Coordination of Mobile Labor

We study coordination failures in many simultaneously occurring coordination problems. Players encounter one of the problems but have the outside option of migrating to one of the remaining ones. Drawing on the global games approach, we show that such a mobile game has a unique equilibrium that allows us to examine comparative statics. The endogeneity of the outside option value and of the migration activity leads to non-monotonicity of welfare with respect to mobility friction; high mobility may hurt players. We apply these “general equilibrium” findings to the problem of the labor market during industrialization as described by Matsuyama [11].Coordination, General Equilibrium, Global Games, Globalization, Industrialization, Mobility.

Coordination of mobile labor

We study coordination failures in many simultaneously occurring coordination problems. Players encounter one of the problems but have the outside option of migrating to one of the remaining ones. Drawing on the global games approach, we show that such a mobile game has a unique equilibrium that allows us to examine comparative statics. The endogeneity of the outside option value and of the migration activity leads to non-monotonicity of welfare with respect to mobility friction; high mobility may hurt players. We apply these “general equilibrium” findings to the problem of the labor market during industrialization as described by Matsuyama [Increasing returns, industrialization and indeterminacy of equilibrium, Quart. J. Econ. 106(1991) 617–650]

Fighting Tax Competition in the Presence of Unemployment: Complete versus Partial Tax Coordination

In this paper, we analyze the welfare consequences of tax coordination agreements which cover taxes on mobile capital and immobile labor, respectively. In doing so, we take into account two important institutional details. First, we incorporate decentralized wage bargaining, giving rise to involuntary unemployment. Second, we distinguish between complete tax coordination, which effectively covers both tax instruments, and the more plausible case of partial tax coordination, where one tax is marginally increased by all countries, while the other tax rate can still be freely chosen by all countries. It is shown that complete tax coordination remains to be welfare enhancing in the presence of unemployment. In contrast, for partial tax coordination, the welfare effects become ambiguous and are different to the case of competitive labor markets

Globalization and Redistribution: Feasible Egalitarianism in a Competitive World

A reduction of impediments to international flows of goods, capital and professional labor is thought to raise the economic costs of programs by the nation state (and labor unions) to redistribute income to the poor and to provide economic security. But some of the more politically and economically successful examples of such policies --for example Nordic social democracy and East Asian land reform-- have occurred in small open economies which would, on the above account, provide a prohibitive environment for egalitarian interventions. I present a model of globalization and redistribution to answer the following question: in a liberalized world economy, what programs of egalitarian redistribution and social insurance are implementable by democratic nation states acting independently? While in the absence of international coordination, globalization indeed makes it difficult for nation states to affect the relative (after tax) prices of mobile goods and factors of production and for this and other reasons may limit the effectiveness of some conventional strategies of redistribution, a large class of state and trade union interventions leading to substantial improvements in the wages, employment prospects, and economic security of workers is not ruled out by globalization. Included are redistributions of assets which provide efficient solutions to incentive problems arising in principal agent relationships such as wage employment, farm and residential tenancy.

Coordination of Capital Taxation Among a Large Number of Asymmetric Countries

We examine international fiscal coordination in a world where markets are integrated but national governments are sovereign. Consequences of the liberalization of the capital market on national fiscal policies and possible remedies to resulting ine¢ciencies are analyzed. A simple model, with N countries where competitive firms produce an homogeneous good using mobile capital and immobile labor is considered. Fiscal competition arises between governments that have to tax capital and labor in order to raise fixed amount of revenue. It is shown that capital mobility improves the capital allocation among countries as it enables capital owners to invest it in the country where capital is scarce. But fiscal competition leads to asymmetric capital taxation among countries and thus to a distortion on the international capital market. Two fiscal reforms are considered: the introduction of a minimum capital tax level and the imposition of a tax range, i.e. a minimum plus a maximum capital tax level. We show that the minimum tax reform is never prefered to fiscal competition by all countries while tax range reforms are unanimously accepted when it imposes convergence to the extreme taxes and it does not change the international remuneration of capital.fiscal policy;capital markets;economic integration

Collective Bargaining under EMU: Lessons from the Italian and Spanish Experiences, CES Working Paper, no. 72, February 2000

This paper seeks to shed light on the question of the likely evolution of collective bargaining in Europe under EMU by considering the experiences of two countries (Italy and Spain) in which governments and social actors attempted to decentralized collective bargaining during the 1980s only to opt in favor of a re-centralization of bargaining during the 1990s. The paper argues that the experiences of Italy and Spain offer two kinds of insights for our understanding of the future evolution of wage bargaining in the EU. On the one hand, they illustrate why governments and social actors may come to favor a consolidation of the structure of bargaining under EMU rather than opt for a further decentralization of bargaining. On the other hand, they also suggest that any such process of consolidation faces great obstacles in moving beyond the national level. The recent experiences of Italy and Spain thus lead us to conclude that the most likely outcome in the EU is that of a reaffirmation of the national and national/sectoral-levels of bargaining within member states, rather than either a radical decentralization of bargaining across the EU, or an effective shift to EU-level bargaining

Can Partial Fiscal Coordination Be Welfare Worsening? A model of tax competition

Most work on tax competition argues that mobile factors tend to be undertaxed except if there is coordination of tax policies. Full coordination is not however always feasible, and as a consequence some measures of partial coordination have been proposed such as minimal witholding taxes on interest income. We show that partial coordination can be in some instances welfare worsening and that then no coordination is to be preferred.tax competition, tax coordination, witholding tax

Fighting Poverty, Profitably: Transforming the Economics of Payments to Build Sustainable, Inclusive Financial Systems

The Gates Foundation's Financial Services for the Poor program (FSP) believes that effective financial services are paramount in the fight against poverty. Nonetheless, today more than 2 billion people live outside the formal financial sector. Increasing their access to high quality, affordable financial services will accelerate the well-being of households, communities, and economies in the developing world. One of the most promising ways to deliver these financial services to the poor -- profitably and at scale -- is by using digital payment platforms.These are the conclusions we have reached as the result of extensive research in pursuit of one of the Foundation's primary missions: to give the world's poorest people the chance to lift themselves out of hunger and extreme poverty.FSP conducted this research because we believe that there is a gap in the fact base and understanding of how payment systems can extend digital services to low income consumers in developing markets. This is a complex topic, with fragmented information and a high degree of country-by-country variability. A complete view across the entire payment system has been missing, limiting how system providers, policy makers, and regulators (groups we refer to collectively as financial inclusion stakeholders) evaluate decisions and take actions. With a holistic view of the payment system, we believe that interventions can have higher impact, and stakeholders can better understand and address the ripple effects that changes to one part of the system can have. In this report, we focus on the economics of payment systems to understand how they can be transformed to serve poor people in a way that is profitable and sustainable in aggregate

Country characteristics and the incidence of capital income taxation on wages: an empirical assessment

This paper examines the incidence of corporate income taxes on wages using data from the US Bureau of Labor Statistics for 13 OECD countries. Within a wage-bargaining framework, our econometric analysis shows that a substantial share of the corporate tax burden is shifted from capital to labour. However, the magnitude of this shift is influenced importantly by country characteristics affecting the process of wage determination, such as the degree of capital mobility, a country's relative influence over the world price of output and trade unions’ strength