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 […]

Crossposted at The Street Light. Last week I took a look at the way that higher labor productivity has not translated into higher worker compensation, particularly during the 1980s and 2000s. This is at odds with classical labor market theory, which suggests that as workers become more productive, their increasing value to firms should cause […]

Crossposted at The Street Light. Yesterday Ezra Klein had a chart (from a paper by Larry Mishel and Heidi Shierholz at EPI) showing that both private sector and public sector wages have been stagnating for the past several years, and have certainly not kept up with productivity growth. I think it’s useful to look at […]

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 […]