Mergers and capital flight in unionised oligopolies: Is there scope for a “national champion” policy?

Many policy makers seem to prefer domestic alternatives to cross-border mergers. We construct a model where cross-border mergers drive down union-set wages, domestic mergers have non-labour cost synergies and policy evaluators care more about workers than capital owners. Apparently, the stage is set for “national champion” policies to be sensible. However, we also introduce the possibility of capital flight by allowing a domestic firm to move production abroad. Restrictive cross-border merger policies can then seriously backfire, since they do not necessarily bring about a domestic merger — but capital flight instead.     

Occupational mobility and the returns to training

The literature on the returns to training has pointed out that, immediately following a training episode, wages of participants in employer-sponsored training increase substantially while wages of participants in government-sponsored training hardly change. We argue that there is a potential selection issue—most of the government-sponsored trainees are occupation switchers while most participants in employer-sponsored training are occupation stayers. An occupational switch involves a substantial destruction of human capital, and once we account for the associated decline in wages, we find a large positive impact of both employer- and government-sponsored training on workers’ human capital.     

Fiscal Policy,Economic Integration and Unemployment

In this paper fiscal policy is examined for an open economy characterized by unemployment due to efficiency wages. We allow for capital and firm mobility in a model where the government chooses the level of wage, source-based capital and profit taxation. The taxing choices of governments are analyzed in scenarios which differ with respect to the constraints imposed on the set of available taxes and on the mobility of firms. As a general result, the welfare loss from labor market imperfections increases when tax bases become internationally mobile, which suggests an increasing relevance of domestic labor-market reforms when tax bases become global.     

最低工资标准提升的就业效应——一个基于自然实验的经验研究

本文以最低工资标准提升作为自然实验,应用回归调整的差中差方法分析了最低工资标准提升对青年和中年低技能劳动力就业的影响。研究结果表明,最低工资标准提升对低技能群体中的男性和青年女性的就业没有产生显著影响;但对低技能群体中的中年女性就业却产生显著的消极影响,且最低工资标准提升幅度越大,对就业的消极影响越大。因此,政府适当的提升最低工资标准将有助于低技能劳动力整体工资水平的增长。     

Efficient risk sharing,non-marketable labor income and fixed-wage contracts

This paper seeks to explain fixed-wage labor contracts. The traditional rationale that fixed wages represent an implicit sale of ‘wage insurance’ by risk-neutral firms to risk-averse workers is rejected as being incompatible with the fact that firms are owned by risk-averse investors. Instead, it is shown that fixed-wage contracts might arise from the non-marketability of labor income. When human capital is not marketable, it becomes optimal to shift all the risk in production onto the firm, since trading in equity markets enables efficient allocation of the uncertainty. The fixed-wage contract shifts the risk to equity owners and in fact replicates the first-best equilibrium that would emerge if individuals were paid their realized marginal product and allowed to trade shares in human capital.     

Optimal Monetary Policy, Taxes, and Public Debt in an Intertemporal Equilibrium

This article is devoted to a study of the optimal monetary and fiscal policies within the framework of an overlapping generations model with cash-in-advance constraints. We first characterize the intertemporal equilibrium. Then we show how to decentralize the optimal growth path using available policy instruments (i.e., labor income and capital taxes, public debt, money supply). Between the four instruments: wages and capital taxes, debt and monetary policy, one is redundant among the three last which implies that the Friedman Rule is only a special case.     

Corporate Tournaments, Human Capital Acquisition, and the Firm Size–Wage Relation

This paper provides a possible explanation for the empirically observed size–wage effect and inter-industry wage differences. It develops a model in which incentives for workers to accumulate general human capital are provided by corporate tournaments, where workers with the highest level of general human capital win promotions. Given that the prizes in such tournaments are determined by outside market conditions, the investment and the equilibrium wages depend on firm and industry characteristics. The model implies that workers in bigger firms and in more technology intensive and profitable firms and industries acquire more human capital and receive higher wages and benefits.     

International capital flows,liquidity risk,and monetary policy

In recent years, there has been a large amount of lending coming from the public sector of many developing countries. At the same time, the financial sectors in many advanced countries have issued a large share of portfolio debt to other countries. What are the implications of these events for the global financial system and overall economic activity? Do they have an impact on the transmission channels of monetary policy across countries at different stages of economic development? We investigate these important issues using a micro-founded model of money and banking so that the effects of monetary policy across countries can be meaningfully studied. Notably, the increase in capital outflows to the advanced economy renders monetary policy in developing countries to be less effective, while the effects of monetary policy in advanced economies are more pronounced. Yet, our results indicate that it can indeed be optimal for lower income countries to lend to the advanced world. Importantly, we find that the optimal amount of lending to advanced countries critically depends on the degree of liquidity risk — if it is sufficiently high, then public sector lending to advanced economies is not warranted. Consequently, our results indicate that governments in developing countries should carefully consider how much capital they send abroad to foreign countries.     

Capital tax,minimum wage,and labor market outcomes

Often an increase in the minimum wage is accompanied by a reduction in the capital tax. This paper analyzes the effects of interactions between the minimum wage and the capital tax in the general equilibrium framework. The analysis is conducted in an inter-temporal search model in which firms post wages. A (binding) minimum wage provides a lower support for the distribution of wages. The paper finds that the interaction of these two policy instruments significantly modify labor market outcomes and welfare cost. In the presence of a binding minimum wage, a decrease in the capital tax leads to an increase in wage dispersion. In contrast, when it is not binding, a lower capital tax may reduce the dispersion in wages. A binding minimum wage magnifies the positive effects of a lower capital tax on labor supply, employment, and output. It also enhances the welfare cost of capital tax. A policy change which involves an increase in the minimum wage and a fall in the capital tax such that employment level remains constant increases welfare and output.     

Capital–skill complementarity and the immigration surplus

We build a neoclassical growth model with overlapping dynasties and capital–skill complementarities to evaluate changes in immigration policy. Calibrating the model using US data, we quantify the differential effects of skilled and unskilled immigration on factor returns and on the welfare of different sectors of the population. An influx of high-skilled immigrants lowers the wages of skilled workers, raises the wages of unskilled workers, and because of the relative complementarity between capital and skilled labor, substantially raises the rate of return to native-owned capital. By contrast, an influx of unskilled immigrants produces an opposite effect on wages, and has only a negligible effect on the return to capital. Because of capital–skill complementarity, an increase in the number of skilled immigrants generates an immigration surplus—the overall welfare benefit accruing to the native population—that is approximately ten times larger than the immigration surplus generated by an identical increase in the number of unskilled immigrants. This differential welfare effect is far higher than can be accounted for by the disparity between the productivities of each type of worker.     

Corruption,intrinsic motivation,and the love of praise

Do higher wages prevent corruption (bribe taking)? We investigate a setting where individuals who apply for public sector jobs are motivated not just by monetary incentives but also by intrinsic motivation and concern for the collective reputation of their profession. We show that an increase in monetary compensation may cause reputation‐concerned individuals to be more prone to participate in corruption due to an “overjustification” effect. The overall effect of monetary incentives on fighting corruption crucially depends on the composition of the pool of public sector workers for two reasons: first, different types of workers react differently to the same policy; second, the composition of the pool of workers affects individual behavior through its effect on collective reputation. These results imply in particular that policies to fight corruption should focus more on increasing the collective reputation of the public sector rather than using monetary incentives, which have perverse effects on some agents.     

Employment shifts, economic reform and the changes in public/private sector wages in Mexico: 1987–1997

Over the last decade, the public sector in Mexico experienced substantial fiscal reform, divestiture of public enterprises, and the elimination of many regulations affecting pay and employment. This study analyzes the changes in the public/private sector differences in wages during the 1987–1997 period. The results from analyzing microdata from the Encuesta Nacional de Empleo Urbano show that relative public sector wages increased from 1987 to 1997. Most of the relative wage increase in the public sector can be explained by increases in the price of skills and by changes in sorting across sectors. The results have important public policy implications since they suggest that public sector workers earn more and their wages have grown faster than those of their private sector counterparts. As such, policies contemplating public sector reform should take into account the effect of these measures on the inter-sectoral income distribution and the overall economic growth. First version received: April 2000/Final version received: December 2000     

Wages fund, high wages, and social conflict in a classical model of unemployment equilibrium

The aim of the paper is to provide an explanation of involuntary unemployment in a classical (post-Ricardian) framework. The model describes a three-stage bargaining process with four agents (governments, firms, unions, workers). In the first stage, firms determine the wage offered, following a short-run version of the wages fund theory. In the second stage, unionists determine the wage demanded, which depends on workers’ tendency to conflict, while firms decide the number of employed under a “right to manage” hypothesis. In the third stage, governments tax the wages fund and pay unemployment benefits. Public intervention is subject to a trade-off between accumulation and legitimation.     

Human capital heterogeneity of the unemployed and jobless recoveries

The jobless recovery enigma remains largely unsolved. As a special case of broader unemployment, the term “jobless recovery” describes an economic recovery where output recovers—and even expands—yet employment growth remains anemic. While the effects of these prolonged recoveries are significant—from increased crime to a lifetime reduction in wages—they are not well understood. Building on the insights of labor market matching models that incorporate heterogeneity among workers, this paper sheds light on jobless recoveries, developing a first-of-its-kind index of human capital heterogeneity for the unemployed, and testing that index using of a Structural Vector Autoregression. I demonstrate that the extent to which unemployed human capital is heterogeneous and specific, rather than homogeneous and general, plays a key and under-appreciated role in the labor market; increases in human capital heterogeneity can account for between one-quarter to three-quarters of the joblessness of the past three recoveries in the pre-COVID era.     

HETEROGENEITY AND THE PUBLIC SECTOR WAGE POLICY

A model with search and matching frictions and heterogeneous workers was established to evaluate a reform of the public sector wage policy in steady state. The model was calibrated to the U.K. economy based on Labour Force Survey data. A review of the pay received by all public sector workers to align the distribution of wages with the private sector reduces steady‐state unemployment by 1.4 percentage points.     

Factor mobility and fiscal policy in the EU: policy issues and analytical approaches

Increased integration of labour and capital markets creates significant challenges for the welfare states of modern Europe. Taxation of capital and labour that finances extensive programmes of cash and in-kind redistribution creates incentives for capital owners and workers to locate in regions where they obtain favourable fiscal treatment. Competition among countries for mobile resources constrains their ability to alter the distribution of income and may lead to reductions in the size and scope of redistributive policies. Mobility of labour and capital is imperfect, however. Recent trends indicate that labour and capital are neither perfectly mobile nor perfectly immobile, but rather adjust gradually to market conditions and economic policies. This paper presents an explicitly dynamic analysis showing that governments can achieve some redistribution when it is costly for factors of production to relocate. As the costs of factor mobility fall, however, the effectiveness of redistributive policies is more limited, and governments have weaker incentives to pursue them. Liberalized immigration policies, EU enlargement, and other steps that promote integration of the factors markets of Western Europe with those of surrounding regions thus present a challenge to policy-makers if they also wish to maintain fiscal systems with extensive redistribution.     

聚集外部性的非对称性承受与人口过度集中

由于农民工工资与城市生活成本的非相关性、农民工和应届大学毕业生对城市病的不敏感性、以及大城市居民中劳动人口数量很大的迁移成本等问题的存在,大城市工人部分丧失了向厂商索取较高名义工资以补偿其较高生活成本的能力。此时,厂商享受着大城市较高的聚集经济带来的高效率,却不用对工人较高生活成本进行完全补偿。这种厂商和工人承受聚集外部性的非对称性,必然引发生产与人口在大城市过度集中问题。     

Wages, Experience and Seniority

In this paper we study the sources of wage growth. We identify the contribution to such growth of general, sector specific and firm specific human capital. Our results are interpretable within the context of a model where the returns to human capital may be heterogeneous and where firms may offer different combinations of entry level wages and firm specific human capital development. We allow for the possibility that wages are match specific and that workers move jobs as a result of identifying a better match. To estimate the average returns to experience, sector tenure and firm specific tenure within this context, we develop an identification strategy which relies on the use of firm closures. Our data source is a new and unique administrative data-set for Germany that includes complete work histories as well as individual characteristics. We find positive returns to experience and firm tenure for skilled workers. The returns to experience for unskilled workers are small and insignificant after 2 years of experience. Their returns to sector tenure are also zero. However, their returns to firm tenure are substantial.     

Education,training and employability

Two hypotheses are tested: (1) education and training increase the employability of workers at other tasks within the firm and reduce the need for help from supervisors when workers encounter small problems, and (2) greater employability and problem solving capability increase wages. The empirical results show that greater employability and problem solving capability are independent from each other. Formal work-related training increases employability. Workers in jobs requiring no induction training are less employable at other jobs or departments. Both general and specific human capital increase the ability of workers to solve problems on their own. Greater employability does not increase wages. Male workers who solve problems on their own earn more than men who need help from others. The effects of human capital variables on employability and problem solving capability do not differ between and men and women. However, it is found that the ability to solve problems on one's own has a pay off for men but not for women.     

Tax incidence,majority voting and capital market integration

We re-examine, from a political economy perspective, the standard view that higher capital mobility results in lower capital taxes — a view, in fact, that is not confirmed by the available empirical evidence. We show that when a small economy is opened to capital mobility, the change of incidence of a tax on capital–from capital owners to owners of the immobile factor–may interact in such a way with political decision-making so as to cause a rise in the equilibrium tax. This can happen whether or not the immobile factor (labour) can be taxed, and whether or not savings can be subsided under capital mobility.