The Single Mindedness Theory Micro-foundation and Application to Labor Market
E. Canegrati
ABSTRACT: The central purpose of this paper is to introduce a new political economy approach which explains the characteristics of Social Security Systems. This approach is based on the Single Mindedness Theory, which assumes that the more single minded groups are able to exert a greater power of influence on Governments and eventually obtain what they ask. Governments are seen as voting-maximizer policy-makers, whose unique goal is winning elections. Using an OLG model and a probabilistic voting approach, I analyze a society divided into two groups, the old and the young, which only differ as for their preferences for leisure. I show that, to win elections, the Government sets the marginal tax rates taking into account the numerosity and the density of groups; eventually, the old receive a positive transfer, whose burden is entirely carried by the young. Furthermore, the more single minded group (the old) is taxed with higher tax rates; this result can be explained by the necessity that the group of the old have to find a way out to solve a free-riding problem among its members. Indeed, higher tax rates induce the old to retire earlier, so that retirees may have more time to participate in political activities and support the old group’s goals.
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Issue number: 20
In this issue:
The Single Mindedness Theory Micro-foundation and Application to Labor Market
E. Canegrati
ABSTRACT |
PDF
The central purpose of this paper is to introduce a new political economy approach which explains the characteristics of Social Security Systems. This approach is based on the Single Mindedness Theory, which assumes that the more single minded groups are able to exert a greater power of influence on Governments and eventually obtain what they ask. Governments are seen as voting-maximizer policy-makers, whose unique goal is winning elections. Using an OLG model and a probabilistic voting approach, I analyze a society divided into two groups, the old and the young, which only differ as for their preferences for leisure. I show that, to win elections, the Government sets the marginal tax rates taking into account the numerosity and the density of groups; eventually, the old receive a positive transfer, whose burden is entirely carried by the young. Furthermore, the more single minded group (the old) is taxed with higher tax rates; this result can be explained by the necessity that the group of the old have to find a way out to solve a free-riding problem among its members. Indeed, higher tax rates induce the old to retire earlier, so that retirees may have more time to participate in political activities and support the old group’s goals.
Impact of international trade on employment in Polish industrial sector
G. Grotkowska
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In this article I am trying to address the question of impact of international trade on employment and its skill structure in the Polish secondary sector. After presenting stylized facts concerning changes in employment and wages in the years 1994–2003, I estimate elasticity of employment versus international trade flows. Both direct and indirect effects (impact of trade through changes in labour productivity) are taken into account. The elasticity appears to be positive in the case of exports and negative as far as imports is concerned, but is much higher—as for absolute value—in the case of outflow of goods from Poland. What’s more, the sensitivity of employment for international trade appears to be much higher in the case of blue-collar workers than in the case of white-collar workers. Using estimated parameters and relative changes in trade in the analyzed period, the quantitative effects of trade are estimated: in spite of high dynamics of import penetration, higher elasticity of employment versus exports results in positive general effect of trade for employment (about 1.6 million workers as for secondary sector except for mining). It seems therefore that there are different factors that lie behind fall of employment in manufacturing (changes in demand structure, industry structure, technological shocks) and the main effect of trade was a changes of both skill and branch structure of employment.
Stylized Facts of Macroeconomics: the Polish Experience
K. Rosiak-Lada
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The aim of this paper is to provide detailed analysis of quarterly frequency dynamics in macroeconomic aggregates in Poland. The following areas of concern have been included: the balanced growth theory, the comparison of empirical performance of the New Classical, New Keynesian and Hybrid Philips curve specifications and the changes of macroeconomic stylized facts across the monetary regimes. Thorough analysis of those, as well as other facts, may contribute significantly to the development of macromodelling of Poland. Analysis of other facts has also been conducted, however due to limited space is not provided. The main result of the presented analysis is to give overwhelming evidence that the standard textbook stylized facts of macroeconomics present a reasonably good approximation to the behaviour of Polish economy, providing that this analysis takes into account that the Polish time series are contaminated with outliers.
The Effect of Wealth on Consumption Expenditures: Cross Country and Cross Socio-Demographic Group Comparisons
E. Sierminska, Y. Takhtamanova
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This study is a contribution to literature on the impact of wealth on consumption (the wealth effect). We assess within- and between-country differences in the housing and financial wealth effect and analyze these differences according to socio-demographic characteristics. Our interest in separating the wealth effect into two is motivated by increases in housing prices in many industrialized countries. The fact that many developed countries are undergoing demographic changes prompted us to consider the relationship between socio-demographic characteristics and wealth effects. Differences are found in the magnitudes of financial and housing wealth effects by age, gender, as well as family composition of the households in all three countries. This paper reports some of the first findings based on data from a new source, the Luxembourg Wealth Study (LWS), built within the larger Luxembourg Income Study (LIS). LWS is a database containing harmonized wealth micro-datasets from a number of industrialized countries. In our analysis we use data from three countries: Canada, Finland and Italy.
The Top-Down Approach to Calculation of the Insurance Premium
W. Otto
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When the risk loading for the whole portfolio is set proportionally to the standard deviation, then the problem of coherent pricing of individual risks arises. Borch (1962), proposed a solution based on Shapley's value of the n-person game. However, the solution is suited only for small n, rather reflecting the game played by few companies that negotiate pooling their portfolios. Otto (2004) proposed an intuitively appealing approximation for the case of large n that leads to allocation of the risk loading proportionaly to variances. The paper is devoted to formally justify that the variance principle can be justified as an approximation to the Shapley’s solution.
Balassa-Samuelson Effect in Poland: Is Real Convergence a Threat to Nominal One?
L. Wincenciak
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In this article I try to estimate the Balassa-Samuelson effect for Poland during the transition period. I try to answer the question about the difference in inflation between Poland and EU that can be attributed to productivity growth differentials. Expected further faster growth of tradable goods productivity in Poland as compared to EU, apart from other factors, can contribute to real apprectiation of Polish zloty and/or a higher inflation rate. Both of these results can negatively influence the possibility of compliance to Maastricht convergence criteria. My calculations for the period 1995(1)–2004(2) (quarterly data) that higher relative productivity growth in Poland than in EU translated to a higher inflation in Poland by 1.6pp than EU15 average.
