Missing Market in Labor Quality: The Role of Quality Markets in Transition

This paper characterizes a key feature of the classic socialist economy and state-owned enterprise, namely that of missing markets in labor quality. Under the socialist regime in which students and workers were assigned to work units, the rights of managers to monitor and reward workers were limited. The exchange of labor services was based more on measures of quantity rather than quality. Workers who performed functions broadly consistent with that of their assigned occupations for the duration of the designated workweek received the standard wage. With the reassignment of property rights, this situation has changed. Students and workers have resumed control over the accumulation of their human capital the trade of skill and effort. Managers have acquired greater authority to monitor labor - to discriminate in setting wages and bonuses and to hire and fire - as well as stronger incentives to use this authority to raise efficiency and profits. The result is an emerging market in labor quality.A 1995 cross section of enterprise data spanning 10 ownership types is used to test the hypothesis of an emerging labor quality market. The results show that certain non-state forms of ownership, in which the rights of managers to monitor and reward skill and effort are presumed to be relatively well developed, encourage labor quality, most notably training, which raises productivity. The relative inability of state enterprises to monitor and reward high quality labor is likely to create an adverse selection problem in which the most skilled and motivated workers exit from the state sector, so as to cause a "hollowing" of skilled workers and weakened enterprise performance. The theoretical contribution of this paper is to generalize Coase's analysis of the critical role of property rights in creating resource markets to the creation and exchange of quality in all goods. Analytically, the conditions for a missing market in labor quality are equivalent to those for a missing market in pollution abatement and water quality. The analysis underscores the importance of property rights in creating the conditions for the accumulation and efficient exchange of human capital.http://deepblue.lib.umich.edu/bitstream/2027.42/39645/3/wp260.pd

Missing Market in Labor Quality: The Role of Quality Markets in Transition

This paper characterizes a key feature of the classic socialist economy and state-owned enterprise, namely that of missing markets in labor quality. Under the socialist regime in which students and workers were assigned to work units, the rights of managers to monitor and reward workers were limited. The exchange of labor services was based more on measures of quantity rather than quality. Workers who performed functions broadly consistent with that of their assigned occupations for the duration of the designated workweek received the standard wage. With the reassignment of property rights, this situation has changed. Students and workers have resumed control over the accumulation of their human capital the trade of skill and effort. Managers have acquired greater authority to monitor labor - to discriminate in setting wages and bonuses and to hire and fire - as well as stronger incentives to use this authority to raise efficiency and profits. The result is an emerging market in labor quality.A 1995 cross section of enterprise data spanning 10 ownership types is used to test the hypothesis of an emerging labor quality market. The results show that certain non-state forms of ownership, in which the rights of managers to monitor and reward skill and effort are presumed to be relatively well developed, encourage labor quality, most notably training, which raises productivity. The relative inability of state enterprises to monitor and reward high quality labor is likely to create an adverse selection problem in which the most skilled and motivated workers exit from the state sector, so as to cause a "hollowing" of skilled workers and weakened enterprise performance. The theoretical contribution of this paper is to generalize Coase's analysis of the critical role of property rights in creating resource markets to the creation and exchange of quality in all goods. Analytically, the conditions for a missing market in labor quality are equivalent to those for a missing market in pollution abatement and water quality. The analysis underscores the importance of property rights in creating the conditions for the accumulation and efficient exchange of human capital.transition, markets in labor quality, adverse selection, Chinese enterprise reform

The determination of equivalent bearing loading for the BSMT that simulate SSME high pressure oxidizer turbopump conditions using the SHABERTH/SINDA computer programs

The MSFC bearing seal material tester (BSMT) can be used to evaluate the SSME high pressure oxygen turbopump (HPOTP) bearing performance. The four HPOTP bearings have both an imposed radial and axial load. These radial and axial loads are caused by the HPOTP's shaft, main impeller, preburner impeller, turbine and by the LOX coolant flow through the bearings, respectively. These loads coupled with bearing geometry and operating speed can define bearing contact angle, contact Hertz stress, and heat generation rates. The BSMT has the capability of operating at HPOTP shaft speeds, provide proper coolant flowrates but can only apply an axial load. Due to the inability to operate the bearings in the BSMT with an applied radial load, it is important to develop an equivalency between the applied axial loads and the actual HPOTP loadings. A shaft-bearing-thermal computer code (SHABERTH/SINDA) is used to simulate the BSMT bearing-shaft geometry and thermal-fluid operating conditions

Some thoughts on the role of the Reserve Banks

Monetary policy ; Monetary policy - United States

The federal budget's effects on intergenerational equity: undone or not undone?

Deficit financing ; Budget ; Income distribution

An Investigation of Firm-Level R&D Capabilities in East Asia

This paper uses a survey of 1,826 firms distributed over ten East Asian metropolitan areas – Jakarta, Kuala Lumpur, Manila, Seoul, and five Chinese cities – to investigate the sources of firm-level R&D capabilities. The analysis identifies the impact of 23 survey variables, classified by openness, human capital, R&D network, and institutional quality, on the efficiency of firm R&D operations and on overall firm performance. These firmlevel results are used to construct composite measures R&D capabilities for each of the 10 metropolitan economies. Using the firm samples, returns to R&D are also estimated for each of the metropolitan areas. Where cross economy comparisons are possible, as they are for Seoul and the five Chinese cities, we find a strong association between overall R&D productivity in these city economies and the composite measures of citywide R&D capabilities. In particular, high composite measures in Seoul and Shanghai are associated with high returns to R&D in those cities. The large productivitywage gaps in the Chinese cities appear to be attracting large and visible investment in R&D operations. Whether R&D wages rise to narrow this gap or investment and technology flows continue to sustain the gap will substantially affect the pattern of R&D operations within the Asian region.http://deepblue.lib.umich.edu/bitstream/2027.42/39969/3/wp583.pd

The Soft Path for Water

There are two primary ways of meeting water-related needs, or more poetically, two paths. One path -- the "hard" path -- relies almost exclusively on centralized infrastructure and decision making: dams and reservoirs, pipelines and treatment plants, water departments and agencies. It delivers water, mostly of potable quality, and takes away wastewater. The second path -- the "soft" path -- may also rely on centralized infrastructure, but complements it with extensive investment in decentralized facilities, efficient technologies, and human capital.1 It strives to improve the overall productivity of water use rather than seek endless sources of new supply. It delivers diverse water services matched to the users' needs and works with water users at local and community scales. This chapter tells the tale of these paths up to the present. Decisions made today, and actions of future generations, will write the conclusion of the story

What Does the NAEP Tell Us About Student Achievement in Arkansas?

This brief discusses the most recent and historical NAEP data in math, science, reading, and writing. Arkansas’ NAEP results are compared to national and border state averages. Based on the most recent NAEP exams, Arkansas is performing slightly below the national average in reading, math, science, and writing. There is also data to support that Arkansas students perform less well in Grade 8 than in Grade 4 when compared to the national and border state averages. Arkansas, however, is among the highest performing states with regard to change over the last decade. Since 1992, Arkansas has gained on the national and border state averages. In addition, Arkansas’ black-white and Hispanic-white achievement gaps in reading and math are lower than over half of participating states

Chinese Enterprise Reform as a Market Process

The reform of China's enterprise system increasingly reflects the outcome of China's emerging property rights market. We distinguish between a centrally-directed reform strategy, with characteristics similar to those of a Pigouvian tax, and a market-driven reform process, which captures the essential features of a Coasian approach to social cost. The Coase Theorem postulates that eliminating transaction costs and attaching well specified property rights to public goods that generate externalities will allow uncoordinated economic agents to negotiate institutional arrangements that produce socially efficient allocation of resources. Extending Coase's reasoning to the case of socialist transition ' we argue that reforms that expand competition, move toward well-specified assignment of ownership rights to public enterprises, and reduce transaction costs will motivate the "ultimate" owners, including officials of national and sub-national government agencies, to reconfigure their assets or to combine their assets with those of other jurisdictions and/or private investors to create more efficient ownership arrangements. We review the extent to which China's reforms have established the conditions for an effective market in ownership rights to industrial property. We tabulate progress from 1 980 to present along the three major analytic dimensions inherent in Coase's analysis: competition, property rights, and transaction costs. We conclude that the sheer size and diversity of China's industrial economy will motivate a continuation of decentralized reform initiatives. To support this Coasian reform process, central and provincial governments need to expand initiatives to clarify property rights, particularly the right of alienation, reduce impediments to competition, and facilitate the reduction of transaction costs.http://deepblue.lib.umich.edu/bitstream/2027.42/39466/3/wp76.pd