Urban search models under high-relocation costs. Theory and application to spatial mismatch

We develop a search-matching model in which mobility costs are so high that it is too costly for workers to relocate when a change in their employment status occurs. We show that, in equilibrium, wages increase with distance to jobs and commuting costs because firms need to compensate the transportation cost difference between the employed and unemployed workers at each location in the city. We also show that the equilibrium land rent is negatively affected by the unemployment benefit because an increase in the latter induce firms to create less jobs, which, in turn, reduces the competition in the land market. We then use this model to provide a mechanism for the observed spatial mismatch between where black workers live and where jobs are. We finally show that a transportation policy consisting in subsidizing the commuting costs of black workers can increase job creation and reduce unemployment if the level of the subsidy is set at a sufficiently high level.     

Job matching, social network and word-of-mouth communication

Workers can find a job either directly or through personal contacts. From this micro scenario, we derive an aggregate matching function that has the standard properties but fails to be homogeneous of degree one. We show that, when the network size increases, on average, the unemployed workers hear about more vacancies through their social network. However, above a certain critical value, job matches decrease with network size. We then establish existence and uniqueness of the labor market equilibrium and study its properties. Finally, we demonstrate that the decentralized market equilibrium is not efficient because of both search and network externalities.     

Temporary financial equilibrium

Summary. In a two-period pure exchange economy with financial assets, a temporary financial equilibrium is an equilibrium of the current spot and security markets given forecast functions of future prices and payoffs. The temporary equilibrium model can then be interpreted as an Arrow-Debreu economy where preferences depend on prices. This identification implies, among other consequences, the existence and the generic determinateness of the financial temporary equilibria associated with given forecast functions. Received: December 29, 1999; revised version: December 20, 2001     

The Post-Apartheid Development Debacle in South Africa: How Mainstream Economics and the Vested Interests Preserved Apartheid Economic Structures

Nelson Mandela and the African National Congress (ANC) were persuaded by mainstream economists and South African businesses to pursue neoliberal policies. The ANC implemented policies that made South Africa more open to international trade and financial flows along with privatization and austerity, other than a modest increase in social expenditures. After twenty-three years of such policies, we can judge their effectiveness. Unfortunately, neoliberalism worsened the inequality created under apartheid and failed to stimulate significant growth and development. This article documents the extent to which the maintenance of key apartheid-era institutions, under the guise of “market friendly policies,” undermined the prospects for long-term economic and human development in South Africa. This post-apartheid development debacle should go down in history as one of the great failures of mainstream economics and its neoliberal policy recommendations. Breaking the cycle of uneven development in South Africa will require fundamental changes in institutions, including changes in democracy, ownership structures, and the very nature of the economic system. This article offers some ideas for how an adjusted institutional structure might reconfigure the social provisioning process in South Africa to address racial divisions and lingering inequality.     

Intelligence, Human Capital, and Economic Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach

Human capital plays an important role in the theory of economic growth, but it has been difficult to measure this abstract concept. We survey the psychological literature on cross-cultural IQ tests and conclude that intelligence tests provide one useful measure of human capital. Using a new database of national average IQ, we show that in growth regressions that include only robust control variables, IQ is statistically significant in 99.8% of these 1330 regressions, easily passing a Bayesian model-averaging robustness test. A 1 point increase in a nation’s average IQ is associated with a persistent 0.11% annual increase in GDP per capita.     

Attitudes Towards Paying Taxes in Austria: An Empirical Analysis

People mostly pay their taxes although there is a low probability of getting caught and being penalized. Thus, new attempts in the tax compliance literature try to go beyond standard economic theory. This paper examines citizens attitudes toward paying taxes – what is sometimes termed their tax morale, or the intrinsic motivation to pay taxes. Tax morale may be a key determinant to explain why people are honest. However, there are very few papers that explore the concept of tax morale theoretically and empirically. This study, based on the World Values Survey and the European Values Survey, therefore attempts to fill this gap in the literature, focusing on tax morale in Austria. Societal variables such as trust or pride have been identified as key determinants that shape tax morale in Austria. Furthermore, a lower perceived compliance leads to a decrease of tax morale, which indicates that social comparisons are relevant. The results also show a decrease of tax morale between 1990 and 1999, although Austrias taxpayers still have a very high tax morale compared to other European countries.