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Abstract:
What determines the structure of labour market institutions? This paper argues that common explanations based on rent sharing are incomplete; unions, job protection, and egalitarian pay structures may have as much to do with social insurance of otherwise uninsurable risks as with rent sharing and vested interests. In support of this more benign complementary hypothesis the paper presents a range of historical, theoretical, and cross-country regression evidence. The social insurance perspective changes substantially the assessment of often-proposed reforms of European labour market institutions. The benefits from eliminating labour market rigidities have to be set against the costs of reduced coverage of human capital related risk. The paper also argues that it is unclear whether the forces of globalisation, and the new economy, will really force countries to make their labour markets more flexible. While these phenomena may increase the efficiency costs of existing institutions, they may also make people more willing to pay a high premium to preserve institutions that provide insurance.

Labour market institutions, comparative historical evidence, Sweden, Massachusetts, rent seeking, social insurance, union models, cross-country regressions, openness, linguistic fractionalisation

Abstract:
Previous research indicates that, on average, large employers tend to provide their employees with higher wages as compared to their smaller counterparts.To better understand the reasoning behind this trend, the size effects in pay policy were examined.Questionnaires were distributed in March 1999, with 885 Swedish establishments included in the final sample.Background information on the businesses and the employees was provided by the business register of Statistics Sweden; by survey questions relating to union density, pay systems, and employment contracts; and by the tax and education registers of Statistic Sweden. Econometric analysis was used to analyze the data sets. Findings indicate the following:the use of performance pay and the importance of the career ladder were more prevalent in larger firms; larger firms tended to have more skewed earning distributions; peer pressure and work norms were more important in disciplinary actions in smaller firms; and large firm employees were more attentive to wage relativities than small firm employees.Details of thefindings are provided as well as the implications associated with them. (AKP)

Experimental/primary research, Incentive pay, Motivation, Firm size, Wages & salaries, Incentive plans, Performance evaluation

Abstract:
Do incentives differ between large and small organizations? Results from a representative survey of compensation managers are used to shed light on the issues. I find that (i) small establishments rely less on pecuniary incentives, and have a significantly more hostile attitude towards incentive schemes based on competition and relative rewards; (ii) large units are more vulnerable to mechanisms of efficiency wages, effects that remain even after controlling for differences in monitoring ability; (iii) large units are more prone to indicate that negative reciprocity is important, and that their employees care about relative pay. I argue that these findings fit with behavioral stories of incentives and motivation, in particular those stressing group interaction effects, inequity aversion and gift exchange.

Abstract:
Do incentives in small organizations differ from those in large ones? This paper uses a representative survey of compensation managers to shed light on the issues. I find that (i) small establishments rely less on pecuniary incentives, and have a significantly more hostile attitude towards incentive schemes based on competition and relative rewards; (ii) large units are more vulnerable to mechanisms of efficiency wages, effects that remain even as I control for differences in monitoring ability; (iii) large units are more prone to indicate that negative reciprocity is important, and that their employees care about relative pay. I argue that these findings fit with behavioral stories of incentives and motivation, in particular those stressing group interaction effects, inequity aversion and gift exchange.
field-survey, matched data

firm-size effect, motivation, relative pay,

Abstract:
In this paper, we analyze government budget balance within a simple model of endogenous growth. For the AK model, simple analytical conditions for a tax cut to be self-financing can be derived. The critical variable is not the tax rate per se, but the "transfer-adjusted" tax rate. We discuss some conceptual issues in dynamic revenue analysis, and we explain why previous studies have arrived at seemingly contradictory results. Finally, we perform an empirical study of the transfer-adjusted tax rates of the OECD countries to see which country has the highest potential for fiscal improvements; it turns out that only a few countries have any potential for such "dynamic scoring".

Laffer effects, intertemporal models, dynamic scoring, growth models

Abstract:
We report the results from a representative survey of human resource managers in 885 Swedish firms. We estimate that during the severe recession of the 1990s, only 1.1 percent of workers took a cut in regular nominal pay. We trace the lack of wage moderation to a combination of exogenous (primarily labor law and collective bargaining contracts) and endogenous factors. Our analysis suggests that (i) endogenous wage rigidity plays an important role in most segments of the labor market, (ii) sources of endogenous wage rigidity differ significantly between the high- and low-end of the labor market, and between large and small firms, and (iii) mechanisms of wage rigidity tend to complement each other. Some of our questions deal with issues in the economics of personnel. We report evidence that job protection tends to reinforce the stigma from long-term unemployment, and that labor market training tends to reduce the same stigma. We show that managers in small organizations have a more negative attitude towards incentive schemes based on relative rewards, and we report evidence suggesting that gender has an impact on attitudes concerning effort and motivation.

Wage Rigidity, Survey Evidence, Effort Models, Motivation, Labor Law, Long-term Unemployment, Gender and Pay

Abstract:
We use a random survey of Swedish human resource managers to study the reasons for wage rigidity. Our findings are as follows. First, during the exceptional recession of the 1990s only 1.1 percent of workers received a wage cut. Second, much wage rigidity can be traced to behavioral mechanisms involving negative reciprocity, relative wage comparisons and money illusion. Third, the reasons for wage rigidity differ significantly between large and small establishments, and between the high- and low-end of the labor market. Fourth, there are significant empirical complementarities between efficiency wage mechanisms and worker bargaining strength, and between
"exogenous" institutions and endogenous sources of wage rigidity. Fifth, external pay comparisons are a more important source of rigidity in highly unionized establishments. Sixth, there are significant gender differences in pay bargaining and work morale.

wage rigidity, survey evidence, matched data, reciprocity, behavioral macroeconomis, labor law

Abstract:
We examine how tax avoidance in the form of trade in well-functioning asset markets affects the basic labor supply model. We argue that models that integrate tax arbitrage and labor supply decisions may shed light on a number of positive and normative questions concerning modern systems of income taxation. Such models also appear to have strong implications for empirical research. Studies that ignore the effects of tax arbitrage and asset trade on labor supply incentives may easily come up with biased estimates of the tax responsiveness of the hours supply of high-wage individuals. Finally, because of tax avoidance in the form of asset trade, international comparisons of income inequality will exaggerate the redistributive achievements of high-tax countries like Sweden.

Abstract:
What determines the structure of labour market institutions? I argue that common explanations based on rent seeking are incomplete. Unions, job protection and egalitarian pay structures may have as much to do with social insurance of otherwise uninsurable risks as with rent seeking. In support of this more benign complementary hypothesis the paper presents a range of historical, theoretical and cross-country evidence. The social insurance perspective changes substantially the positive analysis of the future of European labour market institutions. It is not clear that globalization and the 'new economy' will force countries to make their labour markets more flexible. These phenomena will probably increase the efficiency costs of existing institutions, but they may also make voters more willing to pay a high premium to preserve institutions that provide insurance.

Abstract:
This paper tries out a variety of approaches to examine three questions. How did the major Swedish tax reform of 1991, which implied lower tax rates and a sharp increase in real after-tax borrowing rates, affect aggregate consumption? How did the tax reform affect household savings composition? To what extent did the portfolio adjustments differ across taxpayers? Our main conclusions are as follows. Although the tax reform coincided with the exceptional consumption bust of the early 1990s, tax factors most likely played a minor role. To the extent that the tax reform mattered, capitalization effects in the housing market is the most plausible mechanism. However, on the asset side there was a strong incentive to shift from nonfinancial to financial savings outlets, and aggregate data suggest that households responded to these incentives. Our microeconomic evidence, building on survey data on the asset holdings of individual households, indicates somewhat surprisingly that most tax clientele effects had vanished already before the tax reform.

Abstract:
The popular explanation for the Swedish boom to bust cycle is that the liberalisation of financial markets in the mid 1980s spurred a consumption boom, which had grave consequences when the economy was hit by large macroeconomic shocks in the early 1990s. We take another look at the boom period, and conclude that other factors than financial liberalisation played a role. The mid 1980s was also a period when wage growth picked up, and our data is consistent with the simple idea that permanent income dynamics was an important factor. We document the stylised facts, report simulations with a simple life cycle model, and present a range of econometric evidence on how excess sensitivity in Swedish consumption has evolved over time.