IS LABOUR MARKET FLEXIBILITY DESIRABLE OR HARMFUL? A FURTHER DYNAMIC PERSPECTIVE

A common belief of mainstream economics as well as underpinning government policy is that the more flexible real wage is, the lower is unemployment. In this paper we study the dynamics of a standard neoclassical labour market under the simplest Walrasian adjustment rule. We show that when consumption and leisure are sufficiently low substitutes, an increase in real wage flexibility may destabilize the unique Walrasian equilibrium of the economy, triggering fluctuations in wages and employment. Minimal departures from strict (Walrasian) neoclassical equilibrium modelling are required to obtain instability results for wage flexibility.     

Aggregation, efficiency and mutual fund separation in incomplete markets

Summary. This paper studies the conditions for aggregation, portfolio separation and effective completeness of competitive allocations in general equilibrium models with incomplete markets where agents have general preference and endowment distributions. We show that these properties are distinct. Demands may aggregate yet may fail to exhibit fund separation and conversely. Fund separation implies effective completeness while aggregation does not. The implications of these properties for the structure of equilibria are discussed, and generalizations of the CAPM, the consumption CAPM and the CAPM with nonmarketed wealth emerge from the analysis. Received: September 12, 1996; revised version: November 7, 1996     

WOULD YOU LIKE TO ENTER FIRST WITH A LOW‐QUALITY GOOD?

Using a two‐period duopoly model with vertical differentiation, we show that there exists a unique subgame perfect equilibrium where the first entrant supplies a lower quality and gains higher profits than the second entrant. We also prove that this entry sequence is socially efficient.     

THE LABOUR MARKET AND TECHNICAL CHANGE IN ENDOGENOUS CYCLES

The paper examines how a macro model, where there is an endogenous technical progress and strong interdependence between real and monetary aspects in both the labour and capital markets, can generate endogenous business cycles. This approach helps to understand the ambiguity of the NAIRU, the nature of the Phillips curve and the impact of labour productivity changes on the curve itself. Finally, the presence of expectation functions based upon a Markov‐switching time series process fosters endogenous dynamics and contributes to make asymmetries an important feature of the cycles.     

Income distribution and debts in a fragile economy: market processes and macro constraints

The purpose of the paper is to study fluctuations in a fragile economy, where the role of debt and income distribution is considered. It is based upon a macro approach that emphasizes interactions between market processes and macro constraints within an uncertain environment. By utilizing a regime switching approach, where behavioural functions change when a threshold is violated, robust dynamics can be generated. The model can mimic some aspects of the present evolution of the world economy by means of simulations.     

Mortality in elderly injured patients: the role of comorbidities

Home injuries in older people are an important cause of morbidity, disability and death. In addition, the presence of a pre-existing disease has generally been shown to be associated with higher mortality in this population. The objective of the study was to evaluate the association between pre-existing chronic conditions and risk of death among older trauma patients. A retrospective study was conducted in the Lazio Region, including the city of Rome. The study included all the people aged 65 years or older who were admitted to emergency departments in the year 2000 for home or road injuries, which was followed by hospitalisation within 24 hours. Comorbidities are quantified according to the Charlson Comorbidity Index (CCI). The outcome of interest was 30-day mortality. To measure the association between comorbidities and the probability of death, logistic regression was used, adjusting for triage code, sex, age and place of injury. An analysis stratified by triage was also performed. It was found that 17.9% of the injured subjects (8145) were affected by one or more chronic conditions. The probability of death was higher among males, older people, more severe patients and in cases of home accident. Risk of death for non-urgent and urgent patients increased with the increasing of the CCI score. Mortality among very urgent injured elderly was not affected by the presence of chronic conditions. It was concluded that chronic conditions are strong determinants of mortality, particularly for mild injuries.     

eBusiness applications in SMEs of Italian industrial districts: the textile and wood/furniture cases

The paper presents the results of a study dealing with the adoption of eBusiness applications in two Italian industrial districts: the textile district in Como and the wood/furniture district in the area of Brianza. These two districts are part of important “made in Italy” industries, with a high volume of worldwide exports. The goal of the paper is to show how Internet technology is changing the behavior of small and medium-sized enterprises (SMEs) in these two local (but with worldwide relevance) districts and to understand how the potential benefits and constraints for SMEs pointed out in several literature contributions are really acting in these districts.

High-frequency trading: a literature review

The relatively recent phenomenon of high-frequency trading has had a profound impact on the micro-structure of financial markets. Several authors hailed it as a provider of liquidity and a mechanism for controlling volatility, two highly welcome features, especially beneficial to retail traders, whereas other authors view the situation generated by algorithmic trading as damaging for both small and institutional traders, and the orderly functioning of the markets. This paper analyzes the impact of high-frequency trading in respect of the main parameters affecting market quality: volatility, transaction costs, liquidity, price discovery, penalization of slower traders, and impact on sudden financial crises, the notorious flash crashes. As often happens within the financial community, different views stand to each other and no conclusive agreement on the value of most parameters has been reached as yet. A section on the apparently falling profits of high-frequency traders, as denounced in recent times, completes the review.

     

Long‐term Effects of the Efficiency Wage Hypothesis in Goodwin‐type Economies

The existence of an efficiency wage mechanism in Goodwin‐type models may lead to the unexpected appearance of an economically meaningful equilibrium with zero labour share, which is globally stable for some parameter constellation and allows the system to attain its ‘maximal growth'. A subsequent ‘normative’ comparison between the possible long‐term regimes of the economy shows that (1) the zero labour share equilibrium can be the ‘preferred’ equilibrium in terms of welfare; (2) in all the long‐term regimes the welfare is higher than in the original Goodwin model; (3) a point of maximal welfare exists. Moreover, the effects of rational behaviour of firms are compared with the ‘traditional’ situation in which rationality is not explicitly assumed. A striking result appears: myopic rationality can have deleterious effects on the profit of firms and on the overall welfare of the economy.     

Gini’s transvariation analysis: an application on financial crises in developing countries

The damage and the recurrence of financial crises have increased the concern of investors and policymakers on one hand and the interest of macroeconomists on the other. This paper presents an original non parametric methodology, whose aim is to give a very intuitive and rigorous method for variable selection in order to analyse financial crises. Transvariation analysis compares the distributions of two different groups of countries (sound and distressed) with respect to a single macroeconomic variable and selects the indicators on the basis of a low transvariation probability index. The current account deficit to GDP ratio, differently from other studies on financial crises, seems to be a suitable variable in discriminating distressed countries from sound ones, and the case of Argentina and Turkey confirms this finding.