Wage Setting, Wage Curve and Phillips Curve: The Italian evidence

The purpose of this paper is to investigate some issues of wage setting in order to assess if nominal inertia and wage flexibility characterise the Italian supply side, using multivariate cointegration models. Our estimates indicate that an explicit distinction between stationary and non-stationary variables and a joint analysis of long-run and short-run structure is crucial for achieving clearer results. To this end, we use quarterly time series data for industry sector 1976:1–1993:4. Interesting results have been found concerning the empirical evidence of a long-run wage curve and the existence of a Phillips curve, through adopting alternative order reduction of the I(2) wage and price variables. Moreover, some insights on regional (North-South) unemployment effects are pointed out and discussed.     

Misallocation and aggregate productivity across time and space

Productivity is at the core of the large differences in income per capita across countries. What accounts for international productivity differences? I discuss cross‐country differences in the allocation of inputs across heterogeneous production units—misallocation—as a potential factor in accounting for aggregate productivity. Policies and institutions generating misallocation are prevalent in poor and developing countries and may also be responsible for differences in the selection of operating producers and technology used, contributing substantially to aggregate productivity differences across countries.     

Factor market distortions across time,space and sectors in China

In this paper, we measure TFP losses in China?s non-agricultural economy associated with labour and capital misallocation across provinces and sectors between 1985 and 2007. We also decompose the overall loss into factor market distortions within provinces (between state and non-state sectors) and distortions between provinces (within sectors). Over the entire period, misallocation lowers aggregate non-agricultural TFP by an average of twenty percent. However, after initially declining, these losses increased appreciably beginning in the mid-1990s. This reversal can be attributed almost exclusively to increasing misallocation of capital between state and non-state sectors within provinces, while losses from between province misallocation remained fairly constant. We argue that the recent increase in capital market distortions is related to government policies that encourage investments in the state sector at the expense of investments in the more productive non-state sector.     

Minimum Wage Compliance and the Labor Demand Curve

Contrary to the traditional analysis of the employment effects of the minimum wage setting, the author shows that if compliance is contingent upon enforcement, complying with the minimum wage law involves a leftward shift of the labor demand curve rather than an upward movement along the curve. Furthermore, the labor demand curve will shift leftward with enforcement even if enforcement is insufficient to ensure compliance, becoming vertical when the options of compliance and noncompliance are equally attractive. Hence, it is not paying the statutory minimum wage that brings about a reduction in employment down to the full-compliance level but enforcement that, if sufficiently high, induces that same reduction in employment, even if the employer is still noncomplying with the minimum wage law.     

Political‐Economic Regime and the Wage Curve: Evidence from Chile, 1957–96

This paper tests whether a wage curve—a negative relationship between the level of unemployment and the level of pay—existed in Chile during 1957–96. The analysis is divided into two periods. For 1957–73, during inward‐led development, we reject the existence of a wage curve. For 1974–96, when the economy opened, state‐run industries were privatised and labour rights weakened, we find a wage curve of ?0.08. Based on this finding we conclude that the unemployment–pay elasticity in the post‐reform period is similar to the ?0.07 to ?0.10 wage curve found in other western, capitalist countries. Disaggregating the analysis by group, we find that women, non‐university educated workers and public sector workers have suffered more from unemployment. Yet informal sector workers have not experienced pay drops as a result of unemployment, contradicting the hypothesis that the informal sector acts as a buffer during economic downturns.     

Inflation, unemployment, and the time consistency of the US monetary policy

This paper verifies the performance of the Barro and Gordon (1983) model to explain the US inflation since the early 1950s. We divide the period from 1951:2 to 2010:2 according to each chairman of the Federal Reserve (FED). In addition, we consider aggregated periods, represented by pre-Volcker, Volcker-Greenspan, Greenspan-Bernanke, and whole sample. A genetic algorithm of stochastic search is applied to reduce the sensitivity of the maximum likelihood estimator to the initial parameter values. Surprisingly, our results show that the time consistency problem explains the US inflation during the Greenspan chairmanship at the FED.     

Wage,labour mobility and working time effects of profit sharing

This study presents empirical tests of a number of labour market hypotheses related to profit sharing using individual-level data from the German Socio-Economic Panel. It examines questions of differing wage, mobility (inter-and intra-firm) and working time responses under profit sharing as compared to conventional compensation arrangements.

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Zusammenfassung Auf Basis der Daten des deutschen Sozio-ökonomischen Panels werden verschiedene Hypothesen über Wirkungen der Gewinnbeteiligung auf dem Arbeitsmarkt getestet. Im einzelnen geht es um Fragen der Lohndifferenzierung, der inner- und zwischenbetrieblichen Mobilität sowie der Arbeitszeit. Es wird untersucht, ob und in welchem Umfang Effekte von der Gewinnbeteiligung ausgehen.

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We thank anonymous referees for helpful comments.     

Wage Discrimination in India's Informal Labor Markets: Exploring the Impact of Caste and Gender

Although there has been considerable interest in wage discrimination in India, available studies have largely dealt with formal rather than informal markets that are of little relevance for the poorest people. Focusing on India's informal labor markets leads to three findings of interest. First, gender wage discrimination is larger in informal than in formal labor markets, resulting in losses that are larger than receipts from one of the country's most important safety‐net programs. Second, economic growth will not make gender discrimination in wage labor markets disappear. Finally, contrary to what is found for gender, the hypothesis of no significant wage discrimination based on caste cannot be rejected.     

Transactions technology and the time consistency of optimal policy

In a perfect foresight, continuous time model of the macro economy. Turnovsky and Brock (1980) have demonstrated that the government's choice of an optimal policy will be time inconsistent only if it is bound by a k% rule regarding the growth of nominal monetary balances. This result is shown to be invalid when bonds bear a liquidity yield. Under such circumstances, it is shown that all optimal policies are time inconsistent. The conclusion is that the liquidity properties of the government's financing instruments play an important role in determining the consistency properties of its optimal policies.     

Non-parametric test of time consistency: Present bias and future bias

This paper reports the elicited time preference of human subjects in a laboratory setting. The model allows for non-linear utility functions, non-separability between delay and reward, and time inconsistency including future bias in addition to present bias. In particular, the experiment (1) runs a non-parametric test of time consistency and (2) estimates the form of time discount function independently of instantaneous utility functions, and then (3) the result suggests that many subjects exhibiting future bias, indicating an inverse S-curve time discount function.     

Wage causality in the aukrust-efo model : The Australian case

The object of this paper is to test, for the Australian economy, the Aukrust-EFO hypothesis that wage leadership in the economy is provided by workers in the E-sector. The Granger-Sims causality tests are used. We conclude that the Aukrust-EFO assertion is not upheld by these tests. Instead bidirectional causality in the wage determination process is probable.     

Reliability of individual valuations of public and private goods: Choice consistency, response time, and preference refinement

We examined the reliability of a large set of paired comparison value judgments involving public goods, private goods, and sums of money. As respondents progressed through a random sequence of paired choices they were each given, their response time decreased and they became more consistent, apparently fine-tuning their responses, suggesting that respondents tend to begin a hypothetical value exercise with relatively imprecise preferences and that experience in expressing preference helps reduce that imprecision. Reliability was greater for private than for public good choices, and greater for choices between a good and a monetary amount than for choices between two goods. However, the reliability for public good choices was only slightly lower than for the private goods.     

Wage settlements and wage setting: results from a multi-level model

Which dimensions of wage setting differ across establishments applying collective contracts and uncovered establishments? The empirical analysis reported here utilizes German linked employer–employee data for the years 1990, 1995 and 2001 and is restricted to workers without supervisory functions in larger manufacturing firms. Results show that the expected wage of an average worker is higher in firms applying collective contracts, while returns to human capital and the gender wage gap are reduced. Moreover, during the 1990s these effects became stronger.     

Kydland and Prescott's Nobel Prize: the methodology of time consistency and real business cycle models

This paper provides a non-technical and illustrated introduction to the econometric contributions of the 2003 Nobel Prize winners, Robert Engle and Clive Granger, with a special emphasis on their implications for heterodox economists.     

Wage inequality,segregation by skill and the price of capital in an assignment model

Some pieces of empirical evidence suggest that in the U.S., from the 1970s to the 1990s, (i) wage inequality between-plants rose much more than wage inequality within-plants and (ii) there was an increase in the segregation of workers by skill into separate plants. This paper presents a frictionless assignment model in which these two features can be explained simultaneously as the result of the decline in the relative price of capital. Additional implications of the model regarding the skill premium and the dispersion in labor productivity across plants are also consistent with the empirical evidence. The model permits to consider changes in the skill distribution too. Combining these changes with falling capital prices provides a more comprehensive view of the overall trend of wage inequality and of workers' segregation by skill in the data, and it helps explaining some episodes of decreasing wage inequality.     

Wage and price controls in the equilibrium sequential search model

In this paper, we study the effects of wage and price controls on employment, output, and welfare in a simplified version of the Bénabou (J. Econom. Theory 60 (1993) 140) equilibrium sequential search model with bilateral heterogeneity. We show that a price ceiling increases output but the change in welfare depends on three effects: the reduction in aggregate search costs, the increase in surplus due to increased output, and the transfer of production to the least efficient firm. The model is formally identical to a standard equilibrium search model of the labor market so analogous results hold for the minimum wage.     

Exploring the dynamics of the shadow economy across US states

This article examines the dynamics of the shadow economy using data for 50 US states over the period 1998–2008. Using a panel VAR model, we analyse the impulse response of the shadow economy to an orthogonal shock in capital tax rates, educational attainment, union participation and gross state product. We find evidence of significant dynamics underlying the relationship between the shadow economy and its determinants. The results remain robust to alternate measures of the determinants of the shadow economy, alternate causal ordering of the variables in the system and conditioning on the level of income in each state.     

Income distribution dynamics across European regions: Re-examining the role of space

This paper is aimed at exploring the role played by space on the dynamics of regional per capita income disparities in Europe between 1980 and 2005. To do that, an analysis based on the so-called distribution dynamics approach is used as benchmark. Therefore, the external shape of the per capita income distribution and movements within it are examined using both continuous and discrete techniques. This first approach reveals that regional disparities across European regions have decreased over time and, based on the computation of a mobility index, also highlights the existence of a medium mobility degree within the distribution. Subsequently, a spatially conditioned distribution dynamics approach is developed to adequately assess the spatial dimension of the convergence process. In this new approach per capita income of each region is doubly conditioned on its per capita income and the per capita income of its neighbours, both in a previous period. Additionally, a novel mobility index on the basis of a spatial Markov chains approach is devised. The results illustrate the importance of geography in explaining regional per capita income evolution; in particular it is shown that poor regions surrounded by rich regions have a much higher probability of escaping the poverty trap than other poor regions.