Skill-Biased Technical Change and Wage Inequality: The U.S. versus Europe

This paper analyzes the effect of the recent technical change on the labor market and explains the observed differences in wage inequality among advanced countries. In particular, we focus on the difference between the wage inequality in the U.S. and continental Europe. By introducing human capital investment into Acemoglu (1999)'s model, we show that ex ante homogeneous economies would have distinct ex post wage inequality. In addition, we show that the differences in tax or education system can explain the difference in wage inequality between the U.S. and Europe.skill-biased technical change, wage inequality, human capital investment, matching

Colonial Experience and Postcolonial Underdevelopment in Africa

IIn this paper, we analyze the connection between the history of colonial rule and postcolonial development in Africa. We focus on the fact that many African colonies were governed by indirect rule. Under indirect rule, indigenous people are divided into two groups: a privileged ruling group and an unprivileged ruled group. Our model assumes that the ruled group cannot observe how their deprived resources are divided between the metropolitan ruler and the ruling group. In this economy, a large level of exploitation by the metropolitan ruler yields distrust among indigenous groups and creates a negative effect on postcolonial economic and political development.Africa, colonialism, indirect rule, colonial legacies, ethnic conflict

Labor Immobility in Japan: Its causes and consequences

This paper builds and calibrate a model of competitive search that can reproduce a set of stylized facts concerning major impacts of the decade long stagnation and subsequent changes in the labor market in Japan. We highlight the role played by varying degrees of relation specific investments in forming employment relations. Depending upon the degree of specificity, a job slot can be immediately destructed, or, only the filled jobs survive, or, jobs survive as far as workers with specific training remain in the market. We obtain a rich variety of aggregate labor market responses to a negative productivity shock. By embedding such a system of employment in an economy plagued with limited capital mobility, we can generate upward drift in Beveridge curve, prolonged periods of labor adjustments, decline in the share of jobs with costly investment in training, and strong cohort effects. We also offer some preliminary results from numerical solutions of the model

Japano-Sclerosis?

There exist many symptoms and emerging economic trends suggesting that the Japanese economy is headed in the direction where many European economies ended up in much of 1980s and 1990s. This paper makes highly speculative long-run forecast, based upon a comparison of two stylized models of the Japanese and "Euro" labor markets. We argue that Japano-Sclerosis, if there is one, should look rather different from Eurosclerosis in 1980s and 1990s. Our forecasts are the following. (1) Because of the resilience of the unique recruiting system of the school leavers, the Japanese economy is unlikely to face chronic high unemployment and joblessness, which plagued the Euro economies for decades, whereas (2) the chronic problem in the labor market is more likely to manifest itself as extremely low labor turnovers, and stagnant output growth and earnings. (3) Both circumstantial evidence and model implication suggest that the core characteristics of the Japanese labor market will remain unchanged even if the stagnation of the economy continues or even worsens in the future..

Inequality and Economic Development:The Role of Corruption

This paper presents a model where income inequality negatively affects economic growth through corruption by politicians. While politicians pursue corruption rents that reduce the provision of public goods and sacrifice citizen's welfare, they are also concerned about the political support of citizens to maintain their political power. When inequality among citizens is large, political support is less sensitive to corruption. Therefore, large inequality increases corruption and impedes economic growth. Since corruption is more prevalent in poor countries than rich ones, our argument is consistent with the evidence that shows a negative relationship between inequality and growth in poor countries.Corruption, Income Inequality, Economic Growth

Within-group heterogeneity and civil war

This paper provides a bargaining model of conflict in which the government offers a transfer to an opposition group to avoid civil war. Members of the opposition are heterogeneous in income and ideology, and heterogeneity generates disagreement about whether to accept the government's offer. We assume the probability that government's offer avoids conflict increases continuously with the number of opposition group members who agree to accept it. When the within-group heterogeneity is large, the number of members receptive to the government's offer is less responsive to an increase in transfer level. In this situation, the government must raise its transfer substantially to attract support among the opposition. As peace becomes more costly for the government, negotiations are likely to break down

Why do voters elect less qualified candidates?

Voters sometimes vote for seemingly less qualified candidates; the winners of elections are sometimes less competent than the losers in light of candidates' observable characteristics such as their past careers. To explain this fact, we develop a political agency model with repeated elections in which a voter elects a policy maker among candidates with different competency (valence) levels. We show that politicians' competency relates negatively with political accountability when the challenger in the future election is likely to be incompetent. When this negative relation exists, voters prefer to elect an incompetent candidate if they emphasize politicians' policy choices over their competency. The negative relation between competency and accountability is possible because voters cannot commit to future voting strategies. Furthermore, voters' private information about how they evaluate candidates' competency generates a complementary mechanism leading to the negative relation between competency and accountability. This mechanism implies that voters' anti-elitism can be rational ex post even if it is groundless in the first place

Within-group heterogeneity and civil war

This paper provides a bargaining model of conflict in which the government offers a transfer to an opposition group to avoid civil war. Members of the opposition are heterogeneous in income and ideology, and heterogeneity generates disagreement about whether to accept the government's offer. We assume the probability that government's offer avoids conflict increases continuously with the number of opposition group members who agree to accept it. When the within-group heterogeneity is large, the number of members receptive to the government's offer is less responsive to an increase in transfer level. In this situation, the government must raise its transfer substantially to attract support among the opposition. As peace becomes more costly for the government, negotiations are likely to break down

Why do voters elect less qualified candidates?

Voters sometimes vote for seemingly less qualified candidates; the winners of elections are sometimes less competent than the losers in light of candidates' observable characteristics such as their past careers. To explain this fact, we develop a political agency model with repeated elections in which a voter elects a policy maker among candidates with different competency (valence) levels. We show that politicians' competency relates negatively with political accountability when the challenger in the future election is likely to be incompetent. When this negative relation exists, voters prefer to elect an incompetent candidate if they emphasize politicians' policy choices over their competency. The negative relation between competency and accountability is possible because voters cannot commit to future voting strategies. Furthermore, voters' private information about how they evaluate candidates' competency generates a complementary mechanism leading to the negative relation between competency and accountability. This mechanism implies that voters' anti-elitism can be rational ex post even if it is groundless in the first place

Why do voters elect less qualified candidates?

Voters sometimes vote for seemingly less qualified candidates; the winners of elections are sometimes less competent than the losers in light of candidates' observable characteristics such as their past careers. To explain this fact, we develop a political agency model with repeated elections in which a voter elects a policy maker among candidates with different competency (valence) levels. We show that politicians' competency relates negatively with political accountability when the challenger in the future election is likely to be incompetent. When this negative relation exists, voters prefer to elect an incompetent candidate if they emphasize politicians' policy choices over their competency. The negative relation between competency and accountability is possible because voters cannot commit to future voting strategies. Furthermore, voters' private information about how they evaluate candidates' competency generates a complementary mechanism leading to the negative relation between competency and accountability. This mechanism implies that voters' anti-elitism can be rational ex post even if it is groundless in the first place