Alan Carruth

Unemployment Equilibria and Input Prices: Theory and Evidence from the United States

The paper develops an efficiency-wage model in which input prices affect the equilibrium rate of unemployment. We show that a simple framework based on only two prices (the real price of oil and the real rate of interest) is able to explain the main postwar movements in the rate of U.S. joblessness. The equations do well in forecasting unemployment many years out of sample, and provide evidence that the oil-price spike associated with Iraqs invasion of Kuwait appears to be a component of the mystery recession that followed.

Job insecurity and wages

This paperexamines whether subjective expectations of unemployment are reliable indicators of the probability of becoming unemployed, and investigates their association with wage growth. We find that workers’ fears of unemployment are increased by their previous unemployment experience and by the unemployment experiences of a close friend, and are associated with other objective indicators of insecure jobs. We then show that unemployment fear predicts future unemployment, above and beyond observed objective variables. High fears of unemployment are found to be associated with significantly lower levels of wage growth for men, but to have no significant link with wage growth for women.

Pay determination and industrial prosperity

Introduction Wage determination: Theories of inflexibility Wage determination: Industrial-relations evidence Previous econometric evidence on the link from profits to wages The psychology of equity The seniority model of wage determination Empirical results for Britain Conclusions Statistical appendix Bibliography Index

The determination of union and non-union wage rates

Abstract If, in a partially unionised economy, union workers force up their absolute wage rate, how does this affect the wage paid in the non-union sector? This paper suggests a simple answer. First, in a small open economy a rise in the union wage will raise the non-union wage. Secondly, in a closed economy — or one with some monopoly power in world trade — a rise in the union wage seems likely to depress the non-union wage.

Job Tenure and Asset Holdings

This paper examines the impact of housing equity and occupational pension scheme membership on job tenure. Using job duration data from the 1985 General Household Survey, appropriate hazard functions are constructed and estimated. Housing equity data is constructed from the General Household Survey, with appropriate adjustment for selection on house movers. Housing equity has a negative impact on male job tenure, which is more pronounced the longer the job lasts. In contrast, pension scheme membership raises average tenure, in accordance with other studies, but the results show variation according to pension scheme characteristics. Copyright 1994 by Royal Economic Society.

Industry-wide versus firm-specific uncertainty and investment: British company panel data evidence

This paper presents evidence on the prediction that the impacts of firm-specific and industry-wide uncertainty on investment will be different. Results show that these work in opposing directions and that the effect of industry-specific uncertainty is stronger in concentrated industries.

An asymmetric error correction model of UK consumer spending

This paper augments the Granger and Lee (Journal of Applied Econometrics, 4, 1989) non-symmetric error (equilibrium) correction model to assess the possibility that, in the aggregate, consumers respond differently to different types of disequilibrium error. This idea is illustrated using an Engle-Granger implementation of the Davidson, Hendry, Srba and Yeo (DHSY, Economic Journal, 80, 1978) model. The disequilibrium error is endogenously determined by the long-run, empirical model and a binary dummy variable captures two alternative states, above and below equilibrium spending. Interaction of the dummy variable with key variables in a short-run dynamic model of UK consumer spending augments the dynamics of the DHSY model. Income elasticities, inflation elasticities and speeds of adjustment are all seen to change significantly depending on whether the disequilibrium error is positive or negative, and is suggestive of asymmetric behaviour on the part of consumers. Moreover, the asymmetrically augmented model substantially outperforms a symmetric model with standard error improvements in excess of 50%.

Housing assets and consumer spending - a regional-analysis

CARRUTH A. And HENLEY A. (1993) Housing assets and consumer spending: a regional analysis, Reg. Studies 27, 611–621. This paper is concerned with the relationship between the housing market and consumer spending for the eleven standard regions of the UK. Pooled regional cross-sectional and annual time-series data are used to appraise the effect of housing assets on regional consumer spending in the 1980s. A fixed effects estimator imposing common slope coefficients across the regions is employed, and this assumption is tested using the SURE estimator. Estimates of a DHSY specification of the consumption function and a model augmented with housing assets are compared. The fixed effects models perform quite well indicating that the growth in regional housing equity has had a positive impact on regional consumer spending. The SURE results indicate that the assumption of common regional responses of consumer spending to the explanatory variables is not valid, and that the housing wealth effect is strongest in...

On the role of the production and consumption assumptions for optimum taxation

Abstract The sensitivity of optimum tax rates to a variety of factors has sustained many different lines of enquiry. This paper attempts to demonstrate by computational procedures the role of the production and consumption–leisure assumptions in the light of recent research. In particular the work of Stern will be extended to provide an assessment of the Allen analysis. It will be shown that optimum negative marginal tax rates are no longer a curiousity and that our production and consumption–leisure assumptions are of considerable importance for variable wage tax models.

Demographic Structure, Asset Holdings and the Explanation of Aggregate Consumers′ Expenditure

Recent work on the econometric specification of the consumption function by London Business School (LBS) forecasters has argued that the inclusion of a variable capturing movements in demographic structure is essential to the explanation of the recent sharp drop in the UK personal savings ratio. It is shown that the inclusion of demographic factors does not provide a model that is robust to alternative data formulations. On the contrary, an adequate explanation for recent movements in aggregate consumers′ expenditure can be found using the LBS data by specifying a consumption function that incorporates adjustment of income to control for the maintenance of the real value of asset holdings, following Hendry and Von Ungern‐Sternberg (1981).