On Custom

Custom is a key factor for economic performance. Social and economic institutions build on it. The purpose of this paper is to reflect on the motivational force of custom per se, as brought about by history. History creates entitlements, and these influence behavior. Custom is thus understood as a set of behavioral dispositions inherited from the past. In this, the present considerations deviate from earlier approaches that take custom as being stabilized by external rewards and sanctions alon

Selection Wages: An Illustration

Offering higher wages may enable firms to attract more applicants and screen them more carefully. If firms compete in this way in the labor market, "selection wages" emerge. This note illustrates this wage-setting mechanism. Selection wages may engender unconventional results, such as a pre-tax wage compression induced by the introduction of a progressive wage tax

A Robinsonian Approach to Discrimination

Bei der Festsetzung des Lohnsatzes für eine bestimmte Tätigkeit wird die Unternehmung den Lohnsatz weder unnötig hoch wählen noch so gering , dass es unwahrscheinlich wird, eine geeignete Arbeitskraft zu finden. So werden die Lohnsätze unter Berücksichtigung ihres Einflusses auf die Wahrscheinlichkeit einer erfolgreichen Stellenbesetzung optimal fixiert. Wenn Indikatoren wie Geschlecht oder Rasse typischerweise mit unterschiedlichem Angebotsverhalten verknüpft sind, wird die Lohnsetzung der Unternehmung zu Diskriminierung gemäß diesen Indikatoren führen. Der Ansatz kann als eine moderne Neuformulierung der Diskriminierungstheorie von Joan Robinson verstanden werden. Er führt zu mathematisch identischen Gleichgewichtsbedingungen, allerdings mit abweichender Interpretation und unter Vermeidung einiger Schwierigkeiten des ursprünglichen Ansatzes. Innerhalb des entwickelten Rahmens lässt sich die Möglichkeit langfristig anhaltender Diskriminierung aufweisen und so ein Beitrag zur Erklärung eines Phänomens leisten, das für andere Ansätze (Joan Robinson's eingeschlossen) gewisse Schwierigkeiten biete

Labour Turnover, Wage Structure, and Natural Unemployment

A firm may reduce its turnover and the entailed turnover costs by raising wages. A rise in unemployment reduces turnover and turnover costs in a similar way. The interaction of these effects leads – in presence of perfectly flexible wages – to a stable equilibrium in the labor market which clears the market but accidentally. Unemployment increases with increases in labor mobility. Wage differentials arise between perfectly identical workers working in different firms that face different turnover costs

A Variant of Uzawa's Theorem

Uzawa (1961) has shown that balanced growth requires technological progress to be strictly Harrod neutral (purely labor-augmenting). This paper offers a slightly more general variant of the theorem that does not require assumptions about savings behavior or factor pricing and is much easier to prove

Marshall, Keynes, and Macroeconomics

Marshall's notion of the representative firm can be read as a macro notion with some resemblance to Keynes' aggregative concepts. Keynes' notions of aggregate demand and aggregate supply are fashioned after Marshall's definitions of demand and supply. Keynes starts with the Marshallian equilibrium notion. The main innovation of Keynes--a conception of macroeconomic analysis as distinct from microeconomic analysis--may be understood as a particular application of Marshall's moving equilibrium method

Normality as a Theoretical Concept

This note comments briefly on Mehdad Vahabi's article on Alfred Marshall's concept of "Normal Value." It points out, in particular, the relationship between normality and equilibrium in the context of Marshall's moving equilibrium method