Category Archives: New Articles

The Shapiro-Stiglitz Model with Non-constant Marginal Utility

Authors: Joseph S. K. Wu / Chi Pui Ho
Published Online: 2017-09-06 |

source: Fig. 3 from presented article


The Shapiro-Stiglitz model plays an important role in the employment theory. Woodford pointed out the theoretic limitation of the linear worker’s utility function in that model. He questioned the model’s implication of the secular decline in the unemployment rate when such rate was in fact trendless. He proposed to resolve this by allowing diminishing marginal utility of income. In this paper, the Shapiro- Stiglitz model is generalized using a nonlinear utility function implicit in the Stiglitz Efficiency-wage paper, thus linking these two well-known models. The nonlinear utility function in this generalized model not only allows for diminishing marginal utility of income but also allows for the analysis of parameters representing various factors affecting the secular unemployment rate. In particular, we can specify the condition under which the diminishing marginal utility can cause such rate to be trendless.

Keywords: MacroeconomicsEfficiency-WageS-shaped Effort SupplyShirking model

Shadow Economy: Estimation Methods, Problems, Results and Open questions

Friedrich Schneider / Andreas Buehn
Published Online: 2017-05-16


This paper presents various methods used for estimating the size of the shadow economy. Each method is evaluated and its strengths and weaknesses are discussed, as well as results each method yields. The purpose of the paper is threefold: Firstly, to demonstrate that there is no single infallible method for estimating the size and development of the shadow economy and results can differ significantly between different approaches. The MIMIC approach, discussed in greater detail, is often used due to its flexibility. Secondly, the paper discusses the very definition of the shadow economy and factors contributing to its growth. Finally, latest estimations of the size of the shadow economies of 143 countries over the period 1996 to 2014 are presented.

Keywords: shadow economy estimatesMIMIC approachmethods to estimate the shadow economyadvantages and disadvantages of the methodsMIMIC-methodcalibration procedurelight intensity approach