rich and poor

the equilibrium distribution of income and the market for status this paper explores the implications for risk taking behavior and the equilibrium distribution of income of assuming that the desire for status positions is a powerful motive and that it raises the marginal utility of consumption in contrast to previous analyses we consider the case in which status positions are sold in a hedonic market we show that such a complete hedonic market in status positions can be perfectly replicated by a simpler arrangement with a status good and a social norm that assigns higher status to those that consume more of this good the main result is that for a wide range of initial conditions the equilibrium distribution over income status and consumption is the same that this allocation requires inequality of income and consumption and that this allocation coincides with the optimum of a utilitarian planner

job search and implicit contracts a model incorporating costly search and implicit contracts is examined the contracts differ from those studied in the traditional literature by allowing for both temporary and permanent layoffs a natural rate of unemployment is determined and comparative statics analysis shows that changes in the utility value of leisure in the cost of search and in the dispersion of prices each have an ambiguous effect on this natural rate

why did the west extend the franchise democracy inequality and growth in historical perspective during the nineteenth century most western societies extended voting rights a decision that led to unprecedented redistributive programs we argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution political transition rather than redistribution under existing political institutions occurs because current transfers do not ensure future transfers while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution our theory also offers a novel explanation for the kuznets curve in many western economies during this period with the fall in inequality following redistribution due to democratization i introduction the nineteenth century was a period of fundamental political reform and unprecedented changes in taxation and redistribution britain for example was transformed from an oligarchy run by an elite to a democracy the franchise was extended in 1832 and then again in 1867 and 1884 transferring voting rights to portions of the society with no previous political representation the decades after the political reforms witnessed radical social reforms increased taxation and the extension of education to the masses moreover as noted by kuznets inequality which was previously increasing started to decline during this period the gini coefficient for income inequality in england and wales had risen from 0 400 in 1823 to 0 627 in 1871 but fell to 0 443 in 1901 two key factors in the reduction in inequality were the increase in the proportion of skilled workers williamson 1985 and the redistribution of income toward the poorer segments of the society for example taxes rose from 8 12 percent of national product in 1867 to 18 8 percent by 1927 and the progressivity of the tax system increased substantially see lindert 1989

preferences for redistribution in the land of opportunities this paper explores how individual preferences for redistribution depend on future income prospects in addition to estimating the impact of individuals socioeconomic background and of their subjective perceptions of future mobility we employ panel data to construct dobjectivet measures of expected gains and losses from redistribution for different categories of individuals we find that such measures have considerable explanatory power and perform better than dgeneral mobilityt indexes we also find that preferences for redistribution respond to individual beliefs on what determines one s position in the social ladder ceteris paribus people who believe that the american society offers equal opportunities are more averse to redistribution d 2004 published by elsevier b v

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

the asian financial crisis and international reserve accumulation a robust control approach abstract standard macroeconomic models have difficulties accounting for the surge in international reserves of asian countries in the aftermath of the asian financial crisis of 1997 we propose precautionary demand for saving generated by model uncertainty as an important driver of this phenomenon using korean data we estimate a simple permanent income model augmented with model uncertainty find a structural break at the point of the asian financial crisis and identify a rise in concern for model misspecification which is distinct from an increase in income volatility the post crisis concern for model misspecification implies a reasonable detection error probability we also show that learning serves as an additional powerful amplification mechanism in our framework

human capital vs signalling explanations of wages increases wages by directly increasing the worker s productivity this learning explanation is usually associated with human capital theory however it seems unlikely that learning explains all the wage differences associated with schooling and work history better educated workers are not a random sample of workers they have lower propensities to quit or to be absent are less likely to smoke drink or use illicit drugs and are generally healthier it is unlikely that employers make full use of differences in propensities to quit or to be absent or sick when hiring workers these characteristics are often not directly observed and the americans with disabilities act precludes firms from using either poor health or the likelihood of future sickness as a hiring criterion unless it is directly related to job performance however if low levels of education are associated with these unfavorable employee characteristics and employers are allowed to take education into account when hiring workers we would expect employers to favor better educated workers as a means of reducing their costs of sickness and job turnover in turn students will take these hiring criteria into account when deciding how long to stay in school students will choose a length of schooling to signal their ability to employers and employers will demand a minimum level of schooling

social preferences self interest and the demand for redistribution preferences for redistribution may be influenced by values and beliefs about distributive justice as well as by self interest people may prefer more redistribution to the poor if they believe that poverty is caused by circumstances beyond individual control therefore beliefs about the causes of income may affect demand for redistribution alternatively the effect of these beliefs on redistributive preferences may be spurious if they are correlated with income and self interest is not properly controlled for they may also measure incentive cost concerns using social survey data i find that self interest cannot explain the effect of these beliefs on redistributive preferences 2001 elsevier science b v all rights reserved

the structure of inequality and the politics of redistribution against the current consensus among comparative political economists we argue that inequality matters for redistributive politics in advanced capitalist societies but it is the structure of inequality not the level of inequality that matters our theory posits that middle income voters will be inclined to ally with low income voters and support redistributive policies when the distance between the middle and the poor is small relative to the distance between the middle and the rich we test this proposition with data from 15 to 18 advanced democracies and find that both redistribution and nonelderly social spending increase as the dispersion of earnings in the upper half of the distribution increases relative to the dispersion of earnings in the lower half of the distribution in addition we present survey evidence on preferences for redistribution among middle income voters that is consistent with our theory and regression results indicating that the left parties are more likely to participate in government when the structure of inequality is characterized by skew

political reinforcement how rising inequality curbs manifested welfare generosity we propose a political reinforcement hypothesis suggesting that rising inequality moves party politics on welfare state issues to the right strengthening rather than modifying the impact of inequality we model policy platforms by incorporating ideology and opportunism of party members and interests and sympathies of voters if welfare spending is a normal good within income classes a majority of voters moves rightward when inequality increases as a response the left in particular shift their welfare policy platform toward less generosity we find support for our arguments using data on the welfare policy platforms of political parties in 22 oecd countries

status effects and negative utility growth this paper explains the observed stagnation of happiness measures through a growth model in which agents care about conspicuous consumption normal goods confer direct utility while status goods confer utility only at the expense of others firms can improve the quality of both goods through r d the nash equilibrium of the consumer game results in the share of expenditure on status goods increasing with the number of times the status good has been improved as the economy grows resources for innovation are transferred entirely to status good r d the resulting long run rate of utility growth is negative

intergenerational mobility and preferences for redistribution using new cross country survey and experimental data we investigate how beliefs about intergenerational mobility affect preferences for redistribution in france italy sweden the united kingdom and the united states americans are more optimistic than europeans about social mobility our randomized treatment shows pessimistic information about mobility and increases support for redistribution mostly for equality of opportunity policies we find strong political polarization left wing respondents are more pessimistic about mobility their preferences for redistribution are correlated with their mobility perceptions and they support more redistribution after seeing pessimistic information none of this is true for right wing respondents possibly because they see the government as a problem and not as the solution

the integration of direct real estate and stock markets in asia currently there exists relatively little research investigating the long term association between stock and direct real estate markets using appropriate transaction based property indices this study focuses on the relationship between stock and direct real estate markets in nine asian countries from the period 1980 to 2012 through both linear and nonlinear cointegration techniques we find empirical evidence of linear cointegration of stock and property markets in taiwan fractional cointegration in singapore and hong kong and no evidence of cointegration in china japan thailand malaysia indonesia and south korea it is concluded that segmentation of property markets from stock markets does not appear to be linked to the differences in the maturity of national financial markets and that the differing degrees of integration across asia may instead be reflective of a range of factors impacting upon the underlying economic structures in each country

on recalls layoffs variable hours and labor adjustment costs abstract the paper analyzes the employment policy of a firm that can vary both hours and the level of employment the analysis differs from previous work in the adjustment cost literature in that the firm is able to change its employment not only through hires layoffs and quits but also by recalls of employees who were previously laid off thus we introduce the possibility of the firm inventorying the labor input it is shown that this labor inventory potential is necessary if the firm is to ever lay off workers further it is demonstrated that linear rather than strictly convex adjustment costs are then required if the firm is to always recall employees who were previously laid off prior to hiring new workers

emulation inequality and work hours was thorsten veblen right we investigate the manner in which a desire to emulate the rich influences individuals allocation of time between labour and leisure greater inequality inducing longer work hours as a result data on work hours in ten countries over the period 1963 98 show that greater inequality is indeed associated longer work hours these veblen effects are large and the estimates are robust using country fixed effects and other specifications because consumption inequality is a public bad a social welfare optimum cannot be implemented by a flat tax on consumption but may be accomplished by more complicated progressive consumption taxes at the close of the nineteenth century thorsten veblen proposed what he termed pecuniary emulation as the foundation of a theory of consumption spending he maintained is driven by relative status considerations that is by the desire to be a particular type of person as much as bythedesire to enjoytheconsumer goodsper se the joneses with whom one had to keep up were not the neighbours but the rich theirleveloflivingbecamethenever attainableobjectiveinaconsumptionarmsrace among the less well to do in the theory of the leisure class he wrote the motive is emulation the stimulus of an invidious comparison especially in any community in which class distinctions are quite vague all canons and reputability and decency and all standards of consumption are traced back by insensible gradations to the usages and thoughts of the highest social and pecuniary class the wealthy leisure class 1934 p 81 while valued by some economists as capturing common sense aspects of consumption as a form of status seeking veblen s view of social preferences was soon eclipsed by the simpler and more tractable neoclassical theory of the consumer relegated to the underworld of economics veblen s ideas have nonetheless resonated over the ensuing years in the writing of duesenberry 1949 leibenstein 1950 and galbraith 1958 at the middle of the past century and schor 1998