Employment response to supply and demand shocks under envy in wage formation

Summary We analyse the impact of wage envy on employment and on its sectorial allocation. A multi-sector general equilibrium model in which externalities among sectors arise through wage envy and decentralized bargaining is presented. In the no externality case, sectorial employment is a function of sectorial productivity and of the disutility of work. In the externality case, sectorial employment is additionally affected by union power in all sectors (with a negative sign even though bargaining is efficient), by the productivity in the other sectors (with an undetermined sign) and by the relative average propensity to consume goods of this sector (with a positive sign).Rijksuniversiteit Limburg, FNRS and Université Catholique de Louvain. I would like to thank Franz Palm for valuable comments on an earlier draft. This paper benefitted also from discussions with Torben Andersen, Jacques Drèze and Henri Sneessens (without implying them in any mistake). The detailed comments of the anonymous referee contributed to a large extent to clarify the exposition of the model.     

Do brain drain and poverty result from coordination failures?

The bidirectional causal links between high-skilled emigration and poverty can give rise to multiple equilibria and coordination failures. Two countries sharing identical characteristics may end up in either a “low poverty-low brain drain” equilibrium or in a “high poverty-high brain drain” equilibrium. In this paper, we build a model which endogenizes high-skilled emigration and economic performances in order to derive the conditions under which multiplicity occurs. After identifying country-specific parameters, we find that in the majority of developing countries, the best equilibrium is selected and that the observed brain drain is inevitable. In 22 small developing countries however, the worse equilibrium prevails, implying that poverty and brain drain are increased by coordination failure. These countries require appropriate development policies, such as a temporary subsidization of the repatriation of their high-skilled expatriates. Our results are robust to the inclusion of a brain gain mechanism.     

Product Patent Reform and its Impact on Korea's Pharmaceutical Industry

Our analysis focuses on the effect of U.S. government pressure on Korea to adopt product patents for chemical and pharmaceutical products. American pressure began in November 1985 and ended with the Korean Legislature's passage of a new patent law in December 1986. We conduct an event study of the effect of the new patent law on the value of Korean pharmaceutical firms listed on the Korea Stock Exchange. Regression analysis shows that the new law induced excess returns of-74 percent over the 14-month analysis period. The results suggest that adoption of stronger patent laws reduced Korea's wealth. [G14, O34]     

POPULATION POLICY THROUGH TRADABLE PROCREATION ENTITLEMENTS*

One of the first tradable rights proposal is Boulding's (The Meaning of the Twentieth Century, London: George Allen and Unwin Ltd, 1964 ), dealing with overpopulation. We discuss both tradable procreation allowances and exemptions domestically and globally, to address underpopulation as well. We focus on three effects. Notably, the rights' tradability entails that whereas exemptions or expensive enough allowances benefit the poor, cheap allowances benefit the rich. A natalist policy also worsens the average education level of the next generation, whereas population control enhances it. Also, if procreation rights are grandfathered to countries, the scheme redistributes further. Our analysis suggests that procreation entitlements may be efficient in controlling population, without being necessarily anti‐redistributive.     

WAGE BARGAINING WITH A PRICE-SETTING FIRM

This paper examines the introduction of monopolistic competition into wage bargaining models: in addition to capital-labour substitution, we also consider a cost-push effect. The right-to-manage model requires strong restrictions on the objective functions and leads to problematic conclusions because the wage claims of the union are generally not compatible with the mark-up requirement contained in the firm's price equation. In the efficient bargaining model, the union negotiates also the employment level, which gives it a way of extracting part of the monopoly rent: the firm's commitment to an efficient wage-employment combination forces it to follow a pricing rule such that part of the surplus is transferred to the union.     

How Should the Allocation of Resources Adjust to the Baby Bust?

We analyze the impact of a drop in fertility on the optimal allocation of resources in an overlapping generations economy where old workers care about leisure. We also characterize optimal dynamics and study the decentralization of the optimum by means of inter‐generational transfers and/or public debt. We conclude that the policy recommendations of postponing retirement is fragile and depend on preferences and technologies. Also, even when the optimal adjustment of public debt goes into the expected direction in the long run—i.e., public debt should decrease—this may not be the case during the transition.     

Early Mortality Declines at the Dawn of Modern Growth*

We explore the hypothesis that demographic changes which began in the seventeenth and eighteenth centuries are at the root of the acceleration in growth rates at the dawn of the modern age. During this period, life tables for Geneva and Venice show a decline in adult mortality; French marriage registers reveal an important increase in literacy; historians measure an acceleration of economic growth. We develop an endogenous growth model with a realistic survival law in which rising longevity increases individual incentives to invest in education and fosters growth. We quantitatively estimate that the observed improvements in adult mortality account for 70% of the growth acceleration in the pre‐industrial age.     

From First Canoe to Statehood: Eight Hundred Years of Economic and Political Change in Hawaii

The Hawaiian archipelago was the last major land area on the planet to be settled, with Polynesians making the long voyage just under a millennium ago. Building on new archaeological and historical research, the lecture provides an overview of the economic and political history of Hawai‘i from the first Polynesian settlements in the thirteen century through U.S. colonisation and statehood. The analysis considers how the political and economic institutions that emerged and evolved in Hawai‘i during its centuries of global isolation changed in response to Hawai‘i's post-1778 integration into a new world of global markets and colonial politics.     

Structural Changes in the Labor Market and the Rise of Early Retirement in France and Germany

The rise of early retirement in Europe is typically attributed to the European system of taxes and transfers. A model with an imperfectly competitive labor market allows us to consider also the effects of bargaining power and of matching efficiency on pre‐retirement. We find that lower bargaining power of workers and declining matching efficiency have been important determinants of early retirement in France and Germany. These structural changes, combined with early retirement transfers and population aging, are also consistent with the employment and unemployment rates, labor share and seniority premia.     

Intellectual Property Rights in China: The Changing Political Economy of Chinese–American Interests

We review the evolution of modern Chinese intellectual property right (IPR) laws and enforcement and explore economic and political forces involved in international conflicts over Chinese IPR protection. Our analysis considers why the US and China moved from conflict to cooperation over intellectual property rights. Structural and institutional aspects of the political economy of IPRs within each country are considered, and data on Chinese‐US trade in intellectual property‐intensive goods are examined. We conclude that although enforcement of IPRs within China continues to be relatively weak, Chinese IPR institutions are converging on those in the OECD nations.