This article develops a model in which quit rates, and thus the income distribution, depend on employee perceptions of the accuracy of employer assessments of individual productivity because these latter assessments affect wages. When employees believe that these assessments are accurate, income inequality tends to be high. The model can account for the negative correlation across some countries of inequality and the extent to which inequality is deemed to be excessive. It also fits the contrast in U.S. and French experiences concerning the tenure of highly educated workers with high wages relative to the tenure of lower‐paid workers.

This paper studies a model of random technical progress where technology diffuses at realistically slow rates. It fits smooth trends to the sum of GDP series generated by this model and series representing transitory, or cyclical, fluctuations. Detrended GDP is then largely unrelated to technical progress. The detrending method proposed by Rotemberg (1999) reconstructs cyclical variations somewhat more accurately than the HP filter. With sufficiently slow diffusion it is also more accurate than a method based on VARs fitted to hours and GDP growth. Consistent with the model’s predictions, permanent shocks initially depress both hours and output in these VARs.

In public discussions of policy, evidence that import‐competing sectors earn low or falling incomes is often used to argue for protection. This paper rationalizes the apparent effectiveness of this argument in both direct and indirect democracies. In direct democracies, a small degree of voter altruism leads to protection in the specific factors model when the import‐competing sector earns little. Similarly, voter altruism creates an incentive in representative democracies for self‐interested parties to present evidence to legislators on the income of import‐competing factors. This leads to a theory in which campaign contributions buy access to legislators rather than buy votes.

This paper presents the competitive equilibrium of an economy in which people hold money for transactions purposes. It studies both the steady states that result from different rates of monetary expansion and the effects of such non-steady-state events as an open-market operation. Even though the model features no uncertainty and perfect foresight, open-market operations affect aggregate output. In particular, a simultaneous increase in money and governmental holdings of capital temporarily raises aggregate capital and output while it lowers the real rate of interest on capital.

This paper presents a model in which inventories are used by a duopoly to deter deviations from an implicitly collusive arrangement. Higher inventories allow firms to punish cheaters more strongly and can thus help to maintain collusion. We show that when demand is high, the incentive to deviate increases so that increases in inventories may be optimal for the duopoly. This rationalizes the observed positive correlation between inventories and sales. In our empirical section we show that, as our model predicts, this correlation is more important in concentrated industries. We also provide several examples where inventories have been a factor in cartel behavior.

This paper studies implicitly colluding oligopolists facing fluctuatingdemand. The credible threat of future punishments provides the discipline that facilitates collusion. However, the authors find that the temptation to unilaterally deviate from the collusive outcome is often greater when demand is high. To moderate this temptation, the optimizing oligopoly reduces its profitability at such times, resultingin lower prices. The behavior of the railroads in the 1880s, the automobile industry in the 1950s, the cyclical behavior of cement prices, and of price-cost margins are consistent with this theory. Thereduction of price by the oligopolistic sectors may have macro consequences. Copyright 1986 by American Economic Association.

We test whether comovements of individual stock prices can be justified by economic fundamentals. This is a test of the present value model of security valuation with the constraint that changes in discount rates depend only on changes in macroeconomic variables. Then, stock prices of companies in unrelated lines of business should move together only in response to changes in current or expected future macroeconomic conditions. Using a latent variable model to capture unobserved expectations, we find excess comovement of returns. We show that this excess comovement can be explained in part by company size and degree of institutional ownership, suggesting market segmentation.

Hall has shown that, with perfect competition and price flexibility, total factor productivity measured using labor's share either in revenues or in costs will be acyclical regardless of the level of labor hoarding. We show that if firms producing a homogeneous good under constant returns must pick their prices before demand is known, both measures of productivity become procyclical. The model implies that productivity should be more procyclical the more important is labor hoarding. Empirically, productivity is more procyclical in industries and in nations where labor hoarding appears more important.

A dynamic model is used to understand how sharp changes in energy prices affect investment behavior, employment, and energy use. The authors discuss the theory behind their model selection, model specifications, estimation methods and data; list parameter estimates and elasticities for the selected model; and describe the simulations. They conclude that (1) the data strongly reject the hypothesis of constant returns to scale within their specification of aggregate production; (2) the data indicate adjustment costs on labor are small, and (3) their results help reconcile some of the conflicting estimates of energy-demand elasticities appearing in recent literature. 23 references, 3 figures, 3 tables.