EXCHANGE, RAIDING, AND THE SHADOW OF THE FUTURE

A two-period exchange model is developed where production decisions in the first period determine the amount of resources available in the second period. Each agent allocates resources to defend its production and attack the production of the other agent. Production, conflict and exchange occur simultaneously in a dynamic model. This extends earlier exchange models, which are static and preclude defense and appropriation. The agents jointly determine price through their export decisions. Upon introducing exchange endogenously, raiding in the first relative to the second period decreases with growth, appropriation cost, and when the future becomes more important, and increases with defense cost, production cost, and usability of appropriation. Increasing the usability of appropriation and defense cost causes a transition from pure exchange via joint exchange and raiding to pure raiding. This implies that agents gradually substitute from defense to appropriation, they exchange less, and utility decreases. Utility isoquants in a usability of appropriation versus discount factor diagram are concavely increasing for joint exchange and raiding, and can be convexly decreasing for pure raiding. Cobb-Douglas utilities are assumed. The results are confirmed with CES utilities.Production, Exchange, Trade, Appropriation, Defense, Mutual raiding, Dynamics, Growth, Discounting, Predation, Attack,

The difference between wages and wage potentials: Earnings disadvantages of immigrants in Germany

Immigrants in Germany have poor earnings performance relative to natives. Claiming that human-capital endowments determine earnings potentials rather than actual earnings, a stochastic earnings frontier is estimated and used to seek systematic differences between natives and migrants for GSOEP data for the year 2000. While empirical results clearly support the frontier assumption, natives and immigrants are surprisingly about the same with respect to the frontier. Assuming a half-normal distribution of the wage gap, on average, both groups transform a modest 84% share of their potential income into market earnings. This implies wage inequality can be attributed to human-capital differentials alone. The human-capital endowments of immigrants are largely determined by the very low percentage who have college degrees, their slow assimilation and zero-return on imported experience. The paper also tries to explain individual wage gaps, which are significantly decreased in married subjects raising families, but increased in employees in small- or medium-sized relative to larger firms. However, these variables only make minor contributions to the variance. Copyright Springer 2005assimilation, human capital, immigration, imported skills, stochastic wage frontier, wage gap,

RAISING THE COST OF REBELLION: THE ROLE OF THIRD-PARTY INTERVENTION IN INTRASTATE CONFLICT

This paper presents a simple model to characterize explicitly the role that an intervening third party plays in raising the cost of rebellion in an intrastate conflict. Extending the Gershenson-Grossman (2000) framework of conflict in a two-stage game to the case involving outside intervention in a three-stage game as in Chang et al. (2007b), we examine the conditions under which an outside party optimally intervenes such that (i) the strength of the rebel group is diminished or (ii) the rebellion is deterred altogether. We also find conditions in which a third party optimally intervenes but at a level insufficient to deter rebellion. Such behavior, which improves the incumbent government's potential to succeed in conflict, is overlooked in some conflict studies evaluating the effectiveness of intervention. One policy implication of the model is that an increase in the strength of inter-governmental trade partnerships increases the likelihood that third-party intervention deters rebellion.Intrastate conflict, Third-party intervention, War, Peace,

Coping with Low Pay: Cognitive Dissonance and Persistent Disparate Earnings Profiles

The paper focuses on an employee’s perception of his or her own labour market outcome. It proposes that the basic earnings function, by adopting an approach that ignores perception effects, is likely to result in biased results that will fail to understand the complexities of the wage distribution. The paper uses an orthodox job search framework to illustrate the nature of this problem and then adapts the model to take onboard the theory of cognitive dissonance. The search model indicates how workers may adopt a coping strategy in order to reduce the disutility associated with the wage underpayment that develops. Then, by modelling cognitive dissonance, the paper highlights the weaknesses of using purely human capital proxies to understand labour market outcome. The analysis goes some way to explaining why individuals with equivalent human capital investment can have disparate earnings profiles. Copyright Springer 2004Cognitive dissonance, Job search model, Wage differentials,