The industry supply curve: Two different traditions

Abstract

The present paper seeks to provide some new insights into the precise nature and the analytical foundations (or lack of them) of the familiar industry supply curve. We reconsider some fundamental phases of its historical evolution. Two different traditions are distinguished: one consists of the formalisations of Marshall's theory proposed by Barone and, later, by Pigou, Viner, Harrod and Robinson; the other consists of the models of Hicks and Allen, on the basis of ideas and criticism put forward by other London School of Economics scholars, like Kaldor and Robbins, in the mid-1930s. It is argued that the second tradition did not really remedy the weak aspects of the Marshallian theory of supply.     

Female labour supply in Australia: Another example of a backward-bending labour supply curve

Hours worked by employed married females in Australia are analysed using techniques to correct for sample selection bias. Consistent with the conclusions of the study of female labour supply in the U.S. and Canada by Nakamura and Nakamura (1981), working wives work fewer hours per week when paid higher hourly wage rates.     

Straightening out the backward-bending supply curve of labour: from overt to covert compulsion and beyond

The inadequancy of the work-leisure choice model of orthodox theory suggests the need to reexamine the nature of work from the vantage points of anthropology and economic history. Such a reexamination challenges the theory of human behaviour upon which the work-leisure model is built. It suggests that work is not necessarily painful. Moreover, it suggests that more attention needs to be given to the potential for institutional changes which encourage creativity in the workplace.     

A clarification of the IS curve and the aggregate demand curve

This paper clarifies the current textbook interpretations of the IS curve and the aggregate demand (AD) curve. Most macroeconomic textbooks portray the IS curve as representing equilibrium in the product, goods, or commodity market. This paper illustrates that in flexible-price models the IS curve does not necessarily portray equilibrium in the goods market because the textbooks introduce two contradictory notions of equilibrium. Furthermore, it will be shown that, contrary to popular textbook usage, the AD curve, which is derived from the IS-LM framework, is not the economy's effective demand curve for goods.     

Privatization and the British Post Office

This article considers whether privatization or liberalization of the Royal Mail division of the Post Office is likely to be desirable. It examines the natural monopoly issue but finds it not definitive. It then investigates various potential outcomes of change in the direction of privatization and liberalization and several potential instruments for securing these changes. The article argues for improved regulation rather than denationalization as a means of sustaining improvement in performance.     

Thought experimentation and the Phillips curve

This paper offers the rationale for presenting a particular type of Phillips curve and develops the dynamic behavior of an economy where such a Phillips curve relation is observed. The specific kind of relation that is explored has similarities with the sticky-information Phillips curve of the Mankiw-Reis framework. Nevertheless, it adds an important dimension: firms need to form expectations about current events on past time periods not because of infrequent optimal updating of information but because producers want to evaluate the possibility of taking advantage of information deficiencies on the consumers’ side. A positive probability of ‘fooling’ consumers with a price above the one imposed by market conditions re-shapes the dynamic relation between the inflation rate and the output gap.     

Disinflation and the supply side

This paper studies the dynamics associated with permanent and temporary reductions in the devaluation rate. The analysis uses an intertemporal optimizing model of a small open economy with imperfect capital markets and endogenous labor supply. With a constant capital stock, the model predicts an initial reduction in real wages and an expansion in output. Consumption falls on impact but increases afterward. In addition, with a temporary shock, a current account deficit emerges and a recession sets in at a later stage. With endogenous capital accumulation, numerical simulations show that the model is also capable of predicting a boom in investment.     

办公环境与心理健康

本文从办公室的空气环境、视觉环境、声音环境、电磁辐射、空间布局等几方面出发,分别阐述了这些物理因素对员工心理健康的影响,并提出为员工提供一个舒适的工作空间,有利于员工提高工作满意度与工作效率,以及有助于员工的心理健康。     

Measuring the natural yield curve

We generalize the concept of the natural rate of interest (Laubach and Williams, 2003; Woodford, 2003) by defining and estimating the natural yield curve (NYC) – the term structure of natural interest rates. Our motivation stems i.a. from the observation that at times when central banks attempt to directly affect long-term interest rates (e.g. via quantitative easing) the gap between the short-term real and natural rate is no more a good indicator of the monetary policy stance. We estimate the NYC on US data, document its main properties and show i.a. that in the period 2008 to 2011 the NYC allows to better capture the US monetary policy stance than the short-term natural rate.     

Shifts of the beveridge curve and the matching technology

TraditionalU/V analysis so far has been based on the assumption that the matching technology is linear-homogeneous. Only if this assumption holds, shifts of the Beveridge curve can be regarded without more ado as an increase or decrease of structural and/or frictional unemployment. If, however, the matching technology exhibits increasing or decreasing returns to scale, shifts of the Beveridge curve, leaving a variation in the matching probability aside, may be due to an increase or decrease in the matching activity level. The empirical results using Austrian data suggest that slightly increasing returns to scale are present in the matching process, but these are not so high that the observed shifts in the steady-state Beveridge curve could be explained by this fact.

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Zusammenfassung Die traditionelle U/V-Analyse basiert auf der Annahme, daß die Job-Vermittlungstechnologie auf dem Arbeitsmarkt linear homogen ist. Denn nur in diesem Fall lassen sich Verschiebungen der Beveridge-Kurve eindeutig als Anstieg oder Verringerung der Struktur- bzw. Friktionsarbeitslosigkeit interpretieren. Weist hingegen die Vermittlungstechnologie steigende oder sinkende Skalenerträge auf, so können Verschiebungen der Kurve auch durch Veränderungen im Transaktionsniveau auf dem Arbeitsmarkt hervorgerufen werden. Die ökonometrischen Schätzungen der Matchingfunktion mit österreichischen Daten zeigen, daß diese leicht steigende Skalenerträge aufweist; die Skalenerträge sind freilich nicht so groß, daß durch sie die Außenverschiebung der österreichischen Beveridge-Kurve in den achtziger Jahren erklärt werden könnte.

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I am indebted for helpful comments to Wolfgang Franz, Klaus Neusser, Karl Pichelmann, Denis Snower, Herbert Walther, and three anonymous referees.     

Vacancies, unemployment, and the Phillips curve

The canonical new Keynesian Phillips curve has become a standard component of models designed for monetary policy analysis. However, in the basic new Keynesian model, there is no unemployment, all variation in labor input occurs along the intensive hours margin, and the driving variable for inflation depends on workers’ marginal rates of substitution between leisure and consumption. In this paper, we incorporate a theory of unemployment into the new Keynesian theory of inflation and empirically test its implications for inflation dynamics. We show how a traditional Phillips curve linking inflation and unemployment can be derived and how the elasticity of inflation with respect to unemployment depends on structural characteristics of the labor market such as the matching technology that pairs vacancies with unemployed workers. We estimate on US data the Phillips curve generated by the model. While we can reject the baseline new Keynesian Phillips curve in favor of the search-frictions specification, we show it is still too stylized to fully describe the dynamics of firms’ marginal costs.     

Reservations on the classical Laffer curve

Throughout the last two decades, some economists have objected to the conventional shape of one peak point on the Laffer curve. This paper examines the reservations presented in the literature and demonstrates the possibility of a Laffer curve with three peak points. Such a shape may be due to the three heterogeneous population groups of younger workers, adult males, and adult females. These groups respond differently to net wage rate changes, thus reducing the applicability of the changing of tax rates by policymakers.

     

Spatial heterogeneity in the wage curve

Blanchflower and Oswald argue that the wage curve is a predictable empirical relationship with the “unemployment elasticity of pay” of about −0.1. Using GWR I find evidence of significant spatial heterogeneity in the unemployment elasticity of pay for US counties.     

Some analytics of the laffer curve

It is shown that, in a general equilibrium model with one private good, one public good, labour and an income tax, certain widely-assumed properties of the Laffer curve do not necessarily hold. For well-behaved functional forms it may not be continuous and may not have an interior maximum. Its slope depends on technology as well as on the tax elasticity of labour supply. For certain technologies, a more negative elasticity may imply a more positive slope. Moreover, the relevant tax elasticity is a general equilibrium one which may differ in sign from the widely- quoted partial equilibrium one.     

Measuring and testing advertising-induced rotation in the demand curve

Advertising can rotate the demand curve if it changes the dispersion of consumers’ valuations. We provide an elasticity form measure of the advertising-induced demand curve rotation in five demand models and test for its presence in the US nonalcoholic beverage market. The Almost Ideal Demand System (AIDS) model reveals that doubling advertising spending rotates the demand curves clockwise for milk, and coffee and tea with associated slope changes of 7 and 12%. Soft-drink advertising rotates its demand curve counterclockwise. Our policy suggestion is that milk and soft-drink firms time advertising to coincide with high-and low-price periods, respectively.     

Dynamic adverse selection and the supply size

In this paper we examine the problem of dynamic adverse selection in a stylized market where the quality of goods is a seller׳s private information while the realized distribution of qualities is public information. We obtain that full trade occurs in every dynamic competitive equilibrium. Moreover, we show that if prices can be conditioned on the supply size then a dynamic competitive equilibrium always exists, while it fails to exist if prices cannot be conditioned on the supply size and the frequency of exchanges is high enough. We conclude that the possibility to condition prices on the supply size allows us to reach efficiency in the limit for exchanges becoming more and more frequent, while otherwise the welfare loss due to delays of exchanges remains bounded away from zero.