Who should pay the resource costs of higher education? This paper investigates a simple model of the general equilibrium of the labor market with three skill levels. Those in the population with the lower level of intelligence and/or sophistication can only become low-skilled workers, but the brighter segment of the population can become either high- or medium-skilled workers. Given the tax structure, the welfare of each group is maximized by a unique subsidy rate on the cost of training high-skilled workers. Under several circumstances, the lower IQ group wants a higher subsidy rate than will the group that benefits directly from the training.

Journal Article Uncertainty and Price Theory: Comment Get access George E. Johnson George E. Johnson University of California, Berkeley Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 78, Issue 4, November 1964, Pages 647–648, https://doi.org/10.2307/1879662 Published: 01 November 1964

Empirical evaluation of the effect of school quality, or type and amount of resources per student, on adult earnings requires a conceptual framework. A model of the returns to schooling in a simple human capital growth context is extended to illustrate how factors such as consumption benefits of students, parental concern over equity between siblings, and use of schools to facilitate parental labor supply can alter the apparent return to school quality. The need for microlevel time diary and other data on human capital formation in both classrooms and families is highlighted.

The purpose of this paper is to examine certain received theories of the firm, trade union behavior, and bargaining in order to derive testable implications concerning the conditions under which labor disputes are more likely to occur. There are at least three reasons why an investigation of industrial strike activity seems fruitful. First, it might be argued that, because of their relatively frequent disruption of key sectors of the economy, work stoppages are the most important public policy issue raised by the existence of trade unions. It would therefore be useful to know whether, as Hicks thought, the majority of actual strikes are doubtless the result of faulty negotiation [18, p. 146] or whether they are an inevitable part of the functioning of an institutionalized market economy. Although it has long been known that the level of strike activity follows the business cycle [23] [20] [29], this leaves open the questions of the behavioral relations involved and their stability over time. Second, data on industrial disputes provide a potentially rich source of material for testing the implications of bargaining theories which purport to explain the outcome of labor-management negotiations.' Yet little work seems to have been done to date on the application of bargaining theoretic models to nonexperimeiltal data. A third reason for undertaking a study of this problem stems from the continuing interest in the effect of unions upon both the relative wage structure and the rate of change of aggregate money wages. Most union power is derived from the threat of the strike, and, accordingly, we agree with Charles Holt's recent suggestion that . the theory and analysis of industrial disputes may belp to clarify the role that unions play in the determination of wages [19, p. 50].

During the past few years there has been considerable interest, among both economists and politicians, in the question of how to lower the unemployment rate consistent with nonaccelerating inflation by the use of structural policies. Although it is not possible to estimate the value of this rate (which will hereafter be referred to as U* ) with any precision, its consensus estimate in 1978 terms is about 6 percent, plus or minus one-half of 1 percent. While recognition of this constraint on aggregate macro-economic policy has been taking hold, Congress has been debating a bill to establish a 4 percent overall unemployment rate as the national goal for 1983. Implicit in this bill (the socalled Humphrey-Hawkins proposal) is the necessity of expanding labor market programs in order to achieve its principal objective. The major component of such programs in the United States has been the direct provision of job opportunities to specific groups in the labor force.' These generally take the form of public service employment (PSE), but there has also been some use of employment tax credits in the private sector. There are several possible objectives of employment policy, ranging from fiscal relief for local governments to a substitution of subsidized employment for welfare. The purpose of this paper, however, is to examine the potential of employment policy to lower U*, i.e., to shift the long-run Phillips curve to the left.2 Can the provision of a large number of PSE jobs or the extensive use of wage subsidies alter the relationship between labor market tightness and the overall unemployment rate such that a lower unemployment can be sustained by macro-economic policy without accelerating inflation? The answer to this question depends on how individual labor markets work-in particular, on the nature of unemployment among the persons toward whom the unemployment programs are targeted. There is little consensus among labor economists about the functioning of these markets and, accordingly, the question of the probable impact of employment policy on U* is subject to considerable controversy. It is therefore useful to frame the issue in a manner which permits empirical testing. Such an attempt, as well as the associated empirical results, is presented in Section I of the paper. Some qualifications to these results, empirical and conceptual, are discussed in Section II.

Myriad politicians express concern over increased competition from abroad, but among economists the home economy is widely believed to benefit from improvement in foreign economies (Jeffrey Williamson, 1991). Work by a few economists (John R. Hicks, 1953; Ronald Jones, 1979; Paul Krugman, 1979) suggests that there is some truth to popular concerns over competitiveness. The effect of foreign competition in reducing the relative price of the goods that the United States formerly exported can lower aggregate real income in the United States even as world income rises. Accordingly, the success of Japan, Western Europe, and more recently many other nations in producing goods that were, as of the end of World War II, virtual monopolies of the United States is another potential candidate for explaining the fall (relative to trend) of the average living standard or real wage in the United States.