The British labor market in disequilibrium: Did the dole reduce employment in interwar Britain?

In this paper we estimate an econometric model of the labor market in interwar Britain. We reject the hypothesis that wages adjust sufficiently speedily to clear the labor market in each year in favor of a disequilibrium model in which the level of employment is determined by the lesser of labor demand or supply. We find that the level of unemployment benefits is a key determinant of labor supply. We estimate that a reduction in benefits to approximately half the 1925-38 average would have resulted in an increase in employment of between eight and twelve percent.     

The estimation of a disequilibrium real wage equation for Britain

An aggregate wage equation is formulated based on a disequilibrium labor market model. The specification allows for an important special case to be tested, namely the equilibrium hypothesis that real wages move instantaneously to equate the demand for and supply of labor. The hypothesis that the British labor market has been in equilibrium is rejected. The adjustment path for real wages is monotonic and dominated by demand factors. Real wages move quickly to eliminate excess demand but the results contradict the monetarist contention that the aggregate labor market is continuously in a temporary, if not full, equilibrium.     

Trade, Skills and Adjustment Costs: A Study of Intra-Sectoral Labor Mobility

The relationship between the ability of workers to change job, sector or industry and the short‐run adjustment costs associated with a reallocation of labor is the subject of lively debate among academics. This paper examines recent sector and industry level labor market adjustment in the UK using data from the Quarterly Labour Force Survey. We explore the link between the nature of UK trade patterns and labor adjustment within the manufacturing sector and employ a multinomial logit approach to examine the determinants of “within” and “between” industry mobility. By controlling for individual skill specificity we find some evidence of a link between intra‐industry trade and intra‐industry labor adjustment.     

无就业增长与非均衡劳工市场动态学

本文直接模拟了劳工市场的非均衡过程、工资动态轨迹、经济人的最优行为和适应性优化行为。劳动供给源于家庭的效用最大化 ,劳动需求源于企业的利润最大化。企业的适应性优化行为和若干制度因素构成了工资刚性的基本要素 ,劳工市场的供求力量也是影响工资变动的重要因素。根据劳动生产率的变化对工资进行适应性的调节是现实世界企业工资决策的普遍实践。工资刚性与高劳动生产率并存是造成无就业增长的真正原因     

Wage indexation,migration, and unemployment

This article sets up a two-goods model with wage indexation and migrants. A dual labor market is introduced where the domestic workers receive an indexed wage while migrants receive a market-determined wage. The traded sector may be assumed to be unionized while the non-traded goods sector is non-unionized giving rise to flexible wages. This provides an example of segmentation and wage indexation. The wage indexation creates unemployment in the traded sector and the segmentation allows this unemployment to persist. The main results obtained are: sector-specific migration of labor may raise domestic welfare, while with capital accumulation such migration necessarily raises the relative price of the non-traded goods, leading to structural adjustment.     

Monopolistic Competition and Different Wage Setting Systems

In this paper, we present a disequilibrium unemployment model without labor market frictions and monopolistic competition in the goods market within an infinite horizon model of growth. We consider different wage setting systems and compare wages, the unemployment rate, and income per capita in the long‐run at firm, sector, and national (centralized) levels. The aim of this paper is to determine under which conditions, the inverted‐U hypothesis between unemployment and the degree of centralization of wage bargaining, reported by Calmfors and Driffill [Economic Policy, 6, 14–61, 1988], is confirmed. Our analysis shows that a high degree of market power normally produces the inverted‐U shape for unemployment. Moreover, we also illustrate that this inverted‐U shape can be reversed when the ability of trade unions to internalize the provision of social services is great enough at sector level.     

Labor market dynamics in urban China and the role of the state sector

This paper studies the effect of state-owned enterprises (SOEs) on the dynamics of the Chinese urban labor market. Using longitudinally matched monthly panel data, we document very low labor force dynamics in the state sector, which leads to a high long-term unemployment rate. We develop and estimate an equilibrium search and matching model with three differences between the state and non-state sectors: labor productivity, labor adjustment cost, and workers’ bargaining power. Counterfactual analysis shows that, among the three channels, reducing the bargaining power of state sector workers is most effective in reducing unemployment duration and unemployment rate.     

Labor markets and productivity in developing countries

In middle-income countries, the informal sector often accounts for a substantial fraction of the urban labor force. We develop a general equilibrium model with matching frictions in the urban labor market, the possibility of self-employment in the informal sector, and scope for rural–urban migration. We investigate the effects of labor market institutions, different types of growth, and company taxes on labor market outcomes and aggregate productivity. We quantify these effects by calibrating the model to data for Mexico, and show that matching frictions can lead to a large informal sector when formal sector workers have substantial bargaining power.     

Credit rationing in a disequilibrium macroeconomic model

This paper develops a four-market disequilibrium macroeconomic model. The model includes the labor, output, bond, and money markets. A number of papers have considered the interactions between the labor and output markets. Fewer papers have considered the financial sectors. This paper is an exploration into the role of financial market disequilibrium (e.g., credit rationing) within a disequilibrium macroeconomic model.     

Emigration and the Optimal Speed of Transition

The paper presents a model of labor reallocation in a transition economy and analyzes the determinants of the optimal speed of transition. The model is extended to consider the effect of emigration flows from the transition country. In general, a rapid rather than slow pace of restructuring is preferable in the long run, but an initial period of gradualism may be optimal. The authors conclude that emigration, by improving the rate of job creation in the private sector and by reducing the burden of unemployment on the government, may lead to an earlier switch to rapid adjustment of labor, and hence to a faster transition to a market economy.     

A Keynesian Dynamic Stochastic Disequilibrium model for business cycle analysis

A Dynamic Stochastic Disequilibrium model is proposed for business cycle analysis. The core innovation and fundamental deviation from the corresponding full-employment Dynamic Stochastic General Equilibrium model is the assumption that the nominal wage is a policy variable with no tendency to clear the labor market. As a consequence, disequilibrium unemployment arises which crucially alters the transmission of macroeconomic shocks. Solving the puzzle of low fiscal multipliers in conventional general equilibrium models, the effects of spending shocks become considerably more pronounced in the disequilibrium model because idle labor can be quickly utilized to accommodate aggregate demand without requiring households to increase their supply. In contrast to the standard model, technology and labor supply shocks are partly absorbed by unemployment and, hence, only moderately expansionary. Despite its simplicity and unlike the corresponding general equilibrium model, the disequilibrium model is able to generate shock responses which are broadly in line with empirical evidence.     

A welfare economic analysis of labor market policies in the Harris–Todaro model

This paper presents a welfare economic analysis of the benefits of various labor market policies in the Harris–Todaro labor market model. The policies considered are a policy of modern sector job creation, which I call modern sector enlargement (MSENL); a policy of rural development, which I call traditional sector enrichment (TSENR); and a policy of wage limitation in the urban economy, which I call modern sector wage restraint (MSWR). First, I analyze the inequality effects of these policies. I then perform two welfare economic analyses, the first based on summary measures of labor market conditions (total labor earnings, unemployment, inequality of labor incomes, and poverty rates) and the second based on dominance analysis in the labor market, in both cases assuming that the costs are borne elsewhere. The results of the welfare analyses are compared, and it is shown that TSENR unambiguously increases welfare in the labor market using both approaches, the other policies yield ambiguous results, and no policy is unambiguously welfare-decreasing.     

Informal employment in developing countries : Opportunity or last resort?

There is an ongoing debate among researchers and policy makers, whether informal sector employment is a result of competitive market forces or labor market segmentation. More recently it has been argued that none of the two theories sufficiently explains informal employment, but that the informal sector shows a heterogenous structure. For some workers the informal sector is an attractive employment opportunity, whereas for others - rationed out of the formal sector - the informal sector is a strategy of last resort. To test the empirical relevance of this hypothesis we formulate an econometric model which allows for several unobserved segments within the informal sector and apply it to the urban labor market in Côte d'Ivoire.     

Fiscal adjustment and labor market dynamics in an open economy

This paper studies the labor market effects of fiscal adjustment in a two-sector, three-good intertemporal framework. Key features of the model are an informal sector, minimum wages, unionized labor in the formal economy, imperfect labor mobility, and public production of intermediate inputs. “Luxury” and wait unemployment prevail in equilibrium. It is shown that if unions care sufficiently about employment, and if the degree of openness is high, an increase in the price of government services may reduce unemployment in the steady state. A similar result would hold in an efficiency-wage setting if the “disciplinary effect” of unemployment is sufficiently strong.     

A two-dimensional non-equilibrium dynamic model

This paper develops a non-equilibrium dynamic model (NEDyM) with Keynesian features (it allows for a disequilibrium between output and demand and it considers a constant marginal propensity to consume), but where production is undertaken under plain neoclassical conditions (a constant returns to scale production function, with the stocks of capital and labor fully employed, is assumed). The model involves only two endogenous/prognostic variables: the stock of physical capital per unit of labor and a measure of market disequilibrium (MMD). The two-dimensional system allows for a careful analysis of local and global dynamics. Points of bifurcation and long-term cyclical motion are identified. The main conclusion is that the disequilibrium hypothesis leads to persistent fluctuations generated by intrinsic deterministic factors. These fluctuations may reflect some of the features frequently encountered in observed business cycles, once the model is conveniently adapted to this purpose.     

A DISEQUILIBRIUM ECONOMETRIC MODEL OF THE AUSTRALIAN RAW WOOL MARKET*

This paper develops a quarterly disequilibrium model of the Australian wool market. It is postulated that because of inherent market imperfections the market does not clear. The model consists of demand and supply equations for both private and government traders, a minimum condition to determine quantity transacted and a price adjustment equation based on excess demand/supply. Effective demand/supply concepts which recognise the expectation of rationing are employed to model private demand/supply. Supplier price expectations explicitly account for the lower bound imposed by the minimum reserve price scheme (RPS). The estimates suggest that the disequilibrium hypothesis cannot be rejected, as a consequence measures of market imbalance are provided. The model is also used to simulate the effects of the removal of the RPS.     

Indeterminacy, underground activities and tax evasion

This paper introduces underground activities and tax evasion into a one-sector dynamic general equilibrium model with aggregate external effects. The model presents a novel mechanism driving the self-fulfilling prophecies, which is characterized by well behaved (downward sloping) labor demand schedules. This mechanism differs from the customary one, and it is complementary to it. Compared to traditional labor market income, the income derived from underground labor activity is subject to a lower expected tax rate when considering both the probability of detection and the evasion penalty. During a belief-driven expansion, the household allocates more time to both traditional and underground labor supply. In equilibrium, this action serves to lower the effective labor tax rate faced by the household, thus providing stimulus to aggregate labor supply so as to make the initial expansion self-fulfilling. The mechanism here is akin to a “regressive tax”; the household's effective tax rate depends negatively on the level of total labor income. We argue that an underground sector, and the associated tax evasion, offer a good economic rationale for a regressive tax rate.     

非均衡劳动力市场的真实经济周期模型

真实经济周期(RBC)模型通常以市场出清的一般均衡为其理论框架。这使我们无法有效的将这一跨时期的动态优化模型应用于现实的经济环境,因为现实的世界里普遍存在着各种非均衡的状况。本文将劳动的供给和需求分离开来,从而允许非均衡的劳动力市场存在。利用美国的数据,我们对该模型进行了实证检验,结果表明该模型能够更好的解释劳动力市场的波动及消费和就业间的关系,同时说明该模型在数据的拟和上比标准RBC模型更好。     

Autocorrelated errors in simple disequilibrium models

The simple disequilibrium model is extended to the case in which the errors follow a first-order Markov process. This differs from the contribution of Laffont and Monfort in that sample partition is not assumed to be known. The likelihood function is derived and maximum likelihood estimates are obtained for the Rosen-Quandt model of an aggregate labor market.     

Price dynamics in an exchange economy

The pure exchange model is the foundation of the neoclassical theory of value, yet equilibrium predictions and price adjustment dynamics for this model remained untested prior to the experiment reported in this paper. With the exchange economy replicated several times, prices and allocations in most experiment sessions adjust toward the competitive equilibrium in continuous double auction trading, though adjustment is much slower than in previous commodity flow (or perishable good) double auction market experiments. Price adjustment is evaluated by comparing its extent within each market replication (or trading period) to its extent across trading periods. More price adjustment occurs within trading periods than across trading periods, so price adjustment data are evaluated with the disequilibrium Hahn process model (Hahn and Negishi in Econometrica 30:463–469, 1962) of within-period trades. This paper introduces a stochastic version the Hahn process model and demonstrates that a linear approximation to this stochastic model yields an autoregressive process with a near unit root when the adjustment rate is low. In effect, the autoregressive price adjustment model studied extensively by time series econometricians over the past 30 years can be viewed as a reduced form of a stochastic disequilibrium exchange economy price adjustment model. Estimation of the model demonstrates that price adjustment in the exchange economy experiment is considerably slower than in economies without income effects, which suggests that the price discovery process may be a significant factor in the slow adjustment documented by applied econometricians.