Tom van Veen

Efficiency Wages and Local Wage Bargaining

In the literature on wage drift, it is often argued that strikes or work-to-rule practices are used to force employers to pay a wage rate that exceeds the contract wage. Here, the authors introduce the efficiency wage argument as a foundation for bargaining about wage drift. Contrary to the view in most bargaining models, where firms and unions struggle to divide a fixed pie, given employment, they take the relation between wages and revenues explicitly into account. The implications for wages and employment appear to differ not only with respect to the order of magnitude but also in a qualitative sense. Copyright 1996 by The editors of the Scandinavian Journal of Economics.

International education and economic growth

In recent years international student mobility increased. While net hosting countries are in a better position to win highly educated students for their labour force, they face the additional cost of providing the education. In much of continental Europe these costs are not levied on students, but are borne by the national tax payers, making them an active topic of debate. Borrowing some fundamental equations from the Lucas growth model, this paper addresses the question whether countries benefit from educating international students. We derive conditions under which international education has a positive effect on economic growth, overall and in each specific country. Based on empirically motivated parameter values to calibrate our two-country model we find that international student mobility increases steady state growth for both countries on average by 0.013 percentage points. A small country that is favoured by the inflows of a larger country could experience an extra growth of 0.049 percentage points. The benefits from international education increase when a country tunes its education and migration policy.JEL ClassificationI25.

The Adverse Effect of Government Spending on Private Consumption in New Keynesian Models

Empirical evidence shows that government spending crowds in private consumption, a Keynesian phenomenon. The current, state of the art, New Keynesian models based on optimizing households and firms are not able to predict such a result. In this paper, we critically analyse fiscal policy in these models using a graphical framework as well as a formal model. Extensions aimed at generating crowding in, like useful government spending or rule of thumb consumers, turn out to be inappropriate. We argue that introducing productivity enhancing government spending could potentially lead to crowding in.

European Economic and Monetary Integration and the Euro

Recent developments in economic cooperation in Europe are discussed in this article. The launch of the euro on 1 January 2002 will increase the impact of this cooperation in the world economy.