A DISEQUILIBRIUM MODEL UNDER BILATERAL MONOPOLY*

The paper points out a crucial difference between the conventional disequilibrium macro model and partial equilibrium models of wage bargaining, In the former the real wage is constrained to be less than or equal to the marginal product, whereas in the latter the real wage is frequently constrained to be greater than or equal to the marginal product. The paper builds a disequilibrium model under bilateral monopoly, paying explicit attention to the labour market. The well-known union model of McDonald and Solow forms the basis of the labour market analysis. Just as the three regions of Keynesian Unemployment, Classical Unemployment and Repressed Inflation are configured in the conventional case, an equivalent exercise is undertaken but with the addition of a collectively negotiated wage. The particular wage agreement used is the Nash bargain. The framework is then used to account for the unusual events that occurred in the UK labour market 1979–81, particularly the unprecedented rise in unemployment with no diminution of the inflation rate. It suggests that there was a shift in bargaining advantage in favour of employers, which resulted in an increased share of profits in national income. This regime change exacerbated the unfavourable circumstances for labour, which existed at that time.     

Wage,productivity and unemployment: microeconomics theory and macroeconomics data

We confront microeconomics theory with macroeconomics data. Unemployment results from two main micro-level decisions of workers and firms. Most of the efficiency wage and bargaining theories predict that over the business cycle, unemployment falls below its natural rate when the worker’s real wage exceeds the reservation wage. However, these theories have weak empirical support. Firm’s decision predicts that when the worker’s real wage exceeds the marginal product of labour (MPL), unemployment increases above its natural rate. Accounting for this microeconomic decision helps explain almost all the fluctuations of US unemployment.     

Skilled–unskilled wage inequality: A general equilibrium analysis

The paper develops a static three sector competitive general equilibrium model of a small open economy in which skilled labour is mobile between a traded good sector and a non-traded good sector and unskilled labour is specific to another traded good sector. The capital is perfectly mobile among all these three sectors. We examine the effects of change in different factor endowments and of globalization on skilled–unskilled wage inequality. We find that the effect of a change of a factor endowment on wage inequality depends on the factor intensity ranking between two skilled labours using sectors and on the relative strength of the marginal effects on demand for and supply of non-tradable good. We also find that a decrease in the price of the product produced by skilled (unskilled) labour using traded good sector lowers (raises) the skilled–unskilled wage inequality.     

Shocks and rigidities as determinants of CEE labour markets’ performance

In this article, the impact of real wage, productivity, labour demand and supply shocks on eight Central and Eastern European (CEE) economies from 1996–2007 is analysed with a panel structural vector error correction model. A set of long‐run restrictions derived from the dynamic stochastic general equilibrium (DSGE) model is used to identify structural shocks, and fluctuations in foreign demand are controlled for. We find that the propagation of shocks on CEE labour markets resembles that found for OECD countries. Labour demand shocks emerge as the main determinant of employment and unemployment variability in the short‐to‐medium run, but wage rigidities were equally important for observed labour market performance, especially in Poland, Czech Republic and Lithuania. We associate these rigidities with collective bargaining, minimum wage, active labour market policies and employment protection legislation.     

Fair wages in a New Keynesian model of the business cycle

We build a New Keynesian model of the business cycle with sticky prices and real wage rigidities motivated by efficiency wages of the gift exchange variety. Compared to a standard sticky price model, our Fair Wage model provides an explanation for structural unemployment and generates more plausible labor market dynamics—notably accounting for the low correlation between wages and employment. The fair wage induced real wage rigidity also significantly reduces the elasticity of marginal cost with respect to output. The smoother dynamics of real marginal cost increase both amplification and persistence of output responses to monetary shocks, thus remedying the well-known lack of internal propagation of standard sticky price models. We take these improvements as a strong endorsement of the addition of real wage rigidities to nominal price rigidities and conclude that the fair wage extension of this paper constitutes a promising platform for an enriched New Keynesian synthesis.     

The relation between the speed of demand saturation and the dynamism of the labour market

The purpose of this paper is to examine the medium run effect of the speed of demand saturation on the dynamism of the labour market which involves factors such as the growth of employment and real wage rate, using a computer simulation of the stochastically multi-sectoral pure labour model with a logistic demand function. From the simulation, we obtain the evolutions of the expectation of the employment rate and the real wage rate, supposing three cases where the speed of demand saturation for a product that stochastically emerges is, ceteris paribus, different. As a result, it is demonstrated that the faster growth of demand for a product that emerges stochastically accelerates the growth of employment, but decelerates the growth of real wage rate. The result depends on the heterogeneity of the agents, which is neglected by mainstream economics.     

Efficiency and distributional implications of global restrictions on labour mobility: Calculations and policy implications

In this paper a procedure for calculating the annual efficiency gains from various alternative changes in existing global immigration restrictions is presented, along with an evaluation of impacts of wage rate changes on non-migrating labour. A simple methodology uses data on U.S. dollar GNP/capita across countries to infer differences in the marginal productivity of labour both between countries and across major world trading areas. Two key assumptions used are that the worldwide labour supply is fixed and full employment occurs in all regions. Differences occuring in labour's marginal product across regions are assumed to arise because of barriers to inward mobility of labour in high wage countries. When these are removed, labour reallocates and efficiency gains occur. While the calculations are based on contentious assumptions, a striking feature is the size of the annual worldwide gains. In some cases, annual gains can easily exceed existing worldwide GNP generated in the presence of labour mobility restrictions. While all gains do not accrue to LDC's, the size of the gains nonetheless suggests that this issue may be much more important to these countries than other issues raised thus far in the North-South debate. The losses to labour already employed in high wage countries dramatize the incentives for labour unions in the developed world to oppose liberalization.     

The labor wedge: MRS vs. MPN

Do fluctuations of the labor wedge, defined as the gap between the firm's marginal product of labor (MPN) and the household's marginal rate of substitution (MRS), reflect fluctuations of the gap between the MPN and the real wage or fluctuations of the gap between the real wage and the MRS? For many countries and most forcefully for the United States, fluctuations of the labor wedge predominantly reflect fluctuations of the gap between the real wage and the MRS. As a result, business cycle theories of the labor wedge should primarily focus on improving the household side of the labor market. Explanations of the labor wedge based on departures of the representative firm's MPN from the real wage are rejected by the data because the labor share of income is not strongly procyclical.     

Marx Inside the Circuit: Discipline device,wage bargaining and unemployment in a sequential monetary economy

The aim of this paper is to show that Marxian labour theory of value can be consistently interpreted in terms of the monetary circuit model, where firms need initial finance to start production and where the money supply is endogenous. In contrast to the recently revived Marxian monetary models, in particular the New Interpretation, it is argued here that although the money wage is bargained for on the labour market, the real wage is determined by firms' choices, since firms autonomously determine the structure of production and hence real consumption for the working class as a whole. This does not mean that firms are able to set the real wage without economic and social constraints. Starting from our circuitist reading of the labour theory of value and distribution, a model is developed in order to determine the level of employment and income distribution, on the assumptions that (i) the industrial reserve army affects wage bargaining and labour effort and that (ii) workers react to the failure of their expectations on the real wage by reducing their work intensity. In this context, it is shown that firms may increase their share of profits over time only be means of innovations.     

Skilled–unskilled wage inequality,nontraded good and endogenous supply of skilled labour: A theoretical analysis

The paper develops a static four sector competitive general equilibrium model of a small open economy in which skilled labour is endogenously produced by the education sector and is mobile between a traded good sector and a nontraded good sector. Capital is also perfectly mobile among the education sector, skilled labour using traded good sector and the nontraded good sector. However, land and unskilled labour are specific to another traded good sector. We analyse the effects of change in different factor endowments and reduction in tariff rate on skilled–unskilled wage inequality. We find that the effect of a change in different parameters on wage inequality depends on the factor intensity ranking between two skilled labour using sectors and on the relative strength of the marginal effects on demand for and supply of nontraded final good. We also analyse the effects of changes in different parameters on the supply of skilled labour.     

社会功能工资模型的构建

马克思经济学的劳动力价值工资理论、新古典经济学的边际生产力工资理论和利润分享工资理论等,在解释私有制经济中的劳动者报酬方面,都具有一定的优势,同时又都有一定的局限性。以劳动者报酬社会功能工资理论为标准,以马克思经济学的劳动力价值工资理论为起点,综合新古典经济学的边际生产力工资理论和利润分享工资理论,构建劳动者报酬社会功能工资模型,能为提高我国私有制经济中的劳动者报酬提供理论基础。     

Marginal Tax Rate Uncertainty and Wage Indexation

Frequent changes in American tax laws over the last 30 years have led to uncertainty regarding the marginal tax rate on labour income. Using a multisector framework, this paper considers the implications of the tax rate uncertainty for wage flexibility. The Fiscal Authority sets the marginal wage tax rate, and is assumed to be the leader in a Stackelberg game. Wage setters in this game determine the degree of optimal indexation and are assumed to be followers. Increases in tax rate uncertainty lead to greater nominal wage flexibility, and a decrease in optimal progressivity. Additionally, indexation to nominal shocks is complete even if the product market is monopolistically competitive.     

Product cycles, endogenous skill acquisition, and wage inequality

Abstract .  This paper presents an endogenous product cycle overlapping generations model, where the supply of skilled labour is endogenously determined. This is used to examine how production shifts through imitation by developing countries affect the domestic wage differential and supply of skilled labour in developed countries. In the model, production shifts increase the demand for researchers in developed countries and cause higher relative wages for skilled labour: this leads to more individuals acquiring the skills. As a consequence, the model helps to explain the simultaneous increase in the domestic wage gap and in the supply of skilled labour observed in developed countries.     

NON-WAGE LABOUR COSTS, POLICY UNCERTAINTY AND LABOUR DEMAND – A THEORETICAL ASSESSMENT

Labour costs in various European countries have reached a record high in recent years. The topic of non‐wage labour costs is therefore increasingly being discussed among and between the political parties because non‐wage labour costs are likely to have major negative effects on employment. We follow the real options approach, which allows us to investigate the value to a firm of waiting to adjust labour when the firm's wage and non‐wage costs are stochastic and adjustment costs are sunk. Simulation exercises show that the interaction between hiring and firing costs, non‐wage labour costs and uncertainty can have important ramifications for employment dynamics.     

The impact of taxes on female labour supply

There is little agreement in economics on the factors influencing labour supply and hence on the impact of taxes. Within the marginal model, real wages and incomes are directing people's labour market behaviour independent of time and space, whereas the human resources approach takes account of the social environment and past behaviour. Even if strong assumptions are made, the neoclassical theory cannot predict the outcome of a wage increase. The labour supply response depends on the relative strengths of the substitution and the income effect. Since nonparticipation in the labour market is explained by a reservation wage being higher than the market wage, this is the only situation in which neoclassical theory would predict a rise in labour force participation with a wage increase. This case occured in a ‘natural experiment’ in Sweden. The Swedish tax system changed in 1971 from joint to separate taxation of spouses resulting in a substantial increase in the net wage of married women. This article investigates the impact of the change in the Swedish tax system on female labour force participation, concluding that it cannot explain the substantial rise in the participation rates of Swedish women. This is a significant result, questioning standard neoclassical theory and supporting the more institutional views of human labour market behaviour. That is that time and space as well as the social environment are important when analyzing labour supply. This will have consequences for international comparisons. Only factors which explain developments within one country might be relevant for explaining international differences, e.g. in labour force participation.     

Agglomeration and fair wages

Abstract.  This paper implements a fair wage constraint into an analytically tractable core-periphery agglomeration model. This enables us to study the role of imperfect labour markets for the pattern of agglomeration. In the short run, a marginal increase in fair wage preferences leads to an unambiguous compression of the national factor price differential between skilled and unskilled labour, involving an increase in the unemployment rate of unskilled workers. In the long run, this mechanism renders full dispersion of an unstable equilibrium already at higher trade costs than in perfect labour markets. There is a tendency for fair wage preferences to enforce agglomeration.     

Learning-by-doing,technology-adoption costs and wage inequality

In the dominant literature, the technological-knowledge bias that drives wage inequality is determined by the market-size channel. We develop an endogenous growth model with two technologies in which: a specific quality of labour, low or high-skilled, is combined with a specific set of quality-adjusted intermediate goods; the market-size channel is practically removed; adoption costs and learning-by-doing are linked with labour endowments. By solving transitional dynamics numerically, we show that changes in the supply of labour affect learning-by-doing and technology-adoption costs, which, in turn, influence the technological-knowledge bias and thus wage inequality. The proposed mechanisms can accommodate facts not explained by the previous literature.     

The NAIRU reconsidered: why labour market deregulation may raise unemployment

According to the mainstream theory of equilibrium unemployment, persistent unemployment is caused mainly by ‘excessive’ labour market regulation, whereas aggregate demand, capital accumulation and technological progress have no lasting effect on unemployment. We show that the mainstream non‐accelerating inflation rate of unemployment (NAIRU) model is a special case of a general model of equilibrium unemployment, in which aggregate demand, investment and endogenous technological progress do have long‐term effects. It follows that labour market deregulation does not necessarily reduce steady‐inflation unemployment. Theoretically, if the decline in real wage growth claims owing to deregulation is smaller than the ensuing decline in labour productivity growth and in the warranted real wage growth, then in that case steady‐inflation unemployment may increase. Empirical evidence for 20 Organisation for Economic Cooperation and Development (OECD) countries (1984–1997) indicates that the impact of labour market deregulation on OECD unemployment is zero, and possibly negative (causing a higher rate of unemployment).     

Effect of the Tax System ON R&D Intensity,Growth, Wages and Consumption Share

We propose a general equilibrium knowledge‐driven (semi‐)endogenous‐growth model with horizontal R&D, which is extended to consider two types of labour, skilled and unskilled, and exogenous government expenditure, financed through taxes on financial assets and on labour income, to analyse the implications of the tax system on R&D intensity, economic growth, wage inequality and consumption share in the output. In particular, we show that: (i) taxes have negative influence in the consumption share, being higher the marginal effect of the labour‐income tax; (ii) for any given government expenditure share, an increase (a decrease) in financial‐assets tax decreases (increases) the labour‐income tax; (iii) only the financial‐assets tax affects negatively the R&D intensity and the skill‐premium; thus, to reduce the skill‐premium the financial‐assets tax must increase; (iv) ignoring the effect on wage inequality and on R&D intensity, taxes are substitutes.     

Estimation of the specification error in the expectations theory of the term structure

This paper tackles the issue of the procyclicality of the real wage. We present a dynamic relationship between real wages and employment consistent with the long-run stationary equilibrium using a cointegrated VAR model. We find that wages are anticyclical and that a negative relationship between real wages and employment is necessary to achieve an economically identifiable stationary long run solution. The contentiousness of the topic does not appear so important once we recall some measurement issues and economic features of the Italian labour market.