Job Creation, Job Destruction, and the International Division of Labor

The authors incorporate equilibrium unemployment due to imperfect matching into a model of trade in intermediate inputs. Firms are assumed to be price‐takers and their size is given by technology. Firms enter the market as long as expected profits cover the search cost they incur initially; jobs are endogenously destroyed by random shocks that affect firms’ price–cost margins. Trade increases productivity in the final good and then demand for each intermediate input. Steady‐state unemployment is reduced after trade integration because the rate of job destruction is reduced, which in turn induces an indirect positive effect on job creation. A more volatile environment faced by firms does not necessarily increase unemployment. However, the rate of job destruction unambiguously rises, and rises more under free trade.     

REGIONAL UNEMPLOYMENT DISPARITIES: AN EVALUATION OF POLICY MEASURES*

This paper analyses the efficacy of regional and federal government policies in reducing inter‐regional unemployment disparities. We use as our framework a two‐region general equilibrium model with a given freely‐mobile supply of labour. We assume inter‐regional migration to occur in response to inter‐regional utility differentials. Each region has households, firms and a regional government. In addition to regional governments, there is a federal government. The firms in a region use a single factor, labour, to produce a single good which we assume to be different to that produced in the other region. It is supplied to households and to the regional government in the form of payroll taxes. Households consume some, trade some with households in the other region and give some up to the federal government as income tax. Firms and households bargain over wages and firms then choose employment to maximise profits. The resulting equilibrium will generally not be a full‐employment one. We simulate a linearised numerical version of the model. We examine seven alternative policies, six carried out by a regional government and one by the federal government. In the first group there are traditional tax/expenditure polices as well as policies which might be seen as attacking the natural rate of unemployment: changes in unemployment benefits, changes in union power, changes in the labour force and changes in labour productivity. The federal government policy is a regionally‐differentiated fiscal policy. Contrary to expectations, many policies which have traditionally been recommended to alleviate unemployment are found, in fact, to exacerbate the unemployment problem.     

Trade Policy and Poverty In the United States: Theory and Evidence, 1947-1990*

This paper develops a two-sector general equilibrium model to examine the impact of technical progress, factor accumulation, labor growth, unemployment, trade policy, and the government's antipoverty programs on the rate of poverty. the results are then tested empirically using the data regarding the United States. We find that low unemployment, productivity growth, and government transfers have the expected effects of alleviating poverty; but trade liberalization has the unexpected effect of being associated with a major increase in poverty-a result contradicting traditional views.     

Unemployment insurance design: Inducing moving and retraining

Evidence suggests that unemployed individuals can affect their job prospects by undertaking a costly action like deciding to move or retrain. Realistically, such an opportunity only arises for some individuals and the identity of those may be unobservable ex ante. The problem of characterizing constrained optimal unemployment insurance in this case has been neglected in previous literature. We construct a model of optimal unemployment insurance where multiple incentive constraints are easily handled. The model is used to analyze the case when an incentive constraint involving moving costs must be respected in addition to the standard constraint involving costly unobservable job-search. Absent wealth effects on behavior, we derive closed-form solutions showing that when the moving/retraining incentive constraint binds, unemployment benefits should increase over the unemployment spell, with an initial period with low benefits and an increase after this period has expired.     

How Changes in Financial Incentives Affect the Duration of Unemployment

This paper studies how changes in the two key parameters of unemployment insurance—the benefit replacement rate (RR) and the potential benefit duration (PBD)—affect the duration of unemployment. To identify such an effect we exploit a policy change introduced in 1989 by the Austrian government, which affected various unemployed workers differently: a first group experienced an increase in RR; a second group experienced an extension of PBD; a third group experienced both a higher RR and a longer PBD; and a fourth group experienced no change in the policy parameters. We find that unemployed workers react to the disincentives by an increase in unemployment duration, and our empirical results are consistent with the predictions of job search theory. We use our parameter estimates to split up the total costs to unemployment insurance funds into costs due to changes in the unemployment insurance system with unchanged behaviour and costs due to behavioural responses of unemployed workers. Our results indicate that costs due to behavioural responses are substantial.     

策略性环境政策:环境税和减排补贴的比较分析

文章把战略性贸易政策模型扩展到环境领域,策略性环境政策认为政府有动机通过降低环境标准补贴出口企业,以达到利润转移的目的.文章分析了策略性环境政策中比较受忽视的一部分--环境技术补贴,本国政府结合使用环境税和减排补贴,我们验证了政府使用策略性环境政策的动机,得到了最优的污染排放税率,认为虽然环境政策仍旧不能消除生产带来的环境损害,但是环境技术补贴提高了本国的环境标准,企业会更少地遇到绿色壁垒报复.     

DISTRIBUTING THE GAINS FROM TRADE WITH INCOMPLETE INFORMATION*

We argue that the incomplete information which the government has about domestic agents means that tariffs become an optimal instrument to protect them from import competition. Using a model where agents have private information about their endowments, we solve for the optimal government policy subject to the political constraint of ensuring Pareto gains from trade, the incentive compatibility constraint, and the government's budget constraint. We find that the optimal policy takes the form of nonlinear tariffs. These tariffs are never complete, in the sense of bringing prices back to their initial level, but always allow some individuals to be strictly better off than at the initial prices.     

产业升级、贸易政策与经济转型

产业升级是经济转型的内驱动力，贸易政策对于产业升级具有制约作用，是经济转型的外驱力量。政府通过设计合理的激励机制，将两种力量聚合，积极推动经济转型，从而缩短经济转型的时间进程。     

SHORT‐RUN POLICY COMMITMENT WHEN INVESTMENT TIMING IS ENDOGENOUS: ‘MORE HARM THAN GOOD?’

In our model, firms choose when to set cost‐reducing investment and the government, which only has short‐run commitment power, sets an output subsidy. We show that firms that delay investment without government intervention have an incentive to invest early under policy activism, strategically underinvesting or overinvesting to obtain larger subsidies. The policy scheme thus creates a new, potentially more harmful, distortion. Under oligopoly, a firm has a weaker incentive to manipulate policy than under monopoly, which makes policy intervention less harmful. We investigate when the government may do better by adhering to laissez‐faire than by engaging in active policy intervention.     

Unemployment accounts and employment incentives

We explore the far-reaching implications of replacing current unemployment benefit (UB) systems by an unemployment accounts (UAs) system. Under the UAs system, employed people are required to make ongoing contributions to their UAs and the balances in these accounts are available to them during periods of unemployment. The government is able to undertake balanced-budget interpersonal redistributions among the UAs. At the end of their working lives, people could transfer the remaining balances on their UAs into their pensions.We present an analytical framework to analyse the incentive effects of UAs and calibrate our model for the high high-unemployment countries of Europe. Our results suggest that this policy reform would significantly change people's employment incentives and could achieve reductions in unemployment without reducing the level of support to the unemployed.     

Trade Policies as Signals of Private Political Pressure

The situation of a home government facing political pressure from an exporting industry within its jurisdiction is considered. If a foreign government cannot directly observe such pressure, the home government has an incentive to understate it to induce foreign tariff reductions. In equilibrium, the home government will distort its first‐period trade policy in a direction that the industry does not prefer (i.e. raising the export tax or reducing the export subsidy) in order to reveal the true pressure, as compared with a policy selected under complete information.     

DYNAMIC INCONSISTENCY IN THE PUBLIC SUPPLY OF LIQUIDITY*

This paper analyses the optimal control of government securities. The special role of government securities under aggregate macroeconomic shocks results from the government's ability to collect taxes. Liquidity is loosened by an increase in the supply of government securities. The policy‐maker, however, faces a trade‐off between an ex ante incentive for entrepreneurs to expend effort and an ex post efficient utilization of investment opportunities.     

The Nature of Unemployment among Young Men in Urban Ethiopia

This paper investigates the nature of unemployment among young men in urban Ethiopia and finds that it is concentrated among relatively well‐educated first‐time job seekers who aspire to a public sector job and spend on average close to four years in unemployment. This is consistent with a segmented labor market model where youngsters queue in unemployment for a good job, as confirmed by an empirical test of the theoretical prediction. We observe a negative (causal) relationship between household welfare and both the incidence and duration of unemployment, indicating that unemployment is concentrated among the relatively worse off urban households, which from a national perspective represent the middle classes, and find suggestive evidence that part of this effect is due to malnutrition during childhood. Job search through social networks is only effective after one has become unemployed, suggesting that networks provide insurance only after exposure to the risk.     

LIQUIDITY,MONETARY POLICY,AND UNEMPLOYMENT: A NEW MONETARIST APPROACH

We discover a consumption channel of monetary policy in a model with money and government bonds. When the central bank withdraws government bonds (short‐term or long‐term) through open market operations, it lowers returns on bonds. The lower return has a direct negative impact on consumption by households that hold bonds and an indirect negative impact on consumption by households that hold money. As a result, firms earn less profits from production, which leads to higher unemployment. The existence of such a consumption channel can help us understand the effects of unconventional monetary policy.     

Unemployment, growth and taxation in industrial countries

To the layman, the upward trend in European unemployment is related to the slowdown of economic growth. We argue that the layman's view is correct. The increase in European unemployment and the slowdown in economic growth are related, because they stem from a common cause: an excessively rapid growth in the cost of labour. In Europe, labour costs have gone up for many reasons, but one is particularly easy to identify: higher taxes on labour. If wages are set by strong and decentralized trade unions, an increase in labour taxes is shifted onto higher real wages. This has two effects. First, it reduces labour demand, and thus creates unemployment. Secondly, as firms substitute capital for labour, the marginal product of capital falls; over long periods of time, this in turn diminishes the incentive to invest and to grow. The data strongly support this view. According to our estimates, the observed rise of 14 percentage points in labour tax rates between 1965 and 1995 in the EU could account for a rise in EU unemployment of roughly 4 percentage points, a reduction of the investment share of output of about 3 percentage points, and a growth slowdown of about 0.4 percentage points a year.     

Inside and outside fiat money, gains to trade, and IS-LM

Summary. We build a one-period general equilibrium model with money. Equilibrium exists, and fiat money has positive value, as long as the ratio of outside money to inside money is less than the gains to trade available at autarky. We show that the nominal effects of government fiscal and monetary policy can be completely described by a diagram identical in form to the IS-LM curves introduced by Hicks to describe Keynes' general theory. IS-LM analysis is thus not incompatible with full market clearing, multiple commodities, and heterogeneous households. We show that as the government deficit approaches a finite threshold, hyperinflation sets in (prices converge to infinity and real trade collapses). At the other extreme, if the government surplus is too large, the economy enters a liquidity trap in which nominal GNP sinks and monetary policy is ineffectual. Received: January 2, 2002; revised version: April 8, 2002 Correspondence to: P. Dubey     

Environmental Protection in the Presence of Unemployment and Common Resources

This paper examines the effects of an export tax (on a processed resource good), the number of harvesters and an afforestation policy in a small, open economy with urban unemployment. The export tax increases the urban unemployment rate, but improves the quality of the environment. Here, the optimal export tax is lower than the adjusted marginal environmental damage. Reducing the number of harvesters has a similar resource allocation effect to that of an export tax. However, the afforestation policy can resolve the trade‐off between urban unemployment and the quality of the environment and may also improve the welfare of a country.     

Growth,unemployment and public capital

Abstract. Existing literature has studied the growth effects of fiscal policy in models with full-employment. The aim of this paper is to study these growth effects in an endogenous growth model with unemployment and compare them with the effects obtained when there is full-employment. To this end, we assume that unemployment arises due to the existence of unions. We also assume that the government finances, by means of income taxes, both public capital and an unemployment benefit. Public capital increases total factor productivity and modifies the elasticity of the labor demand. We show that the effects of fiscal policy on both employment and growth crucially depend on the relation between this elasticity and public capital. We would like to thank Jordi Caballé, Fernando Sánchez, Manuel Santos and an anonymous referee for their helpful comments. Sorolla is grateful for financial support to Spanish Ministry of Education through DGICYT grant SEC2000-0684 and to Generalitat de Catalunya through grant SGR2001-164. Raurich is grateful to Universitat de Girona for financial support through grant 9100075.     

Time-consistent subsidies to unlucky firms

This paper examines government subsidies that prevent unlucky firms from going out of business. Subsidies can save jobs and prevent an increase in unemployment insurance expenditures, but they modify the incentives of the firms to exert adequate effort. If firms expect to obtain help, they may not undertake enough effort to decrease the probability of needing help. The cost-minimizing government must therefore trade off the savings in unemployment insurance expenditures against the increased bill in subsidies to the firms. The analysis shows that this trade-off is significantly affected by the level of commitment of the government; if the government cannot commit to a future subsidy policy, the level of subsidies will be unambiguously higher, the level of effort by the firms lower, and the number of firms making losses higher than if the government could so commit.     

Factor Endowments,Democracy, and Trade Policy Divergence

We develop a stochastic model of electoral competition in order to study the economic and political determinants of trade policy. We model a small open economy with two tradable goods, each of which is produced using a sector‐specific factor (e.g., land and capital) and another factor that is mobile between these tradable sectors (labor); one nontradable good, which is also produced using a specific factor (skilled labor), and an elected government with the mandate to tax trade flows. The tax revenue is used to provide local public goods that increase the economic agents’ utility. We use this general equilibrium model to explicitly derive the ideal policies of the different socioeconomic groups in society (landlords, industrialists, labor, and skilled workers). We then use those ideal policies to model the individual probabilistic voting behavior of the members of each of these socioeconomic groups. We use this model to shed light on how differences in the comparative advantages of countries explain trade policy divergence between countries as well as trade policy instability within countries. We regard trade policy instability to mean that, in equilibrium, political parties diverge in terms of the political platforms they adopt. We show that in natural resource (land)–abundant economies with very little capital, or in economies that specializes in the production of manufactures, parties tend to converge to the same policy platform, and trade policy is likely to be stable and relatively close to free trade. In contrast, in a natural resource–abundant economy with an important domestic industry that competes with the imports, parties tend to diverge, and trade policy is likely to be more protectionist and unstable.