the multi item single period problem with an initial stock of convertible units abstract this paper deals with the situation of a number of end items each facing uncertain demand in a single period of interest besides being able to purchase units of the end items there is also available a stock of units that can be converted into end items but at unit costs that depend on the specific end item efficient solution procedures are presented for two situations i where the end item demand distributions are assumed known illustrated for the case of normally distributed demand and ii a distribution free approach where only the first two moments of the distributions are assumed known computational results for a set of problems are presented

trade unions and firms product market power a production function model with efficient bargaining between oligopolistic firms and unions is developed to distinguish between product market power and union power in capturing economic rents the model is formalised using the generalized nash bargaining solution and is empirically tested on four belgian manufacturing sectors the conclusions are that product market power is significantly eroded by wage rents but firms retain most of their power during negotiations also the restrictions imposed on the data do not reject the hypothesis that wage erosion arises from efficient bargaining in accordance with other empirical findings for belgian manufacturing

productivity and distribution effects of codetermination in an efficient bargaining model codetermination can be regarded as an extreme regulatory intervention of the legislator in the labor market which might affect the efficiency of production and the bargaining power of labor based on a model that covers both efficient bargaining and employment bargaining a simple equation is derived that is suited to empirical testing the empirical test is based on german data and includes years before and after the extension of german codetermination law in 1976 the estimates determine the productivity of labor and relative bargaining power of capital and labor it turns out that codetermination does not affect productivity but leads to a significant increase in workers bargaining power and the distribution of rents

unions and monopoly profits using cross sectional data for u s manufacturing the author identifies a negative effect of unions on the profits of highly concentrated industries and virtually no effect on the profits of unconcentrated industries the results for concentrated industries are explained in terms of the monopoly model which predicts a negative effect of unions on profits equivalent to the change in employer s surplus the monopoly model also suggests that previous profit studies which omitted the union variable were likely to significantly underestimate the relationship between concentration and profits this prediction is also supported by empirical evidence m sany studies have demonstrated the ability of unions to raise wages above the level of nonunion workers higher union wages in turn may affect the level of prices employment capital intensity productivity and profits recent studies by clark 1982 and freeman 1983 have found significant negative effects of unions on profit rates in the united states using line of business data from 1970 to 1980 for 900 firms clark found a negative effect of unions on the rate of return to capital more specifically the union effects were found to be significantly negative when market shares were low and insignificant when market shares were high according to clark the absence of a union effect in the latter case can be explained by the ability of firms with market power to pass on higher union wages into higher prices 1982 p 47 on the other hand freeman 1983 using data from the survey of manufactures from 1958 to 1976 and the internal revenue service from 1965 to 1976 also found a negative effect of unions on profits contrary to clark s results however the union profit effect was negative only in concentrated industries the point of contention appears to be the role of concentration in determining the union profit effect rather than the overall negative impact of unions the results of clark and freeman are important because previous industrial organization research on profit rates generally ignored unions for instance of the forty six profit studies surveyed by weiss 1974 none included a union variable more recently a profit study in this review by ravenscraft 1983 using high quality line of business data from the federal trade commission also ignored unionization as will be demonstrated the omission of the union variable leads to an understatement of the effect of industrial concentration on profits this means that concentrated industries generate much greater profits than indicated by previous research in order to measure the size of the understatement a new concept employer s surplus is developed which illustrates the theoretical impact of a union wage increase on monopoly profits the empirical estimates of employer s surplus in this paper indicate how monopoly profits are divided between firms and unions most of the data used in this study were obtained from james medoff and charles brown 2 unlike the previous two studies each observation corresponds to a state by two digit sic industry for manufacturing in 1972 because of the large variations in unionization across states this data set offers a useful test of the union profit effect i employer s surplus according to accepted theory the profit maximizing monopolist will employ labor up to the point where the market wage equals the marginal revenue product mrp 3 if for simplicity we assume that all other factors are variable then the mrp curve represents the monopolist s long run demand for labor in the absence of unions employment is determined by the intersection of the mrp curve and nonunion wage wn as pictured in figure 1 if unions raise wages to wa employment will decrease from ln to l with the reducreceived for publication november 28 1983 revision accepted for publication july 6 1984 eastern washington university i am very grateful to dave bunting lisa brown bill dickens claire brown and george strauss for their valuable suggestions on this research this paper is a revised version of chapter 3 from the author s ph d thesis the union impact on profits productivity and prices university of california berkeley 1 see parseley 1980 for a recent review of this literature 2 i would like to thank brown and medoff for making these data available to me 3 marginal revenue product is equal to marginal revenue multiplied by marginal physical product see rees 1979

deficits government expenditures and tax smoothing in the united states 1929 1988 abstract barro s tax smoothing hypothesis tsh implies that the government runs a budget deficit whenever it anticipates the growth rate of national income to increase or the growth rate of its expenditure to decline we test this implication of the hypothesis by examining the implied cross equation restrictions on a vector autoregression var model using u s data for the period ranging from 1929 to 1988 our formal tests reject the hypothesis for the full sample period but cannot reject it for the post 1947 period further investigations show that the statistical rejection should be attributed to sharp differences in the statistical properties of the pre 1947 and the post 1947 data rather than the failure of the hypothesis itself

joint implications of consumption and tax smoothing in this paper the joint hypotheses of consumption and tax smoothing are shown to imply that the present value of expected proportionate declines in government non interest outlays is approximately equal to a log linear function of the budget deficit and private dissaving in this exact linear relation the budget deficit signals declines in future government outlays after controlling for prospective changes in the tax base private dissaving controls for such prospective changes since under the joint hypotheses the present value of expected proportionate rises in tax revenues are approximately equal to a log linear function of private dissaving both exact linear relations are tested in a var framework on annual post world war ii u s data we find considerable empirical support for the theory

testing for employer monopsony in turn of the century coal mining isolated company towns are often cited as likely examples of labor monopsony this article tests for monopsony power by estimating inverse labor supply elasticities using a county level panel dataset on nonunion west virginia coal mining from 1897 to 1932 the model specification incorporates dynamics in such a way that an estimate of the gap between marginal revenue product and the wage can easily be computed as a weighted average of short and long run inverse elasticities modest estimated short run inverse elasticities and very small long run inverse elasticities imply that coal operators enjoyed little if any monopsony power over their workers

rent creation and rent sharing new measures and impacts on total factor productivity this analysis proposes new measures of rent creation and rent sharing and assesses their impact on productivity on cross country industry panel data we find first that 1 anticompetitive product market regulations positively affect rent creation and 2 employment protection legislation boosts hourly wages particularly for low skill workers however we find no significant impact of this employment legislation on rent sharing as the hourly wage increases are offset by a negative impact on hours worked second using regulation indicators as instruments we find that rent creation and rent sharing both have a substantial negative impact on total factor productivity jel e22 e24 o30 l50 o43 o47 c23

budget balance through revenue or spending adjustments abstract the paper provides a historical perspective on the issue of whether budget deficits are typically eliminated by increased taxes or by reduced spending by examining u s budget data from 1792 1988 i conclude that about 50 65 of all deficits due to tax cuts and about 65 70 of all deficits due to higher government spending have been eliminated by subsequent spending cuts while the remainder was eliminated by subsequent tax increases in contrast to previous studies the empirical analysis uses error correction models in a way that the intertemporal budget constraint is imposed in the estimation stage

panel data estimates of the production function and product and labor market imperfections summary consistent with two models of imperfect competition in the labor market the efficient bargaining model and the monopsony model we provide two extensions of a microeconomic version of hall s framework for estimating price cost margins we show that both product and labor market imperfections generate a wedge between factor elasticities in the production function and their corresponding shares in revenue which can be characterized by a joint market imperfections parameter using an unbalanced panel of 10 646 french firms in 38 manufacturing industries over the period 1978 2001 we can classify these industries into six different regimes depending on the type of competition in the product and the labor market by far the most predominant regime is one of imperfect competition in the product market and efficient bargaining in the labor market ic eb followed by a regime of imperfect competition in the product market and perfect competition or right to manage bargaining in the labor market ic pr and by a regime of perfect competition in the product market and monopsony in the labor market pc mo for each of these three predominant regimes we assess within regime firm differences in the estimated average price cost mark up and rent sharing or labor supply elasticity parameters following the swamy methodology to determine the degree of true firm dispersion to assess the plausibility of our findings in the case of the dominant regime ic eb we also relate our industry and firm level estimates of price cost mark up and extent of rent sharing to industry characteristics and firm specific variables respectively copyright 2011 john wiley sons ltd

monopsony power in the market for nurses estimates are presented of the inverse elasticity of supply of nursing services to the individual hospital a quantity which is a natural measure of employer market power the estimates corresponding to employment changes taking place over one year are quite high in the neighborhood of 0 79 and even for changes taking place over three years are substantial in the neighborhood of 0 26 the estimates do not significantly differ for hospitals in major metropolitan areas and do not depend very sensitively on the assumed form of the oligopsony equilibrium this abstract was borrowed from another version of this item

worker substitutability and patterns of unionisation a strategic three party bargaining model is developed in which one distinguished party the firm has to reac h agreements with the other two each of which is a group of workers in the prebargaining stage the two worker groups decide whether to organize jointly or separately the main observation relates the equi librium pattern of unionization to the substitutability in production between the two groups the outcome is joint or separate unions acco rding to whether the two groups are substitute or complementary facto rs of production the analysis also considers possibilities for firm s strategic intervention in the unionization process copyright 1988 by royal economic society

macroeconomic effects of regulation and deregulation in goods and labor markets product and labor market deregulation reduce and redistribute rents leading economic players to adjust to this new distribution it typically comes with distribution and dynamic effects to study these effects we build a macroeconomic model on two central assumptions monopolistic competition in the goods market which determines the size of rents and bargaining in the labor market which determines the distribution of rents product market regulation determines entry costs and the degree of competition labor market regulation determines the bargaining power of workers we show the effects of deregulation we then use our results to discuss the political economy of deregulation and recent macroeconomic evolutions in europe

the determination of profit margins in uk manufacturing this paper examines the determinants of profit margins in 91 u k manufacturing industries over the period 1983 86 it considers how the inclusion of labor market characteristics in empirical industrial organization specifications affects the estimated concentration margins relationship the empirical work pays detailed attention to the endogenous nature of variables derived from structural industrial organization models the authors report instrumental variables estimates of margins equations in which there emerges a significant role for labor market characteristics indeed both unionization and industrywide unemployment are found to depress profit margins the impact of concentration is seen to be biased downward when these variables are omitted

price mark ups market structure and business fluctuation in japanese manufacturing industries howard wach tel and peter adelsheim 1977 and keith cowling 1983 have argued that firms in concentrated industries tend to increase their price mark ups in recession this hypothesis is variously tested for japanese manufacturing industries in 1958 82 most of the results weakly suggest an effect opposite to wachtel and adelsheim and only when industry specific business conditions are taken into account is some albeit weak evidence found in favor of them copyright 1987 by blackwell publishing ltd

application of the scenario aggregation approach to a two stage stochastic common component inventory problem with a budget constraint abstract the purpose of this paper is to study from a new perspective the problem of allocating a given budget among product components that are required for manufacturing the end items in an assemble to order environment since some of the components are common to a number of different end items this constitutes a commonality inventory problem that in fact can be described as a two stage stochastic programming problem we explore the new possibilities made available by the scenario aggregation technique recently proposed by rockafeller and wets in work at the international institute of applied systems analysis iiasa their method was subsequently extended to deal with discrete problems this extension is utilized in the current study

estimation of price cost margins and union bargaining power for belgian manufacturing abstract this paper extends hall s 1988 hall r e 1988 the relationship between price and marginal cost in us industry journal of political economy 96 921 947 methodology to analyze imperfections in both the product and the labor market for firms in the belgian manufacturing industry over the period 1988 1995 we investigate the heterogeneity in price cost mark up and workers bargaining power parameters among 18 sectors within the manufacturing industry as well as the relationship between both parameters using a sample of more than 7000 firms our gmm results indicate that ignoring imperfection in the labor market leads to an underestimation of the price cost margin evaluated at perfect competition in the labor market these findings are confirmed in the sectoral analysis sectors with higher workers bargaining power typically show higher price cost margins

the effect of commonality on safety stock in a simple inventory model we examine the effects of component commonality on optimal safety stock levels in a two product two level inventory model the criterion is to minimize system safety stock subject to a service level constraint although our model is specialized its analysis provides insights not available in other multilevel inventory models

the relation between price and marginal cost in u s industry an examination of data on output and labor input reveals that some u s industries have marginal cost well below price the conclusion rests on the finding that cyclical variations in labor input are small compared with variations in output in booms firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs the paper documents the disparity between price and marginal cost where marginal cost is estimated from annual variations in cost it considers a variety of explanations of the findings that are consistent with competition but none is found to be completely plausible

the costs and benefits of commonality in assemble to order systems with a q r policy for component replenishment abstract in assemble to order systems it has been shown that replacing a number of specific components by a smaller number of general purpose common components can reduce required safety stock levels due to the benefits of risk pooling previous research using single period models has shown that even if the common components are somewhat more expensive than the unique components they replace the benefits of risk pooling often outweigh the added purchasing costs however this has been shown often not to be the case with multiple period models in the long run the added purchasing costs dominate the benefits of risk pooling however both single and multiple period models ignore one of the benefits of commonality order pooling with commonality demand is pooled into a smaller number of components reducing the required number of orders or setups after re optimizing the order quantities and order intervals both the ordering costs and cyclic carrying costs are reduced this paper develops a model to consider the assemble to order environment where components are replenished according to a q r policy results show that order pooling is a significant benefit in many cases it is much more important than the risk pooling benefit in contrast to multiple period models there is often a total cost benefit with commonality even when the common component is several percent more expensive than the unique components it replaces

wage premia price cost margins and bargaining power in belgian manufacturing abstract an asymmetric nash bargaining model as developed by j svejnar 1986 is empirically tested on industry wage negotiations in belgium union s relative bargaining power emerges from this model as the fraction of firm s profits per worker which the unions are able to capture in excess of the alternative wage the estimates of the bargaining power coefficients for blue as well as white collar workers reject the symmetric split the difference outcome determinants of the cross industry variation of bargaining power are explored as well

endogenous scope of firm union bargaining with vertical pay comparisons abstract there is strong evidence that employees motivation and incentives in the workplace are affected by vertical pay comparisons in a stylized cournot duopoly model with firm specific unions that institutionalize workers vertical fairness concerns we show that universal wage employment w e bargaining may arise as the equilibrium scope of bargaining institution we thus propose that intra firm vertical fairness concerns may resolve the mismatch between recent findings in the empirical literature on labor market institutions and the predictions of traditional models that universal w e bargaining will never arise in equilibrium the scope of bargaining puzzle we derive a number of testable hypotheses that address the recent shift towards more decentralized bargaining institutions the decline in unions bargaining power and the prevalence of w e bargaining

inventory accumulation wages and employment this paper analyzes the effect of inventory accumulation on the outcome of wage and employment agreements between a union and a firm a two period model is set up with bargaining in each period and the paper analyzes under what circumstances inventories will be held even if demand and production conditions are constant it is found that inventories have an important strategic role they bring forward employment and strengthen the bargaining position of the firm in the later period however the firm s strategic use of inventories will generally be to the detriment of both parties copyright 1991 by royal economic society

oligopsony and monopsonistic competition in labor markets we argue that models of oligopsony or monopsonistic competition provide insights and explanation for many empirical phenomena in labor markets using a simple model with job differentiation and preference heterogeneity we illustrate how such models can be employed to explain the existence of wage dispersion the persistence of labor market discrimination market failures in the provision of training and the anomalous employment effects of minimum wages

minimum wages for ronald mcdonald monopsonies a theory of monopsonistic competition recent empirical work on the effects of minimum wages has called into question the conventional wisdom that minimum wages invariably reduce employment we develop a model of monopsonistic competition with free entry to analyse the effects of minimum wages and our predictions fit the empirical results closely under monopsonistic competition we find that a rise in the minimum wage raises employment per firm causes firm exit and may increase or reduce industry employment minimum wages increase welfare if they raise industry employment but welfare effects are ambiguous if employment falls

monopsony in the labor market this paper surveys recent theoretical and empirical research on monopsony in labor markets broadly defined as upward sloping labor supply to an employer we compare older monopsony models based on small numbers of employers with newer models based on labor market frictions such as moving costs and search we also compare older econometric approaches that focus on static wage concentration relationships with newer approaches that focus on dynamics our review of empirical estimates suggests that monopsony power based on small numbers of employers is probably rare but occasionally large while monopsony power based on frictions is probably widespread but small on average

endogenous costs and price cost margins an application to the european airline industry this paper allows for endogenous costs in the estimation of price cost margins in particular we estimate price cost margins when firms bargain over wages we extent the standard two equation set up demand and first order condition in the product market to include a third equation which is derived from bargaining over wages in this way price cost margins are determined by wages and vice versa we implement the model using data for eight european airlines from 1976 1994 and show that the treatment of endogenous costs has important implications for the measurement of price cost margins and the assessment of market power our main result is that observed prices in europe are virtually identical to monopoly prices even though observed margins are consistent with nash behavior apparently costs had been inflated to the point that the european consumers were faced with a de facto monopoly prices

bargaining power and wage employment contracts in a unionized industry input and output data are used in conjunction with negotiated wages and employment to estimate a fully specified bargaining model between a labour union the international woodworkers of america and representatives from the british columbia wood products industry bargaining powers are modelled as functions of exogenous variables believed to have influenced the parties relative strike costs the estimated bargaining powers are plotted over time and compared to the proportion of rents captured by each party parameters of the union utility function and the firms technology are also estimated and hypothesis tests are conducted on various aspects of the model there are still relatively few studies in which fully specified models of bargaining between labour unions and firms are estimated this reflects both the extensive data requirements and the complexity of the models involved a fully specified model includes a representation of the firms objectives and technological constraints the union s goals and constraints and the bargaining structure furthermore even when micro data are available usually more than two parties are involved i e firms will negotiate with several unions and each union will have to deal separately with the many firms operating within the industry this complicates the modelling of the bargaining setting considerably in this study data on the wood products industry in british columbia canada are analyzed during the period under study 1963 1983 negotiations in this industry were highly centralized in fact the bargaining setting can be described as a bilateral monopoly between the international woodworkers of america iwa a powerful and stable union and the forest industrial relations an employer association representing firms in the industry this data set includes information on outputs and nonlabour inputs thus allowing the calculation of profits and the joint determination of output and other inputs along with employment and wages a structural model with four dependent variables wages employment output and a materials and supplies input is estimated firms are assumed to maximize profits and union objectives are modelled by a ces utility function with employment and the difference between union wages and alternative wages as arguments given a representation for the firms technology and the union preferences a

component commonality with service level requirements this paper extends recent results of baker et al baker k r m j magazine h l w nuttle 1986 the effect of commonality on safety stocks in a simple inventory model management sci 32 982 988 in understanding the impact of component commonality on stocking levels under service level constraints a model is formulated for an arbitrary number of products with general joint demand distribution the results obtained are not all intuitive while utilizing commonality is beneficial nothing general can be said about the resulting change in the components stock levels when the cost structure is of a particular simple form though some interesting general patterns do emerge we also discuss the case of using a service level measure where rationing of common components might be required and characterize the implied rationing rule

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