Browsing by Author "Merlo, Antonio"

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    On the Political Economy of Income Redistribution and Crime
    (Center for Economic Research, Department of Economics, University of Minnesota, 1996-11) Imrohoroglu, Ayse; Merlo, Antonio; Rupert, Peter
    In this paper we consider a general equilibrium model where heterogeneous agents specialize either in legitimate market activities or in criminal activities and majority rule determines the share of income redistributed and the expenditures devoted to the apprehension of criminals. We calibrate our model to the U.S. economy in 1990, and we conduct simulation exercises to evaluate the effectiveness of expenditures on police protection and income redistribution at reducing crime. We find that while expenditures on police protection reduce crime, it is possible for the crime rate to increase with redistribution. We also show that economies that adopt relatively more generous redistribution policies may have either higher or lower crime rates than economies with relatively less generous redistribution policies, depending on the characteristics of their wage distribution and on the efficiency of their apprehension technology.
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    Pattern Bargaining
    (Center for Economic Research, Department of Economics, University of Minnesota, 1996-11) Marshall, Robert C.; Merlo, Antonio
    Many unions in the United States have for several years engaged in what is known as pattern bargaining-a union determines a sequence for negotiations with firms within an industry where the agreement with the first firm becomes the take-it-or-leave-it offer by the union for all subsequent negotiations. In this paper, we show that pattern bargaining is preferred by a union to both simultaneous industry wide negotiations and sequential negotiations without a pattern. In recent years, unions have increasingly moved away from patterns that equalized wage rates across firms when these patterns did not equalize interfirm labor costs. Allowing for interfirm productivity differentials within an industry, we show that pattern bargaining, whether it involves commitment to a pattern in wages or to a pattern in labor costs, achieves the highest possible payoff for the union from among a large group of alternatives. We also show that for small interfirm productivity differentials, the union most prefers a pattern in wages, but for a sufficiently wide differential, the union prefers a pattern in labor costs. These results provide an explanation for the pervasive use of pattern bargaining as well as many of the observed changes in pattern bargaining that have occurred in recent years.