Pay growth, fairness and job satisfaction : implications for nominal and real wage rigidity

Theories of wage rigidity often rely on a positive relationship between pay changes and utility, arising from concern for fairness or gift exchange. Supportive evidence has emerged from laboratory experiments, but the link has not yet been established with field data. This paper contributes a first step, using representative British data. Workers care about the level and the growth of earnings. Below-median wage increases lead to an insult effect except when similar workers have real wage reductions or frm production is falling. Nominal pay cuts appear insulting even when the firm is doing badly

PAY CUTS AND MORALE : A TEST OF DOWNWARD NOMINAL RIGIDITY

This paper tests the ‘morale’ theory of downward nominal wage rigidity. This theory relies on workers disliking nominal pay cuts : cuts should make workers less happy. We investigate this using panel data on individual employees’ pay and satisfaction. We con…rm that nominal cuts do make workers less happy than if their pay had not fallen. But we find no difference in the effect on happiness of cuts and pay freezes. This represents important information about the nature of wage rigidity in practice and the applicability of the morale theory. The morale theory may be able to explain generalised downward wage rigidity, but apparently fails to explain downward nominal rigidity.Wage rigidity ; Satisfaction JEL Classification: J30 ; E24

Crime and Drugs : An Economic Approach

We present a model which ties together rational drug consumption, taxation, crime and other drug-related externalities. Drug control policy is addressed using an optimal tax framework. Consumption, possession and production of a drug may be prohibited, legalized or decriminalized. In all regimes illicit production of a drug may take place and drug-related crime occurs. We show that illicit drug production, the price elasticity of demand for a drug, the addictive nature of a drug, the effectiveness of drug enforcement strategies, and income distribution all influence optimal (second best) policy. Prohibition is contrasted with decriminalization and legalization, and where legalization yields a higher welfare than prohibition we show that this can be associated with greater drug-related crime and more drug addiction. The model is discussed in the context of US National Drug Control Strategy.Crime ; decriminalization ; drugs ; externalities ; legalization ; optimal tax ; prohibition

Massive stars dying alone: The extremely remote environment of SN 2009ip

We present late-time HST images of the site of supernova (SN) 2009ip taken almost 3 yr after its bright 2012 luminosity peak. SN 2009ip is now slightly fainter in broad filters than the progenitor candidate detected by HST in 1999. The current source continues to be dominated by ongoing late-time CSM interaction that produces strong H-alpha emission and a weak pseudo-continuum, as found previously for 1-2 yr after explosion. The intent of these observations was to search for evidence of recent star formation in the local (1kpc; 10 arcsec) environment around SN 2009ip, in the remote outskirts of its host spiral galaxy NGC 7259. We can rule out the presence of any massive star-forming complexes like 30 Dor or the Carina Nebula at the SN site or within a few kpc. If the progenitor of SN 2009ip was really a 50-80 Msun star as archival HST images suggested, then it is strange that there is no sign of this type of massive star formation anywhere in the vicinity. A possible explanation is that the progenitor was the product of a merger or binary mass transfer, rejuvenated after a lifetime that was much longer than 4-5 Myr, allowing its natal H II region to have faded. A smaller region like the Orion Nebula would be an unresolved but easily detected point source. This is ruled out within 1.5 kpc around SN 2009ip, but a small H II region could be hiding in the glare of SN 2009ip itself. Later images after a few more years have passed are needed to confirm that the progenitor candidate is truly gone and to test for the presence of a small H II region or cluster at the SN position.Comment: 8 pages, 5 figs. submitted to MNRA

The Role of Worker Flows in the Dynamics and Distribution of UK Unemployment

Unemployment varies substantially over time and across subgroups of the labour market. Worker flows among labour market states act as key determinants of this. We examine how the structure of unemployment across groups and its cyclical movements across time are shaped by changes in labour market flows. Using novel estimates of flow transition rates for the UK over the last 35 years, we decompose unemployment variation into parts accounted for by changes in rates of job loss, job finding and flows via non-participation. Close to two-thirds of the volatility of unemployment in the UK over this period can be traced to rises in rates of job loss that accompany recessions. The share of this inflow contribution has been broadly the same in each of the past three recessions. Decreased job-finding rates account for around one-quarter of unemployment cyclicality and the remaining variation can be attributed to flows via non-participation. Digging deeper into the structure of unemployment by gender, age and education, the flow-approach is shown to provide a richer understanding of the unemployment experiences across population subgroups.labour market, unemployment, worker flows

Bargaining power and local labour market influences on wage determination

This paper uses a unique panel of data at the level of the bargaining group to examine aspects of `right-to-manage' models of wage determination. Empirical measures of firms' and unions' bargaining power are identified and found to be important influences on wage setting. The role of union characteristics in wage determination is examined; results confirm their importance and illuminate previous survey findings. Features of the local labour market are shown to affect bargained wages over and above the influence of aggregate factors

Real interest rates, saving and investment

This paper investigates the determinants of real interest rates at world and country level. The starting point is the idea that real interest rates reflect the interaction of desired saving and planned investment, using the framework developed by Barro and Sala-i-Martin (1990) and Barro (1992). The paper updates previous results and extends the analysis to study long real interest rates. We analyse which factors have been responsible for real rate `regime shifts' during 1959 to 1992. We examine the determinants of interest rate differentials across ten major industrialised countries and provide estimates of the extent of capital market integration