Size, Supervision and Patterns of Labor Transactions

This article has been presented at the Workshop on Methods for Agricultural Policy Analysis held at the UP Los Baños on August 13-14, 1985. It explicitly models the role and determinants of supervision in agricultural production and labor transactions. This, in turn, is used to predict the patterns of labor transactions with and without supervision.labor force, labor market, economic growth, agriculture sector

The Architecture of Economic Systems: Hierarchies and Polyarchies

This paper presents some new perspectives on the structure and performance of alternative economic organizations. We posit that decision makers make errors of judgement (for example, they sometimes select bad projects while rejecting good projects), and that how these errors are aggregated within different organizations depends on their architecture (for example, on how individuals are organized together). Using this framework, we compare the performances of two polar forms of organizations: hierarchies and polyarchies. Assuming judgmental abilities of individuals are similar in the two systems, we show that polyarchies accept a larger proportion of bad projects (compared to hierarchies) whereas hierarchies reject a larger proportion of good projects. We then determine the conditions under which polyarchies have higher or lower expected profit. The conditions under which polyarchies perform better appear to be more plausible and, moreover, this conclusion holds also in the case where the rules for accepting or rejecting projects are rationally determined based on the information available to individuals. The architecture of organizations also affects their portfolio of available projects; we determine conditions under which polyarchies have better or worse portfolios compared to those available to hierarchies.There are many possible extensions of our approach. Among them are the analysis of internal structure of firms, selection of managers (by other managers) and the reproduction and self-perpetuation of organizations over time.

The Economics of Price Scissors

We analyze consequences of changing the terms of trade between agriculture and industry on capital accumulation and on welfare of workers in different sectors. The issue was central to Soviet industrialization debate and it remains important in today's developing world. Through a simple general equilibrium model, we show that a price squeeze on peasants increases accumulation (as Preobrazhensky argued), but it makes both urban and rural workers worse-off (contrary to Preobrazhensky's contention). The desirable changes in terms of trade are shown to depend on intertemporal valuations, but, within a range, not on rural-urban welfare trade-off. Our characterization of the optimal terms of trade is remarkably simple, in which the roleof welfare weights and of relevant empirical parameters are easily as certained.We then extend our analysis to economies with labor mobility and unemployment and, using a simple model with rigid industrial wage, show that the optimal terms of trade entail a tax on urban sector,a subsidy to rural sector, and a level of urban employment such that the urban wage exceeds the marginal product of urban worker.

The Social Cost of Labor, and Project Evaluation: A General Approach

This paper develops a general methodology for analyzing shadow wage (and other shadow prices). Our approach is to identify those reduced form relationships describing the economy which are central to the determination of the shadow wage, and use these to obtain simple formulae for the shadow wage. Among the aspects of the economy on which we focus are: (i) the difference between the domestic and international prices, (ii) the equilibrating mechanisms in the economy, (iii) the mechanisms which determine earnings of industrial and agricultural workers, (iv) the nature of migration, and (vi) the intertemporal trade-offs and the attitudes towards inequality. These aspects are modelled in a general manner, which can be specialized to a number of alternative hypotheses concerning technology, behavioral postulates, and institutional settings. Most earlier results on the shadow wages are derived as special cases of our formulae. In addition, we identify a number of new qualitative results concerning the relationship between the shadow wage and the market wage.

The Invariance of R&D to the Number of Firms in the Industry

Thi spaper presents certain remarkably simple results concerning market's allocation to R&D and its comparison to socially efficient allocations. We posit that a firm can undertake more than one project aimed at the same innovation, and consider a product market characterized by Bertrand competition. Among the results we obtain is that the market R&D (that is, the number of projects undertaken, and the effort spent on different projects) is invariant to the number of firms. We also examine the effects of the number of firms on the gains from innovation to consumers, firms, and society, and show, in particular, that the market undertakes less R&D than is socially desirable.