The standard model of Economic Development is Romer’s (1989, JPE 1990) adaptation* of Solow’s (1956, 1957) Model.  Basically, became Y = AKα(HL)(1-α) where the H stands for “human capital,” which multiplies the ability of labor. (Think high-skills labor—construction work, plumbing, teaching—where the worker continually “learns by doing” [op cit., Arrow, 1962]. The additional “human capital” […]

Let the Waves of Pity Begin: More than 80 percent said they don’t believe that their compensation is mainly predicated on performance. Instead, [Capstone managing partner Rik] Kopelan said, young investment bankers worry that it’s “based on the profitability of the firm, based on how powerful the group heads were, based on capricious things.” [emphases […]

New York Times David Leonhardt argues that real wages are rising, so those resilient workers that remain employed will benefit from the bounce-back in “effective pay”. The problem with this insight is twofold: first, the expansion phase of real hourly compensation, a broader measure of total earnings, is falling; and second, sitting atop a mountain […]

By Spencer, Third quarter nonfarm productivity rose at a 9.5% annual rate as output rose 4.0% and hours worked fell at a 5.0% rate. Historically, productivity has been a very good leading indicator of real GDP growth lagged two quarters. Productivity is also highly cyclical and the first year of a recovery typically experiences the […]

Via Mark Thoma, Uwe Reinhardt* hits one out of the park on economist’s research abilities: Evidently, in the mind of economists, Lone Ranger C.E.O.’s can make truly astronomical contributions to a firm’s market capitalization, ceteris paribus, which justifies high bid prices for them. Why Lone Ranger C.E.O.’s who have trashed their firm’s market capitalization should […]