A theory of commerce

The theory of commerce advanced here captures prominent features of retail trade: large employment, congestion effects, anonymous posted prices, and quantity discounts. This theory is built around a directed search model where buyers’ preferences are private information. The analytical solution is easily inserted in a Neoclassical growth framework. In this framework, the parameters of retail trade are calibrated using commercial margins and employment. Welfare properties depend on the sellers’ ability to charge two-tier prices. With two-tier prices, the directed search equilibrium is efficient. Otherwise, it is not. This contrasts with the full information benchmark, where directed search is always efficient.     

Employment and wages with sector-specific shocks and worker moral hazard

We study a model of worker moral hazard with identical workers and where sectoral prices are subject to stochastic shocks. When firms are short-run maximizers, employment is shown to be distorted downward relative to the case of certain prices, and more so the higher is the current price. This implies that employment is relatively insensitive to sectoral output-price changes, and that average employment and output are reduced when price volatility increases. When firms can commit to future employment levels, employment is greater in low-demand states (implying labor hoarding), and thus even less sensitive to shocks, while average employment is less distorted downward by uncertainty. The model gives a new explanation of how increased sector-specific volatility can lead to output losses, and of the possibility of negative comovements of unemployment and turnover.     

Monopolistic price setting and supply rigidities in a disequilibrium framework

Summary. A model of the firm with a delayed adjustment of prices and employment is analyzed. Prices and employment are determined under uncertainty about the location of the demand curve. Three models are distinguished: price setting with predetermined supply, employment determination with pre-determined prices, and a simultaneous price and employment determination. It is shown that many of the results of the deterministic case can be transfered to the stochastic set-up. The deterministic model is included as a special case. However, the model allows for supply rigidities and labour hoarding and permits the analysis of price adjustment.Received: May 17, 1995; revised version: October 13, 1996This revised version was published online in February 2005 with corrections to the cover date.     

Firms’ location decision across asymmetric countries and employment inequality

This paper analyzes the effect of globalization (lower trade costs) on production and trade patterns if, firms are vertically linked, stages of production differ in labor-factors intensity and countries differ in labor-factors prices. In order to reflect the “Continental Europe” experience, relative wages are assumed fixed and spatial changes in production are translated into changes in relative (skilled to unskilled) employment levels. The asymmetry in factors prices across countries results in a unique agglomeration equilibrium for a broad range of trade costs. At low trade costs, firms’ location depends on production costs—vertical specialization occurs. This paper also provides a consistent explanation of the observed increase in employment inequality between skilled and unskilled workers in relatively high-unskilled wage countries.     

Mispricing of Risk in Sovereign Bond Markets with Asymmetric Information

The likelihood that a government will repay its sovereign debt depends both on the amount of debt it issues and on the government's future ability to repay. Whilst the former is publicly observable, the government may have more information about the latter than investors. This paper shows that this asymmetric information problem impairs the market's ability to differentiate economies according to their fiscal sustainability, and can lead to a disconnect between bond prices and default risk. The model can help rationalise the behaviour of Eurozone bond prices prior to the recent European sovereign debt crisis.     

The distributive impact of terms of trade shocks: The case of the oil price changes in Russia

The halving of oil prices, during a short period between 2014 and 2015, has generated major terms of trade losses for oil exporting countries. This terms of trade shock has economy‐wide effects and significant distributive impacts. This paper, using a macro‐micro simulation model, describes and quantifies the channels of transmission from the drop of oil prices, to changes in welfare distribution at the household level for the case of the Russian Federation. The oil price reduction generates a reverse Dutch disease impacting sectoral employment, factor returns and consumption prices. It causes a contraction of employment and wages in more skill‐intensive (non‐tradable) sectors, and a reduction in consumption prices that is more pronounced for non‐food than for food goods. When these shifts are mapped to changes in incomes at the micro level, all households are affected. Poverty rates increase by 1 to 4 percentage points, depending on the poverty line used. At the US$ 10 a day threshold, 4.1 million additional people fall into poverty. Along the consumption distribution, richer people are affected more than those in the bottom 40%. However, this minor progressive impact may be reversed due to increases in unemployment and cuts in social programmes.     

基于资产价格影响的货币政策非对称性效应研究

利用NK-SVAR模型就我国货币政策的非对称性效应进行研究,结果表明,紧缩性货币政策的效果比较明显,而扩张性货币政策效果较弱.货币冲击的紧缩效应强于扩张效应,这表明抑制经济的过快增长时紧缩性的货币政策效果显著,但扩张性货币政策无法摆脱经济的恶性衰退.     

Trends in employment and the employment elasticity in manufacturing, 1971-92: an international comparison

Employment growth in manufacturing is limited by output growthin this sector, but the elasticity of employment with respectto output has varied widely in different regions and economies.This paper focuses attention on the idea that a major determinantof employment elasticity is the way the fruits of output growthare divided between employment growth and wage growth. But beforewe are able to determine the quantitative dimension of the trade-off,we have to allow for two other factors which affect the sizeof the cake available to labour in real terms. These are: (i)the elasticity of the wage bill with respect to output, whichdetermines the trend in the share of labour; and (ii) the priceeffect, depending partly on the rate of inflation and partlyon the movements of producer prices relative to consumer prices.A simple decomposition procedure is outlined in the paper whichallows us to quantify the relative importance of these factors,and hence give a clearer idea of the labour market outcome leaningto one or other of the two interests, employment growth andreal wage growth. The empirical analysis for different regionsof the world is carried out on time series data for the manufacturingsector collected by UNIDO from the national surveys of membercountries for the decades of the 1970s and the 1980s.     

Variable Labor Supply,Terms of Trade Shocks,and Domestic Prices: A Note

This paper develops a two-good, small-country, general-equilibrium trade model with endogenous labor supply, where trade is restricted by a tariff or an import quota. Within this framework, it is shown that, contrary to Anam (1989), under an import quota domestic and world prices may vary in the same direction. This is due to the possibly positive employment effects of terms of trade shocks. In such a case, compared to fixed labor supply, variable labor supply is likely to make the domestic prices less sensitive to foreign price volatility. Received June 13, 2001; revised version received November 14, 2001     

Asymmetric Behaviour of Spanish Regional House Prices

In connection with the housing market, which is presently raising a great deal of concern among the general public, this paper investigates regional housing prices in Spain using variable co-integration techniques. It analyzes the asymmetric behavior in real house prices among the Spanish regions focusing on the study of the long-term relationships over time. This paper raises an important question of the national averages masking important regional asymmetries. Results indicate evidence of co-integration, which suggests a broad grouping of regions based on physical proximity or similar economic characteristics.

THE GREAT DEPRESSION RECONSIDERED: IMPLICATIONS FOR TODAY

This paper reexamines the Great Depression of 1929–1933 within an analytical framework based on the terms of employment for labor. It shows that in areas such as the U.S. farm and Japanese industrial sectors where labor was employed organically—that is, as partners in common enterprise—costs proved flexible, prices fell, and output and employment held up in line with the predictions of Say's Law. Where labor was not employed organically—that is, labor was hired—output collapsed, unemployment mounted, and Say's Law failed. The apparent reason is that any hired input, capital or labor, demands downwardly rigid rates of pay. When demand softens, cost rigidity constrains price cuts, and firms must instead lay off labor. The paper also shows that given organic labor, even oligopolistic rivalry is sufficient to assure that prices will fall enough to sustain output and employment.     

Is ex‐ante ex‐post analysis irrelevant to Keynes's theory of employment?

Ex‐ante ex‐post analysis has become a standard tool in macroeconomics. Yet Keynes dismissed it. We argue that Keynes's dismissal of ex‐ante ex‐post analysis is not an oddity but an indication of the originality of his theory of employment compared to standard macroeconomics. First, the principle of effective demand does not amount to a process that determines employment and income at the point of intersection of the traditionally defined ex ante supply and demand functions. Second, the finance motive allowed Keynes to confirm the identity of aggregate supply and demand already asserted in The General Theory. This latter conclusion is puzzling, however, since the principle of effective demand presupposes the possibility of a discrepancy between supply and demand. We suggest that Keynes's theory of employment is linked to a theory of income distribution whereby profits are a redistributed share of factor income which is transferred to firms when prices exceed factor costs. The identity and the equilibrium condition then relate to separate measurements of income and output, factor cost and prices.     

A general equilibrium approach to wage bargaining and employment

This paper attempts to capture the effects of cyclical fluctuations in business activity on factor prices and employment levels in a two-sector model with wage bargaining.     

Is there a Laffer curve between aggregate output and public sector employment?

This paper develops a model of the relationship between public sector employment, total output and aggregate real demand in market prices, where public employment has a positive productivity effect on private output. Public employment crowds out private employment and output because its increase induces higher wages and taxes. The valuation of government output is also taken into account. While public employment affects total output and aggregate real demand in an a priori ambiguous way, numerical simulations suggest that the relationship may be nonlinear; positive, when public sector is “small” and negative, when it is “large”. Using the annual data from 22 OECD countries over the period 1960–1996 and estimating and testing for threshold models and more commonly used specifications with multiplicative interaction terms give support to this nonlinearity hypothesis between public employment and private sector output. First version received: October 1996/Final version received: April 2000     

Asymmetric evidence of gasoline price responses in France: A Markov-switching approach

It has been documented that retail gasoline prices respond more quickly to increases in wholesale prices than they do to decreases in wholesale prices. However, there is little empirical evidence that identifies the link between the pass-through of oil prices to gasoline in different volatility regimes. Using a Markov-switching model on weekly observations of fuel prices from 1990 to 2011, we find that fuel prices respond significantly faster to increases in crude oil prices than to decreases in crude oil prices. However, when volatility is low, the transmittal of a price change from crude oil to retail fuel is higher compared to periods of high volatility. These results provide important information on the behavior of retailers. The findings of this paper therefore provide clues for better understanding the recent dynamics of fuel prices and some policy implications.     

Asymmetric dynamics in REIT prices: Further evidence based on quantile regression analysis

This study examines whether mean reversion in REIT prices presents an asymmetric behavior across various quantiles. Distinguished from previous literature that applied the traditional linear unit-root test, a state-of-the-art quantile unit-root test is employed to identify financial asset predictability in five real estate investment trust (REIT) classifications. Our empirical results reveal a distinct pattern that mean reversion is found for those relatively high REIT prices, while random walk properties only exist for those relatively low REIT prices. More specifically, the higher the price is, the faster the speed of mean reversion of REIT toward its long-run equilibrium will be.     

Technology,Growth and Employment

The relationship between technology, productivity and employment is a complex one. Increased productivity can lead not just to increased market share, but through falling relative prices can help expand markets, and through product innovation can develop new markets. On the other hand, if demand and hence output does not expand in line with productivity, then an inverse relation between productivity and employment will result. The European Union seeks to improve living standards in Europe by boosting productivity, competitiveness and employment together. How, though, is this to be achieved? This paper looks at the effects on productivity of different forms of investment--in physical capital, in Research & Development, and in human capital. The paper also distinguishes between the high-tech and low-tech sectors. There does appear to be scope for boosting both productivity and employment, particularly in the high tech sectors. But to do so will require increased investment across all three categories--in machinery, in innovation and in people.     

Asymmetric Nash equilibrium in emission rights auctions

This paper studies the problems of emission rights auctions, and presents a uniform price auction mechanism based on three assumptions, i.e., all buyers are asymmetric, every buyer submits a nonincreasing continuous demand function, and every buyer's valuation to per unit of the emission rights is common value information. It focuses on solving the asymmetric Nash equilibrium for this auction mechanism. It concludes that there exist multiple Nash equilibria in our auction mechanism, but the arbitrary low equilibrium prices cannot emerge. We also give several suggestions on how to induce the auction to a desired ideal equilibrium state in mechanism design of emission rights auctions.     

Union wage setting and unemployment in the Netherlands (1965–1987)

This paper presents an empirical model of union wage setting and employment. The (Stackelberg) equilibrium unemployment rate is shown to be a function of taxes, the replacement ratio, the gap between consumer and producer prices, productivity effects, and the rate of long-term unemployment. The model is estimated with aggregate data from the private sector in the Netherlands (1965–1987). The results suggest that the equilibrium unemployment rate is pushed upwards by taxes, the replacement ratio and by the gap between consumer and producer prices, and is reduced by productivity effects. Insider-outsider effects appear insignificant.     

The London Business School econometric model of the UK

This paper describes the London Business School econometric model — the first fully computerized model of the UK — which has been used for regular public forecasting since 1966. The model, estimated on quarterly data, is organized around the income expenditure accounts with a fully integrated flow of funds sector which ensures consistency between portfolio decisions and income, savings and investment decisions. Aggregate demand is built up from its individual components so that demand influences are important for the short- and medium-term behaviour of the model. But there are important supply-side effects which work through the real exchange rate and real wages. Monetary conditions have a powerfull effect on the model through the exchange rate, personal sector wealth and interest rates. Wages and employment are determined in a labour market in which employment decisions depend on the level of demand and real wages while real wages depend on the level of unemployment, real benefits and direct and indirect taxes as well as underlying trends in productivity. Asset prices move in any period to clear both the spot and the future market in assets so that current asset prices in the equity, gilt-edged and foreign exchange markets reflect all current information about the expected state of the economy. In contrast, goods prices adjust sluggishly. The combination of continuously clearing asset markets and sluggish wages and prices gives the model many of the theoretical characteristics associated with the open-economy models of Dornbusch and Buiter and Miller.