Structural change under New Labour

The paper examines specific features of structural change in the UK since 1997, contrasting the decline in industrial jobs with the rise in a variety of service jobs. It examines the proximate causes of structural change, in particular whether the chronically slow growth of manufacturing output in the 1980s has persisted. The implications of this structural change are considered, particularly the effects on the balance of payments and regional employment patterns. The paper suggests that the main impact of government policies on regional employment may have been through the direct and multiplier effects of public expenditure

Optimal incentives with state-dependent preferences

Abstract In both experimental and natural settings incentives sometimes under-perform, generating smaller effects on the targeted behaviors than would be predicted for entirely self-regarding agents. A parsimonious explanation is that incentives that appeal to self-regarding economic motives may crowd out non-economic motives such as altruism, reciprocity, intrinsic motivation, ethical values and other social preferences, leading to disappointing and sometimes even counter-productive incentive effects. We present evidence from behavioral experiments that crowding may take two forms: categorical (the effect on preferences depends only on the presence or absence of the incentive) or marginal (the effect depends on the extent of the incentive). We extend an earlier contribution (Bowles and Hwang, 2008) to include categorical crowding, thus providing a more general framework for the study of optimal incentives and as a result, an expanded range of situations for which the sophisticated planner will (surprisingly) make greater use of incentives when incentives crowd out social preferences than when motivational crowding is absent

An interview with Bob Rowthorn

Filmed and interviewed by Alan Macfarlane on 13 June 2008. Edited by Sarah Harrison.An interview on the life and work of the Cambridge economist Bob Rowthor

Unemployment, Capital-Labor Substitution, and Economic Growth

This paper discusses the influence of economic growth on the equilibrium unemployment rate (NAIRU). It examines how income distribution and the NAIRU are influenced by capital formation, technical progress, and labor force expansion, and how these factors’ impact depends on the elasticity of substitution between capital and labor. The paper distinguishes between the short-run NAIRU when capital stock is exogenous, and the long-run NAIRU when it is endogenous. It also considers how the analysis must be modified to take into account Keynesian ideas concerning the role of aggregate demand. It concludes that unless the capital stock grows in line with labor supply in efficiency units, the short-run NAIRU will increase, reducing the scope for demand stimulation.

Centralized Bargaining, Efficiency Wages, and Flexibility

The main focus of the “wage bargaining” literature has been on the factors promoting real wage flexibility at the macro level. This paper, in contrast, examines the microeconomic issues of wage bargaining. More specifically, this paper appraises the following questions: (a) what are the conditions under which a firm prefers decentralized to centralized bargaining?, (b) what are the characteristic features of firms which prefer decentralized to centralized bargaining?, and (c) has the proportion of firms which prefer decentralized bargaining increased over time? These questions are examined in an efficiency wage model with insider-outsider features. This paper provides useful theoretical insights for understanding the issues involved in shifting from centralized to decentralized wage bargaining.Wage settlements;Economic models;Wage bargaining;bargaining, wage, wages, unemployment, wage determination, wage rate, wage increase, benefits, wage structure, compensation, wage policy, worker, social security, unemployment benefits

Deindustrialization

All advanced economies have experienced a secular decline in the share of manufacturing employment—a phenomenon referred to as deindustrialization. This paper argues that, contrary to popular perceptions, deindustrialization is not a negative phenomenon, but is the natural consequence of the industrial dynamism in an already developed economy, and that North-South trade has had very little to do with deindustrialization. The paper also discusses the implications of deindustrialization for the growth prospects and the nature of labor market arrangements in the advanced economies.