How to Add Apples and Pears: Non-Symmetric Nash Bargaining and the Generalized Joint Surplus

We generalize the equivalence of the non-symmetric Nash bargaining solution and the linear division of the joint surplus when bargainers use different utility scales. This equivalence in the general case requires the surplus each agent receives to be expressed in compatible, or comparable, units. This result is valid in the case of bargaining over multiple-issues. In addition, we discuss the requirements on the curvatures of the agents’ utility functions, or, in other words, on the bargainers’ attitudes towards risk.Bargaining Problems, Non-Symmetric Nash Bargaining Solution, Linear Sharing

Bargaining Frictions, Labor Income Taxation and Economic Performance

A matching model with labor/leisure choice and bargaining frictions is used to explain (i) differences in GDP per hour and GDP per capita, (ii) differences in employment, (iii) differences in the proportion of part{time work across countries. The model predicts that the higher the level of rigidity in wages and hours the lower are GDP per capita, employment, part-time work and hours worked, but the higher is GDP per hour worked. In addition, it predicts that a country with a high level of rigidity in wages and hours and a high level of income taxation has higher GDP per hour and lower GDP per capita than a country with less rigidity and a lower level of taxation. This is due mostly to a lower level of employment. In contrast, a country with low levels of rigidity in hours and in wage setting but with a higher level of income taxation has a lower GDP per capita and a higher GDP per hour than the economy with low rigidity and low taxation. In this configuration,the level of employment is similar in both economies but the share of part-time work is larger.models of search and matching, bargaining frictions, economic performance, labor market institutions, part-time jobs, labor market rigidities

On the Rewards to International Investing: A Safe Haven Currency Perspective

The safe haven property of the Swiss franc presents a specific challenge for Swiss-based investors in their international investments. The central issue is whether the traditional under performance of Swiss assets is compensated by the currency risk associated with the safe haven and the secular appreciation tendency of the franc. In this paper we review the evidence on the terms of this challenge. We conclude that long-run Swiss-based investors are well compensated for the currency risks they take on, that a Swiss-bias in asset allocation can lead to considerable return shortfalls over the long run, and that systematic currency hedging would not have been historically justified and is unlikely to be in the future

On the Rewards to International Investing: A Safe Haven Currency Perspective

The safe haven property of the Swiss franc presents a specific challenge for Swiss-based investors in their international investments. The central issue is whether the traditional under performance of Swiss assets is compensated by the currency risk associated with the safe haven and the secular appreciation tendency of the franc. In this paper we review the evidence on the terms of this challenge. We conclude that long-run Swiss-based investors are well compensated for the currency risks they take on, that a Swiss-bias in asset allocation can lead to considerable return shortfalls over the long run, and that systematic currency hedging would not have been historically justified and is unlikely to be in the future

Labor Market Performance and Heterogeneity

Labor market performance varies greatly across countries while, within countries, individuals have very different labor market experiences. The purpose of this dissertation is to document these features and propose a modelling framework that can help us understand the observations. In Chapter one, labor market indicators of performance and of institutions for OECD countries are described. They lead to the view that labor market stylized facts are richer and more complex than usually argued. In particular, cross-country differences in labor market performance change when different age groups, different gender groups, different educational groups, and different measures of performance are examined. Furthermore, cross-country differences in institutions greatly vary across countries, and not always in the same direction as our preconceptions suggest. Agent heterogeneity and market frictions are necessary to account for these facts. Chapter two introduces a two-sided search model with ex-ante heterogeneity that generates within-skill wage differences and skill-related unemployment The result is a rich description of equilibrium where labor policies have implications that go beyond their effects on the level of current unemployment and aggregate output. In this model, policies, institutions and individual characteristics may result in more or less unemployment as well as in better or worse sorting of skills. Consequently, the size of the pie - the level of aggregate output - but also the way it is distributed - the degree of wage inequality - are affected in non trivial and interesting ways. Finally, it is shown in Chapter three that the model introduced in Chapter two, augmented with three features, can qualitatively explain differences in GDP per hour and GDP per capita, differences in employment, and differences in the proportion of part-time work between the US, France and the Netherlands. The three elements grafted to the model are labor/leisure choices, with the assumption that firms and workers bargain over both wages and hours, frictions in the bargaining process - firms and workers that are engaged in a match cannot always renegotiate - and cross-country differences in labor income taxation.search and matching,labor market performance,heterogeneity,frictions

Labor Market Performance and Heterogeneity

Professor Jeremy Greenwood, Thesis Advisor. Thesis (Ph.D) - Economics Department, University of Rochester.Labor market performance varies greatly across countries while, within countries, individuals have very different labor market experiences. The purpose of this dissertation is to document these features and propose a modelling framework that can help us understand the observations. In Chapter one, labor market indicators of performance and of institutions for OECD countries are described. They lead to the view that labor market stylized facts are richer and more complex than usually argued. In particular, cross-country differences in labor market performance change when different age groups, different gender groups, different educational groups, and different measures of performance are examined. Furthermore, cross-country differences in institutions greatly vary across countries, and not always in the same direction as our preconceptions suggest. Agent heterogeneity and market frictions are necessary to account for these facts. Chapter two introduces a two-sided search model with ex-ante heterogeneity that generates within-skill wage differences and skill-related unemployment duration. The result is a rich description of equilibrium where labor policies have implications that go beyond their effects on the level of current unemployment and aggregate output. In this model, policies, institutions and individual characteristics may result in more or less unemployment as well as in better or worse sorting of skills. Consequently, the size of the pie - the level of aggregate output - but also the way it is distributed - the degree of wage inequality - are affected in non trivial and interesting ways. Finally, it is shown in Chapter three that the model introduced in Chapter two, augmented with three features, can qualitatively explain differences in GDP per hour and GDP per capita, differences in employment, and differences in the proportion of part-time work between the US, France and the Netherlands. The three elements grafted to the model are labor/leisure choices, with the assumption that firms and workers bargain over both wages and hours, frictions in the bargaining process - firms and workers that are engaged in a match cannot always renegotiate - and cross-country differences in labor income taxation

Integrating search in macroeconomics: the defining years

Our paper studies two attempts at integrating unemployment in macroeconomics. The first, due to Diamond, consists in a search model exhibiting multiple equilibria. The second is due to Andolfatto and Merz who, more or less simultaneously, were able to integrate the matching function in RBC modeling. As a common thread of these two attempts is to be based on the search approach as developed in labor economics, we recount the birth and further development of the search paradigm in a first section. We then analyze Diamond’s, Andolfatto’s and Merz’s contributions. Our interest lies specifically in how they made their way in the development of the field. We show that Diamond’s model, which ambitioned to rival Lucas’s Expectations and the Neutrality of Money model, did not live up to its author’s expectations. We propose an interpretation as to the reason this was so. As to Andolfatto and Merz, while their project was less ambitious, we show that they were able to establish what they were striving at, namely an harmonious integration of one particular search model within the RBC paradigm. The price to be paid, however, was to abandon several constitutive traits of the search approach