Disutility Of Labor Research Articles

Discussion

Discussion

Relative government size in globalization and its welfare implications

As globalization spreads across the world, countries are experiencing growing competitive pressure in many fields. Since the role of government is needed to change in this global era, the so-called government-size debate has become fierce. This article provides a measure of relative government size in globalization, and clarifies the welfare effect of relative government size in globalization applying a simplified dynamic utility theoretical approach. The main finding is that there is no systematic relationship between relative government size and relative welfare in globalization; such relation depends on behavioural parameters such as the elasticity of inter-temporal substitution of consumption and the disutility of labour. This result suggests that finding prerequisites for government consumption to play a welfare-improving role in globalization is more beneficial than the government-size debate.

Government Expenditures and Unemployment: A DSGE Perspective

In a New Keynesian DSGE model with labor market frictions and liquidity-constrained consumers aggregate unemployment is likely to increase due to a non-persistent government spending shock. Furthermore, the group of asset-holding households reacts very differently from the group of liquidity-constrained consumers implying that the unemployment rate is likely to decrease for asset-holding households, while it increases among liquidity-constrained consumers. The main driver of our results is the marginal utility of consumption which moves in opposite directions for the two types. Regarding the model's parameters, we find that the size of the fiscal (unemployment) multiplier increases with i) highly sticky prices, ii) high degrees of risk aversion, iii) low convexity in labor disutility iv) high replacement rates, and v) debt-financed expenditures.

Income, happiness, and the disutility of labour

Abstract We re-examine the claim that the income effect on happiness is downward biased because higher income demands more work effort. We find no evidence of an underestimation because the impact of working hours on happiness is rather small and hill-shaped.

Optimal redistribution with unobservable disability: Welfarist versus non-welfarist social objectives

This paper examines the optimal non-linear income and commodity tax when the same labor disutility can receive two alternative interpretations, taste for leisure or disability, but the disability is not readily observable. We compare the optimal policy under alternative social objectives, welfarist and non-welfarist, and conclude that the non-welfarist objective, in which the planner gives a higher weight to the disutility of labor of the disabled individuals, is the only reasonable specification. It has some foundation in the theory of responsibility; further, unlike the other specifications it yields an optimal solution that may involve a lower labor supply requirement from disabled individuals.

Understanding European unemployment with a representative family model

A representative family model with indivisible labor and employment lotteries has no labor market frictions and complete markets. Nevertheless, its aggregate responses to an increase in government supplied unemployment insurance (UI) and to an increase in microeconomic turbulence are qualitatively similar to those in two macromodels with labor market frictions and incomplete markets, namely, the matching and search-island models in Ljungqvist and Sargent [2007a. Understanding European unemployment with matching and search-island models. Journal of Monetary Economics, this issue]. Because there is no frictional unemployment in the representative family model, an increase in employment protection (EP) decreases aggregate work because the representative family substitutes leisure for work, an effect opposite to what occurs in matching and search-island models. Heterogeneity among workers highlights the economy-wide coordination in labor supply and consumption sharing that employment lotteries and complete markets achieve in the representative family model. A high disutility of labor makes generous UI cause very low employment levels.

Optimal Redistribution with Unobservable Disability: Welfarist Versus Non-Welfarist Social Objectives

This paper examines the optimal non linear income and commodity tax when the same labor disutility can receive two alternative interpretations, taste for leisure and disability, but the disability is not readily observable. We compare the optimal policy under alternative social objectives, welfarist and non-welfarist, and conclude that the non-welfarist objective, in which the planner gives a higher weight to the disutility of labour of the disabled individuals, is the only reasonable specification. It has some foundation in the theory of responsibility; further, unlike the other specifications it yields an optimal solution that may involve a lower labour supply requirement from disabled individuals.

Rotten Parents and Child Labor

We show that taking into account the consequences of child labor on both childhood welfare and human capital investment, instead of focusing exclusively on the human capital dimension, brings new insights on the economic analysis of child labor. In particular, there are new sources of potential inefficiencies that appear when we assume that labor induces some disutility. In such a case, household decisions regarding child labor may indeed be inefficient even if household members are altruistic, transfers are not at a corner and there are no market imperfections. Also, the presence of child labor disutility leads to an equilibrium where the conditions for an exogenous reduction of child labor to be Pareto improving are less likely to be fulfilled. This paper stresses therefore the fact that economic analysis should not forget one of the most important aspects of child labor, namely that it does not make children happy.(This abstract was borrowed from another version of this item.)

A business cycle model with variable capacity utilization and demand disturbances

We develop a dynamic general-equilibrium model with demand (preference) shocks, estimated using Hall's (J. Labour Economics 15 (1997) 223) residual, that replicates U.S. business cycles well, at least compared to the real business cycle models. The key factor is cyclical capital utilization, which is based on imperfect competition, slow adjustments in capital stock, and fixed requirement of labor input. We also demonstrate theoretically that a representative-agent economy with preference shocks could be viewed as the reduced form of a heterogeneous-agents economy with incomplete markets. Specifically, a heterogeneous-agents economy with incomplete markets is aggregated into a representative-agent economy with preference shocks. This result would provide a microeconomic foundation for preference shock models. It is also shown that a shock to marginal utility of consumption and a shock to marginal disutility of labor have different effects.

Optimal redistribution when different workers are indistinguishable

Abstract. Using the standard non linear income and commodity taxation framework, we examine the optimal policy to be adopted when the same labour disutility can receive two opposite interpretations: taste for leisure and activity limitation. In the absence of complete information about individual characteristics, an income tax does not allow distinguishing lazy from handicapped individuals. One may rely, however, on a combination of commodity and income taxes to redistribute from the former to the latter when they differ in their preferences for commodities. JEL Classification: H21, H41Redistribution optimale quand les divers travailleurs sont indistincts. A l’aide du cadre d’analyse conventionnel de fiscalité non linéaire sur les revenus et les biens, ce mémoire examine la politique optimale à adopter quand le même niveau de désutilité du travail peut être interprété de deux manières opposées : goût pour le loisir et souffrance attribuable à une infirmité. En l’absence de renseignements complets à propos des caractéristiques des individus, un impôt sur le revenu ne permet pas de distinguer les individus paresseux de ceux qui sont handicapés. On peut cependant compter sur une combinaison de taxes sur les revenus et les biens pour redistribuer du premier groupe vers le second quand leurs préférences pour les biens diffèrent.

Parente and Prescott's Theory May Work in Practice But Does Not Work in Theory

In this paper we challenge Parente and Prescott's (1999) theoretical framework, which establishes that unions use their control of work practices to thwart the efficient use of technology in the firms. We argue instead that unions, despite endowing monopoly rights over a technology, should tend to impose its efficient use. In fact if union members care about labor disutility, along with wage incomes, they will dictate work practices consistent with operating technology at full efficiency, in order to allow workers to enjoy more leisure. Our result is more general than Parente and Prescott's and does not rely on the particular specification of preferences.

My Work as a Historian of Economic Thought

My work as a historian of economic thought and methodologist has had several dimensions. One comprises a heavy research program. Another involves some major editing projects, several long term. Still another involves a synergistic relationship between my work on the history of economic thought and methodology and on the economic role of government. Another involves my participation in the founding and operation of bothHistory of Political Economyand the History of Economics Society. If all this sounds like a lot of activity, it must be understood that my research and professional activities have been both my vocation and principal avocation. I use the word “work” in the title reluctantly and where others might say “career.” I have never thought of my professional activities as either toil or a career; indeed, I have both engaged in and seen them as a joyful adventure—so much for the theory of the marginal disutility of labor! Especially important has been the continued support of my wife, Sylvia. She has not only understood and supported, albeit sometimes with difficulty, my time-consuming involvement with intellectual work, she has nurtured a wonderful family life.

Is It Legitimate to Encourage Work Sharing?

A generalization of Mirrlees' income taxation model is formulated in which qualifications of workers are both endogenous and observable by the government. Individuals differ by their unobservable abilities, which simultaneously affect their disutility of labor and their cost of training. In general the optimal tax schedule depends not only on income but also on its .'components, i.e., wage rate (or qualification) and labor supply. We find conditions under which it is optimal to subsidize lower qualifications or to encourage work sharing.

Disability insurance in an optimal pension scheme

“Disability” or “poor health” is traditionally associated with a complete loss of earnings capacity and/or prohibitive increases in the disutility of labor. Thus, it invokes a necessity to withdraw from the labor market. A number of empirical and theoretical studies have questioned this conventional view and suggested instead that the use of disability-contingent allowances for early retirement mainly reflects the leniency of the eligibility rules. This raises the issue of designing incentive-compatible health-contingent retirement rules and questions concerning the resulting characterization of optimal pension systems. The study shows that the presence of moral hazard induces an overinsurance of normal retirees, raises the optimal contribution-rate, and lowers the optimal normal benefit level and the normal retirement age. Moreover, even if the realization of an ex-ante uncertain health shock increases the disutility of labor only slightly, the disability-contingent retirement age and the date when this health shock occurs will coincide — given that the system entails normal retirement provisions as well. Thus, minimum eligibility ages and other arrangements to induce prolonged work of actually disabled persons can very generally be demonstrated to be suboptimal.

Work as a disutility: Comment

In a recent article in this journal, Robert E. Lane (1992) examined the economist's notion of the “marginal disutility of labor.” Christian views of labor are one of several perspectives singled out for fostering the idea that labor is painful and that work entails a decrease in happiness. This article corrects Lane's misinterpretation of Christian teaching on work. Lane failed to distinguish between the concepts of creation, fall, and redemption, which drew him to the erroneous conclusion that the Bible pictures work as a source of unhappiness. By separating these concepts, we demonstrate the Bible's high view of work, and also refute Lane's claim that Christians after the reformation relied on guilt as a motivating force for labor.

NOMINAL WAGE FLEXIBILITY IN A PARTLY-UNIONIZED ECONOMY

I INTRODUCTION This paper explores equilibrium wage determination in an economy where labour markets may differ-some may be unionized, some competitive and some with rigid wages. In practice, no economy has completely uniform labour markets and it is an important question to ask how the different types of market might interact to influence the macroeconomic properties of the economy. This paper concentrates on the response of nominal wages to demand changes. As we shall see, what happens in the unionized sector depends very much on what is happening in the other sectors, because of inherently intersectoral effects. In representative sector macro models (Blanchard and Kiyotaki, 1987; Dixon, 1987; inter ah), these effects will not be present since nominal and real wages (and prices) will be uniform across sectors. The main importance of the results is that the economy can display a whole range of macroeconomic behaviour from Classical to Keynesian, depending on the precise microeconomic structure of the economy. It is useful to distinguish between real and nominal wage rigidity. Nominal wage rigidity occurs when wages respond to neither the general price level nor the level of demand; real rigidity occurs when wages respond to the price level, but not demand. The interaction of different types of rigidity (or their absence) across sectors leads to interesting and surprising results (see Ball and Romer, 1990, who illustrate this point in a different model). This is because, in addition to the direct partial equilibrium effects of a demand change on wages in a particular sector, there are the indirect general equilibrium effects. These intersectoral effects include changes in the cost of living, and changes in relative prices which can alter budget shares and elasticities. As we shall see, these indirect effects can be crucial. In the unionized sectors, there are several “syndicates” which influence wages by restricting employment, as in Hart (1982). Real wages depend upon the number of unions, the disutility of labour and the elasticity of labour demand. In the rigid sectors, there is complete nominal wage and price

Diligence and laziness in the Chinese countryside revisited

A game-theoretic model is used to asses the impact of changing disutility of labour and distribution schemes on labour supply in Chinese agricultural product teams. It is argued that a previous analysis of the problem by chinn (1980) overlooks some inherent complications. It is shown that application of the symmetric, pure strategy Nash equilibrium concept yields no equilibria over a significant range of values for relevant variables. Asymmetric, pure strategy equilibria are shown to exist over this range. Allowing production teams continuous choice of labour inputs restores symmetric equilibrium.

On the Fixed Nature of Sharecropping Contracts

Newbery and Stiglitz (I979) suggest four stylised facts of sharecropping which theories should attempt to explain. The first is the persistence of sharecropping and its coexistence with fixed rental and wage markets under a variety of conditions over centuries of time. The second is that in modern developed economies there appears to be a decline in share tenancy. Thirdly share tenancy is often but not alwavs associated with lower productivity than fixed rental land. Finally, in many economies contracts involve shares of around one half for landlord and tenant. This does not vary from contract to contract and does not seem to be the object of negotiation. Smith (I776) and many subsequent authors have likened sharecropping to a tax. They argue that under this type of contract tenants choose their labour supply to equate their marginal disutility of labour with their proportionate share of the marginal product instead of the full marginal product. They therefore regard sharecropping as an inefficient form of land tenure. However, this view is difficult to reconcile with the first observation: given the coexistence of fixed rent and share contracts, it is reasonable to expect that if share contracts were relatively inefficient they would quickly die out. This does not appear to have happened. More recently it has been argued, most notably by Cheung (I969), that if there is certainty and transactions costs are the same for all contracts, then provided a share contract specifies the labour supply of the tenant it leads to the same efficient allocation of resources as a fixed rent or wage contract. Cheung has used this result as the basis of an explanation for coexistence. He suggests that the transaction costs for share contracts are higher than for wage and fixed rent contracts. However, share contracts have the advantage that they allow the risk to be shared between the landlord and tenant whereas with fixed rent contracts the tenant bears all the risk and with wage contracts the landlord does. Given varying degrees of risk aversion among landlords and tenants it is possible that for some parties the risk-sharing advantages outweigh the transaction cost disadvantages so that they will prefer share contracts whereas with others the reverse is true. One problem with this argument raised by Stiglitz (I974) and Newbery (I977) is that given constant returns to scale the risk-sharing properties of share contracts can be attained with mixtures of fixed rent and wage contracts. If these do indeed have lower transaction costs, share contracts would not then be observed.