Toward a theory of labor market institutions

Standard economic analysis holds that labor market rigidities are harmfulfor job creation and typically increase unemployment. But many orthodoxreforms of the labor market have proved difficult to implement because ofpolitical opposition. For these reasons it is important to explain why weobserve such regulations. In this paper I outline a theory of how they may arise and why they fit together. This theory is fully developed in aforthcoming book (Saint-Paul (2000)), to which the reader is referred forfurther details.

Capital, wages and growth: Theory and evidence

Returns to scale to capital and the strength of capital externalities play a key role for the empirical predictions and policy implications of different growth theories. We show that both can be identified with individual wage data and implement our approach at the city-level using US Census data on individuals in 173 cities for 1970, 1980, and 1990. Estimation takes into account fixed effects, endogeneity of capital accumulation, and measurement error. We find no evidence for human or physical capital externalities and decreasing aggregate returns to capital. Returns to scale to physical and human capital are around 80 percent. We also find strong complementarities between human capital and labor and substantial total employment externalities.

The implicit theory of historical change in the work of Alan S. Milward

Alan S. Milward was an economic historian who developed an implicit theory ofhistorical change. His interpretation which was neither liberal nor Marxist positedthat social, political, and economic change, for it to be sustainable, had to be agradual process rather than one resulting from a sudden, cataclysmicrevolutionary event occurring in one sector of the economy or society. Benignchange depended much less on natural resource endowment or technologicaldevelopments than on the ability of state institutions to respond to changingpolitical demands from within each society. State bureaucracies were fundamentalto formulating those political demands and advising politicians of ways to meetthem. Since each society was different there was no single model of developmentto be adopted or which could be imposed successfully by one nation-state onothers, either through force or through foreign aid programs. Nor coulddevelopment be promoted simply by copying the model of a more successfuleconomy. Each nation-state had to find its own response to the political demandsarising from within its society. Integration occurred when a number of nation states shared similar political objectives which they could not meet individuallybut could meet collectively. It was not simply the result of their increasinginterdependence. It was how and whether nation-states responded to thesedomestic demands which determined the nature of historical change.

Learning ability and longevity: a symmetrical evolutionary trade-off in Drosophila.

Learning ability can be substantially improved by artificial selection in animals ranging from Drosophila to rats. Thus these species have not used their evolutionary potential with respect to learning ability, despite intuitively expected and experimentally demonstrated adaptive advantages of learning. This suggests that learning is costly, but this notion has rarely been tested. Here we report correlated responses of life-history traits to selection for improved learning in Drosophila melanogaster. Replicate populations selected for improved learning lived on average 15% shorter than the corresponding unselected control populations. They also showed a minor reduction in fecundity late in life and possibly a minor increase in dry adult mass. Selection for improved learning had no effect on egg-to-adult viability, development rate, or desiccation resistance. Because shortened longevity was the strongest correlated response to selection for improved learning, we also measured learning ability in another set of replicate populations that had been selected for extended longevity. In a classical olfactory conditioning assay, these long-lived flies showed an almost 40% reduction in learning ability early in life. This effect disappeared with age. Our results suggest a symmetrical evolutionary trade-off between learning ability and longevity in Drosophila.

A comment on the Nash program and the theory of implementation

The mechanisms in the Nash program for cooperative games are madecompatible with the framework of the theory of implementation. This is donethrough a reinterpretation of the characteristic function that avoids feasibilityproblems, thereby allowing an analysis that focuses exclusively on the payoff space. In this framework, we show that the core is the only majorcooperative solution that is Maskin monotonic. Thus, implementation of mostcooperative solutions must rely on refinements of the Nash equilibrium concept(like most papers in the Nash program do). Finally, the mechanisms in theNash program are adapted into the model.

Business cycle measurement with some theory

A method to evaluate cyclical models not requiring knowledge of the DGP and the exact specificationof the aggregate decision rules is proposed. We derive robust restrictions in a class of models; use someto identify structural shocks in the data and others to evaluate the class or contrast sub-models. Theapproach has good properties, even in small samples, and when the class of models is misspecified. Themethod is used to sort out the relevance of a certain friction (the presence of rule-of-thumb consumers)in a standard class of models.

Evolutionary genetics of arbuscular mycorrhizal fungi - causes and consequences of multiple genomes in Glomus intraradices

Résumé Les champignons endomycorhiziens arbusculaires (CEA) forment des symbioses avec la plupart des plantes terrestres. Les CEA influencent la croissance des plantes et la biodiversité. Ils sont supposés avoir évolué de manière asexuée pendant au moins 400 millions d'années et aucune diversification morphologique majeure n'a été constatée. Pour ces raisons, les CEA sont considérés comme d'anciens asexués. Très peu d'espèces sont connues actuellement. Les individus de ces champignons contiennent des noyaux génétiquement différents dans un cytoplasme continu. La signification évolutive, la variabilité et la maintenance des génomes multiples au sein des individus sont inconnues. Ce travail a démontré qu'une population du CEA Glomus intraradices est génétiquement très variable. Nous avons conclu que les plantes hôtes plutôt que la différenciation géographique devraient être responsables de cette grande diversité. Puis nous avons cherché l'existence de recombinaison entre génotypes dans une population. Nous avons détecté un groupe recombinant au sein de la population, ce qui met en doute l'état d'anciens asexués des CEA. Nous avons également détecté l'occurrence de fusions d'hyphes et l'échange de noyaux entre isolats génétiquement différents. La descendance hybride issue de cet échange était viable et distincte phénotypiquement des isolats parentaux. En résumé, ce travail identifie des événements cruciaux dans le cycle de vie des CEA qui ont le potentiel d'influencer l'évolution de génomes multiples. L'étude des conséquences de ces événements sur les interactions avec les plantes hôtes pourrait éclaircir significativement la compréhension de la symbiose entre plantes et CEA. Abstract Arbuscular mycorrhizal fungi (AMF) are important symbionts of most land plants. AMF influence plant growth and biodiversity. Very few extant species are described. AMF are thought to have evolved asexually for at least 400 million years and no major morphological diversification has occurred. Due to these reasons, they were termed `ancient asexuals'. Fungal individuals harbour genetically different nuclei in a continuous cytoplasm. The variability, maintenance and evolutionary significance of multiple genomes within individuals are unknown. This work showed that a population of the AMF Glomus intraradices harbours very high genetic diversity. We concluded that host plants rather than geographic differentiation were responsible for this diversity. Furthermore, we investigated whether recombination occurred among genotypes of a G. intraradices population. The identification of a core group of recombining genotypes in the population refutes the assumption of ancient asexuality in AMF. We found that genetically different isolates can form hyphal fusions and exchange nuclei. The hybrid progeny produced by the exchange was viable and phenotypically distinct from the parental isolates. Taken together, this work provided evidence for key events in the AMF life cycle, that influence the evolution of multiple genomes. Studying the consequences of these events on the interaction with host plants may significantly further the understanding of the AMF-plant symbiosis.

Bringing game theory to hypothesis testing: Establishing finite sample bounds on inference

Small sample properties are of fundamental interest when only limited data is avail-able. Exact inference is limited by constraints imposed by speci.c nonrandomizedtests and of course also by lack of more data. These e¤ects can be separated as we propose to evaluate a test by comparing its type II error to the minimal type II error among all tests for the given sample. Game theory is used to establish this minimal type II error, the associated randomized test is characterized as part of a Nash equilibrium of a .ctitious game against nature.We use this method to investigate sequential tests for the di¤erence between twomeans when outcomes are constrained to belong to a given bounded set. Tests ofinequality and of noninferiority are included. We .nd that inference in terms oftype II error based on a balanced sample cannot be improved by sequential sampling or even by observing counter factual evidence providing there is a reasonable gap between the hypotheses.

The optimum quantity of money: Theory and evidence

In this paper we propose a simple and general model for computing the Ramsey optimal inflation tax, which includes several models from the previous literature as special cases. We show that it cannot be claimed that the Friedman rule is always optimal (or always non--optimal) on theoretical grounds. The Friedman rule is optimal or not, depending on conditions related to the shape of various relevant functions. One contribution of this paper is to relate these conditions to {\it measurable} variables such as the interest rate or the consumption elasticity of money demand. We find that it tends to be optimal to tax money when there are economies of scale in the demand for money (the scale elasticity is smaller than one) and/or when money is required for the payment of consumption or wage taxes. We find that it tends to be optimal to tax money more heavily when the interest elasticity of money demand is small. We present empirical evidence on the parameters that determine the optimal inflation tax. Calibrating the model to a variety of empirical studies yields a optimal nominal interest rate of less than 1\%/year, although that finding is sensitive to the calibration.

Relative price riddles in international business cycle theory: Are transport costs the explanation?

We study relative price behavior in an international business cyclemodel with specialization in production, in which a goods marketfriction is introduced through transport costs. The transporttechnology allows for flexible transport costs. We analyze whetherthis extension can account for the striking differences betweentheory and data as far as the moments of terms of trade and realexchange rates are concerned. We find that transport costs increaseboth the volatility of the terms of trade and the volatility of thereal exchange rate. However, unless the transport technology isspecified by a Leontief technology, transport costs do not resolvethe quantitative discrepancies between theory and data. Asurprising result is that transport costs may actually lower thepersistence of the real exchange rate, a finding that is in contrastto much of the emphasis of the empirical literature.