the impact of fiscal policy on profits i introduction a large number of policy making decisions rely on the key issue of the impact of fiscal policy on the economy therefore it is not surprising that the effect of fiscal policy on macroeconomic aggregates has been extensively studied in the empirical literature 1 several authors starting with blanchard and perotti 2002 have attempted to estimate the effect of government spending shocks on output and other variables in the context of structural var models see perotti 2008 for a survey this interest has been renewed since the 2008 2009 recession given the unprecedented size of fiscal packages worldwide barro and redlick 2009 hall 2009 an important part of this literature focuses on the theoretical and empirical investigation of the fiscal policy transmission channels theories of fiscal policy transmission differ in their implications regarding the response of different macroeconomic variables to government spending shocks for example the neoclassical model predicts a negative impact of government spending on real wages and consumption while this prediction is challenged by new keynesian models to that end an important branch of empirical literature on fiscal multipliers has investigated the transmission channels of fiscal policy by looking mainly at the response of private consumption and real wages 2 this paper deals with an important but relatively under investigated channel of fiscal policy transmission which is the effect of fiscal policy on profits as pointed out by hall 2009 the impact of fiscal shocks on the markup of price over marginal cost is important for understanding the functioning of the fiscal multiplier in the purely neoclassical general equilibrium model a rise in government spending produces a negative wealth effect the labor supply curve shifts outward and real wages and consumption fall this implies that the output multiplier will be well below unity a keynesian type fiscal multiplier implying a large positive output effect and positive responses of private consumption and real wages to increased government spending relies on a negative response of the markup of price over marginal cost to an increase in economic activity the intuition is that a decrease in the price marginal cost markup in response to higher government spending allows a rise in wages or at least a smaller reduction in wages compared with the case when the markup is constant a rise in wages would then imply that households will substitute away from leisure and into consumption therefore if the markup is countercyclical conditional on government spending shocks sizeable output multipliers of fiscal spending are consistent with existing empirical evidence that fiscal shocks are not related to strong decreases in real wages or consumption blanchard and perotti 2002 fatas and mihov 2001 gall david lopez salid and valles 2007 perotti 2005 2008 in general a new keynesian model with sticky prices implies a countercyclical markup ratio as input prices rise in a boom while output prices stay constant however for understanding the fiscal policy transmission the key factor is markup and not price stickiness itself as a countercyclical markup could also be implied by models with flexible prices when the desired markup changes in response to a shock 3 a model which assigns a central role to markups for fiscal policy transmission has been presented by ravn schmitt grohe and uribe 2007 assuming that demand has a price inelastic component that is a function of deep habits a government spending shock that leads to a positive output response increases the share of the price elastic component of demand causing a rise in the overall demand elasticity and a corresponding decline in the optimal markup 4 thus for a sufficient decline in the markup the resulting rise in wages induces households to substitute away from leisure and into consumption thereby more than offsetting the negative wealth effect of government spending predicted by the neoclassical model

evaluating unemployment policies what do the underlying theories tell us the paper surveys unemployment policies for advanced market economies and evaluates them by examining the predictions of the underlying macroeconomic theories the basic idea is that for the most part different unemployment policy prescriptions rest on different macroeconomic theories and our confidence in the prescriptions should depend at least in part on theories ability to predict some salient stylized facts about unemployment behavior the paper considers four types of policies laissez faire demand management policies supply side policies and structural policies copyright 1995 by oxford university press

industry growth and capital allocation does having a market or bank based system matter are market based or bank based financial systems better at financing the expansion of industries that depend heavily on external finance facilitating the formation of new establishments and improving the efficiency of capital allocation across industries we find evidence for neither the market based nor the bank based hypothesis while legal system efficiency and overall financial development boost industry growth new establishment formation and efficient capital allocation having a bank based or market based system per se does not seem to matter much

representative agent meets class structure imperfect competition and the balanced budget multiplier recently new keynesian economists nke have been concerned with the effect of imperfect competition on the sign and size of the balanced budget fiscal multiplier this literature all came up with models based on a profit income relationship in which imperfect competition increases the tax financed fiscal multiplier accordingly the higher the exercise of market power by firms the greater the effectiveness of fiscal policy in this paper we argue that the new keynesian results are very sensitive to a heroic simplification on which they rest the representative agent we show that in terms of the budget balanced multiplier a kaleckian approach where class structure matters offers a richer set of results moreover we develop a simple short run rational agent optimisation model of the type used by nke and introduce class structure into it we demonstrate in support of the kaleckian approach that even in a general equilibrium optimising framework the balanced budget multiplier is strictly decreasing in the degree of monopoly copyright 2006 oxford university press

the effect of unemployment insurance sanctions on the transition rate from unemployment to employment sanctions or punitive benefits reductions are increasingly used as a tool to enforce compliance of unemployment insurance claimants with search requirements this article analyses sanctions using a unique administrative data set of individuals who started collecting unemployment insurance in the netherlands in 1992 after correction for selectivity in the imposition of sanctions we find that sanctions substantially raise individual re employment rates

how are product demand changes transmitted to the labour market in the traditional keynesian and classical models the transmission of product demand changes to the labor market generally involves wage price sluggishness or countercyclical real wage movements in practice however real wages are often acyclical or procyclical and wages and prices are flexible over periods of several years this paper examines the main channels whereby product demand can affect employment under these conditions the analysis suggests that the effectiveness of demand management policies under wage price flexibility depends significantly on the availability of a limited number of supply side transmission channels copyright 1994 by royal economic society

public capital and imperfect competition abstract in this paper we consider a macroeconomic model in which public capital is a productive input and there is monopolistic competition in the product market we analyze the effects of a permanent variation in public capital investment both in the short and in the long run finally we show that the optimal provision of public capital under imperfect competition is higher than that associated with the first best policy

beyond publication bias abstract this review considers several meta regression and graphical methods that can differentiate genuine empirical effect from publication bias publication selection exists when editors reviewers or researchers have a preference for statistically significant results because all areas of empirical research are susceptible to publication selection any average or tally of significant insignificant studies is likely to be biased and potentially misleading meta regression analysis can see through the murk of random sampling error and selected misspecification bias to identify the underlying statistical structures that characterize genuine empirical effect meta significance testing and precision effect testing pet are offered as a means to identify empirical effect beyond publication bias and are applied to four areas of empirical economics research minimum wage effects union productivity effects price elasticities and tests of the natural rate hypothesis

successful in the long run a meta regression analysis of persistent firm profits we study the profit persistence literature by applying meta regression analysis mra to a set of 36 empirical papers which analyze the persistence of abnormal firm profits over time the analyzed literature provides evidence for a mediocre degree of persistence in abnormal profits an initial analysis of the distribution of reported profit persistence estimates reveals some degree of excess variation this points toward publication bias that favors significant results independent of their algebraic sign the mra however reveals that publication bias is particularly favoring results that indicate profit persistence and thus contradict the neoclassical model of perfect competition moreover the mra enables to control for heterogeneity driven by the study design we find that the analyzed country developing vs developed the applied econometric approach as well as the analyzed period of time are significant drivers of heterogeneity in reported persistence estimates

profits markups and entry fiscal policy in an open economy in this paper we develop a general model of an imperfectly competitive small open economy there is a traded and non traded sector whose outputs are combined in order to produce a single final good that can be either consumed or invested we make general assumptions about preferences and technology and analyze the impact of fiscal policy on the economy we find that the fiscal multiplier is between zero and one and provide sufficient conditions for it to be increasing in the degree of imperfect competition we also are able to compare the multiplier under free entry and with a fixed number of firms and welfare a simple graphical representation of the model is developed

meta regression analysis a quantitative method of literature surveys abstract pedagogically literature reviews are instrumental they summarize the large literature written on a particular topic give coherence to the complex often disparate views expressed about an issue and serve as a springboard for new ideas however literature surveys rarely establish anything approximating unanimous consensus ironically this is just as true for the empirical economic literature to harmonize this dissonance we offer a quantitative methodology for reviewing the empirical economic literature meta regression analysis mra is the regression analysis of regression analyses mra tends to objectify the review process it studies the processes that produce empirical economic results as though they were any other social scientific phenomenon mra provides a framework for replication and offers a sensitivity analysis for model specification in this brief essay we propose a new method of reviewing economic literature mra and discuss its potential

monopolistic competition and the effects of aggregate demand how important is monopolistic competition to an understanding of the effects of aggregate demand on output we ask the question at three levels can monopolistic competition by itself explain why aggregate demand movements affect output can it together with other imperfections generate effects of aggregate demand in a way that perfect competition cannot if so can it give an accurate account of the response of the economy to aggregate demand movements the answers are no yes and yes

ethically questionable behavior in sales representatives an example from the taiwanese pharmaceutical industry recent corporate disgraces and corruption have heightened concerns about ethically questionable behavior in business the construct of ethically questionable behavior is an under portrayed area of management field research and deserves further studying especially in sales positions this study uses four variables from the human resource management field to explain the ethically questionable behavior of sales representatives in the pharmaceutical industry these variables include frame pattern commission structure behavior control type and marketing norm perceptions this work uses a 2 2 2 2 subject experimental design and 328 fully completed questionnaires for logistic regression analysis results suggest that a medical representative in a loss frame compared with a gain frame in a high commission structure compared with a low commission structure in loose behavior control compared with strict behavior control and in a low perception of marketing norm compared with a high perception of marketing norm is more likely affected by heuristic biases and make an ethically questionable choice

how strong is co movement in employment over the business cycle evidence from state sector data abstract this study measures the extent of co movement in employment across states and sectors at business cycle frequencies the strength of co movement is quantified using the cohesion measure developed by croux forni and reichlin rev econ statist 83 2001 232 the data indicate that cohesion is generally positive for the state sector pairs although the distributions mass around relatively low values the results suggest that cohesion has risen over time and that cohesion increases with spatial aggregation evidence reveals that the measured degree of co movement is sensitive to the chosen periodicity of the data and that there is much greater cohesion across states for a given sector than across different sectors within a state an investigation into the sources of cross state variation in cohesion reveals that important determinants include the share of state employment in manufacturing the different effects of monetary policy actions on each state s employment and the degree of sectoral diversity within a state

small menu costs and large business cycles a macroeconomic model of monopoly i introduction the conflict between modern neoclassical and traditional keynesian theories of the business cycle centers upon the pricing mechanism in neoclassical models prices are fully flexible they represent the continuous optimization of economic agents and the continuous intersection of supply and demand in keynesian models prices are often assumed to be sticky they do not necessarily equilibrate all markets at all times one of the reasons for the resurgence of the equilibrium approach to macroeconomics has been the absence of a theoretical underpinning for this keynesian price stickiness this note shows that sticky prices can be both privately efficient and socially inefficient the business cycle results from the suboptimal adjustment of prices in response to a demand shock to the extent that policy can stabilize aggregate demand it can mitigate the social loss due to this suboptimal adjustment in some keynesian models prices are simply exogenously fixed 2 in others agents must set their prices in advance of the transaction date the act of altering a posted price is certainly costly these costs include such items as printing new catalogs and informing salesmen of the new price yet these menu costs are small and therefore generally perceived as providing only a weak foundation for these fixed price models however this inference is flawed small menu costs can cause large welfare losses the claim that price adjustment costs are small does not rebut the claim that they are central to understanding economic fluctuations

increasing returns and the foundations of unemployment theory current approaches to macroeconomic theory divide roughly into two basic schools of thought one approach typically associated with rational expectations views the economy as basically at or near walrasian market clearing equilibrium in which case it becomes very difficult to explain away convincingly the undeniable persistence at times of involuntary unemployment another approach views the underemployed economy as being in a state of temporary fixed price disequilibrium in which case aside from having to repress suspicions that the essence of effective demand failure might not have to do with prices fixed at wrong values there is a lot of rationalising to be done about why profitable adjustments are so slow this paper argues that something like an internally consistent theory of steady state involuntary unemployment is possible and even plausible the cornerstone of this third approach is increasing returns to scale which blocks unemployed agents from breaking out of a low level equilibrium trap unless there is overall coordination or stimulation a simple model is presented which contains the basic ideas

rational choice the contrast between economics and psychology rational choice the published record of a conference on economics and psychology frames the issues as a contest between economic theory and the falsifying evidence from psychology according to a third perspective that of experimental economics most standard theory provides a correct first approximation in predicting motivated behavior in laboratory experimental markets but the theory is incomplete particularly in articulating convergence processes in time and in ignoring decision cost this view has roots in the work of herbert simon and sidney siegel but it is not plainly represented in contemporary research in economic pyschology

wheat from chaff meta analysis as quantitative literature review abstract this paper presents and develops a quantitative method of literature reviewing and evaluating empirical research meta regression analysis or mra economics is theory driven yet we must learn empirically if economics is to advance mra offers a more objective statistical method to summarize our empirical knowledge and to explain the wide study to study variation in economic research mra is used to assess the evidence for ricardian equivalence and its findings are contrasted to those of conventional narrative review furthermore mra establishes a platform from which to distinguish genuine empirical effect from the exploitable specification error that infests applied econometrics

market structure and fiscal policy effectiveness in a monopolistic competition macromodel with endogenous market structure the fiscal multiplier is shown to consist of two components the first depicts the response of output to a fiscal expansion through the conventional channels that disregard the role of market imperfections the second component captures the effects of firms market power as well as the policy induced change in market structure the latter effect which has not been taken into account in existing studies is shown to be quite significant in raising the fiscal multiplier even above unity and in improving consumers welfare when the labour market is competitive

theories of bank behavior under capital regulation abstract this paper reviews academic studies of bank capital regulation in an effort to evaluate the intellectual foundation for the imposition of the basel i and basel ii systems of risk based capital requirements the theoretical literature yields general agreement about the immediate effects of capital requirements on bank lending and loan rates and the longer term impacts on bank ratios of equity to total or risk adjusted assets this literature produces highly mixed predictions however regarding the effects of capital regulation on asset risk and overall safety and soundness for the banking system as a whole thus the intellectual foundation for the present capital regulation regime is not particularly strong the mixed conclusions in the academic literature on banking certainly do not provide unqualified support for moving to an even more stringent and costly system of capital requirements these widely ambiguous results do suggest however that assessing the implications of capital regulation for balance sheet risk and monitoring effort in diverse banking systems is an important agenda for future theoretical research in the banking area

capital structure choice and company taxation a meta study this paper provides a quantitative review of the empirical literature on the tax impact on corporate debt financing synthesizing the evidence from 46 previous studies we find that this impact is substantial in particular the tax rate proxy determines the outcome of primary analyses measures like the simulated marginal tax rate graham 1996a avoid a downward bias in estimates for the debt response to tax moreover debt characteristics econometric specifications and the set of control variables affect tax effects accounting for misspecification biases by means of meta regressions we predict a marginal tax effect on the debt ratio of 0 3

the british low wage sector and the employment prospects of the unemployed abstractare low wages a way for the unemployed to switch to higher paying jobs using data from the british household panel survey the labour market dynamics of unemployed low paid and higher paid employed men are analysed moreover the respective un employment duration and occupational skill level are accounted for results show that in general low wages significantly reduce the risk of future unemployment and increase the chances of ascending the salary ladder especially in the case of long term unemployment 360 days furthermore the occupational skill level has a substantial influence on the upward mobility of low paid jobs individuals working in the initial period in a low paid and higher skilled occupation have on average an 11 percentage points higher probability of entering higher pay compared to when working in a low paid and low skilled occupation

can training and employment subsidies combat european unemployment active policy evaluation problems methods and results european countries with poorly performing labour markets and labour market institutions conducive to high unemployment also feature considerable expenditures on active labour market policy and such policies are emphasized by the european union s employment strategy however the practice of these programmes evaluation is much less well developed in europe than in the united states we outline key issues facing such evaluation and offer a review and formal assessment of european evaluation studies over the last three decades we find that programme effects are very heterogeneous across types of interventions and target groups that training and job search assistance can be effective and that the young among the unemployed are typically difficult to assist jochen kluve and christoph m schmidt

endogenous markups and the effects of income taxation theory and evidence from oecd countries abstract existing studies on the effects of fiscal policy under imperfect competition typically treat each firm s price cost markup as fixed this paper examines the implications of endogenising the markup in a simple model of income taxation under monopolistic competition it is demonstrated that an increase in income tax reduces the number of firms lessens competition among surviving firms and raises the optimal markups in the new steady state through this channel the effects of income taxation on the key macroeconomic variables as well as on consumer welfare are unambiguously enlarged the simple model prediction is largely supported by cross section regressions with data from oecd countries

does privatisation of vocational rehabilitation improve labour market opportunities evidence from a field experiment in sweden this paper analyses if privatisation of vocational rehabilitation can improve labour market opportunities for individuals on long term sickness absence we use a field experiment performed by the p

coordination failure multiple equilibria and economic institutions models of coordination failure have equilibria that are not first best because of externalities usually these models display multiple equilibria we provide an example of how the existence of some economic institutions and government policies can be explained as mechanisms for internalizing externalities and selecting the best equilibrium in these settings the example we analyse is that of nominal wage and debt contracts nominal contracts can improve on the underinvestment equilibrium by implementing pareto improving transfers between agents if there are multiple underinvestment equilibria then monetary policy can have real effects because the monetary authority can choose a money supply rule to coordinate beliefs and thereby select the best equilibrium

evaluating the econometric evaluations of training programs with experimental data this paper takes the results of an employment and training program thatwas run as a field experiment in which the participants were randomlyassigned into a treatment or a control group and compares these results to the estimates that might have been produced by an econometrician who evaluated the program using the same econometric procedures that have been used in the program evaluation literature this comparison shows that many of these econometric procedures fail toreplicate the experimentally determined results and suggests that researchers should be aware of the potential for specification errorsin other nonexperimental evaluations copyright 1986 by american economic association

market structure cost asymmetries and fiscal policy effectiveness abstract imperfectly competitive macroeconomic models typically assume a symmetric equilibrium with identical firms despite the fact that most industries are characterised by substantial degrees of firm heterogeneity we examine how inter firm efficiency gaps affect fiscal policy effectiveness under monopolistic competition

fiscal policy monopolistic competition and finite lives abstract this paper studies the short run transitional and long run output effects of permanent and temporary shocks in public consumption under various financing methods to this end a dynamic macroeconomic model for a closed economy is developed which features a perfectly competitive final goods sector and a monopolistically competitive intermediate goods sector finitely lived households consume final goods supply labor and save part of their income amongst the findings for a permanent rise in public consumption are i monopolistic competition increases the absolute value of the balanced budget output multiplier ii positive long run output multipliers are obtained only if the generational turnover effect is dominated by the intertemporal labor supply effect iii short run output multipliers under lump sum tax financing are smaller than long run output multipliers if labor supply is elastic and iv bond financing reduces the size of long run output multipliers as compared to lump sum tax financing and may give rise to non monotonic adjustment paths if labor supply is sufficiently elastic and the speed of adjustment of lump sum taxes is not too high temporary bond financed fiscal shocks are shown to yield i permanent effects on output and ii negative long run output multipliers

the spike at benefit exhaustion leaving the unemployment system or starting a new job in this paper we review the literature on the spike in unemployment exit rates around benefit exhaustion and present new evidence based on administrative data for a large sample of job losers in austria we find that the way unemployment spells are measured has a large effect on the magnitude of the spike at exhaustion both in existing studies and in our austrian data spikes are typically much smaller when spell length is defined by the time to next job than when it is defined by the time spent on the unemployment system in austria the exit rate from registered unemployment rises by over 200 at the expiration of benefits while the hazard rate of re employment rises by only 20 the difference between the two measures arises because many individuals leave the unemployment register immediately after their benefits expire without returning to work the modest spike in re employment rates implies that most job seekers do not wait until their ui benefits are exhausted to return to work fewer than 1 of jobless spells have an ending date that is manipulated to coincide with the expiration of ui benefits this abstract was borrowed from another version of this item

the relation between price and marginal cost in u s industry an examination of data on output and labor input reveals that some u s industries have marginal cost well below price the conclusion rests on the finding that cyclical variations in labor input are small compared with variations in output in booms firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs the paper documents the disparity between price and marginal cost where marginal cost is estimated from annual variations in cost it considers a variety of explanations of the findings that are consistent with competition but none is found to be completely plausible

fiscal policy multipliers the role of monopolistic competition scale economies and intertemporal substitution in labour supply a dynamic macroeconomic model of monopolistic competition is developed for the closed economy forward looking consumers demand differentiated goods supply labour and save part of their income in the form of shares producers manufacture the differentiated goods by using labour and capital we study the short run transition and long run effects of fiscal policy comparisons with the new classical case of perfect competition are made simple expressions far multipliers are derived the sensitivity of the multipliers for diversity preference and ethier productivity effects intratemporal and intertemporal substitution effects and markup effects under free and restricted entry are also studied

active labor market policy evaluations a meta analysis this article presents a meta analysis of recent microeconometric evaluations of active labour market policies we categorise 199 programme impacts from 97 studies conducted between 1995 and 2007 job search assistance programmes yield relatively favourable programme impacts whereas public sector employment programmes are less effective training programmes are associated with positive medium term impacts although in the short term they often appear ineffective we also find that the outcome variable used to measure programme impact matters but neither the publication status of a study nor the use of a randomised design is related to the sign or significance of the programme estimate

how effective are unemployment benefit sanctions looking beyond unemployment exit this paper provides a comprehensive evaluation of benefit sanctions i e temporary reductions in unemployment benefits as punishment for noncompliance with eligibility requirements in addition to the effects on unemployment durations we evaluate the effects on post unemployment employment stability on exits from the labor market and on earnings in our analysis we use a rich set of swiss register data which allow us to distinguish between ex ante effects the effects of warnings and the effects of enforcement of benefit sanctions adopting a multivariate mixed proportional hazard approach to address selectivity we find that both warnings and enforcement increase the job finding rate and the exit rate out of the labor force warnings do not affect subsequent employment stability but do reduce post unemployment earnings actual benefit reductions lower the quality of post unemployment jobs both in terms of job duration as well as in terms of earnings the net effect of a benefit sanction on post unemployment income is negative over a period of two years after leaving unemployment workers who got a benefit sanction imposed face a net income loss equivalent to 30 days of full pay due to the ex post effect in addition to that stricter monitoring may reduce net earnings by up to 4 days of pay for every unemployed worker due to the ex ante effect

macroeconomic impact of basel iii evidence from a meta analysis abstract we present a meta analysis of the impact of higher capital requirements imposed by regulatory reforms on the macroeconomic activity basel iii the empirical evidence derived from a unique dataset of 48 primary studies indicates that there is a negative albeit moderate gdp effect in response to a change in the target capital ratio meta regression results suggest that the estimates reported in the literature tend to be systematically influenced by a selected set of study characteristics such as econometric specifications the authors affiliations and the underlying financial system finally we discuss the publication bias

the benefits of relationship lending in a cross country context a meta analysis relationship lending may create benefits for borrowers by reducing information asymmetries however empirical evidence is mixed we conduct a meta analysis to summarize and explain the heterogeneity in the results in the literature using hand collected information from 101 studies in the united states europe asia and latin america from 1970 to 2010 we find that strong relationships are generally beneficial for borrowers but lending outcomes differ across the relationships dimensions long lasting exclusive and synergy creating bank relationships are associated with higher credit volume and lower loan rates these benefits are more likely in the united states and in countries where bank competition is high they are not related to the importance of small and medium sized enterprises in an economy suggesting that prevalence of relationship lending does not necessarily come along with borrower benefits our inferences are robust when we control for observed systematic heterogeneity in the original

aggregate scale economies market integration and optimal welfare state policy abstract using a two sector two country model with aggregate scale economies and unionisation we show that optimal welfare state policy entails positive levels of unemployment benefits under free trade and capital mobility in this setting economic integration does not reduce the revenue raising capacity of governments and thus does not lead to a race to the bottom in social standards instead trade and capital flows interact with welfare state policies in increasing welfare even when each government acts independently non cooperatively in determining its optimal welfare payment cooperation is shown to improve upon non cooperative outcomes by raising both the generosity of the welfare state and aggregate welfare

which fiscal multipliers are regime dependent a meta regression analysis we analyse whether estimated multiplier effects are systematically higher if the economy suffers a downturn for that purpose we conduct a meta regression analysis on a unique data set of 98 empirical studies with more than 1800 observations on multiplier effects and control for regime dependence of the multiplier we find that spending multipliers are much higher by about 0 7 0 9 units during a downturn tax multipliers are not sensitive to the economic regime and generally lower than spending multipliers finally for all spending categories other than government consumption the multiplier significantly exceeds one during downturns

stock markets banks and growth panel evidence this paper investigates the impact of stock markets and banks on economic growth using a panel data set for the period 1976 98 and applying recent gmm techniques developed for dynamic panels on balance we find that stock markets and banks positively influence economic growth and these findings are not due to potential biases induced by simultaneity omitted variables or unobserved country specific effects

discretionary policy and multiple equilibria in lq re models we study discretionary equilibria in dynamic linear quadratic rational expectations models in contrast to the assumptions that pervade this literature we show that these models do have multiple equilibria in some situations we demonstrate the existence of multiple discretionary equilibria by example we investigate general properties of discretionary equilibria and discuss implications for numerical algorithms

monopolistic competition as a foundation for keynesian macroeconomic models a general equilibrium macroeconomic model based on monopolistic competition is presented the model exhibits a traditional multiplier in the short run but due to free entry the multiplier disappears in the long run by construction all agents are fully rational the keynesian results are a consequence of the assumption of monopolistic competition which creates a divergence between optimal private behavior and optimal social behavior

ethical ideologies and older consumer perceptions of unethical sales tactics demographic differences among consumer groups have become increasingly important to the development of marketing strategies marketers depend heavily on the sales force to implement strategies at the consumer level and not surprisingly different groups may view the salesperson s role differently unfortunately unethical sales practices targeted at various consumer groups and especially at seniors have been utilized as well the purpose of this study is to provide initial empirical evidence of the ethical ideological make up of four age segments outlined by strauss and howe 1991 generations the history of america s future 1584 2069 morrow new york and to examine the propensity for these groups seniors in particular to respond differentially to potentially unethical sales tactics data were collected from 179 respondents representing the four generational age groups manova revealed that the seniors in this study were distinct with respect to ethical ideology and less accepting of unethical sales tactics managerial implications are discussed for sales organizations to maximize their effectiveness across consumer groups

experimental evidence on the effects of early meetings and activation we analyze the effects of four randomized social experiments involving early and intensive active labour market policy conducted in denmark in 2008 the experiments entailed different combinations of early and intensive treatment in terms of meetings and active labour market programmes we find that frequent meetings between newly unemployed workers and case workers can increase employment rates over the next two years by up to 10 weeks the effects continue to grow over the whole 4 year horizon studied for men we find evidence of a threat effect of having to participate in early active labour market programmes while no such effect is found for women we conduct a cost benefit analysis of each ofthe four experiments and find that meetings yield the largest net benefits

risk in banking and capital regulation this paper investigates the role of bank capital regulation in risk control it is known that banks choose portfolios of higher risk because of inefficiently priced deposit insurance bank capital regulation is a way to redress this bias toward risk utilizing the mean variance model the following results are shown a the use of simple capital ratios in regulation is an ineffective means to bound the insolvency risk of banks b as a solution to problems of the capital ratio regulation the theoretically correct risk weights under the risk based capital plan are explicitly derived and c the theoretically correct risk weights are restrictions on asset composition which alters the optimal portfolio choice of banking firms the recent increase in bank failures especially after the 1980 and 1982 deregulatory acts has again ignited a controversy over the risk portfolio of the banking industry given the importance of this sector there has been increased scrutiny of the industry s motives for risk taking and possible regulatory changes to improve its stability these investigations have centered around two rather complementary areas the first of these is the role of deposit insurance and how its current pricing procedure encourages risk taking and justifies current bank regulations the works of buser chen and kane 4 kane 9 and benston et al 2 have made substantive contributions the authors demonstrates the way in which our current fixed rate insurance system rewards risk taking by the firm and insulates it through deposit insurance from the market discipline that needs to exist to ensure proper risk evaluation this realization has led these authors to propose a series of regulatory changes to encourage proper portfolio choice within the industry these include a shift to market value accounting risk based deposit insurance premiums and additional capital regulation the last of these serves as a method of coinsurance whereby higher capital levels require the bank to absorb greater losses in the event of failure and encourage additional prudence in management in essense it is one method of risk reduction that may offset the risk preference imposed on the industry due to the inappropriate insurance pricing because the amount of capital influences the probability of bank insolvency and thus the soundness of the entire banking system the regulators ceteris paribus prefer more capital to

optimal labour contracts and imperfect competition a framework for analysis this paper examines the macroeconomic properties of imperfectly competitive economies by modeling the labor market from the perspective of optimal contract theory the point is to demonstrate that important properties of imperfectly competitive economies such as underemployment equilibria multipliers and the prospect of coordination failures are not the consequence of arbitrary labor relations but can emerge with privately optimal labor contracts

career technical education and labor market outcomes evidence from california community colleges career technical education cte programs at community colleges are increasingly seen as an attractive alternative to four year colleges yet little systematic evidence exists on the returns to specific certificates and degrees we estimate returns to cte programs using administrative data from the california community college system linked to earnings records we employ estimation approaches including individual fixed effects and individual specific trends and find average returns to cte certificate and degrees that range from 14 to 45 percent the largest returns are for programs in the healthcare sector estimated returns in non health related programs range from 15 to 23 percent end page 986 abstract from author

assessing the employment effects of vocational training using a one factor model matching estimators use observed variables to adjust for differences between groups to eliminate sample selection bias when minimum relevant information is not available matching estimates are biased if access to data on usually unobserved factors that determine the selection process is unavailable other estimators should be used this study advocates the one factor control function estimator that allows for unobserved heterogeneity with factor loading technique treatment effects of vocational training in sweden are estimated with mean and distributional parameters and then compared with matching estimates the results indicate that unobservables slightly increase the treatment effect for those treated

regional discontinuities and the effectiveness of further training subsidies for low skilled employees the author analyzes the effects of further training subsidies for low skilled employees on individual labor market outcomes in germany using detailed administrative data the author exploits cross

endogenous markups intensity of competition and persistence of business cycles in order to study the propagation mechanism of business cycles in particular to investigate how the intensity of competition affects market structure and output persistence over business cycles this paper presents a real business cycle model with imperfect competition and increasing returns to scale this analysis considers the markups of price over cost to be endogenous with endogenous markups two standard forms of oligopolistic competition bertrand and cournot are considered results show that 1 the propagation mechanism in the sense of output persistence is greater under cournot 2 the propagation mechanism is unequivocally greater with imperfect competition regardless of whether markups are endogenous or not and 3 under imperfect competition the propagation mechanism is greater with endogenous markups than with exogenous markups overall these results suggest that more intense competition produces lower persistence in output growth and thus a weaker propagation mechanism in a calibration exercise these differences were also found to be quantitatively important

vocational training programs and youth labor market outcomes evidence from nepal abstract lack of skills is arguably one of the most important determinants of high levels of unemployment and poverty in response policymakers often initiate vocational training programs in effort to enhance skill formation among the youth using a regression discontinuity design we examine a large youth training intervention in nepal we find twelve months after the start of the training program that the intervention generated an increase in non farm employment of 10 percentage points itt estimates and up to 31 percentage points for program compliers late estimates we also detect sizeable gains in monthly earnings women who start self employment activities inside their homes largely drive these impacts we argue that low baseline educational levels and non farm employment levels and nepal s social and cultural norms towards women drive our large program impacts our results suggest that the program enables otherwise underemployed women to earn an income while staying at home close to household errands and in line with the socio cultural norms that prevent them from taking up employment outside the house

public debts and fiscal politics how to decide the phenomenal growth in our public deficits over the past twenty years is a matter of public and professional concern see symposium 1989 while this concern may indeed be well founded particularly given current deficit levels public deficits are not always bad certainly in times of deep recessions short term deficit financing can stimulate aggregate demand increase national income and reduce unemployment in a keynesian fashion see richard startz 1989 second long term deficit financing may be needed to sustain a long term path of optimal consumption see peter diamond 1965 third public deficits including pay as yougo social security can offer welfare gains for significant subsets of consumers who have been liquidity constrained r glenn hubbard and kenneth judd 1986 who have been unable to purchase indexed private annuities alan blinder 1988 or who have been unable to sufficiently diversify their investment portfolios away from human capital robert merton 1983 finally robert barro 1979 has argued that public deficits may be an important policy instrument to insure intertemporal welfare maximization when public expenditures are stochastic and public taxes are economically inefficient taxes can be smoothed to reduce the lifetime excess burden of public financing the concern today is not that we have deficits but rather that we may be overdoing a good thing if this is the issue then we need to ask why and what can be done about it this is my agenda here i the political economy of recent deficits

imperfect competition and the fiscal multiplier the impact of fiscal policy in an economy with a monopolistic output market but a perfectly competitive labor market is examined both in the short run with a fixed number of firms and in the long run with free entry the main innovation of the paper is the generality of the assumptions about preferences and technology which enable the authors to examine the robustness of the relationship between the degree of monopoly and the fiscal multiplier found by r startz 1989 n g mankiw 1988 and h d dixon 1987 the specific results of these papers are found to rest on two assumptions constant returns and cobb douglas preferences copyright 1996 by the editors of the scandinavian journal of economics

optimal government spending in an economy with imperfectly competitive goods and labor markets this article examines the growth and welfare maximizing government spending in an economy that is characterized by market imperfections namely unionization in the labor market and monopolistic competition in the goods market to thoughtfully explore the optimal spending two distinct scenarios where the government spending is financed by labor capital income taxes are considered our analysis shows that the optimal growth maximizing government spending is inconsistent with the welfare maximizing government spending moreover the growth maximizing welfare maximizing government spending have quite different responses to distinctive market imperfections markups in the goods and labor markets particularly in the scenarios with distinctive financing modes our numerical study indicates that the growth maximizing and welfare maximizing government expenditures in general are more responsive to the change in the labor market friction than that in the product market friction and the growth maximizing government spending is more likely to be lower than the welfare maximizing government spending

a microeconometric evaluation of the active labour market policy in switzerland in the second part of the 1990 s switzerland conducted an ambitious active labour market policy almp encompassing a wide variety of programmes we evaluate the effects of these programmes on the individual employment probability of potential participants our econometric analysis uses unusually informative data origi nating from administrative unemployment and social security records we apply a matching es timator adapted for the case of multiple programmes we find substantial positive effects for one particular programme that is a unique feature of the swiss almp it consists of a wage subsidy for temporary jobs in the regular labour market that would otherwise not be taken up by the unemployed we also find large negative effects for traditional employment programmes oper ated in sheltered labour markets for training courses the results are mixed doi 10 1111 1468 0297 00072 download internet appendix pdf 2 590 kb

imperfect competition and crowding out abstract this paper applies the central feature of imperfect competition in the goods market to examine the validity of the standard belief in international macroeconomics namely that policy effects in a small open economy are less effective than in a closed economy it is shown that the profit margin in imperfect competition and marginal propensity to leisure are the key factors in determining whether this standard belief is valid

evidence of treatment spillovers within markets this paper provides a method to infer the presence of treatment spillovers within markets where a fraction of agents is treated we model individual outcomes as functions of the assigned treatment status and the distribution of assigned treatments in a market we develop a two step identification and estimation method focusing first on the treatment distribution among individuals within markets and then on the treatment distribution across markets we apply our approach to training programs for unemployed individuals in france using rich administrative data our results provide evidence of interactions within local labor markets as potential individual outcomes vary with the proportion of treated individuals

welfare improving debt policy under monopolistic competition abstract we analyse the effects of debt policy in an overlapping generations model with monopolistic competition debt crowds out capital and raises interest rates but unlike competitive models this is welfare improving for all generations if the elasticities of substitution in production are low in a non competitive model the social marginal product of capital could be negative while the rate of interest exceeds the population growth rate the latter two are non negative and profits exceed investment

time series minimum wage studies a meta analysis time series minimum wage studies a meta analysis author s david card and alan b krueger reviewed work s source the american economic review vol 85 no 2 papers and proceedings of the hundredth and seventh annual meeting of the american economic association washington dc january 6 8 1995 may 1995 pp 238 243 published by american economic association stable url http www jstor org stable 2117925 accessed 04 11 2011 15 46

efficiency gaps love of variety and international trade we develop a general equilibrium monopolistic competition model of trade with technical heterogeneity among firms and countries with free entry technical asymmetries between firms result in the endogenous determination of the equilibrium average efficiency of the industry we show that trade reduces increases the minimum efficiency required to survive in the more less efficient country this has important welfare implications 1 contrary to the constant elasticity of substitution homogeneous firms model trade affects welfare even when there is no love of variety 2 there are circumstances in which trade liberalization leads to a loss of consumer welfare

quick job entry or long term human capital development the dynamic effects of alternative training schemes this study evaluates and compares the eectiveness of two alternative training schemes for the unemployed short job search oriented training and long human capital oriented training we investigate the impact dynamics of these pro grams considering both unemployment and employment duration our analysis uses a rich administrative longitudinal data set for germany where both programs were implemented at the same time our estimation strategy flexibly accounts for dy namic selection on observables and unobservables as well as heterogeneous treatment eects the results indicate that short term training schemes can be an eective tool to reduce unemployment in the long run in particular if participation occurs early during unemployment long term training schemes increase the average du ration of employment spells more strongly than short term training however they increase the expected unemployment duration if they are started early during un employment this negative short run impact of long term training is an important driver of its overall eectiveness

imperfect competition and the keynesian cross abstract this paper presents a simple general equilibrium model in which the only non walrasian feature is imperfect competition in the goods market the model is shown to exhibit various keynesian characteristics in particular as competition in the goods market becomes less perfect the fiscal policy multipliers approach the values implied by the textbook keynesian cross

optimal bank capital this article reports estimates of the long run costs and benefits of having banks fund more of their assets with loss absorbing capital or equity we model how shifts in funding affect required rates of return and how costs are influenced by the tax system we draw a clear distinction between costs to individual institutions private costs and overall economic or social costs we find that the amount of equity capital that is likely to be desirable for banks to use is very much larger than banks have used in recent years and also higher than targets agreed under the basel iii framework this article reports estimates of the long run costs and benefits of having banks fund more of their assets with loss absorbing capital by which we mean equity rather than debt the benefits come because a larger buffer of truly loss absorbing capital reduces the chance of banking crises which as both past history and recent events show generate substantial economic costs the offset to any such benefits comes in the form of potentially higher costs of intermediation of saving through the banking system the cost of funding bank lending might rise as equity replaces debt and such costs can be expected to be reflected in a higher interest rate charged to those who borrow from banks that in turn would tend to reduce the level of investment with potentially long lasting effects on the level of economic activity calibrating the size of these costs and benefits is important but far from

punitive sanctions and the transition rate from welfare to work in the netherlands the average exit rate out of welfare is dramatically low most welfare recipients have to comply with guidelines on job search effort that are imposed by the welfare agency if they do not then a sanction in the form of a temporary benefit reduction can be imposed this article investigates the effect of such sanctions on the transition rate from welfare to work using a unique set of rich register data on welfare recipients we find that the imposition of sanctions substantially increases the individual transition rate from welfare to work

the short and long run impacts of financial crises on youth unemployment in oecd countries abstractthe impact of financial crises on the youth unemployment rate yur compared to the total unemployment rate ur is estimated for a panel of oecd countries over the period 1981 2009 using bias corrected dynamic panel data estimators of short and long run coefficients both yur and ur are found highly persistent also short and long run effects of financial crises on yur are significantly large respectively some 1 9 and 1 5 1 7 times higher than the short and long run effects on ur similar results are found for the unemployment impacts of gdp growth lagged 1 year and institutional variables these results are robust to various dynamic specifications

the welfare cost of bank capital requirements abstract capital requirements are the cornerstone of modern bank regulation yet little is known about their welfare cost this paper measures this cost and finds that it is surprisingly large i present a simple framework which embeds the role of liquidity creating banks in an otherwise standard general equilibrium growth model a capital requirement limits the moral hazard on the part of banks that arises due to deposit insurance however this capital requirement is also costly because it reduces the ability of banks to create liquidity the key insight is that equilibrium asset returns reveal the strength of households preferences for liquidity and this allows for the derivation of a simple formula for the welfare cost of capital requirements that is a function of observable variables only using us data the welfare cost of current capital adequacy regulation is found to be equivalent to a permanent loss in consumption of between 0 1 and 1

what works a meta analysis of recent active labor market program evaluations we summarize the estimates from over 200 recent studies of active labor market programs we classify the estimates by type of program and participant group and distinguish between three different post program time horizons using regression models for the estimated program effect for studies that model the probability of employment and for the sign and significance of the estimated effect for all the studies in our sample we conclude that 1 average impacts are close to zero in the short run but become more positive 2 3 years after completion of the program 2 the time profile of impacts varies by type of program with larger average gains for programs that emphasize human capital accumulation 3 there is systematic heterogeneity across participant groups with larger impacts for females and participants who enter from long term unemployment 4 active labor market programs are more likely to show positive impacts in a recession

cross country heterogeneity in intertemporal substitution abstract we collect 2735 estimates of the elasticity of intertemporal substitution in consumption from 169 published studies that cover 104 countries during different time periods the estimates vary substantially from country to country even after controlling for 30 aspects of study design our results suggest that income and asset market participation are the most effective factors in explaining the heterogeneity households in rich countries and countries with high stock market participation substitute a larger fraction of consumption intertemporally in response to changes in expected asset returns micro level studies that focus on sub samples of rich households or asset holders also find systematically larger values of the elasticity

the role of bank capital in the propagation of shocks abstract the recent financial turmoil has underlined the importance of analyzing the link between banks balance sheets and economic activity we develop a dynamic stochastic general equilibrium model in which bank capital mitigates an agency problem between banks and their creditors as a result the capital position of banks affects their ability to attract loanable funds and therefore influences the business cycle through a bank capital channel of transmission we find that the bank capital channel greatly amplifies and propagates the effects of technology shocks on output investment and inflation moreover bank capital shocks create sizeable declines in output and investment

an evaluation of the swedish system of active labour market programmes in the 1990s we investigate the presence of short and long term effects from joining a swedish labor market program vis a vis more intense job search in open unemployment overall the impact of the program system is found to have been mixed joining a program has increased employment rates among participants a result robust to a misclassification problem in the data on the other hand it has also allowed participants to remain significantly longer on unemployment benefits and more generally in the unemployment system this being particularly the case for those entitled individuals entering a program around the time of their unemployment benefits exhaustion

fiscal policy and entrepreneurship abstract this paper reexamines the effect of expansionary fiscal policy on real gdp in the presence of entrepreneurship when government expenditure partially crowds out private consumption as government expenditure cannot reflect changes in consumers tastes expansionary fiscal policy weakens the social role of firms activities to predict and adapt to idiosyncratic changes in consumers taste i show that expansionary fiscal policy can lower real gdp when idiosyncratic risk and the substitutability of goods are large and when firms have a strong ability to predict changes in consumer tastes i also investigate how expansionary fiscal policy influences firms investments in prediction ability

the own wage elasticity of labor demand a meta regression analysis firms labor demand responses to wage changes are of key interest in empirical research and policy analysis however despite extensive research estimates of labor demand elasticities remain subject to considerable heterogeneity in this paper we conduct a comprehensive meta regression analysis to re assess the empirical literature on labor demand elasticities building on 942 elasticity estimates from 105 different studies we identify sources of variation in the absolute value of this elasticity heterogeneity due to the theoretical and empirical specification of the labor demand model different datasets used or sectors and countries considered explains more than 80 of the variation in the estimates we further find substantial evidence for the presence of publication selection bias as estimates of the own wage elasticity of labor demand are upwardly inflated

investment and market power abstract this paper argues that the degree of market power within an industry is an important determinant of interindustry differences in investment behavior a neoclassical investment model is analyzed to show that market power is positively associated with capital stock flexibility the intuition for the result is that firms adjust their stocks and investment plans quickly in response to new conditions so as to capture the rents asssociated with their market power

inflation targeting genuine effects or publication selection bias abstract this paper uses a meta regression analysis mra to evaluate the impact of publication selection bias as for the macroeconomic effects of inflation targeting it a popular approach to implementing monetary policy documented in the existing literature using 8 059 point estimates from 113 studies we show that a significant part of the documented positive effects of it on inflation and to some extent output growth volatility is in fact due to publication selection bias in particular results pointing to lower inflation volatility and higher real gdp growth tend to be favored by researchers as well as those pointing to statistically significant macroeconomic effects however even after controlling for these two types of biases we find it to be correlated with lower inflation and higher real gdp growth differently the evidence on the it inflation volatility relationship is found to be less clear

employment and earnings effects of awarding training vouchers in germany participation in intensive training programs for the unemployed in germany is allocated by awarding training vouchers using rich administrative data for all vouchers and actual program participation the authors provide first estimates of the short run and long run employment and earnings effects of receiving a training voucher award based on a selection on observables assumption the results imply that after the award voucher recipients experience long periods of lower labor market success compared to had they not received training vouchers small positive employment effects and no gains in earnings were observed four to seven years after the receipt of the voucher award in addition the findings suggest stronger positive effects both for all low skilled individuals who were awarded and redeemed a voucher and for low skilled and medium skilled individuals who chose to take degree courses than for higher skilled recipients

the effects of human capital interventions on entrepreneurial performance in industrialized countries this paper provides a systematic review of studies on the effects of human capital interventions on entrepreneurial performance in industrialized countries we identify 21 experimental and quasi experimental studies published before september 2018 these studies examine the effects of business training formal education and entrepreneurship education their performance outcomes include firm profits firm size and entrepreneurial earnings the main finding across these studies is that these interventions do not have statistically significant effects formal education is the only exception showing positive effects on firm profits and entrepreneurial earnings yet these effects are small in magnitude evidence is inconclusive regarding effect duration these findings stand in stark contrast to correlational studies which tend to find large positive correlations between human capital interventions and entrepreneurial performance we therefore conclude that correlational studies tend to overestimate the benefits of human capital interventions moreover our estimates show that the interventions are associated with moderately low additionality

the dynamically extended keynesian cross and the welfare improving fiscal policy abstract we construct a dynamic keynesian cross the dynamic extension allows for seigniorage on government financing in lieu of lump sum taxation because seigniorage imposes no tax burden expansionary fiscal policy improves welfare even if wasteful

providing advice to jobseekers at low cost an experimental study on online advice we develop and evaluate experimentally a novel tool that redesigns the job search process by providing tailored advice at low cost we invited jobseekers to our computer facilities for twelve consecutive weekly sessions to search for real jobs on our web interface for one half instead of relying on their own search criteria we use readily available labour market data to display relevant alternative occupations and associated jobs the data indicate that this broadens the set of jobs they consider and increases their job interviews especially for participants who otherwise search narrowly and have been unemployed for a few months

the impact of an adult education voucher program evidence from a randomized field experiment abstract lifelong learning is often promoted in aging societies but little is known about its returns or governments ability to advance it this paper evaluates the effects of a large scale randomized field experiment issuing vouchers for adult education in switzerland we find no significant average effects of the voucher program on earnings employment and subsequent education 1 year after treatment but effects are heterogeneous low educated individuals are most likely to profit from adult education but least likely to use the voucher in addition the public voucher program appears to crowd out firm financed training the findings cast doubt on the effectiveness of untargeted voucher programs in promoting labor market outcomes through adult education

markups and the number of firms in a simple model of imperfect competition abstract two counter intuitive results regarding the number of firms emerge from the existing monopolistic competition literature first the number of firms is positively related to the extent of the monopoly power second when the goods market is perfectly competitive the number of firms is reduced to zero this paper proposes a plausible way to escape from these two counter intuitive deficiencies