Real-Time Pricing and Imperfect Competition in Electricity Markets*

We analyze the effects of the adoption of real-time pricing (RTP) of electricity when generating firms have market power. We find that an increase in consumers on RTP contracts decreases peak prices and increases off-peak prices, increases consumer surplus (both for switching and non-switching consumers) and welfare, while decreasing industry profits, with these effects being magnified by the extent of market power. We illustrate these results by calibrating our model to the New Zealand electricity market, and find that taking into account the market power of generating firms increases the efficiency gains from RTP adoption by 41%.     

The Economics of Internal Labor Markets

Our essay focuses on the economics of long-term contractual relationships between a firm and its employees, referred to as the internal labor market. We review the economics literature on match-specific investments, risk aversion, asymmetric information, and transaction costs. We argue that an integrated treatment of all four factors is needed in order to apply implicit contract theoy to internal labor markets. Integrating the topics also highlights the tradeoffs created among these factors. Our discussion stresses contract enforcement mechanisms, including self-enforcing contracts and third-party enforcement.     

Internal Labor Markets and Worker Quits

This article uses establishment-level data to explore the impact of internal labor markets on worker quits. Quits are lower where job ladders are long, pay growth from the bottom to the top of job ladders is high, and seniority is used as a criterion for promotion. Using a system of internal promotion without a commitment to seniority is associated with higher worker quits. These results hold true even when controlling for the specific human capital skills of workers, suggesting that personnel factors other than specific training are responsible both for the existence of internal labor markets and for the impact of internal labor markets on worker quits.     

LDC Labor Markets: Applications of Internal Labor Market Theory

This article does not attempt, nor has it delivered, a complete theory for the labor market in Egypt, let alone for LDC labor markets in general. The macro-model developed here serves mainly to demonstrate the diaculties involved in formulating macro-theories for LDC labor markets that, while necessarily simple, can still claim realism when confronted with certain fundamental “stylized h t s. Our considerations have, moreover, been limited to LDCs with mixed economies, using Egypt as the example. Hence, large-scale modern industry was assumed to belong to the public sector which then emerges as the country dominant, nonagricultural employer. Agriculture is the second large and relatively homogeneous sector, in Egypt dominated by small holdings. In-between we find the private, nonagricultural sector, overwhelmingly dominated by small-scale enterprises with large numbers of the self-employed, and with trade as the most important single activity. Labor is (in Egypt) generally unorganized or enrolled in government-controlled unions, active mainly in the public sector and without much real say in matters of wages and salaries. It is in this specific institutional setting that I have tried to discuss the application of internal labor market theory. This theory has, to the best of my understanding, nothing to offer by way of explaining public sector behavior (which is of crucial importance for wage and employment formation in a mixed economy). However, adapted to the circumstances, internal labor market theory goes a long way toward explaining wages and employment in agriculture and the “informal” small-scale sector. Our considerations, tentative though they are, do not point to any single, dominant labor market mechanism that could form the basis for a simple macro-theory. Wage flexibility differs greatly between sectors, overstaEng may be a more important phenomenon than unemployment in some activities, and unemployment may be of both the voluntary and involuntary variety, with withdrawals from the labor market related to well-defined reserve wages, and open unemployment related to internal labor market behavior. These considerations are based more on loose impressions than on solid facts. Further theorizing may be needed, but the development of labor market theory for LDCs has undoubtedly reached a point where progress depends critically upon painstaking empirical studies of basic labor market institutions such as employment and wage forms and responses, bargaining procedures, and conditions of both labor and output markets for small private enterprises in particular countries. Considerable work has been done in India but even here much remains for investigation. Studies of specific countries may, even for LDCs in rapid, turbulent transformation, disclose ongoing changes in institutions that for a full understanding of the labor market may be more important than the institutions themselves. Existing wage theory has little to offer for the analysis of such institutional change, but something may be learned from the American institutional school in labor economics whose leading exponent we are paying homage to with these papers.     

Occupational and Internal Labor Markets in Japan

The distinction between internal and occupational labor markets requires the development of informative indicators that go beyond standard measures such as firm size, which are too vague. This article develops an alternative measure, based on the comparison between firm-specific and occupation-specific tenure, and applies it to Japanese occupational data. We believe that the proposed measure is useful not only in classifying different occupations according to the degree of labor market internalization but also in documenting changes over time in job definition, "reengineering" of the corporation, and the like.     

Gender and Job Search in Developing Country Labor Markets

Gender discrimination in developing country labor markets raises the concern that women may be unable to find alternative employment following public-sector job loss. Theoretical and empirical results in this article suggest that, in segmented labor markets, observed unemployment spells may actually be shorter for women than for men. This is a result of the relatively strong incentive wage-sector discrimination creates for women to accept more readily available, but less-remunerative, nonwage-sector positions.     

On Storage Behavior Under Imperfect Competition,with Application to the American Cheese Market

This paper investigates the economic implications of storage behavior under imperfect competition. It evaluates the economic dynamics implied by a storage firm under alternative market structures. This includes perfect competition as well as imperfect competition under Cournot behavior. The conceptual analysis is used to specify and estimate a model of storage behavior, with an econometric application to the U.S. American cheese market. The empirical results provide statistical evidence of non-competitive storage behavior. They show how the exercise of market power can contribute to reduced stock fluctuations and increased price instability in the U.S. cheese market.      

Opportunities for Revitalizing Stagnant Markets: An Analysis of Household Appliances

For many durable consumer products, the conditions needed for sustained growth in sales seem to have disappeared. Some of these products have reached saturation levels of ownership; others seem to have plateaued at lower levels of ownership. The authors of this article, Professors Clark, Freeman, and Hanssens, have taken a multidisciplinary approach to the analysis of one portion of the consumer durables market—household appliances—to detect the underlying components of demand. They speculate on how these demand components will fare in the coming years and draw implications for the way these markets can be stimulated.     

Labor Market Analysis and Concerted Behavior

In the first part of this paper, the importance of concerted behavior by workers emerges from examination of some prominent theories which set out to explain wage rigidity in the face of declining demand or excess supply without abandoning key elements of competitive theory. In the second part, the imoportance of certain Keynesian and satificing behavioral postulates in motivating concerted worker behavior is suggested by the shortcomings of some contemporary econmic models of the trade union which assume expected utility maximization and accurate knowledge of market conditions under ordinary circumstances.     

Half a Career: Discrimination & Railroad Internal Labor Markets

This paper examines the causes and consequences of the racial structure of railroad internal labor markets in the American South. By 1900, many southern railroads hired blacks almost exclusively for middle-level occupations on their trains but did not permit their promotion to top-level positions. This institutionalized bias in promotion helps explain the employment of whites and blacks at identical jobs but different wages. It also explains why it was impossible for some southern railroads to adopt the seniority-based promotion ladders that had become standard on railroads elsewhere in the United States.     

Opening the Black Box: The Internal Labor Markets of Company X

This paper sets out to analyze an internal data set on a Taiwanese auto dealer employing three distinct types of workers. The effects of jobs and levels are positive on both the salary and bonus equations, albeit smaller under a fixed effects than under OLS; however, when factoring in individual fixed effects, the reductions in the bonus equations are greater than those in the salary equations. With changing economic conditions, any consequent variations are greater in bonuses than in salaries, with the most extreme variations being felt by higher ranking employees than lower-level workers. Promotion premiums between levels are smaller than the average differences in pay, and although wage variations do exist within and between levels, the greater effect is on bonuses rather than salaries. The variations in both salaries and bonuses, defined by the coeffficient variations, are also greater in those years when demand is high, as opposed to years of low demand. Entry and exit behavior is observed at all levels, although it is more likely to occur among the lower levels of the hierarchy. Finally, we present strong evidence in support of the cohort effect. Overall, our findings confirm the prevalence of internal labor market (ILM) theories.     

Industrial Structure and Unemployment in Regional Labor Markets Industrial Structure and Unemployment

Even during periods of moderated national joblessness, certain regions face stubbornly high unemployment. Rust Belt areas are often particularly affected and raise the question of whether such labor markets may not clear even in equilibrium. This article examines evidence from a panel data set of West Virginia counties, along with case-study surveys. The combined findings help provide a better understanding of persistent local unemployment, which appears to be due to nonclearing labor markets.     

Sidney and Beatrice Webb's Institutional Theory of Labor Markets and Wage Determination

Sydney and Beatrice Webb were among the most influential institutional labor economists of the pre‐World War II period yet this portion of their work has fallen out of sight for more than a half‐century. This paper reconstructs the Webbs' theory of labor markets and wage determination and explains how it differs from the rival neoclassical labor theory of Alfred Marshall. Key institutional components of their theory are developed, such as rent theory, institutional pyramid, chain of bargains, inequality of bargaining power, unemployed residuum, and common rule. The Webbs' theory is then used to explain the operation of labor markets and why in the absence of regulation they generate numerous social problems, including widespread poverty wages, excessive work hours and injuries, substantial unemployment, and human capital exploitation. Also described is the set of labor policies the Webbs advocate to solve these problems. Implications for modern labor theory and policy are developed.     

Predicting Household Switching Behavior and Switching Costs at Depository Institutions

This paper uses new survey data to investigate the covariates of self-reported switching costs and switching behavior by deposit account holders. Factors affecting geographic mobility appear to be most important in explaining the duration of deposit relationships. Both younger and older respondents are more likely than others to be at their first bank ever, suggesting a cohort effect in deposit relationships. Households reporting switching costs, net of the benefits from switching, are less likely than others to have stayed with a bank for prices or customer service, suggesting that switching costs may decrease price sensitivity. Switching costs appear more severe for households with high income or education and for households with very low income or minority ethnicity. These findings imply that banking markets characterized by such households may present greater entry costs for new firms.