Heterogeneous Jobs and the Aggregate Labour Market

This paper analyses a simple search‐and‐matching model with heterogeneous jobs. First, I derive an explicit formula that ensures the social efficiency of the equilibrium outcome. This formula generalises the well‐known Hosios condition and clarifies the role of externalities across labour markets for different types of jobs. Second, business cycle fluctuations with heterogeneous jobs are analysed. Heterogeneity in productivity and job stability plays an important role in generating strong labour‐market responses to productivity shocks.     

Diffusion and Innovation of New Technologies under Skill Heterogeneity

This article presents a model of innovation and diffusion of machines which embody a new technology. Users of the machines are heterogenous in their skill level. Skilled machine-users adopt new machines first, while unskilled users wait until machines become more user-friendly and reliable. The improvement of machines is the engine of diffusion, and it is carried out by the monopolist machine producer. The speed of diffusion is affected by the skill distribution in the economy. At any point in time, the machine producer can innovate a new generation of machines. The timing of innovation is also influenced by the skill distribution.     

The determinants of employers’ use of temporary contracts in the frictional labor market

This paper focuses on the following two primary reasons that employers use temporary contracts: to flexibly adjust employment and to screen workers. A search-matching framework is used to not only address employers’ endogenous choices in using temporary contracts, but also numerically identify the situations in which these contracts are likely to be used as a screening tool for permanent positions. This numerical exercise demonstrates that reducing employment protections in permanent jobs, reducing benefits for unemployed workers and raising the conversion probability from temporary to permanent employment will increase the relative proportion of employers who use temporary contracts as a screening device.     

Asset prices in a Huggett economy

This paper explores asset pricing in economies where there is no direct insurance against idiosyncratic risks but other assets can be used for self-insurance, subject to exogenously-imposed borrowing limits. We analyze an endowment economy, based on Huggett (1993) [11], both with and without aggregate risk. Our main innovation is that we obtain full analytical tractability by studying the case with “maximally tight” borrowing constraints. We illustrate by looking at riskless bonds, equity, and the term structure of interest rates, and we show that the model can reproduce many features of observed asset prices when idiosyncratic risks are quantitatively reasonable.     

Spam mails impede economic growth

We estimate labor losses caused by spam mails and input these estimated values into a production function, while also estimating damage to the Gross Domestic Product (GDP) in Japan. As a result, we have found that spam mails decreased the Japanese GDP by about 500 billion yen in 2004. This marginal negative effect of spam mail to the GDP increased with the progress of broadband in 2000. Moreover, from the result of a social simulation conducted by the authors, the amount of damage is projected to reach 1% of the Japanese GDP by 2010, unless adequate countermeasures are taken against spam mails. This projection provides a statistical fundamental to several theoretical analyses of spam mails.     

Farmers and Middlemen in a Transmigration Area in Indonesia 1

Compared with long-settled lava, transmigration areas in the outer islands of Indonesia are characterised by an underdeveloped transportation and communication infrastructure that makes farmers' access to markets relatively difficult. In this case study, however, no significant difference was found in either marketing margins or middleman profits between a transmigration area in Sumatra and a long-settled area m West Java. High risk and transaction costs, associated with long-distance trade under poor infrastructure, together with delays in the issue of formal land titles to transmigrant settlers, operate as entry barriers to marketing activities. These negative factors in the transmigation area are largely compensated for by the larger marketable agricultural surplus per farm, which has the effect of reducing transportation and transaction costs.     

Japanese Investment in Indonesia: Problems and Prospects

The majority of Japanese investment in Indonesia is import-substitution orientated and located primarily in manufacturing. Declining Japanese investment in recent years is attributable partly to economic factors such as the drop in the price of oil and the higher cost of imports resulting from the devaluation of March 1983 But it is also due to Indonesian government policy. The author suggests a number of ways in which the Indonesian government could establish conditions more favourable to foreign investment.     

Aggregate implications of indivisible labor, incomplete markets, and labor market frictions

We study the impact of tax and transfer programs on steady-state allocations in a model with search frictions, an operative labor supply margin, and incomplete markets. In a benchmark model that has indivisible labor and incomplete markets but no trading frictions we show that the aggregate effects of taxes are identical to those in the economy with employment lotteries, though individual employment and asset dynamics can be different. The effect of frictions on the response of aggregate hours to a permanent tax change is highly nonlinear. There is considerable scope for substitution between “voluntary” and “frictional” nonemployment in some situations.     

Why did the average duration of unemployment become so much longer?

There has been a substantial increase in the average duration of unemployment relative to the unemployment rate in the U.S. over the last 30 years. We evaluate the performance of a standard job-search model in explaining this phenomenon. In particular, we examine whether the increase in within-group wage inequality and the decline in the incidence of unemployment can account for the increase in unemployment duration. The results indicate that these two changes can explain a significant part of the increase over the last 30 years, although the model fails to match the behavior of unemployment duration during 1980s.     

Theoretical and experimental investigations of the performance of keyword auction mechanisms

Two keyword auction mechanisms, the Generalized Second‐Price auction (GSP) and the Vickrey‐Clarke‐Groves mechanism (VCG), were compared theoretically and experimentally. The former is widely used in practice; the latter is not, but it has a dominant strategy equilibrium where all participants bid their true values. In the theoretical investigation, by applying the “locally envy‐free Nash equilibrium” to the VCG, we found that the allocations are efficient and that upper and lower bounds of the auctioneer's revenue coincide in the two mechanisms. A laboratory experiment, in which the revenues and efficiencies were similar in both mechanisms, supported this result.