Unemployment Insurance and Union Behavior: Comparison of Some Paradigms and Endogenous Membership

This paper discusses the sensitivity of the labor market outcome in the standard bargaining paradigms - monopoly union and efficient bargaining - to the existence of a budget constraint pending on the financing of the unemployment benefit. Consequences of how the unions value members and members' status (employed or unemployed) in their collective maximand, implications of union having control over membership, and, hence, of unemployment insurance coverage, are also considered, as well as of different fiscal scenarios on the form of financing the unemployment benefit bill.Unions, Wage Determination Models, Unemployment Benefit, Unemployment Insurance, Union Wage Bargaining, Union Membership.

Frontier Techniques: Contrasting the Performance of (Single-)Truncated Order Regression Methods and Replicated Moments

This research contrasts three econometric alternatives for stochastic efficiency frontier analysis: order – inter-quantile – and inverse order regression under the assumption of truncated error term distribution, and replicated moment estimation. The demonstration departs from a simple linear regression form of the effective frontier; truncated (at zero) errors are then added to it for simulation purposes. For order regression, experiments with the standard normal, uniform, exponential, Cauchy and logistic error terms are provided. For complex error structures we rely on normal distributions only. The three alternatives would perform satisfactorily for simple error disturbances, specially if they are normal. With more than one residual added to the dependent variable, the weight of the unrestricted range one can blur the conclusions regarding observation efficiency.Stochastic Frontier Model, Generalized Method of Order Statistics, Minimum Distance Method of Order Statistics, Inverse Order Regression, Replicated Moments, Linear Models.

Reconciling the Nash and Kalai-Smorodinsky Cooperative Solutions: Generalized Maximands of CES Form

This note suggests variations to the baseline Nash cooperative solution that take into account the Kalai-Smorodinsky critique. One the one hand, a CES form of the maximand is proven to accommodate both the generalized two-person Nash and the Kalai-Smorodinsky - as other proportional - solutions as special cases. As an alternative, a Stone-Geary formulation is forwarded, weighing both the distances to the threat and to the ideal point, along with the corresponding CES generalization. Interpretations of the implied equilibrium solutions – generalizable to n-person cooperative games – are provided, arising as equations balancing geometric averages of measures of attitude towards (large) risk(s) of the players.Two-Person Cooperative Games, Cooperative Games Maximands, Opportunism, Pessimism.

Segmented Life-cycle Labor Markets – Portuguese Evidence

The paper contrasts the pattern of returns to human capital in different economic sectors. As job mobility, especially across sectors, is limited, it is argued that coefficients of experience in earnings regressions may capture or be interpreted as the growth rate – net of depreciation – of earnings ability propitiated by schooling when years of education are also included in the right hand-side of the equation. As a consequence, under long-term contracts, labor market equilibrium is compatible with different “gross” rates of return to schooling, provided initial earnings levels allow for the same accumulated present value. That implies a special relation between the intercept and experience coefficient of earnings regressions performed for different sectors. Additionally, implications of (log-stable) nonstationary environments for rate of return inference from log-earnings regressions – appropriate for pooled (or panel) estimation and nominal earnings information - are also investigated. Then, the trend coefficient measures the (steady-state) nominal productivity growth; the experience coefficients approximate individuals’ earnings profiles growth rates net of the human capital depreciation rate; schooling’s, the nominal rate of return in the economy net of the nominal productivity growth rate. Tests of the hypothesises are provided, along with the inspection of the determinants – including financial ratios and productive organization indicators, calculated from aggregate balance sheet information - of the observed differences across industries. A study of the estimated variances of rate of return estimates was also conducted, as an attempt to capture features of financial risk in human capital investment.Returns to Schooling; Earnings/Wage Growth; Wage Determinants; Segmented Labor Markets. Industry-Specific Human Capital. Human Capital Risk. Financial Structure and Performance. Weighted Principal Components.

On Simple Conditions for Mixed Equilibria in Dualistic Models. Part I: Degree of Mobility

On Simple Conditions for Mixed Equilibria in Dualistic Models. Part I: Degree of MobilityTime Discount, Time Preference, Interest, Retrospect Theory, Durable Goods, Durable Felicity Functions, Vertical Production Systems, Intertemporal Economies of Depth, Supply Chains, Networks, Complexity, Consistency, Term Structure of Interest Rates.

On Depth and Retrospect: “I Forget, and Forgive – but I Discount”

The discounting of future felicity flows transposes to the intertemporal optimization context the assumption of interest-bearing wealth or savings. The validity of the hypothesis has been challenged by several empirical (ir)regularities and by the theoretical implications for human decision processing. In particular, it implies a very special weight of past decisions on current welfare prospects, which appears largely inconsistent with forgetfulness – even if not with learning – and memory effects, often stressed or embedded in behavioral science studies. In this article, we explore the modifications induced by generalizing the typical welfare function in order to accommodate such retrospective influences. The idea is simple – and can be thought inspired in felicity functions encompassing habit formation: to allow for accumulated welfare – of hypothetically “compounded” but also depreciating past-to-current felicity streams – to affect the periodic utility function – which therefore enjoy some durable good properties. Sensitivity of the Ramsey optimal path to the new formulation is also inspected. The mathematical principle has useful production theory applications: in supply chain modelling. Then the optimal depth of a production process stems from a standard problem that now also embeds delay evaluation – discounting; a rationale for a particular pattern of the term structure of interest rates was also forwarded. Growth – general equilibrium - models are extended to allow for the hypothesis.Time Discount, Time Preference, Interest, Retrospect Theory, Durable Goods, Durable Felicity Functions, Vertical Production Systems, Intertemporal Economies of Depth, Supply Chains, Networks, Complexity, Consistency, Term Structure of Interest Rates.

Compliance with the Institutional Wage in Dualistic Models

This research extends simple two-sector models in order to inquire the impact of the extent of coverage or enforcement of minimum wage legislation in one of the sectors on the equilibrium outcome. Two versions of institutional wage avoidance are presented. They may be seen as representing different institutional detection rules: one working through worker complaint, the other through firm sampling inspection (and enforcement) by the legal system. Both cases are modelled as enlargements of two dualistic models: Harris-Todaro (the wage in the other sector is market determined) and Bhagwati-Hamada (the wage in the other sector is institutionally fixed and coverage is complete). Impact on population flows of changes in degree of coverage (compliance) is also confronted with the effect of a change in the institutional wage for each scenario.Migration, Mobility, Minimum Wages, Segmented Labor Markets, Informal Sector, Regional Labor Markets, Dualistic Models, Coverage.

Frontier Techniques: Contrasting the Performance of (Single-) Truncated Order Regression Methods and Replicated Moments

This research contrasts three econometric alternatives for stochastic efficiency frontier analysis: order – inter-quantile – and inverse order regression under the assumption of truncated error term distribution, and replicated moment estimation. The demonstration departs from a simple linear regression form of the effective frontier; truncated (at zero) errors are then added to it for simulation purposes. For order regression, experiments with the standard normal, uniform, exponential, Cauchy and logistic error terms are provided. For complex error structures we rely on normal distributions only. The three alternatives would perform satisfactorily for simple error disturbances, especially if they are normal. With more than one residual added to the dependent variable, the weight of the unrestricted range one can blur the conclusions regarding observation efficiency.Stochastic Frontier Model, Generalized Method of Order Statistics, Minimum Distance Method of Order Statistics, Inverse Order Regression, Replicated Moments, Linear Models.

Calls and Couples: Communication, Connections, Joint-Consumption and Transfer Prices

The article explores joint consumption equilibrium environments. It illustrates network formation through one-to-one directional synapses. Family (couple) arrangements, spontaneously generated under a decentralized general equilibrium price system are suggested - involving link and direction-specific transfer prices along with standard resource one. The research also inspects preference characteristics able to generate monogamous choices and assortative matching and mating. Assortative mating (and income pooling) is clarified, related to exclusivity or taste-for unicity at the utility level with respect to shared good, with optimal assignment connected to equalization of the marginal benefit of the match - adequately defined - across individuals in the economy. Contrast with a multiple external effect good - one-to-many communication; (or) shared by a fixed number of, more than two, individuals; common property - and with a pure public good is also provided. If paired consumption with end-point specificity generates (or may generate), under reasonable assumptions, a unique decentralized equilibrium solution, supporting an efficient allocation, multiple agent sharing among more than two individuals and individual types requires, along with excludability, perfect differentiation of a larger number of consumption - partnership - roles.Shared goods, Joint consumption, Cost-sharing, Communications, Call, Linkage, Network nodes, Synapses, Matching, (Assortative) Mating, Couple goods, Family formation, Dowry, Transfer prices, Theory of the firm

Uninsurable Risks: Uncertainty in Production, the Value of Information and Price Dispersion

This article digresses over the interaction of uncertainty with the firm's optimal decisions in a simple framework: a standard price-taking (short-run restricted) single-input and output unit, subject to the interaction with a zero-mean Bernoulli lottery. The firm is always considered an expected profit-maximizing entity. We inspect the consequences of exogenous uncertainty on the optimal allocations and on its “mean-(and)variance†valuation position. On one hand, we contrast the effect of different sources of uncertainty on the producer's problem – input and output prices and quantities. On the other, we analyse the impact of ex-post flexibility of the decision variables.