does employment protection create its own political support this paper investigates the ability of employment protection to generate its own political support a version of the mortensen pissarides model is used for this purpose if wages are set through nash bargaining workers value employment protection because it strengthens their hand in wage negotiations workers in high productivity matches benefit most from higher wages as they expect to stay employed for longer by reducing turnover employment protection shifts the distribution of match specific productivity toward lower values thus stringent protection in the past actually reduces support for employment protection today introducing involuntary separations reverses this conclusion now workers value employment protection because it delays involuntary dismissals workers in low productivity matches gain most since they face the highest risk of dismissal the downward shift in the productivity distribution is now a shift towards supporters

why is labour receiving a smaller share of global income the labour share of income has been on a downward trend in both advanced and emerging economies declining labour shares in emerging economies though less pronounced present an important puzzle as they contradict the predictions of classical trade theory this paper presents a stylized mechanism to reconcile these findings at the centre of which is routinization that is the automation of labour in occupations highly exposed to substitution by computer capital we assemble a novel dataset and introduce a new measure of the exposure to routinization to analyse the drivers of falling labour shares while technological progress and exposure to routinization explain over half the overall decline in advanced economies in emerging markets the globalization of trade and the accompanying capital deepening are the most significant driver with technological progress and routinization playing a negligible role

an empirical investigation of the determinants of discount window borrowing a disaggregate analysis abstract this article investigates the individual demand for discount window credit by employing a cross sectional time series database of commercial banks the analysis employs a simple linear model that accounts for the latent nature of individual borrowing our findings reveal that borrowing is positively correlated with the federal funds discount rate spread large borrowers are shown to have a stronger correlation between borrowing and the federal funds spread in addition we find that the nonpriee mechanism is more binding on large banks that avoid contiguous use of the discount facility or defer their visit in the expectation that interest rates will increase in the near future

is unemployment lower if unions bargain over employment would there be more employment if unions bargained over employment and not only over wages most economists seem to answer yes 1

innovation and growth supply and demand factors in the recent us expansion it is widely held that the social economic context of the us characterised by labour market flexibility and deregulation of product and capital markets lies at the basis of the innovative capacity displayed by the country s productive system in the 1990s thus accounting for the growth differential with europe starting from a different interpre tative model of innovation and growth the paper focuses on both supply institutional and technological and demand factors it is argued that when their interaction is taken into account there is no strong evidence that more deregulated labour and product markets are among the factors allowing for us growth in accordance with the view that there is no single road to innovation and growth this leaves room for the exploration and implementation of policies that might reconcile innovation and growth with safeguards such as those provided by europe s social institutions

unemployment institutions and reform complementarities re assessing the aggregate evidence for oecd countries there is no or limited consensus on the quantitative impact of institutions on unemployment which has led some to question the case for structural reforms recent studies suggest also that institutions interact with each other and cannot be analysed in isolation in this paper we estimate a standard reduced form model to explore the institutional determinants of unemployment and assess its robustness using a large battery of robustness checks we show that although the impact of each individual policy varies across countries due to policy interactions the simple linear model can be used to draw inferences for countries with an average mix of institutions the model is then extended to encompass systemic interactions in which individual policies interact with the overall institutional framework we find relatively robust evidence of broad reform complementarities

the discount window and credit availability abstract this paper models the impact of the discount window on decisions of individual banks facing regulatory capital requirements and stochastic deposit supply a central result is that banks may choose a larger lending capacity if the discount window is available than if it is not moreover if the cost of capital is higher during recessions banks may then avoid the window contributing to the downturn a discontinuous interaction emerges between risk based capital requirements and use of the discount window with a more stringent capital requirement inducing some banks to hold less capital

resistance to reform status quo bias in the presence of individual specific uncertainty comment why do governments so often fail to adopt policies which economists consider to be efficiency enhancing our answer to this question relies on uncertainty regarding the distribution of gains and losses from reform we show that there is a bias towards the status quo and hence against efficiency enhancing reforms whenever some of the individual gainers and losers from reform cannot be identified beforehand there are reforms which once adopted will receive adequate political support but would have failed to carry the day ex ante the argument does not rely on risk aversion irrationality or hysteresis due to sunk costs jel d72 f13 why do governments so often fail to adopt policies that economists consider to be efficiency enhancing this is one of the fundamental questions of political economy the answer usually relies on what may be

stock market development and cross country differences in relative prices abstract we document a positive correlation between stock market capitalization and price levels wages within the group of countries with poorly developed stock markets and a negative correlation between these two variables within the group of countries with more developed stock markets this paper argues that there is a causal relationship behind these correlations stock markets initially stimulate growth pushing the demand for nontradables and increasing prices and wages stock markets also promote a shift toward more capital intensive technologies in the tradable sector increasing the migration of workers to services and eventually putting downward pressure on wages and prices

administering the window abstract this paper presents a game theoretic model of nonprice rationing at the discount window it focuses on the federal reserve s use of frequency guidelines and harassment to deter excessive use of the discount window by banks the model investigates the role of the discount officer the effect of uncertainty and the credibility of threats used by the discount officer to deter excessive borrowing by banks

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

the commercial banking firm a simple model a commercial bank must decide its volume of illiquid loans and investments without full knowledge of its deposits in case withdrawals exceed its defensive position in liquid assets the bank incurs extra costs in meeting reserve requirements penalties in borrowing or losses in disposing of illiquid assets in case of good luck on deposits an unnecessarily large defensive position sacrifices profits from more remunerative but less liquid assets the paper presents a simple model of this precautionary portfolio decision by a profit maximizing bank the effects of variations in monetary policy banking regulations and competitive structure are traced reserve requirements access to central bank credit deposit interest rate ceilings monopolistic power in loan and deposit markets relative importance of capital and time deposit liabilities size and nature of illiquidity penalties and degree of deposit uncertainty commercial banks are the most important kind of financial intermediary their liabilities are the closest privately issued substitutes for government currency demand deposits serve as means of payment generally acceptable for most transactions for several reasons depositors bear very little of the risks of the loans the banks make there are economies of scale in pooling of default risks specific to borrowers and in specialized administration and appraisal of the loans the banks shareholders assume the residual risk only after their equity is wiped out would depositors claims be jeopardized finally the government stands behind bank deposit liabilities both as lender of last resort to tide banks over crises of illiquidity and as insurer of deposits against the contingency of insolvency government monetary and credit policy operates mainly through the commercial banking system and this is the main reason today to give special attention to commercial banks historically the first reason for government intervention in the banking business was to protect depositors or in older times bank note holders against the risks of bank illiquidity and insolvency but the public regulations and institutions established for this purpose can also be used to regulate credit markets in the interests of economic stabilization maintenance of the value of the currency or other government objectives as the protective purpose of government intervenscand j of economics 1982 this content downloaded from 207 46 13 172 on fri 07 oct 2016 06 13 42 utc all use subject to http about jstor org terms

efficient wage bargaining as a repeated game this paper builds a bridge between the two existing approaches for wage and employment determination in a unionized market the monopoly union model and the efficient bargaining model both fail to capture the dynamic aspects of wage bargaining when the repeated nature of the wage bargaining process is considered the equilibria are neither as inefficient as the monopoly union model predicts nor as fully efficient rather the two models can be regarded as particular cases with certain discount rates we apply our model to issues such as the endgame interpretation of the u s steel industry wage concessions and featherbedding

does globalisation discipline monetary policymakers abstract this paper analyses globalisation using a small general equilibrium model it concludes that whether increased openness a reduction in the costs of international trade helps to discipline monetary policy in large open economies depends on the type of trade costs moreover to the extent that globalisation induces stronger competition in the goods market this may also have an adverse effect on monetary policy discipline the latter is due to international expenditure switching which becomes a more forceful channel as competition intensifies thus the answer to the question in the title is not necessarily affirmative

unions rent creators or extractors this paper proposes a model of workplace specific unions that integrates two views of what unions do one view holds that unions mainly engage in rent extraction another view holds that unions mainly engage in rent creation by providing agency services that increase workplace productivity we demonstrate that the choice between the two activities is systematically related to the economic and regulatory environment in which the union operates product market competition encourages rent creation while labor market deregulation encourages rent extraction moreover we provide a rationale for why firms may want to subsidize unions the editors of the scandinavian journal of economics 2005

modernization of financial markets an analysis of informal credit markets in prewar japan abstract why are informal credit markets in developing countries so persistent and difficult to eradicate this paper argues that one of the basic reasons for this lies in the efficiency of information channels between informal lenders and their customers this hypothesis is tested by estimating the demand and supply functions of informal credit using cross section regional data for prewar japan the effectiveness of the so called high deposit rate policy based on mckinnon shaw theory is also evaluated from this viewpoint

capital requirements monetary policy and aggregate bank lending theory and empirical evidence capital requirements linked solely to credit risk are shown to increase equilibrium credit rationing and lower aggregate lending the model predicts that the bank s decision to lend will cause an abnormal runup in the borrower s stock price and that this reaction will be greater the more capital constrained the bank i provide empirical support for this prediction the model explains the recent inability of the federal reserve to stimulate bank lending by increasing the money supply i show that increasing the money supply can either raise or lower lending when capital requirements are linked only to credit risk the motivation of this article is first to examine the impact of risk based capital requirements namely those that link mandatory capital to asset ratios for banks to their loans on aggregate bank lending these requirements called the basle capital rules or bis guidelines went into effect in march 1989 for banks in the leading industrialized nations these rules initially required banks to maintain capital equal to 7 25 percent of business and most consumer loans with the requirement increasing to 8 percent by the end of 1992 secondly i wish to understand the link between monetary policy and aggregate bank credit in the presence of risk based capital requirements my curiosity is sparked in part by two recent phenomena one is the experience of the u s economy which displayed sluggish growth during 1989 93 despite a monetary policy that attempted to spur bank lending and economic activity and the other is the striking decline in loans relative to security holdings mostly government bonds in the asset portfolios of u s

review of hoshi and kashyap s corporate financing and governance in japan examining the development of the japanese financial system since the meiji era hoshi and kashyap derive a number of interesting propositions on the evolution of bank centered financing its contribution to rapid growth and its future transformation they argue that the piecemeal approach to deregulation is one of the main reasons for the current banking crisis and conclude that japan will shift to a capital market based financial system like the one in the united states or in prewar japan hoshi and kashyap s work makes an important contribution as a coherent long term overview of japan s bank centered financial system

interest rate management in ldc s the mckinnon argument that higher time deposit rates raise output and lower inflation in the short run and increase medium term growth by raising the savings rate are shown to depend crucially on the assumption that portfolio shifts into td s come out of an asset providing less intermediation than the banking system we show that if instead the shift is out of an asset providing more intermediation e g loans on a curbmarket raising td rates is contractionary in the short run may have negative impacts on growth and can lead to more rather than less inflation in the short run

education market rigidities and growth the paper exploits macro panel data for oecd countries close to the technological frontier the education level product market rigidities and employment protection legislation would be significantly related to tfp growth with a substantial contribution of the interaction between market rigidities

the decline in capital efficiency and labour share we calibrate and simulate a neoclassical growth model with a variable elasticity of substitution production function and three types of technological change labour augmenting capital augmenting and investment specific in this framework we find that the decline in us labour share was caused by a large decline in capital efficiency which led to a decrease in the ratio of effective capital to effective labour in a context in which capital and labour are gross complements moreover the decline in the relative price of investment contributed to reducing the fall in us labour share while the increase in the economic depreciation rate of us fixed assets accounted for a small reduction in us labour share

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

inferring market power from time series data abstract using bank specific data on deposit rates this paper tests for the existence of market power in banking by means of time series estimations a test is developed that can reject perfect competition on the basis of the observed relationship over time between deposit rates and security rates adjusted for operating costs the analysis also examines whether pricing behavior differs across markets and banking products in a manner consistent with hypothesized differences price taking behavior is rejected for the vast majority of banks for the deposit category that one would expect to be more geographically limited greater market power is found to be exercised by banks located in more concentrated markets

credit market imperfections and persistent unemployment abstract this paper develops the thesis that credit market frictions may be an important contributor to high unemployment in europe when a change in the technological regime necessitates the creation of new firms this can happen relatively rapidly in the u s where credit markets function efficiently in contrast in europe job creation is constrained by credit market imperfections so unemployment rises and remains high for an extended period the data show that there has not been slower growth in the most credit dependent industries in europe relative to the u s but the share of employment in these industries is lower than in the u s this suggests that although credit market imperfections are unlikely to have been the major cause of the increase in european unemployment they may have played some role in limiting european employment growth

regulation and investment use newly assembled data on regulation in several sectors of many oecd countries to provide evidence that regulatory reform of product markets is associated with an increase in investment a component of reform that plays a very important role is entry liberalization but privatization also has a substantial effect on investment sensitivity analysis suggests that our results are robust jel e22 l5

the role of demandable debt in structuring optimal banking arrangements demandable debt finance by banks warrants explanation because it entails costs of bank suspension liquidation and idle reserve holdings an explanation is developed in which demandable debt provides incentive compatible intermediation where the banker has comparative advantage in allocating investment funds but may act against the interests of uninformed depositors demandable debt attracts funds by giving depositors an option to force liquidation its usefulness in transacting follows from information sharing between monitors and nonmonitors copyright 1991 by american economic association

market regulations prices and productivity this study is to our knowledge the first attempt to infer the consequences on productivity entailed by anticompetitive regulations in product and labor markets through their impacts on production prices and wages results show that changes in production prices and wages at country industry levels are informative about the creation of rents impeding productivity in different ways and to different extents a simulation based on oecd regulation indicators suggests that nearly all countries could expect sizeable gains in multifactor productivity from the implementation of large structural reform programs changing anticompetitive regulation practices on product and labor markets

discount window borrowing monetary policy and the post october 6 1979 federal reserve operating procedure abstract a demand schedule for discount window borrowing based on profit maximizing bank behavior is derived a feature of non price rationing at the discount window making longer duration borrowing more costly is shown to make lagged borrowing and expected future spreads between the federal funds rate and the discount rate relevant to the current borrowing decision consequently both the size of the coefficients in the borrowing functions as well as the form of the function itself depend on expected fed policy toward the spread the demand function for discount window borrowing provides the critical link by which non borrowed reserve control affects short term interest rates and ultimately the money supply under post october 6 1979 reserve targeting the analysis suggests some reasons why the fed has experienced difficulty in specifying estimating and utilizing a discount window borrowing function in the non borrowed reserve operating procedure

the decline of the labor income share in mexico 1990 2015 abstract the paper studies the decline of the labor income share lis in mexico during the period 1990 2015 the decline is mostly explained by reductions within the economy s major sectors including manufacturing tradables and non tradables rather than by a recomposition of value added towards sectors with low labor shares in contrast to agriculture where lis fell due to a shift of labor force from self employment to wage employment in other major areas of the economy the fall in lis is explained by reductions within the wage employment sector econometric estimations indicate that parallel declines in the wage share and relative productivity of non tradables and in the us manufacturing labor share all played a large role in the reduction of the manufacturing wage share in mexico more generally the analysis suggests that the lagging productivity of the economy s informal non tradable sector itself a reflection of the country s low aggregate rate of economic growth is a crucial factor in the fall of lis in the formal sectors the paper concludes by discussing possible explanations for the paradox of the slow rate of economic growth in mexico despite the rise in the profit share

do market regulations reduce investment evidence from european regions abstractdo market regulations reduce investment evidence from european regions regional studies this paper investigates the impact of market imperfections on non farm business sector investment in european regions for 1995 2007 using dynamic panel and generalized method of moments gmm methods for estimating a euler equation the results show that barriers to entrepreneurship and to trade and investment decrease the productivity of capital which has negative effects on european regions investment corruption leads to increased operational costs creates uncertainty and thereby deters investment greater labour market regulation also means higher labour costs hiring and firing regulation and employment protection and legislation indicators increase the productivity of capital which has positive effects on regional investment

family values and the regulation of labor flexible labor markets requires geographically mobile workers to be e cient otherwise rms can take advantage of the immobility of workers and extract monopsony rents in cultures with strong family ties moving away from home is costly thus individuals with strong family ties rationally choose regulated labor markets to avoid moving and limiting the monopsony power of rms even though regulation generates lower employment and income empirically we do nd that individuals who inherit stronger family ties are less mobile have lower wages are less often employed and support more stringent labor market regulations there are also positive cross country correlations between the strength of family ties and labor market rigidities finally we nd positive correlations between labor market rigidities at the beginning of the twenty rst century and family values prevailing before world war ii which suggests that labor market regulations have deep cultural roots

determinants of labour s income share in the era of financialisation numerous studies have analysed the decline in the labour share of income but only few have linked it to the increase in financialisation the process of financialisation can roughly be described as an increasing importance of the financial sector that had an impact on the distribution between wages and profits on the one hand and retained earnings and financial income in the form of dividends and interests on the other hand this article seeks to explore the relationship between financialisation and labour s share of income using a time series cross sectional dataset of 13 countries over the time period from 1986 until 2007 the results suggest that there is indeed a relationship between increasing dividend and interest payments of non financial corporations and the decline of the share of wages in national income other factors that can account for the decline relate to globalisation and a decrease in the bargaining power of labour

the drivers of income inequality in rich countries rising income inequality has recently come centre stage as a core societal concern for rich countries the diagnosis of the forces driving inequality upwards and their relative importance remains hotly contested notably with respect to the roles of globalization versus technology and of market forces versus institutions and policy choices this survey provides a critical review and synthesis of recent research the focus is on income inequality across the entire distribution rather than only on what has been happening at the very top we pay particular attention to including what has been learned from the analysis of micro data to ensuring that the coverage is not unduly us centric and to analyses of the interrelations between the different drivers of inequality the marked differences in inequality trends across countries and time periods reflect how global economic forces such as globalisation and technological change have interacted with differing national contexts and institutions major analytical challenges stand in the way of a consensus emerging on the relative importance of different drivers in how income inequality has evolved in recent decades

sluggish institutions in a dynamic world can unions and industrial competition coexist during the 1930s and 1940s collective bargaining emerged as the workplace governance norm in much of the u s industrial sector following its peak in the 1950s union density in the u s private sector fell steadily to only 7 4 percent in 2006 governance shifted from a formalized union norm to one of constrained managerial discretion in competitive and dynamic economic environments a union tax on company earnings and slow response to economic shocks combine to produce poor performance by union companies two industries automotives and airlines are used to illustrate these points if worker based institutions are to flourish they must add value and permit companies to perform at levels similar to those obtained under evolving nonunion governance norms

product market reforms labour market institutions and unemployment we analyze the impact of product market competition on unemployment and wages and how this depends on labour market institutions we use differential changes in regulations across oecd countries over the 1980s and 1990s to identify the effects of competition we find that increased product market competition reduces unemployment and that it does so more in countries with labour market institutions that increase worker bargaining power the theoretical intuition is that both firms with market power and unions with bargaining power are constrained in their behaviour by the elasticity of demand in the product market we also find that the effect of increased competition on real wages is beneficial to workers but less so when they have high bargaining power intuitively real wages increase through a drop in the general price level but workers with bargaining power lose out somewhat from a reduction in the rents that they had previously captured

bank market structure and monetary control financial innovations and regulatory actions together have acted to produce sweeping changes in the u s financial environment much of the recent literature in the area of money and banking has been concerned with the implications of these developments for monetary policy however one major aspect of this issue which has been relatively ignored is the relationship between the competitive structure of banking markets and the capability of the federal reserve to exercise control over its intermediate or ultimate policy goals given that deregulation of banking and various forms of financial innovations e g technological innovations in the provision of financial services the proliferation of various near money financial assets and the growth of nonbank financial intermediaries have altered the competitive environment in banking it seems clear that this relationship should be investigated two previous efforts to examine the monetary policy implications of different bank market structures are aftalion and white 1977 and vanhoose 1983 in each of those papers the short run real sector effects of potential policy instruments under the structural extremes of perfect competition and monopoly are derived and contrasted however the analysis in each case is based upon models in which perfect certainty is assumed and no interactions are allowed between the real and

employment effects of product and labour market reforms are there synergies this article investigates the effect of product market liberalisation on employment allowing for interactions between policies and institutions in product and labour markets using panel data for oecd countries over the period 1980 2002 we present evidence that product market deregulation is more effective at the margin when labour market regulation is high the data also suggest that product market liberalisation may promote employment enhancing labour market reforms

identifying the influences of nominal and real rigidities in aggregate price setting behavior we formulate a generalized price setting framework that incorporates staggered contracts of multiple durations and that enables us to directly identify the influences of nominal vs real rigidities we estimate this framework using macroeconomic data for germany 1975 1998 and for the u s 1983 2003 in each case we find that the data are well characterized by nominal contracts with an average duration of about two to three quarters we also find that new contracts exhibit very low sensitivity to marginal cost corresponding to a relatively high degree of real rigidity finally our results indicate that backward looking price setting behavior such as indexation to lagged inflation is not needed in explaining the aggregate data at least in an environment with a stable monetary policy regime and a transparent and credible inflation objective

good times bad times postwar labor s share of national income in capitalist democracies this article returns to a classic question of political economy the zero sum conflict between capital and labor over the division of the national income pie a detailed description of labor s shar