Compensation Schemes and Labor Market Competition: Piece Rate versus Wage Rate

We investigate the choice of compensation scheme by firms. Our basic model shows that the unique equilibrium choice for profit maximizing duopsonists in a labor market is for one firm to offer a wage rate and for the other to offer a piece rate. This result arises because the firms recognize that, by offering different compensation schemes, they induce self-selection among workers, which thereby decreases the intensity of competition in the labor market. We find this asymmetry to be robust to allowing for firing, free entry, and a class of more general compensation schemes. When we broaden our model to permit firms to be differentiated in the eyes of workers (either geographically or by "other working conditions," e.g.), we find that our results are preserved when differentiation is low, but that both firms choose to offer a piece rate when differentiation is high.     

Some considerations about 1992

Invited Address at the Twenty-Seventh International Atlantic Economic Conference, March 18–24, 1989, Barcelona, Spain. Partial financial support from CICYT Grants n. PB 86-013 and PB 0340 is gratefully acknowledged.     

TESTING PRICE TAKING IN LOAN AND DEPOSIT MARKETS BY FINANCIAL FIRMS

This paper tests for the failure of price taking in the markets for financial and nonfinancial services. A firm that can purchase or sell an unlimited quantity at the prevailing price is a price taker. This hypothesis is tested using historical data on a sample of eighteen banks, considering financial services, demand deposits, time deposits, labor, cash, materials, and capital. The empirical results indicate little flexibility in the financial technology, whether price taking is imposed on all markets or only on the labor market.     

The Importance of Trade and Geography in the Pattern of Spatial Dependence of Growth Rates

The paper examines the nature of spatial dependence of growth rates across countries. Economic space as well as geographic space is considered as a possible medium through which growth rates may be correlated. The results indicate that the growth rates of developing countries are influenced by the lagged growth rates of their trading partners' growth rates. Industrialized countries' growth rates, on the other hand, display only contemporaneous correlation with others' growth rates that can be explained by the presence of time-specific global shocks. The conclusions seem consistent with a general model of North–South trade with endogenous knowledge-generated growth in the North and imitation, trade-driven growth in the South.     

Central Bank Independence and the Cost of Disinflation: Why the Wage Contracts Length Matters?

Recent empirical contributions demonstrate that countries with less independent central banks enjoy lower output losses during disinflationary cycles. To explain these somewhat surprising empirical findings, some authors suggest that independent central banks probably face a flatter short-run Phillips curve. In this paper, we provide both theoretical and empirical arguments to rationalize this intuition. We demonstrate that, since central bank independence reduces the mean inflation rate and its variance, wage setters opt for a lower degree of nominal wage indexation leading to more wage and price inertia and, thus, to a flatter short-run Phillips curve. Consequently, this paper put forward a channel of positive influence of central bank independence on the sacrifice ratio through its impact on nominal wage indexation. Empirical tests, performed using a sample of 19 OECD countries during the 1960–1990 period, show that these theoretical results hold also empirically.     

How do work-family balance practices affect work-family conflict? The differential roles of work stress

This paper investigates the relationship between employees’ perception of work-family balance practices and work-family conflicts. It examines the role of challenge stress and hindrance stress as moderators. Based on survey data collected from 841 civil servants in Beijing, we found that perceived work-family balance practices may reduce work-family conflict, while challenge and hindrance work stresses were positively related to work-family conflict. In addition, challenge and hindrance stresses differentially moderated the relationship between perceived work-family practices and work-family conflict. When challenge stress is high then work-family balance practices will reduce work-family conflict. However, under high hindrance stress, work-family balance practices will serve to reduce work-family conflict less. More detailed analysis of the configurational dimensions of work-family balance practices (work flexibility, and employee and family wellness care) are also tested. This study provides additional insight into the management of work-family interfaces and offers ideas for future research.     

To Comply or Not To Comply? Pollution Standard Setting Under Costly Monitoring and Sanctioning

In this paper, we characterize optimal regulatory policies composed of a pollution standard, a probability of inspection and a fine for non-compliance, in a context where both monitoring and sanctioning are socially costly, and the penalty may include gravity and non-gravity components at the regulator’s discretion. Under given penalties, the optimal policy entails compliance with the standard as long as a quite intuitive condition is met. Non-compliant policies may include standards even below the pollution levels that minimize the sum of abatement costs and external damages. Interestingly, the appropriate structure of the penalty under non-compliance is highly progressive, while the best possible shape of the fine under compliance is linear. If the regulator is entitled to choose the structure of the fine, linear penalties are socially preferred and the optimal policy induces compliance.      

The Transmission of Sustained Growth through the Terms of Trade in an Endogenous Growth Model

This paper develops a two‐country model of endogenous growth and international trade in intermediate goods. In autarky just one of the economies enjoys sustained growth. The trade situation may be characterized by complete specialization of both countries, or by incomplete specialization of the growing economy. In either case, trade transmits perpetual growth to the stagnant economy because of the permanent improvements in its terms of trade. The existence of a non‐reproducible factor in the growing economy is crucial to ensure propagation of growth. Moreover, under incomplete specialization countries converge in per capita income. This result relies on two assumptions. First, there must be a large enough share of world income to pay for the input in which the stagnant economy has comparative advantage. Second, all technologies producing intermediate goods should be equally intensive in the non‐reproducible factor.