Kjell Erik Lommerud

Geography of the Family

We study the residential choice of siblings who are altruistic towards their parents. If some siblings moves further away, he or she can shift some of the burden of takin care for the parents to his or her siblings. Thus, siblings have a strategic incentive to move away that only children do not have. Siblings locate futher away from parents than only children, and, for some preferences, asymmetric location patterns emerge. These theoretical predictions are also confirmed by empirical data.

Family Policy with Non-cooperative Families*

The authors consider a noncooperative model of a familys time allocation between market work and providing a home-produced family public good (such as child care or care for the elderly). The model predicts underprovision of the public good. Because of crowding out, this does not necessarily warrant public provision. In contrast to other approaches in family economics, the authors find that attempts to redistribute between spouses may alter the final distribution within the marriage and that such a policy may be Pareto improving. They also find that some degree of progressivity of the income tax can be welfare improving. Copyright 1995 by The editors of the Scandinavian Journal of Economics.

Downstream merger with upstream market power

We examine how a downstream merger a2ects input prices and, in turn, the pro3tability of a such a merger under Cournot competition with di2erentiated products. Input suppliers can be interpreted as ordinary upstream 3rms, or trade unions organising workers. If the input suppliers are plant-speci3c, we 3nd that a merger is more pro3table than in a corresponding model with exogenous input prices. In contrast to the received literature, we 3nd that it can be more profitable to take part in a merger than being an outsider. For 3rm-speci3c input suppliers, on the other hand, results are reversed. We apply our model to endogenous merger formation in an international oligopoly, and show that the equilibrium market structure is likely to be characterised by cross-border merger. c

Minimum wages and the incentives for skill formation

We show that minimum wages may have beneficial effects on human capital allocation in a situation when the marginal product of skilled labor is shared between firm and worker according to bargaining strength. Firms prefer more productive workers to less p

UNION EGALITARIANISM AS INCOME INSURANCE

It is a common observation that unions often try to compress the wage distribution among their members as compared with the productivity distribution. A troublesome aspect of standard theories of redistributive unions is the question why high-productivity workers choose to enter the union in the first place. This paper develops and explores the implications of an alternative insurance rationale for egalitarian wage objectives. Apart from providing a simple explanation of why heterogeneous union members may agree on egalitarian wage policies, it also suggests a more guarded attitude toward the welfare costs of pay compression. Copyright 1992 by The London School of Economics and Political Science.

Egalitarianism and Growth

Are competitive wage premia an obstacle to growth? The answer of the architects of the Scandinavian model in the 1950s and 1960s was in the affirmative. By punishing expansive and growth enhancing sectors of the economy, competitive wage premia imposed an unwarranted drag on the rate of structural change. The authors formalize this intuition using a two-sector endogenous growth model, considering both open and closed economy cases. They also show that egalitarian pay compression, combined with active labor market policies, works in the same way as an industrial policy of subsidizing sunrise industries. Copyright 1993 by The editors of the Scandinavian Journal of Economics.

Employment Protection Versus Flexicurity: On Technology Adoption in Unionised Firms

We analyse how different labour market institutions--employment protection versus ‘flexicurity’--affect technology adoption in unionised firms. We consider trade unions’ incentives to oppose or endorse labour-saving technology and firms’ incentives to invest in such technology. Increased flexicurity--interpreted as less employment protection and a higher reservation wage for workers--unambiguously increases firms’ incentives for technology adoption. If unions have some direct influence on technology, a higher reservation wage also makes unions more willing to accept technological change. Less employment protection has the opposite effect, since this increases the downside (job losses) of labour-saving technology.

Merger and product range rivalry

Abstract The received literature concludes that if scale economies are absent, mergers are often unprofitable under Cournot competition, but always profitable under Bertrand. In a linear demand model with three firms initially, where there are two merger candidates, we show that results will change if we introduce the number of brands as a choice variable. When a non-participating firm responds to a merger by introducing a new brand, the merger would often have been welfare improving, but it is never profitable. When the merged unit narrows its product range, the merger can be profitable. It will not be socially beneficial, though, unless the fixed cost of marketing a brand is high and non-sunk and brands are close substitutes.

Foreign direct investment, intra-firm trade and ownership structure

Asymmetric information about true opportunity cost in trade between a multinational and its foreign affiliate can alleviate the hold-up problem in foreign direct investment. Selling shares in the affiliate to locals is also beneficial because it increase the parent multinationals information rent that is protected from a host governments confiscatory taxation.

Relative standing comparisons, risk taking and safety regulations

Abstract We study the question of how relative standing comparisons, or ‘status seeking’, influence risk taking. When utility is separable in consumption and status the following results apply. With non-systematic risks, more concern for status leads to more (less) risk taking when, in a sense made precise in the paper, the utility function is less (more) concave in status than in pure consumption. With systematic risk, risk taking always increases with the concern for status. However, status seeking always implies socially excessive risk taking, thus suggesting a role for public regulation of risky choices.