Yijiang Wang

Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited

This article investigates how human capital investment, labor turnover, and wages are jointly determined when the current employer knows more about a workers productivity than potential employers. Results derived are quite different from, or unexplored by, the standard human capital theory. We show that the information asymmetry can cause an externality distortion in human capital investment because higher productivity due to the investment may not be recognized by the market. The investment level increases in the degree of firm specificity of human capital. The underinvestment problem is more severe when human capital is general than when it is firm-specific.

A Multi-Task Theory of the State Enterprise Reform

During transition, maintaining employment and providing a social safety net to the unemployed are important to social stability, which in turn is crucial for the productivity of the whole economy. Because independent institutions for social safety are lacking and firms with strong profit incentives have little incentives to promote social stability due to its public good nature, state-owned enterprises (SOEs) are needed to continue their role in providing social welfare. Charged with the multi-tasks of efficient production as well as social welfare provision, SOEs continue to be given low profit incentives and consequently, their financial performance continues to be poor.

What Do Unions in China Do? Provincial-Level Evidence on Wages, Employment, Productivity, and Economic Output

Utilizing provincial-level data from the period of 1994-2008, this paper studies the relationship between union density and wages, employment, productivity, and economic output in China. The findings indicate that union density does not affect average wage levels, but is positively associated with aggregate productivity and output. We discuss if and to what extent these findings are consistent with the familiar two faces of unions model and alternative explanations relevant in the context of Chinese labor and union institutions.

FINANCIAL REPRESSION AND OPTIMAL TAXATION

Financial repression entails an implicit taxation on savings. When effective income-tax rates are very uneven, as common in developing countries, raising some government revenue through mild financial repression can be more efficient than collecting income tax only.

The Ambiguity of Strike Replacement Legislation and Wages: A Sequential Investment-Bargaining Model

The effect of strike replacement, or striker replacement, bans has been theoretically modeled using private information bargaining models which predict that strike replacement restrictions will increase wages. These models, however, assume that the capital stock is constant. This paper develops a sequential model in which a capital investment decision precedes wage bargaining. Strike replacement legislation which increases labors bargaining power and reduces the productivity of capital during a strike can cause reduced investment. Consequently, the theoretical effect of strike replacement restrictions on wage outcomes is ambiguous. This model can also be applied to other public policy debates in labor relations.

Labor Policy and Investment: Evidence from Canada

Some critics of proposed legislative labor policy changes contend that laws favoring labor would adversely affect business investment. Research on labor policy, however, often assumes that investment is fixed. The authors present a sequential bargaining model in which labor policies that increase labors bargaining power and reduce managements options during strikes are predicted to reduce investment. The results of an analysis of provincial data on investment for 1967 to 1999 indicate that strike replacement bans and protections for workers who refuse to handle struck work did indeed reduce new investment, especially within the first few years after the policy change. Particularly sensitive was building construction investment, which declined by about as much when a labor policy benefiting labor was enacted as it would be expected to decline in a recession.

Firm's information-sharing policy and strike incidence

Abstract A model is build to study when the firm will share the information (open the books) regarding the true state of its profit with the workers. It is shown that when book-opening is allowed, strikes cannot be an equilibrium outcome. It is argued that the pure strategy of always opening the books is adopted only because the firm fails to credibly commit itself to a mixed strategy.

Optimal liquidation rule and debt in the principal-agent model

Abstract This paper introduces liquidation decisions into the standard principal-agent model. The problem is formulated and the optimal compensation and liquidation rules are characterized. It is also shown that, under an assumption about the distribution function of the output, debt can be used to implement the optimal liquidation rule.