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AbstractAn ideologically biased expert faces trade-offs in model design. The perceived model must be autocoherent—its use by all agents delivers a self-confirming equilibrium. Policy may be influenced by manipulating the Keynesian multiplier or the Phillips curve parameters. Ideological bias may arise in a way that resembles well-known historical controversies. A larger reported Keynesian multiplier is favored by more left-wing economists, as is a flatter inflation output trade-off. Some combinations of parameters must be truthfully revealed, illustrating the tight link between parameter identification and the scope for bias that is implied by the autocoherence conditions. (JEL A11, D72, E12, E13, E52, E61, E62)

Abstract:In order to credibly “sell” legitimate children to their spouse, women must forego more attractive mating opportunities. This paper derives the implications of this observation for the pattern of matching in marriage markets, the dynamics of human capital accumulation, and the evolution of the gene pool. A key consequence of the trade-off faced by women is that marriage markets will naturally tend to be hypergamous– that is, a marriage is more likely to be beneficial to both parties relative to remaining single, the greater the man’s human capital, and the lower the woman’s human capital. As a consequence, it is shown that the equilibrium can only be of two types. In the “Victorian” type, all agents marry somebody of the same rank in the distribution of income. In the “Sex and the City” (SATC) type, women marry men who are better ranked than themselves. There is a mass of unmarried men at the bottom of the distribution of human capital, and a mass of single women at the top of that distribution. It is shown that the economy switches from a Victorian to an SATC equilibrium as inequality goes up.The model sheds light on how marriage affects the returns to human capital for men and women. Absent marriage, these returns are larger for women than for men but the opposite may occur if marriage prevails. Finally, it is shown that the institution of marriage may or may not favour human capital accumulation depending on how genes affect one’s productivity at accumulating human capital.

We develop a model of optimal productivity growth under demand fluctuations. We consider two alternative hypotheses. First, we assume that productivity growth is costly in terms of current production. Second, we assume that the cost of productivity improvements is independent of current production. It is shown that, in the first case, productivity improvements will be countercyclical whereas, in the second case, they will be procyclical. The model then is used to study the impact of the frequency and amplitude of fluctuations on long-run growth. The results corresponding to the first hypothesis are shown to be consistent with recent empirical work.

This paper studies the link between aggregate fluctuations and technological choice. It is shown that a more volatile environment discourages the adoption of product-flexible technologies and induces the adoption of volume-flexible technologies. The consequences of this argument for economic policy are then discussed, and some empirical evidence supporting the hypothesis is presented. J. Japan. Int. Econ.,March 1993, 7(l), pp. 78–106. DELTA, CERAS, Paris 75014, France; and CEPR, London. UK.

We develop a simple model to study how relative wage rigidity affects equilibrium taxation. It is argued that relative wage rigidity, by compressing incomes within the middle class, leads to a lower degree of redistributive conflict within the politically important core of society, even though income inequality may increase for society as a whole. In the model, people vote first on wage rigidity and second on redistributive taxation. The rigid society has a ower tax rate than the flexible one. it is supported by the “middle-class” in the first stage, while the poor, the rich and the unemployed suffer from it.

A model is built in which, the more incomplete financial markets are, the more technological dualism is prevalent in the economy. The model is extended to show that, through dualism and technological choice, incomplete financial markets can have a negative impact on long-run growth.

This paper studies the effect of economic integration of two regions on the mobility of skilled and unskilled workers across regions and on the resulting location of industrial activity. In particular, we study what happens when wages in both regions are set by the unions of the “West”—the region with a greater initial relative stock of human capital. We show that under some circumstances, it is the interest of the West’s unions to set up a speed of wage convergence greater than equilibrium, thus generating unemployment in the East. This slows the migration of human capital toward the East, but quickens the migration of raw labor toward the West. A greater share of economic activity is eventually located in the Western region. Unions in the West will benefit from this provided human capital has low migration costs relative to raw labor.