Human Capital Externalities with Monopsonistic Competition

This paper provides a novel microeconomic foundation for pecuniary human capital externalities in a labor market model of monopsonistic competition. Multiple equilibria arise because of a strategic complementarity in investment decisions.externalities, human capital, multiple equilibria

Cournot-Walras equilibrium without profit feedback

In this note we consider a general equilibrium model with oligopolistic competition between firms who ignore the feedback effect of their dividend payments on demand. The outcome of this competition coincides with the perfectly competitive equilibrium solution, provided that firms have identical production technologies.General equilibrium

Firm volatility and credit: a macroeconomic analysis

This paper examines a tractable real business cycle model with idiosyncratic productivity shocks and binding credit constraints on entrepreneurs. The model shows how firm volatility increases in combination with credit market development. It further generates the observed comovement of credit and firm volatility with output at business cycle frequencies in response to aggregate productivity shocks.Business cycles

Integrators on homogeneous spaces: Isotropy choice and connections

We consider numerical integrators of ODEs on homogeneous spaces (spheres, affine spaces, hyperbolic spaces). Homogeneous spaces are equipped with a built-in symmetry. A numerical integrator respects this symmetry if it is equivariant. One obtains homogeneous space integrators by combining a Lie group integrator with an isotropy choice. We show that equivariant isotropy choices combined with equivariant Lie group integrators produce equivariant homogeneous space integrators. Moreover, we show that the RKMK, Crouch--Grossman or commutator-free methods are equivariant. To show this, we give a novel description of Lie group integrators in terms of stage trees and motion maps, which unifies the known Lie group integrators. We then proceed to study the equivariant isotropy maps of order zero, which we call connections, and show that they can be identified with reductive structures and invariant principal connections. We give concrete formulas for connections in standard homogeneous spaces of interest, such as Stiefel, Grassmannian, isospectral, and polar decomposition manifolds. Finally, we show that the space of matrices of fixed rank possesses no connection

Equal-Treatment Policy in a Random Search Model with Taste Discrimination

We consider a search model of the labor market with two types of equally productive workers and two types of firms, discriminators and non-discriminators. Without policy intervention, there is wage dispersion between and within the two worker groups, but all wage differences become negligible when the taste for discrimination is small. We analyze the effect of an equal-pay policy, both in combination with affirmative action and without. When equal opportunity of hiring cannot be enforced, wage dispersion increases and wages for minority workers fall substantially relative to laissez faire. Sometimes also the wage gap between worker groups widens in response to the policy.search model, wage dispersion, discrimination, equal pay policy

Capital misallocation and aggregate factor productivity

We propose a sectoral–shift theory of aggregate factor productivity for a class of economies with AK technologies, limited loan enforcement, a constant production possibilities frontier, and finitely many sectors producing the same good. Both the growth rate and total factor productivity in these economies respond to random and persistent endogenous fluctuations in the sectoral distribution of physical capital which, in turn, responds to persistent and reversible exogenous shifts in relative sector productivities. Surplus capital from less productive sectors is lent to more productive ones in the form of secured collateral loans, as in Kiyotaki–Moore (1997), and also as unsecured reputational loans suggested in Bulow–Rogoff (1989). Endogenous debt limits slow down capital reallocation, preventing the equalization of risk– adjusted equity yields across sectors. Economy–wide factor productivity and the aggregate growth rate are both negatively correlated with the dispersion of sectoral rates of return, sectoral TFP and sectoral growth rates. If sector productivities follow a symmetric two–state Markov process, many of our economies converge to a limit cycle alternating between mild expansions and abrupt contractions. We also find highly periodic and volatile limit cycles in economies with small amounts of collateral.Industrial productivity

Minimum Wages and Welfare in a Hotelling Duopsony

Two firms choose locations (non-wage job characteristics) on the interval [0,1] prior to announcing wages at which they employ workers who are uniformly distributed; the (constant) marginal revenue products of workers may differ. Subgame perfect equilibria of the two-stage location-wage game are studied under laissez-faire and under a minimum wage regime. Up to a restriction for the existence of pure strategy equilibria, the imposition of a minimum wage is always welfare-improving because of its effect on non-wage job characteristics.duopsony, minimum wages, hotelling

Efficient Firm Dynamics in a Frictional Labor Market

The introduction of firm size into labor search models raises the question how wages are set when average and marginal product differ. We develop and analyze an alternative to the existing bargaining framework: Firms compete for labor by publicly posting long-term contracts. In such a competitive search setting, firms achieve faster growth not only by posting more vacancies, but also by offering higher lifetime wages that attract more workers which allows to fill vacancies with higher probability, consistent with empirical regularities.The model also captures several other observations about firm size, job flows, and pay. In contrast to bargaining models, efficiency obtains on all margins of job creation and destruction, both with idiosyncratic and aggregate shocks. The planner solution allows a tractable characterization which is useful for computational applications.Labour market search, multi-worker firms, job creation and job destruction