Edward Montgomery

Leadership at the Fed

Assesses Eccles, Martin, Burns, and Volcker, four of the Federal Reserves mo influential chairmen, looks at how they have expanded the agencys powers, a discusses conflicts with the Treasury Department.

Pensions and Wages: An Hedonic Price Theory Approach

This paper examines whether a tradeoff exists between the level of pension benefits and wages for comparably skilled workers. The 1983 survey of Consumer Finances is used to match detailed information on pension plans to detailed personal characteristics of a random sample of the population. The pension wage tradeoff is estimated using both a life-tine or contractual model of the labor market and the spot market model used in previous studies. The results indicate a large negative tradeoff in the contractual model but only a negligible tradeoff in the spot market model. Results from estimating the underlying structural supply and demand equation for pensions are also presented.

Asymmetries and Rigidities in Wage Adjustments by Firms

In this paper we use micro data from the Employment Opportunity Pilot Project (EOPP) surveys of firms in 1980 and 1982 to test for labor market rigidities and asymmetries in response to demand shifts. We analyze wage and employment adjustments to positive and negative shifts, as measured by sales growth between 1979 and 1981. The analysis is done for both entire sample of firms and for selected subsamples based on firm size, unionization, industry and skill mix. The results show that wage adjustments appear to be fairly rigid, compared with employment adjustments. They also appear to be quite asymmetric, with significant adjustments in response to positive shifts but little adjustment in response to negative shifts. These asymmetries are not more pronounced in large firms, manufacturing, heavily-waged or highly-skilled industries than in other firms or industries. In contrast, employment adjustments show no consistent pattern of asymmetry.

Employment and unemployment effects of unions

Despite an extensive literature examining the effects of unions on wages, little attention has been paid to the resultant aggregate employment consequences of this change in the relative cost of unionized labor. This article uses 1983 Current Population Survey data to estimate the effects of union strength on the probability of employment and labor force participation. Union strength, which reflects both union coverage and the union wage differential, is found to decrease employment and increase unemployment by a small but significant amount. These effects are concentrated primarily among females and young males, while little impact is found on prime-age males.

The Impact of Bargainer Experience on Teacher Strikes

Using data on Pennsylvania public schools for the period 1978–84, the authors investigate the effects of bargainer experience on the frequency and duration of strikes. They find that increases in the negotiation experience of the chief or principal bargainer on either side, as well as increases in the experience of the two bargainers combined, reduce both the frequency and duration of strikes, suggesting that experienced bargainers are more adept than inexperienced bargainers at learning the minimum payoffs demanded by their opponents and conveying their own true positions. Also, strikes are less likely to occur the more equal the experience levels of the two chief bargainers.

Long-term contracts, expectations and wage inertia

Abstract This paper develops a macro model of contractual wage setting that is used to test the importance that increased contract length has in generating wage inertia. Using an errors-in-variables format to isolate the effect of price and productivity shocks, it is shown that the sensitivity of union wages to unanticipated disturbances would increase by only a small amount in the absence of long-term, three-year, labor contracts. Our results suggest that formal contracts are not a major source of nominal wage rigidity and the price surprises play a relatively small role in generating business cycles.

Toward a Theory of Saving

Until the mid-1930s the theory of saving was simple. In classical economics, saving was an increasing function of the rate of interest. Investment was a decreasing function of the interest rate. Together the saving and investment functions gave the equilibrium level of saving (equal to capital formation) and the rate of interest. John Maynard Keynes’s General Theory changed this. In the Keynesian model saving depended on disposable income. In the IS—LM model the saving function plays a crucial role in the determination of equilibrium output and expenditure. In the neo-classical synthesis, with prices variable, the IS and LM curves yield an aggregate demand curve, which, in conjunction with output determined by a perfectly inelastic aggregate supply curve, means the saving function is an important determinant of the price level. In recent years economists have analyzed the optimum consumption behavior of the representative household, where the rate of interest is again of importance in determining saving.

The Myth of America's Decline: Leading the World Economy into the 1990s.

Introduction: Leadership or decline: Americas choice Part I: Domestic and international sources of U>S> foreign economic policy: Purpose, policy and ideas: A choice-oriented perspective on American foreign economic policy Power, markets, institutions and society: Linking voluntarist concepts with international constraints Part II: Making Bretton Woods: The Bretton Woods agreements: A false start The Marshall Plan: Purpose and policy for prosperity Part III: Breaking Bretton Woods: Blaming Bretton Woods: Purpose and policy collapse Ending Bretton Woods: Cooperation without content Part IV: Restoring Bretton Woods?: Recession 1979-1982: Domestic policy adjustment and international conflict Rebound 1983-1985: Missed opportunity for International cooperation Retreat 1985-88: International cooperation without domestic adjustment Part V: The Limits of Bretton Woods: Managing East-West trade: Denial, detente and deterrence Conclusion: The Bretton Woods Policy Triad in the World Economy of the 1990s

The real wage-employment relationship: An industry analysis

Abstract Estimates of industry differences in the strength and direction of the real wage-employment relationship are used to draw implications for the magnitude of aggregation bias and the role of employment contracts.