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.     

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.     

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.     

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 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.     

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.     

Examining the consistency of spatial association patterns across socio-economic indicators: an application to the Greek regions

This paper addresses an important empirical question for spatial economics that has so far attracted little attention in the literature, namely, how patterns of spatial association differ across socio-economic indicators. This issue is examined here with a large socio-economic dataset from the Greek prefectures. We start by identifying spatial patterns of association in the data through an exploratory spatial data analysis and then explore the persistence of spatial clustering across socio-economic indicators through the application of a number of simple statistical tests. Greece presents an interesting case for examination, given its complex nature of geographical disparities and spatial heterogeneity. The derived results are important for Greek regional policy, as they help highlight yet another dimension of the challenges it faces for regional development, but they are also of particular relevance for applied spatial analysis, as they offer new insights in the analysis of spatial processes. Earlier versions of this paper have been presented in the 2005 RSAI (British and Irish Section) conference in Stratford-upon-Avon and the 2006 International Workshop on Spatial Econometrics and Statistics in Rome. I am thankful to participants in these two conferences for useful comments and suggestions. I have also benefited from comments by Andreas Antoniadis, Giuseppe Arbia, Badi Baltagi, Eckhard Bode, Yiannis Chorianopoulos, Bernard Fingelton, Ian Gordon, Stamatis Kalogirou, Yiannis Kaplanis, Yiannis Psycharis and two anonymous referees. All errors and omissions remain with the author.     

External and internal consistency of choices made in convex time budgets

We evaluate data on choices made from convex time budgets (CTB) in Andreoni and Sprenger (Am Econ Rev 102(7):3333–3356, 2012a) and Augenblick et al. (Q J Econ 130(3):1067–1115, 2015), two influential studies that proposed and applied this experimental technique. We use the weak axiom of revealed preference (WARP) to test for external consistency relative to pairwise choice, and demand, wealth and impatience monotonicity to test for internal consistency. We find that choices made by subjects in the original Andreoni and Sprenger (Am Econ Rev 102(7):3333–3356, 2012a) paper violate WARP frequently; violations of all three internal measures of monotonicity are concentrated in subjects who take advantage of the novel feature of CTB by making interior choices. Wealth monotonicity violations are more prevalent and pronounced than either demand or impatience monotonicity violations. We substantiate the importance of our desiderata of choice consistency in examining effort allocation choices made in Augenblick et al. (Q J Econ 130(3):1067–1115, 2015), where we find considerably more demand monotonicity violations, as well as many classical monotonicity violations which are associated with time inconsistent behavior. We believe that the frequency and magnitude of WARP and monotonicity violations found in the two studies pose important confounds for interpreting and structurally estimating choice patterns elicited through CTB. We encourage researchers employing CTB in present and future experiments to include consistency tests in their design and pre-estimation analysis.     

Wage Drift and the Relevance of Centralised Wage Setting

The system of wage setting in the Nordic countries is often regarded as highly centralised, contributing to considerable real wage flexibility. This view has been questioned, as sizeable wage drift may offset the effect of central negotiations. This paper presents evidence from the four major Nordic countries, suggesting that there is little or no such offsetting effect. Yet, at central negotiations, the institutional system of wage formation may induce nominal rigidities that may prevent wage restraint when there is little room for money wage growth. Empirical evidence supports the existence of nominal rigidity.     

Knowledge, hierarchy and the selection of routines: an interpretative model with group interactions

The aim of this paper is to analyze the selection of routines inside an organizational structure characterized by different cognitive representations and facing hierarchical pressure leading to either truce or conflict. After a brief discussion of the role of hierarchy and the related problems of organizational practice selection in the evolutionary literature, we model the interactions between different groups within a firm trying to interfere with its coordination mechanisms in order to support their own practices. Numerical simulations highlight the different learning abilities present in various organizational set-ups and their related knowledge distribution. It is shown that networking designs are the most profitable organizational configurations because of their dynamics of learning, though they are very sensitive to the truce problem.JEL Classification: L14, L20, L22, B52, D83Correspondence to: Nathalie Lazaric     

Cities, Workers, and Wages: A Structural Analysis of the Urban Wage Premium

Workers earn higher wages in cities vs. rural areas. This gap could arise because cities make workers more productive, or it could be the result of a non-random selection of workers into cities based on their ability and their endogenous history of career choices. To untangle these issues, this paper estimates a dynamic programming model, which embeds the choice of residing in a city or rural area within a model of career choices over time. After controlling for all the sources of selection and endogeneity, the estimates indicate that a given worker does earn more in the city for white-collar work, but not for blue-collar work. In addition, city work experience is found to be worth more than rural work experience in the rural area for white-collar work, but not for blue-collar work. These results support the interpretation that cities make white-collar workers more productive and suggest that workers may consider moving to the city not only in terms of locational choice, but also as a form of human capital investment.     

Trade policy with asset markets: The role of financial structure for time consistency

The present study uses a two-country, two-good, stochastic general equilibrium trade model to analyze the implications of optimal trade policy under uncertainty in the presence of financial markets. Using such a framework, I demonstrate that the policy-active home government, acting to maximize domestic welfare, will always have incentive to revise the previously announced import tariff policy once an asset position is taken by the representative agent in each country engaged in trade. The resulting time-consistent solution will be sensitive to the composition of asset income. Since the fiancial contracts can be combined in an infinite number of ways to yield the same optimal level of asset income, there will exist multiple time-consistent solutions, one for each financial structure. Using a specific log utility function, I also show that for certain financial structures, precommitment solutions will be replicated by time-consistent solutions, a result which marks a significant departure from the standard deterministic framework.     

Luddites, the industrial revolution, and the demographic transition

Technological change was unskilled-labor-biased during the early industrial revolution, but is skill-biased today. This implies a rich set of non-monotonic macroeconomic dynamics which are not embedded in extant unified growth models. We present historical evidence and develop a model which can endogenously account for these facts, where factor bias reflects profit-maximizing decisions by innovators. In a setup with directed technological change, and fixed as well as variable costs of education, initial endowments dictate that the early industrial revolution be unskilled-labor-biased. Increasing basic knowledge then causes a growth takeoff, an income-led demand for fewer but more educated children, and a transition to skill-biased technological change in the long run.     

The Phillips Curve, the IS Curve and Monetary Transmission: Evidence for the US and the Euro Area

In this paper we assess the empirical performance of commonlyused empirical specifications of the baseline New Keynesianmodel for the US and the euro area. We estimate standard specificationsof the model and extended specifications also including non-standarddeterminants of aggregate supply and demand. The results suggestthat based on the standard specifications it is often not possibleto establish a significant link between the monetary policyinstrument and output and inflation. Based on the extended specificationsof the model, which take into account the significant effectof commodity prices on inflation and of house prices on theoutput gap, we are generally able to restore a significant monetarytransmission channel. (JEL E3, E52, C22)