sustainability of external imbalances in the oecd countries the authors wish to thank three anonymous referees for helpful comments to a previous version financial support from the spanish institute for fiscal studies the spanish ministry of economy and competitiveness projects eco2011 29314 c02 02 o bajo rubio and c diaz roldan and eco2011 30260 c03 01 v esteve and the department of education and science of the regional government of castilla la mancha project peii09 0072 7392 is also gratefully acknowledged v esteve also acknowledges support from the generalitat valenciana project gvprometeo2009 098

the impact of immigration comparing two global eras summary this paper asks whether history can inform modern debate about immigration s impact on high wage economies it examines the relationship between migration s labor market impact and capital flows before 1914 the first global era it then assesses the effects of immigration on wages and employment with and without international capital mobility today in the second global era it then explores the links between these economic relationships welfare burdens and immigration policy it concludes with an explanation for the apparent difference in immigration s impact in the two global eras and thus on policy

testing intertemporal budget constraints theory and applications to u s federal budget and current account deficits this paper extends previous tests of intertemporal budget balance and present value relationships by expanding the set of allowable deficit processes and by deriving a testable condition that is sufficient to ensure intertemporal budget balance as long as the expected discount rate is strictly positive using these tests the authors find that both the postwar federal budget deficit process and the process governing accumulation of u s assets by foreigners are consistent with intertemporal budget balance copyright 1991 by ohio state university press

mill political economy and women s work the sexual division of labor and the social and economic value of women s work in the home has been a problem that scholars have struggled with at least since the advent of the second wave women s movement but it has never entered into the primary discourses of political science this paper argues that john stuart mill s political economy provides innovative and useful arguments that address this thorny problem productive labor is essential to mill s conception of property and property was vital to women s independence in mill s view yet since mill thought most women would choose the career of wife and mother rather than working for wages then granting that work productive status would provide a radical and inventive foundation for women s equality mill however is ambiguous about the productive status of domestic labor and is thereby representative of a crucial failure in political economic thought as well as in egalitarian liberal thought on gender but because mill at the same time develops a conception of production that goes well beyond the narrow limits offered by other prominent political economists he offers contemporary political scientists and theorists a way to rethink the relationship of reproductive to productive labor the requirements for gender equality and the accepted categories of political economy

common trends the government s budget constraint and revenue smoothing abstract the requirement that the government s budget be balanced in present value terms is shown to be equivalent to the condition that government expenditures inclusive of interest tax receipts and seignorage be cointegrated the condition is in fact stronger requiring that the deficit inclusive of interest be stationary stationarity of the net of interest deficit is neither necessary nor sufficient for intertemporal budget balance however it does have implications for barro s tax smoothing hypothesis data for the period 1890 1986 are consistent with intertemporal budget balance but not with tax smoothing

the political economy of gender explaining cross national variation in the gender division of labor and the gender voting gap mainstream political economy has tended to treat the family as a unit when examining the distributional consequences of labor market institutions and of public policy in a world with high divorce rates we argue that this simplification is more likely to obscure than to instruct we find that labor market opportunities for women which vary systematically with the position of countries in the international division of labor and with the structure of the welfare state affect women s bargaining power within the family and as a result can explain much of the cross country variation in the gender division of labor as well as the gender gap in political preferences

education variation in earnings and nonmonetary compensation the nas nrc twin offspring data support the proposition that for those with low levels of education earnings may be an adequate proxy for compensation whereas the opposite holds for highly educated individuals the inclusion of variables that control for reasons monetary or nonmonetary individuals chose their occupation explains an additional 9 percent of the variation in earnings for those with 16 or more years of education and lowers the male female wage gap by almost 40 percent and only an additional 2 percent for those with 15 years or less no affect on male female wage gap

job change patterns and the wages of young men this study uses data from the national longitudinal survey of youth to distinguish empirically between mover stayer search good and experience good models of job mobility we estimate wage models in which the pattern of overall job mobility affects both the level and tenure slope of the log wage path after controlling for the correlation between mobility patterns and time constant person and job specific unobservables we find that workers who undergo persistent mobility have lower log wage paths than less mobile workers this finding is consistent with models in which job mobility is driven by time varying unobservables such as experience good models where changes in perceived match quality cause turnover

global imbalances and the intertemporal external budget constraint a multicointegration approach abstract this paper analyzes the external solvency of a group of 23 oecd countries for the period 1970 2012 the empirical strategy adopted underlines the increasing importance of the financial channel for the external adjustment as proposed in gourinchas and rey 2007 we unify the traditional approaches to testing for external sustainability considering the stock flow system created by the variables representing the external relationships of an open economy external sustainability is tested using several types of cointegration and multicointegration tests the results obtained point to weak sustainability in the flows analysis whereas some degree of strong sustainability is found for up to six countries in the stock flow approach among these countries we find both non european economies such as japan and new zealand and euro area members especially those with more restricted access to financing in the international markets

persistence of interindustry wage differentials a reexamination using matched worker firm panel data we estimate interindustry wage differentials using new french longitudinal data that allow a tracking of workers and their firms over time we find that when measured on a cross sectional basis they primarily reflect the interindustry variations in unmeasured labor quality however interindustry wage differentials are only a minor component of interfirm wage differentials the average differential in wages paid to the same workers by different firms is about 20 30 in a given industry wage policies are more favorable to workers in large capital intensive firms

the sustainability of government deficits implications of the present value borrowing constraint this paper introduces a new methodology for evaluating the sustainability of fiscal policy the new methodology is distinguished from most existing tests in two important respects first it allows for stochastic real interest rates and second it is both necessary and sufficient results from the application of the new test suggest that recent fiscal policy in the united states has not been sustainable the paper contrasts its findings with those of james d hamilton and marjorie a flavin 1986 copyright 1989 by ohio state university press

can the intertemporal budget constraint explain the feldstein horioka puzzle abstract we investigate the small sample behavior of the cross sectional saving investment correlation when saving and investment are cointegrated over time as is implied by the intertemporal budget constraint the simulations show that the effect of the intertemporal budget constraint seems strong enough to explain the high correlation of saving and investment across countries feldstein horioka puzzle

theory based measurement of the saving investment correlation with an application to norway i introduction the findings of feldstein and horioka 19c 0 have led to numerous theoretical and empirical papers on the close correlation between domestic saving and domestic investment and its supposed implications for international capital mobility feldstein and horioka 1980 317 state that with perfect world capital mobility there should be no relation between domestic saving and domestic investment saving in each country responds to the worldwide opportunities for investment while investment in that country is financed by the worldwide pool of capital however in a cross country regression using period averaged saving and investment figures for sixteen oecd countries they obtain a significant coefficient close to unity and conclude that capital is rather immobile this result constitutes the feldstein horicka puzzle as it contradicts the widely held perception that capital is highly mobile across countries subsequent empirical work confirmed the close correlation though its implication for the degree of capital mobility is a moot point see tesar 1991 this paper contributes to the understanding of the puzzle on both theoretical and empirical counts first we present a theory based econometric specification for estimating saving investment correlations second we discuss the possible usefulness of the estimates for detecting capital mobility third we provide empirical results for the interesting case of norway we argue that feldstein and horioka s basic idea that the saving investment correlation contains information about international capital mobility is correct but that the interpretation of the estimated correlation value must be altered substantially in view of the results derived from modern macroeconomic models our research is motivated by the observation that various regression equations have been used to measure the saving investment correlation but that none of them has a firm theoretical foundation this in turn raises questions about the interpretation and comparability of the existing empirical results we propose an econometric specification that is founded in intertemporal general equilibrium models in which agents optimize under intertemporal budget constraints we show that time series studies have estimated misspecified equations and that cross section studies are seriously flawed because they neglect dynamics as a result the puzzle may turn out to be an artifact caused by measurement errors however the significance of reliable measurement of saving investment correlations goes beyond solving the feldstein horioka puzzle because they represent stylized facts open economy models should explain norway serves as a suitable example to cement our methodological arguments with empirical evidence thanks to its system of capital controls which were phased out during the 1970s and 1980s the oil discoveries and its small size we demonstrate that the failure to take structural breaks into account seriously distorts the picture making a strong case for careful diagnostic testing our main empirical result is that the feldstein horioka puzzle does not exist for norway the paper proceeds as follows in section ii we briefly summarize the state of the discussion regarding feldstein and horioka s findings in section iii we derive our specification from the theory compare it to the previous specifications and discuss how to make inferences about capital mobility in section iv we sketch major developments in the post war norwegian economy notably the abolition of capital controls and the emergence of the important oil sector section v presents the empirical results section vi summarizes and concludes ii the feldstein horioka puzzle many authors have confirmed feldstein and horioka s result of a high and stable correlation of saving and investment for oecd countries both in cross country studies and in time series studies

is there a trade off between supervision and wages an empirical test of efficiency wage theory abstract the logic of efficiency wage theory suggests a trade off between wages and supervision this paper reports evidence that high levels of supervision are indeed associated with lower wage levels the empirical investigation centers on the effect that safety supervision by host employers has on the wages of contract maintenance workers in the petrochemical industry this narrow focus is important special institutional features of the contract employment relationship in petrochemicals make it possible to ameliorate econometric problems that may have influenced earlier studies

current account sustainability in the us what did we really know about it abstract we analyze the sustainability of the us current account ca deficit by means of unit root tests first we argue that there are several reasons to believe that the ca may follow a non linear mean reversion behavior under the null of stationarity using a non linear estar model we can reject the null of non stationarity favoring the sustainability hypothesis second we ask whether unit root tests are a useful indicator of sustainability by comparing in sample results for the 1960 2004 period to the developments observed up to the end of 2008 we find that the non linear model outperforms the linear and random walk models in terms of forecast performance the large shocks to the ca observed in the last five years induced a faster speed of mean reversion ensuring the necessary adjustment to meet the inter temporal budget constraint

labor supply hours constraints and job mobility if hours can be freely varied within jobs the effect on hours of changes in preferences for those who do change jobs should be similar to the effect on hours for those who do not change jobs conversely if employers restrict hours choices then changes in preferences should affect hours more strongly when the job changes than when it does not change for a sample of married women we find that changes in many of the labor supply preference variables produce much larger effects on hours when the job changes

some stabilizing and destabilizing effects of foreign debt accumulation in developing countries abstract recent research indicates that current account imbalances in the three largest industrial countries germany japan and the united states are self correcting a long run equilibrium relationship exists between the cumulated current account which is the net stock of these countries foreign assets or liabilities and other economic factors the situation appears to be different in a sample of 26 developing countries examined here this paper attempts to explain why it examines the effects on the current account of government and government guaranteed foreign debt on the one hand and net foreign liabilities or the cumulated current account deficit on the other while the cumulated current account deficit does generate stabilizing forces possibly through wealth effects large amounts of government and government guaranteed debt create destabilizing effects by stimulating capital flight

incentives in organizations n 1975 steven kerr published on the folly of rewarding a while hoping for b the argument was simple you get what you pay for kerr distilled this unifying theme from a disparate set of examples involving politicians soldiers doctors orphanage directors professors and students as well as manufacturing and clerical employees and even human resource managers from these examples kerr pp 77980 concluded that two main causes of distorted incentives are fascination with an objective criterion where individuals seek to establish simple quantifiable standards against which to measure and reward performance and overemphasis on highly visible behaviors when some parts of the task are highly visible while others are not it took agency theory 15 years to express kerr s title not to mention to evaluate or extend his conclusions during this period agency theory was obsessed with the tradeoff between incentives and insurance even though clear eyed observations like kerr s about the design and performance of real incentive contracts suggested that several other issues are at least as important fortunately recent work has brought agency theory not only to kerr s position but beyond in this paper i summarize four new strands in agency theory that help me think about incentives in real organizations as a point of departure i begin with a quick sketch of the classic agency model i then discuss static models of objective performance measurement that sharpen kerr s argument repeated game models of subjective performance assessments incentives for skill development rather than simply for effort and incentive contracts between versus within organizations i con

is the budget deficit too large yes specifically we find that recent spending and taxing policies of the government if continued violate the government s intertemporal budget constraint as a result government spending must be reduced and or tax revenues must be increased these conclusions are based on tests of whether government spending and revenue are cointegrated in addition to examining real spending and revenue we also normalize these variables by real gnp and population for a growing economy these normalized measures are perhaps more pertinent we also test and find support for the hypothesis that deficits have become a problem only in recent years

wages nonwage job characteristics and labor mobility this paper examines the effects of a set of nonwage job characteristics on the quit decisions of young and middle aged men the data set was constructed by merging data in the national longitudinal surveys of young and mature men with data from the dictionary of occupational titles file and the bureau of economic analysis file on fringe benefits the empirical analysis shows that some nonwage job attributes have significant influence on worker quit behavior and that there are important differences in the effects of the nonwage job characteristics across age groups young men are significantly more likely than older men to quit repetitive jobs for example whereas the presence of bad working conditions is a more important factor in the quit decisions of the older cohort the results also indicate that for the older men fringe benefits have a stronger effect on quit decisions than wages do further evidence on age differences is provided through an analysis of panel data from the quality of employment survey since the time of adam smith the theory of equalizing differences that individuals are induced to accept less attractive jobs by receiving compensating increases in their wages has been used by economists to explain the existence of wage differences in the labor market by definition the theory has important implications for understanding the mobility of labor since an individual s decision to change jobs is based on all the characteristics of a job the wage rate fringe benefits and nonpecuniary job at

fiscal policy and the current account deficits and trade jose vinals does the balance of payments act as an external constraint on the design of domestic economic policy in practice most governments believe it does yet popular discussion is sometimes confused this paper begins by evaluating the nature of the external constraint and the extent to which it can adequately be measured by the current account of the balance of payments it is often argued that a fiscal expansion will increase employment it is also widely held that a fiscal expansion necessarily leads to a deterioration of the current account while these propositions may hold in specific circumstances neither is generally true the theoretical basis of the two propositions is examined and compared with recent international experience when important changes in fiscal stance occurred the popular presumptions are confirmed by recent experience in the us the uk and germany but france is a counterexample to the first and spain to the second the important policy implication is that one can identify both in theory and in practice clear circumstances in which expansionary fiscal policy is appropriate and will not be thwarted by external considerations

saving investment correlations and capital mobility on the evidence from annual data this paper evaluates the use of saving investment correlations to measure capital mobility it is argued that the intertemporal approach to the balance of payments predicts that the practice of calculating the correlation coefficient using long term averages of saving and investment shares biases the result toward accepting the hypothesis of capital immobility calculations based on annual data show that the correlation coefficient is much lower and that is varies considerably estimates of intranational capital mobility based on saving and investment shares of u s federal states show that the saving and investment link is much looser within a nation than among nations copyright 1992 by royal economic society

international intertemporal solvency in industrialized countries evidence and implications recent large current account deficits among industrialized countries have caused concern for policy makers some believe for example that the current buildup of claims on the u s by foreigners violates her solvency condition with respect to the rest of the world recent research 22 suggests that for a country s intertemporal solvency condition to hold the change in the country s obligations to the rest of the world i e her current account deficit must be stationary stationarity tests on current accounts were performed for the u s by trehan and walsh 22 and wickens and uctum 23 for the u s and canada by otto 15 and for twenty three countries by gundlach and sinn 10 these papers present evidence that current accounts are non stationary for several major industrialized countries including the u s the u k canada germany and japan these findings do not favor international intertemporal solvency for this reason the issue merits further investigation in this paper we test for the stationarity of current account deficits of the group of seven industrialized countries preliminary results confirm many of gundlach and sinn s 10 findings however several events during the 1980s might have caused discrete breaks in current account balances events potentially linked with current account breaks include the reduction in world inflation tax reduction and reform in the u s and other industrialized countries attempts at international macroeconomic coordination i e the plaza accord and shifts in the after tax rate of return on capital in many countries as shown in recent research on gross national product 16 2 if such breaks are not accounted for stationarity tests will be biased in favor of accepting the null hypothesis of non stationarity our results suggest strong evidence of discrete breaks in the u s and japan and some evidence favoring breaks in the u k germany and canada the break in the u s current account appears to occur in 1983 while breaks in the other countries appear to occur somewhat later between late 1984 and 1987 more importantly once these breaks are incorporated the evidence is more favorable toward the stationarity of current accounts in these countries these findings thus support intertemporal solvency for these countries

are bond financed deficits inflationary a ricardian analysis this paper considers the possible theoretical validity of the following monetarist hypothesis that a constant positive government budget deficit can be maintained permanently and without inflation if it is financed by the issue of bonds rather than money the question is studied in a discrete time perfect foresight version of the competitive equilibrium model of sidrauski modified by the inclusion of government bonds as a third asset it is shown that the monetarist hypothesis is invalid if the deficit is defined exclusive of interest payments but that it is valid under the conventional definition it is also shown that the stock of bonds can grow indefinitely at a rate in excess of the rate of output growth provided that the difference is less than the rate of time preference these formal conclusions do not take account of possible limitations on taxing capacity arising from default incentives that tend to grow with the stock of bonds

on the limitations of government borrowing a framework for empiricaltesting this paper seeks to distinguish empirically between two views on the limitations of government borrowing according to one view nothing precludes the government from running a permanent budget deficit paying interest due on the growing debt load simply by issuing new debt an alternative perspective holds that creditors would be unwilling to purchase government debt unless the government made a credible commitment to balance its budget in present value terms we show that distinguishing between these possibilities is mathematically equivalent to testing whether a continuing currency inflation might be fueled by speculation alone or is instead driven solely by economic fundamentals empirical tests which have been developed for this economic question lead us to conclude that postwar u s deficits are largely consistent with the proposition that the government budget must be balanced in present value terms this abstract was borrowed from another version of this item

job mobility and gender based wage growth differentials i introduction evidence presented by goldin 1989 o neill 1985 and others shows that the gender wage gap is narrowing much of the narrowing has been attributed to changes in female employment behavior such as the increased consistency of labor force participation and investment in education however because wages are not yet equal questions remain for example does mobility play a role in the remaining wage gap in this paper we examine the role of mobility because this has been a relatively neglected area of interest for researchers concerned about the gender wage gap some evidence on gender differences in mobility and the returns to mobility has been presented but there is little consistency in the reported evidence keith and mcwilliams 1995 demonstrate that the mobility histories of young men and women differ significantly loprest 1992 reports that for a sample of individuals who worked full time for four consecutive years young men s wages grew twice as much when they changed jobs i e employers as young women s did however abbott and beach 1994 find that the wage effects of mobility for women are similar in magnitude to the gains that mincer 1986 and holmlund 1984 find for men given the sometimes conflicting results reported so far determining the extent and the cause of gender differences in wage mobility effects has important implications for gender wage gap arguments in this study we examine the patterns and the returns to mobility for young men and women to examine mobility patterns we disaggregate mobility into involuntary or employer initiated and voluntary or employee initiated separations we further disaggregate involuntary separations into layoffs and discharges and we further disaggregate voluntary separations into family related and non family related quits by examining the impact of each of these different types of job separation on wage growth and the difference in the relative frequency of each type of separation for men and women we can make inferences about the impact of early career mobility on the gender wage gap the remainder of this paper is organized as follows in section ii we review evidence on the returns to different types of mobility in section iii we present evidence on gender differences in mobility and wage growth we use data from the national longitudinal survey of youth nlsy to examine the mobility patterns of men and women and to calculate average wages and average wage growth in section iv we describe how we selected a sample and specified a model for estimating the determinants of wage growth in section v we examine the wage growth effects of different types of mobility controlling for starting wages and individuals fixed effects in section vi we discuss our conclusions ii the returns to different types of mobility workers change jobs for different reasons some voluntary and some involuntary there is some evidence that the returns to different types of mobility differ not surprisingly there is consistent evidence that employee initiated separations quits increase wage growth and that employer initiated separations layoffs and discharges decrease wage growth relative to staying with the same employer 1 additional evidence on the job mobility and wage growth of men has been offered as well bartel and borjas 1981 show that job related quits have a larger positive impact on wage growth than do non job related quits with the highest wage growth resulting from those quits that are associated with successful job shopping parsons 1989 shows that for young men an employer initiated separation with prejudice a discharge results in a larger wage penalty than an employer initiated separation without prejudice a layoff keith 1993 and keith and mcwilliams 1995 show that the number of previous discharges decreases and the number of previous job related quits increases the current wage for samples of young men

the industrial mobility of displaced workers this article uses a two industry model of unemployment duration and job search to estimate rates of transition of displaced workers from unemployment to employment distinguishing between employment in a worker s previous industry and in other industries the competing risks model allows inferences about search strategies to be drawn from data concerning employment outcomes and allows tests of some fundamental implications of search theory there is evidence that improvements in the prospects for employment in their previous industry induce displaced workers to reduce search intensity or increase reservation wages in other industries

international capital mobility in the long run and the short run can we still learn from saving investment data the idea to learn about international capital mobility from saving and investment data remains appealing our approach is based on var methods and overcomes some of the problems associated with saving investment regressions when the data are non stationary we propose a new measure of long run capital mobility that can be easily calculated as a by product of the estimation procedure of a cointegrated var in an application to historical us and british data we find long run capital mobility to have been remarkably stable over the century whereas variations in the mobility of capital primarily seem to have affected short run capital flows

foreign currency debt financial crises and economic growth a long run view what are the costs of hard currency liabilities after being implicated in the global financial instability of the late 1990s the costs are widely believed to be large and as a result many emerging markets have pushed to minimize currency mismatches we study the growth effects of exposure to foreign currency debt using data from two periods of international financial integration 1880 1913 and 1973 2002 for over 45 countries hard currency debt is associated with increased risks of currency and debt crises in both periods especially when a country s macroeconomic financial fundamentals are weak we find the risk of financial crisis associated with hard currency debts translated into significantly diminished growth rates however we also find evidence that strong financial development and policy credibility attenuate the crisis risks associated with high exposure to hard currency debt which has implications for eastern european countries where large current account deficits and high levels of hard currency debt are believed to pose financial risks in this region some countries have adopted flexible exchange rates and avoided foreign currency debt several others have built up large net foreign currency liabilities and are exposed to a significant likelihood of a financial crisis in the near future

a century of current account dynamics abstract recent globalization trends have refocused attention on the historical evolution of international capital mobility over the long run the issue is examined here using time series analysis of current account dynamics for fifteen countries since circa 1850 the inter war period emerges as an era of low capital mobility and only recently can we observe a tentative return to the degree of capital mobility witnessed during the late nineteenth century the analysis of saving and investment dynamics also helps make sense of the frequently observed high correlation of saving and investment rates in historical data

the sustainability of current account deficits abstract this paper proposes a new method of determining whether a country is likely to be able to sustain its current account deficits without defaulting on its debt it is based on the notion of the national intertemporal budget constraint ibc which is derived from a forward solution of the balance payments identity although the problem is formally similar to that considered in the literature on the government ibc a more general solution is obtained by allowing the primary deficit to be endogenous instead of exogenous it is shown that the existence of negative feedback from net indebtedness to the primary deficit a wealth effect is sufficient this method supplants the ad hoc approach previously adopted in the current account literature whilst many of the same variables appear a formal structure for analysing them is provided

a theory of quits and layoffs with efficient turnover this paper answers the efficient turnover literature s long silence regarding the quit layoff distinction treating quits as worker initiated separations and layoffs as firm initiated separations i establish that the existence of layoffs is compatible with optimizing workers and firms forming and dissolving employment matches to exploit all the gains from trade the efficient turnover approach is shown to be consistent with many empirical regularities that distinguish quits from layoffs structural implications of the model are tested on data from the psid

how to evaluate the solvency of an indebted nation reassessing third world debt daniel cohen the conventional measures of the solvency of developing countries usually rely on such indices as debt export or debt gnp ratios the underlying rationale is that to be solvent a country must eventually pay back all its debt this paper starts from two simple but important remarks first solvency need not require the full eventual repayment of all debt continued borrowing may be possible rather what is required is that a country s debt accumulation does not outstrip its capacity to make future repayments and the capacity of lenders to make future loans second solvency therefore cannot be defined independently of the growth rates of lender and borrower countries nor of the interest rate at which past debts accumulate putting these ideas together a new solvency index is proposed and this is computed for all the less developed countries this new index suggests a less gloomy view of the international debt crisis the largest debtors may have already accomplished an adjustment which is more than sufficient to restore their solvency when this is properly computed to investigate this claim there is a detailed analysis of the policies recently adopted in argentina and brazil

business cycles in international historical perspective business cycle models seek to answer the question of why economies go through cycles of recession and recovery or boom and bust any theory of the business cycle makes two sorts of claims what shocks are most important in disturbing the economy and what economic structure is necessary for propagating these shocks for example one common explanation of business cycles begins with monetary shocks and then seeks to explain why monetary shocks are not purely neutral as neoclassical theory would have it and instead have real effects at least in the short term early models in this vein were often implicitly or explicitly based on the proposition that markets do not clear continuously early equilibrium real business cycle theories instead emphasized the importance of real shocks especially to technology which may cause socially efficient fluctuations even when markets are always in equilibrium more recent models have attempted to marry the equilibrium approach to macroeconomics with the substantive keynesian ideas that money is not neutral and that economic fluctuations are costly new keynesian theories of the business cycle admit the possibility of a number of economic shocks including monetary and technology shocks but then focus on explaining how nominal price rigidities within the economy can turn these shocks into recessions or booms other models show that business cycles driven by keynesian animal spirits are consistent with rigorous microfoundations and rational expectations seeking empirical evidence for and against these various approaches we turn business cycle theories loose on perhaps the greatest macroeconomic laboratory

carrots and sticks pay supervision and turnover the efficiency wage model ewm has been advanced as an explanation for large and persistent wage differentials the shirking version of the ewm assumes a trade off between self supervision and external supervision the turnover version assumes turnover is costly to the firm variation across firms in the cost of monitoring shirking or turnover then is hypothesized to account for wage variations across firms for homogeneous workers using a new sample of firm data this paper presents empirical evidence of the trade off of wage premiums for supervisory intensity and turnover little evidence is found to support either version of the ewm

financial development exchange rate regimes and the feldstein horioka puzzle evidence from the mena region this article investigates whether the feldstein and horioka 1980 argument on domestic saving investment relationship is supported by the data of the countries in the middle east and north africa region when financial development levels and exchange rate regimes are taken into account to this end we employ both the auroregressive distributed lag bounds cointegration test and panel mean group procedures the results support the view that a successful international financial integration requires compatible levels of financial intermediation the evidence also suggests that saving investment cointegration is not invariant to exchange rate regimes

inter industry mobility and the cyclical upgrading of labor we investigate whether a market clearing model is consistent with industry employment and wage patterns related to the cyclical upgrading of labor we demonstrate that roy s 1951 market clearing

are stationarity and cointegration restrictions really necessary for the intertemporal budget constraint abstract time series related to fiscal and external deficits are commonly subjected to stationarity and cointegration tests to assess if the deficits are sustainable such tests are incapable of rejecting sustainability the intertemporal budget constraint proves to be satisfied if either the debt series or the revenue and with interest spending series are integrated of arbitrarily high order i e stationary after differencing arbitrarily often revenues and spending do not have to be cointegrated rejections of low order difference stationarity and of cointegration are thus consistent with the intertemporal budget constraint error correction type policy reaction functions are suggested as more promising for understanding deficit problems

expected interruptions in labor force participation and sex related differences in earnings growth the paper analyzes the joint determination of wives earnings and labor force participation over the life cycle given the interruptions in wives work careers the interruptions affect the profitability of the investment in human capital which in turn determines earnings the earnings prospects feed back into the participation decision namely the decision whether and for how long to drop out of the labor force the formal analysis compares the age earnings profiles of persons who drop out of the labor force with those who do not during the pre and post interruption period the comparison is carried out where interruptions are assumed to be exogenous and when they are endogenous the effect of productivity at home the initial stock of human capital and its rental value on the length of the interruption is investigated this abstract was borrowed from another version of this item

where to go workers reasons to quit and intra vs interindustry job mobility we show that workers reasons for quitting their job affect their decision to stay in or leave their industry using survey data among public sector employees in the netherlands workers quitting for e g pay work pressure or job duties move relatively often to another industry in contrast to workers quitting for commuting time or the atmosphere at work this suggests that workers use their experience in the initial job to update their expectations on other jobs in the industry as the first set of job aspects is more likely to be related among jobs within an industry than the latter furthermore it is shown that workers reasons to quit fully explain the differences in wage growth between intra and interindustry job movers lastly we find that workers who quit for pay or management often leave the public sector altogether the data used in this article are proprietary

fiscal policy rules and the sustainability of public debt in europe the sustainability of public debt is interpreted as the result of the interaction of fiscal policy with the economic environment and not as a statistical concept as in most of the recent literature if debt is not to explode over time policymakers have to respond to the changing conditions in the macroeconomic environment this article defines the conditions that will ensure compliance of fiscal policy with the intertemporal budget constraint in the context of europe s fiscal policy rules the empirical part of the article reveals that european public debt is sustainable in this respect but questions regarding long run liquidity requirements remain unresolved

u s federal indebtedness and the conduct of fiscal policy abstract this paper examines whether the conduct of u s fiscal policy since the 1920s has been influenced by constraints on the accumulated stock of outstanding federal debt the evidence is affirmative during most of the inter and post war period policy in effect stabilized the federal debt relative to gnp but after 1981 large debt and debt service costs failed to produce deficit reductions consistent with the pattern of previous decades

are saving and investment co integrated abstract the observation of a strong positive correlation between national saving and domestic investment rates calls into question the assumption of highly mobile international capital i re examine the question of a high correlation by considering the time series relationship between national saving and domestic investment rates in the u s using newly developed co integration techniques national saving and domestic investment appear to be co integrated prior to 1971 but appear not to be co integrated after 1971

financial integration investment and economic growth evidence from two eras of financial globalization abstract does international financial integration boost economic growth the empirical literature has not yet established a robust link between openness to the international capital market and economic growth in this paper we turn to the economic history of the first era of financial globalization 1880 1914 for new insights using identical empirical models and techniques as contemporary studies we find a significant growth effect in the historical period a key difference between now and then is that opening up to the international market led to net capital movements and higher investment in the historical period but it no longer does so today

ownership agency and wages an examination of franchising in the fast food industry this paper estimates the difference in compensation between company owned and franchisee owned fast food restaurants the contrast is of interest because contractual arrangements give managers of company owned outlets less of an incentive to monitor and supervise employees estimates based on two data sets suggest that employee compensation is slightly greater at company owned outlets than at franchisee owned outlets the earnings gap is 9 percent for assistant and shift managers and 2 percent for full time crew workers furthermore the tenure earnings profile is steeper at company owned restaurants these findings suggest that monitoring difficulties influence the timing and generosity of compensation

are southern poor countries governments more profligate than their northern rich counterparts fiscal criteria and impulse responses this study examines the health of public finances in different geographical regions by emphasising the discrepancies in north versus south and rich versus poor countries the last decade s debt and deficit figures depicting a general fiscal consolidation across regions and income levels show signs of worsening when the fiscal criteria are adjusted for cyclical factors fiscal pressure appears in most countries since the end of the 1990s but has been more persistent in poor countries and in asia the dynamics of governments reaction to debt accumulation reveals however that most regions exhibit consistent anti debt policies to various degrees the exception is the latin american and caribbean region where results suggest a lack of debt fighting policies among income categories rich countries generate the highest primary surpluses when confronted with debt accumulation

countertrade transactions theory and evidence countertrade consists of bilateral agreements usually between western industrial enterprises and government agencies or state owned enterprises in developing countries ldcs and centrally planned economies cpes whereby sales of goods by the western exporter are linked contractually to the exporter s purchases of other goods or services from the countertrade partner this paper reports findings from a sample of 230 countertrade agreements we develop an analytical framework that both explains the mutual attraction of countertrade deals to the parties and predicts the terms of trade in individual transactions various statistical tests serve to assess assumptions underlying the model evaluate various predictions and corollaries and distinguish between certain competing hypotheses about the motives or effects of countertrade transactions from authors

savings investment and international capital flows abstract the high correlation between national savings and domestic investment rateshas been interpreted as evidence that capital is not internationally mobile this paper surveys the theory and evidence on the relationship between savings and investment in a sample of 23 oecd countries a positive correlation between savings and investment rates is found in both the short and long runs however a wide variety of models generate such co movements in savings and investment in response to exogenous disturbances even under conditions of complete financial markets thus the savings investment correlation provides little evidence on the question of international capital mobility

self selection and the power of incentive schemes an experimental study we examine how self selection of workers depends on the power of incentive schemes and how it affects team performance if the power of the incentive schemes is increased in a laboratory experiment we let subjects choose between low powered team incentives and high powered individual incentives we observe that subjects exhibiting high trust or reciprocity in the trust game are more likely to choose team incentives when exposed to individual incentives subjects who chose team incentives perform worse if both the unobservable interdependency between their efforts and their incentive to cooperate under team incentives are high

red signals current account deficits and sustainability abstract this paper proposes a method to asses the potential problems of sustainability of a country s sovereign debt we claim that the relevant variables used for this analysis are typically subject to changes that are associated with changes in macroeconomics policies we propose a procedure for identifying periods under which the current account accumulates at a non stationary rate our approach is based on imposing identifying restrictions on markov switching type models empirical applications of the procedure to argentina brazil japan uk and usa are examined and discussed

the risk of financial crises is there a role for income inequality abstract could macroeconomic factors such as income inequality be the real root cause of financial crises we explore a broad variety of financial and macroeconomic variables and employ a general to specific model selection process to find the most reliable predictors of financial crises in developed countries over a period of more than 100 years our in sample results indicate that income inequality has predictive power beyond loan growth and several other financial variables out of sample forecasts for individual predictors show that their predictive power tends to vary considerably over time but income inequality has predictive power in each forecasting period

the sustainability of india s current account this study conducts an investigation into the sustainability of the indian current account using data for 1950 onwards a necessary condition for current account sustainability is that exports and imports are cointegrated after testing for unit roots that allow for a structural break we employ parametric tests for cointegration based on johansen 1995 and saikkonen and lutkepohl 2000a b c as well as the nonparametric procedure proposed by breitung 2002 and breitung and taylor 2003 that does not assume linearity by employing these procedures recursively two distinct regimes are identified characterized by whether or not imports and exports are cointegrated the regime of noncointegration runs until the late 1990s and the second regime of cointegration is present after that this latter regime coincides with the liberalization of the indian economy