what do we know about macroeconomics that fisher and wicksell did not the answer to the question in the title is a lot in this essay i argue that the history of macroeconomics during the 20th century can be divided into three epochs

how do sex ratios affect marriage and labor markets evidence from america s second generation sex ratios i e relative numbers of men and women can affect marriage prospects labor force participation and other social and economic variables but the observed association between sex ratios and social and economic conditions may be confounded by omitted variables and reverse causality this paper uses variation in immigrant flows as a natural experiment to study the effect of sex ratios on the children and grandchildren of immigrants the flow of immigrants affected the second generation marriage market because second generation marriages were mostly endogamous i e to members of the same ethnic group the empirical results suggest that high sex ratios had a large positive effect on the likelihood of female marriage and a large negative effect on female labor force participation perhaps surprisingly the marriage rates of second generation men appear to be a slightly increasing function of immigrant sex ratios higher sex ratios also appear to have raised male earnings and the incomes of parents with young children the empirical results are broadly consistent with theories where higher sex ratios increase female bargaining power in the marriage market

oligarchy democracy inequality and growth abstract this paper analyses the dynamics of inequality democratization and economic development in a political economy model of growth where education is both the engine of growth and a determinant of political participation in a context with imperfect capital markets we investigate the incentives for an educated oligarchy to subsidize the poor s education and to initiate a democratic transition we characterize the equilibrium patterns of political institutions income distribution and growth as a function of the initial income and inequalities in particular we identify circumstances under which the elite promotes the endogenous emergence of a middle class for purely political economy reasons a simple linear infinite horizon framework is then presented in this setting we discuss the importance of historical dependence for long run social stratification and redistribution

delay and cycles when the profitability of investment depends on the general level of economic activity entrepreneurs have an incentive to delay investments during a recession endogenous delay thus prolongs the recovery from a recession and heightens the effect of the boom this paper describes a dynamic model that exhibits both delay and cycles and develops methods for analysing the role of delay in propogating business cycles a number of interesting characteristics of the cycle are revealed first the effect of delay is asymmetric it lengthens the recovery but not the downturn second delay can increase the amplitude and typically reduces the frequency of the cycle third it can reduce the average level of activity but it achieves this effect by prolonging the recession rather than by reducing the amplitude of the cycle the welfare effects of delay are ambiguous however

the stochastic ordering of mean preserving transformations and its applications abstract the stochastic variability measures the degree of uncertainty for random demand and or price in various operations problems its ordering property under mean preserving transformation allows us to study the impact of demand price uncertainty on the optimal decisions and the associated objective values based on chebyshev s algebraic inequality we provide a general framework for stochastic variability ordering under any mean preserving transformation that can be parameterized by a single scalar and apply it to a broad class of specific transformations including the widely used mean preserving affine transformation truncation and capping the application to mean preserving affine transformation rectifies an incorrect proof of an important result in the inventory literature which has gone unnoticed for more than two decades the application to mean preserving truncation addresses inventory strategies in decentralized supply chains and the application to mean preserving capping sheds light on using option contracts for procurement risk management

living in an imaginary world that looks real abstract in the paper we show using standard approaches general equilibrium modeling and the assumption of complete rationality that the macroeconomic environment is endogenous and is indeterminate specifically it is argued without resorting to sunspot type arguments that microeconomic fundamentals do not suffice to characterize the economy at the macro level in particular we show how perceptions of rational agents of the workings of the economy a shape the environment b affect the environment sufficiently to ensure that rational economic agents find the observed environment consistent with their beliefs even though it is not as a by product we illustrate that endogenous macro uncertainty can arise as an outcome if rational economic agents whose expectations are anchored on endogenous variables expect them to arise finally we show that systematic errors can persist indefinitely under rationality

marriage and divorce changes and their driving forces the family is not a static institution in recent decades marriage rates have fallen divorce rates have risen and the defining characteristics of marriage have changed the economic approach to the family seeks to explain these trends by reference to models that can also explain how and why families form gary becker s 1981 treatise on the family proposed a theory based on production complementarities in which husband and wife specialize in the market and domestic spheres respectively production complementarities also arise in the production and rearing of one s own children however production complementarities at least as initially described are decreasingly central to modern family life increased longevity and declining fertility mean that most of one s adult life is spent without one s own children in the household also the rise in marital formation at older ages including remarriage means that many families form with no intention of producing children moreover increases in female labor force participation suggest that household specialization has either declined or at least taken on a different meaning these changes have come about as what is produced in the home has been dramatically altered both by the emergence of labor saving technology in the home and by the development of service industries that allow much of what was once provided by specialized homemakers to be purchased in the market the availabil

central bank communication design in a lucas phelps economy abstract in a lucas phelps island economy an island has access to many informative signals about demand conditions each signal incorporates both public and private information the correlation of a signal s realizations across the economy determines its publicity if information sources differ in their publicity then price formation and expectations formation processes separate causing output gaps to open an output stabilizing central bank prefers averagely public information and sometimes limits the clarity of its policy announcements to achieve this the bank s incentive to engage privately in costly information acquisition and transmission is strongest not for the most influential signals but instead for those which drive the largest wedge between prices and expectations signals that are far from averagely public

consumer confidence and economic fluctuations if consumers become pessimistic about the state of the economy can there be a slowdown in output even if their pessimism is not based on economic fundamentals recent macroeconomic models show the answer is yes if there are strategic complementarities and multiple equilibria we investigate the link between consumer confidence and economic fluctuations using vector autoregressions in all models after controlling for economic fundamentals the hypothesis that consumer sentiment does not cause gnp in the granger sense can be rejected variance decompositions suggest that consumer sentiment accounts for between 13 and 26 percent of the innovation variance of gnp

an inquiry into the state s role in marriage abstract i view state intervention in marriage as a means of avoiding large transaction costs between men and women i define transaction costs as the resources devoted towards wealth capture and protection and i argue that they are high within a cohabitational contract state intervention is successful because marriage creates incentives that make private enforcement relatively costly and because marriages tend to be homogeneous i test the hypothesis by examining state responses to changing divorce laws and i find that these actions are consistent with the state increasing the social value of marriage by mitigating transaction costs

spousal control and intra household decision making an experimental study in the philippines i elicit causal effects of spousal observability and communication on financial choices of married individuals in the philippines when choices are private men put money into their personal accounts when choices are observable men commit money to consumption for their own benefit when required to communicate men put money into their wives account these strong treatment effects on men but not women appear related more to control than to gender men whose wives control household savings respond more strongly to the treat ment and women whose husbands control savings exhibit the same response changes in information and communication interact with underlying control to produce mutable gender specific outcomes

from polygyny to serial monogamy a unified theory of marriage institutions consider an economy populated by males and females both rich and poor the society has to choose one of the following marriage institutions polygyny strict monogamy and serial monogamy divorce and remarriage after having identified the conditions under which each of these equilibria exists we show that a rise in the share of rich males can explain a change of regime from polygyny to monogamy the introduction of serial monogamy follows from a further rise in either the proportion of rich males or an increase in the proportion of rich females strict monogamy is a prerequisite to serial monogamy as it promotes the upward social mobility of females more than polygyny we also show that polygyny is compatible with democracy

dynamic coordination and the optimal stimulus policies this article studies stimulus policies in a simple macroeconomic model featuring a dynamic coordination problem that arises from demand externalities and fixed costs of investment in times of low economic activity firms face low demand and hence have lower incentives for investing which reinforces their low demand expectations in a benchmark case with no shocks the economy might get trapped in a low output regime and a social planner would be particularly keen to incentivise investment at times of low economic activity however this result vanishes once shocks are considered

having it all for all child care subsidies and income distribution reconciled abstract we study the design of child care policies when redistribution matters traditional mothers provide some informal child care whereas career mothers purchase full time formal care the sorting of women across career paths is endogenous and shaped by a social norm about gender roles in the family via this social norm traditional mothers informal child care imposes an externality on career mothers so that the market outcome is inefficient informal care is too large and the group of career mothers is too small so that inefficiency and gender inequality go hand in hand in a first best world redistribution across couples and efficiency are separable redistribution is performed via lump sum transfers and taxes which are designed to equalize utilities across all couples the efficient allocation of child care is obtained by subsidizing formal care at a pigouvian rate however in a second best setting a trade off between efficiency and redistribution emerges the optimal uniform subsidy is lower than the pigouvian level conversely under a nonlinear policy the first best pigouvian rule for the marginal subsidy on informal care is reestablished while the share of high career mothers continues to be distorted downward for incentive reasons this policy is effective in reconciling the objectives of reducing the child care related inefficiency and achieving a more equal income distribution across couples our results continue to hold when the norm is defined within the mothers social group rather than being based on the entire population

the risk of polygamy and wives saving behavior in a polygamous society all monogamous women are potentially at risk of polygamy however the anthropological and economic literatures are silent on the potential impact of the risk of polygamy on the economic decisions of monogamous wives this paper explores this issue in senegal using individual panel data the paper first estimates a cox model for the probability of transition to polygamy second it estimates the impact of the predicted risk of polygamy on monogamous wives savings the findings show a positive impact of the risk of polygamy on female savings entrusted to formal or informal institutions which is suggestive of self protective strategies the increase in savings comes at the cost of reduced consumption of household food expenditures and wives private nonfood expenses

macroeconomic implications of production bunching factor demand linkages abstract existing empirical evidence suggests that output is more variable than consumption so that production smoothing is not apparently present in this paper we investigate some macroeconomic implications of the proposition that the empirical evidence reflects the presence of some firms in the economy that produce with nonconvex technologies overall when activities are sufficiently complementary and inventory holding is sufficiently costly nonconvexities at the firm level can generate a pattern of output and sales such that the variance of output exceeds that of sales at an aggregate level in this way nonconvexities at the individual firm level may have macroeconomic consequences

production function regressions returns to scale and externalities a number of recent papers have used simple linear regressions in an attempt to identify market structure the extent of returns to scale and possible external effects in u s manufacturing industries the results obtained from these regressions have important implications for several branches of modern macroeconomics as a result the macro literature frequently cites specific numerical evidence from caballero and lyons 1992 and hall 1990 which suggests that there are quantitatively significant increasing returns to scale or external effects in u s manufacturing in contrast it is the argument of this paper that this evidence is not convincing the most robust evidence suggests that the typical u s manufacturing industry displays constant returns with no external effects on the other hand there is significant heterogeneity across industries

quality of available mates education and household labor supply we investigate the impact of sex ratios by education and metropolitan area on spouses bargaining power and labor supplies to capture the local and qualitative nature of mate availability using current population survey and census data for 2000 1990 and 1980 we estimate these effects in a collective household framework we find that a higher relative shortage of comparably educated women in the couple s metropolitan area reduces wives labor supply and increases their husbands the impact is stronger for couples in higher education groups but not significant for high school graduates results are similar across decades no such effects are found for unmarried individuals jel d1 j22 2008 western economic association international

coordinating regime switches the canonical model of strategic complementarities between individual actions which exhibits multiple equilibria under perfect information is extended with heterogeneous agents and imperfect information agents observe their own cost of action and the history of the levels of aggregate activity the distribution of individual characteristics evolves through a random process and individuals are rational bayesians under plausible conditions there is a unique equilibrium with phases of high and low activity and random switches applications may be found in macroeconomics and revolutions

on the effect of demand randomness on inventories and costs we explore analytically cardinal effects of the extent of demand randomness on optimal inventory levels and the associated expected costs to model changes in demand randomness we make extensive use of a mean preserving transformation commonly used in probabilistic microeconomics as well as the notion of risk pooling aggregating independent demands for the single period news vendor model the order quantity and associated costs are shown to depend on the randomness parameter in a simple and highly interpretable manner we show by a simple example that in some situations risk pooling might neither reduce inventories nor move them closer to the mean or median demand the managerial relevance of such analyses is discussed

dynamic complementarities a quantitative analysis abstract this paper considers the importance of dynamic complementarities as an endogenous source of propagation in a dynamic stochastic economy dynamic complementarities link the stocks of human and organizational capital which are influenced by past levels of economic activity to current levels of productivity we supplement an otherwise standard dynamic business cycle model with both contemporaneous and dynamic complementarities the model is calibrated using estimates of these effects from both micro and aggregate data our quantitative analysis identifies empirically relevant dynamic complementarities as a source of propagation for both technology and taste shocks

intergenerational mobility and interpersonal inequality in an african economy how much economic mobility is there across generations in a poor primarily rural economy how much do intergenerational linkages contribute to current inequality we address these questions using original survey data on senegal that include a sub household measure of consumption for cells within the household while intergenerational linkages are evident we find a relatively high degree of mobility across generations associated with the shift from farm to non farm sectors and greater economic activity of women male dominated bequests of land and housing bring little gain to consumption and play little role in explaining inequality though they have important effects on sector of activity inheritance of non land assets and the education and occupation of parents especially the mother and their choices about children s schooling are more important to adult welfare than property inheritance significant gender inequality in consumption is evident though it is almost entirely explicable in terms of factors such as education and non land inheritance there are a number of other pronounced gender differences with intergenerational linkages appearing through the mother rather than the father

discrimination in matchmaking evidence from the price policy of a french marriage bureau this article shows how a matchmaking agency may improve the quality of serious meetings between individuals seeking long term relationship thanks to a price discrimination policy its filtering is based on objective and official characteristics sex age and contract s environment and on implicit criteria the few asked characteristics by its clients

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

a theory of allocation of time in markets for labour and marriage this paper analyzes the interdependence between labor and marriage markets it is argued that market conditions concerning marriage influence the value of time in the home according to this economic view marriage involves an exchange of household labor between individual men and women wages in labor markets affect marital behavior and conditions in the markets for household labor influence labor supply single persons must decide whether to marry and if so how much work to invest and employ in the framework of marriage in monogamous societies marriage tends to occur when a man demands the amount of household labor a woman wants to supply and a woman demands the amount of labor supplied by the man however changing outside factors can disrupt this equilibrium and produce changes in income redistribution between the spouse new marital labor relations or divorce this approach diverges from the traditional theory of labor supply in the way the value of time in the home is determined awareness that the supply of labor can shift following changes in a market determined wage for household labor opens new avenues for research in labor economics and studies of female labor supply a change in sex ratio is likely to increase the proportion of women who marry and decrease the number of hours women work outside the home group differences in patterns of division of household labor further influence the elasticity of female labor supply a positive correlation between achievements in markets for labor and household labor can provide an additional explanation for the backward bending supply of labor finally the relative position of husbands and wives in their respective marriage markets has implications for their consumption patterns and fertility this theory could provide a useful framework for analyzing the consequences of public policy for production reproduction and the distribution of wealth

on the formation of family structures hitherto models of family economics focus on explaining theorganization of monogamous and polygynous family patterns a thirdexisting marriage pattern polyandrous marriages has beenneglected this paper shows that in contrast to the common view a polyandrous marriage may be individually rational i considera game theoretic model of a subsistence economy whose membersmaximize their personal reproductive success in this model allthree family formations can appear as equilibrium solutions

divorce remarriage and welfare a general equilibrium approach modern marriage markets display increasing turnover with less marriage but more divorce and remarriage as a consequence a large number of children live in single parent and step parent households we summarize here a general equilibrium approach that allows welfare evaluations in the absence of children we show that higher aggregate divorce may raise welfare because it facilitates remarriage even children may be better off in a high divorce remarriage environment because of stronger incentives for fathers to transfer money to the custodial mothers jel j1 j12 j13 k1 k10

women s liberation what s in it for men the nineteenth century witnessed dramatic improvements in the legal rights of married women given that these changes took place long before women gained the right to vote they amounted to a voluntary renouncement of power by men in this paper we investigate men s incentives for sharing power with women in our model women s legal rights set the marital bargaining power of husbands and wives we show that men face a tradeoff between the rights they want for their own wives namely none and the rights of other women in the economy men prefer other men s wives to have rights because men care about their own daughters and because an expansion of women s rights increases educational investments in children we show that men may agree to relinquish some of their power once technological change increases the importance of human capital we corroborate our argument with historical evidence on the expansion of women s rights in england and the united states

dressing a ghost size and value of unpaid family care unpaid family care work encompasses care and assistance provided by members of a household to other members it is not considered to be a productive activity and its exclusion from national accoun

from stagnation to sustained growth the role of female empowerment this paper explores the role of gender equality over a long run economic and demographic development path of industrialized countries our unified cliometric growth model of female empowerment suggests that changes in gender relations are a key ingredient of economic development the economy evolves from a malthusian regime with slow technological progress low income and low fertility to a modern growth regime with high living standards and low fertility the rise in technological progress together with improvements in gender equality generates a positive feedback loop that engages the process of human capital accumulation economic transition and triggers the demographic transition

it s raining men hallelujah the long run consequences of male biased sex ratios we document the short and long run effects of male biased sex ratios we exploit a natural historical experiment where large numbers of male convicts and far fewer female convicts were sent to australia in the 18th and 19th centuries in areas with more male biased sex ratios women were historically more likely to get married and less likely to work outside the home in these areas today both men and women continue to have more conservative attitudes towards women working and women work fewer hours outside the home while these women enjoy more leisure they are also less likely to work in high ranking occupations we demonstrate that the consequences of uneven sex ratios on cultural attitudes labour supply decisions and occupational choices can persist in the long run well after sex ratios are back to the natural rate we document the roles of vertical cultural transmission and marriage homogamy in sustaining this cultural persistence

fulfilled expectations of entry i develop a two period model of entry deterrence with endogenous market demands such that the consumer s expectation about the future market structure is fulfilled in equilibrium i find that both expectations duopoly and monopoly are fulfilled in the incumbent s price setting game while there is a unique equilibrium in the quantity setting game i also find that quantity is more entry deterring than price in the sense that the maximum value of the entry cost that allows entry in the price setting game is higher than or equal to that of the quantity setting game

debt crisis adjustment policies and capital formation in developing countries where do we stand abstract this paper documents the decline in investment rates observed in developing countries after 1982 and explores analytically and empirically the factors contributing to explain it the paper focuses on the impact of macroeconomic adjustment and reform measures on private investment particularly in latin america and east asia and underscores the importance of macroeconomic uncertainty policy credibility and potential coordination failures in shaping the response of investment to the changes in economic incentives brought about by structural reforms the analysis concludes with some policy recommendations to improve the design of sustainable growth oriented adjustment programs

why did the west extend the franchise democracy inequality and growth in historical perspective during the nineteenth century most western societies extended voting rights a decision that led to unprecedented redistributive programs we argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution political transition rather than redistribution under existing political institutions occurs because current transfers do not ensure future transfers while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution our theory also offers a novel explanation for the kuznets curve in many western economies during this period with the fall in inequality following redistribution due to democratization i introduction the nineteenth century was a period of fundamental political reform and unprecedented changes in taxation and redistribution britain for example was transformed from an oligarchy run by an elite to a democracy the franchise was extended in 1832 and then again in 1867 and 1884 transferring voting rights to portions of the society with no previous political representation the decades after the political reforms witnessed radical social reforms increased taxation and the extension of education to the masses moreover as noted by kuznets inequality which was previously increasing started to decline during this period the gini coefficient for income inequality in england and wales had risen from 0 400 in 1823 to 0 627 in 1871 but fell to 0 443 in 1901 two key factors in the reduction in inequality were the increase in the proportion of skilled workers williamson 1985 and the redistribution of income toward the poorer segments of the society for example taxes rose from 8 12 percent of national product in 1867 to 18 8 percent by 1927 and the progressivity of the tax system increased substantially see lindert 1989

efficiency wage models of unemployment keynesian economists hold it to be self evident that business cycles are characterized by involuntary unemployment but construction of a model of the cycle with involuntary unemployment faces the obvious difficulty of explaining why the labor market does not clear involuntarily unemployed people by definition want to work at less than the going wage rate why don t firms cut wages thereby increasing profits

a theory of rational marriage and divorce abstract despite high rates of cohabitation before marriage and considerable efforts invested in the search for a life partner a high number of marriages end in divorce this paper develops a model of household formation and dissolution in which it may be rational for individuals to marry fully anticipating that they will subsequently divorce economies of scale associated with living as a couple rather than in two separate households provide an incentive to marry problems with free riding in the provision of household collective goods may lead to divorce marriages which involve partners who are similar in tastes or in their productive capacities and in which private goods are equally shared are the most likely to be stable in contrast marriages which involve very disparate partners or which share the fruits of market labor very unequally between the partners are more likely to be shortlived and end in divorce

the economics of polygyny in sub saharan africa female productivity and the demand for wives in cote d ivoire polygyny is still practiced throughout much of sub saharan africa with important social consequences this paper makes the first attempt to link african polygyny directly to the productivity of women in agriculture using micro data i develop a structural model of the demand for wives that disentangles wealth and substitution effects using a large household survey from cote d ivoire i find that marked geographic diversity in cropping patterns leads to regional variation in female labor productivity i also find that conditional on wealth men do have more wives when women are more productive that is cheaper this substitution effect may explain why polygyny declined in rural areas of cote d ivoire during agricultural development

matching finding a partner for life or otherwise how do job worker and husband wife relationships form and why do some matched pairs subsequently separate economists and game theorists are in the process of developing and applying an equilibrium explanation of match formation and separation based on the principle of voluntary pairing under competitive conditions the purpose of this paper is to assess the current state of these developments the general existence of patnership structures with the property that no one has an incentive to separate has been established these equilibrium structures maximize aggregate value over the set of all feasible match structures in the transferable utility case according to this pure theory of matching competition for partners can be expected to yield equilibrium match structures that are both stable and socially efficient at least under conditions of frictionless certainty search theoretic models that take account of meeting costs and initial uncertainty about match values have been developed to explain sepa

big shocks versus small shocks in a dynamic stochastic economy with many interacting agents abstract this paper investigates the conditions under which a dynamic stochastic macroeconomic model with many interacting agents will exhibit the small shocks large shocks property that is often said to characterize observed time series small shocks have a transient impact on the system whereas a sufficiently large shock will change its trajectory forever an example is analyzed where the steady state distribution of output has a unique mode if the variance of labor productivity is sufficiently high but has two modes each with its own basin of attraction if the variance falls below a critical value an unanticipated exogenous shock can have a long lasting impact if it moves the economy into the basin of attraction of a different output mode a general result is derived showing that the invariant measure of output can have multiple modes if each firm s probability of producing increases appropriately as the number of other firms producing rises

the risk of divorce and household saving behavior we analyze the causal impact of an increase in the risk of marital dissolution on the saving behavior of married couples we use the legalization of divorce in ireland in 1996 as an exogenous shock to the risk of divorce we propose several comparison groups unaffected by the law change that allow us to use a difference in differences approach our findings suggest that the legalization of divorce led to a significant increase in the propensity to save by married individuals which is consistent with individuals saving more as a response to the increase in the probability of marital breakup

sectoral shocks and aggregate fluctuations abstract this paper presents a multisector dynamic general equilibrium model of business cycles with a distinctive feature aggregate fluctuations are driven by independent sectoral shocks the model hypothesizes that trade among sectors provides a strong synchronization mechanism for these shocks due to the limited but locally intense interaction that is characteristic of such input trade flows limited interaction characterized by a sparse intermediate input use matrix reduces substitution possibilities among intermediate inputs which strengthens comovement in sectoral value added and leads to a postponement of the law of large numbers in the variance of aggregate value added the chief virtue of this model is that reliance on implausible aggregate shocks is not necessary to capture the qualitative features of macroeconomic fluctuations building on horvath 1998 review of economic dynamics 1 781 808 which establishes the theoretical foundation for the relevance of limited interaction in the context of a stylized multisector model this paper specifies a more general multisector model calibrated to the us 2 digit standard industrial code economy simulations prove the model is able to match empirical reality as closely as standard one sector business cycle models without relying on aggregate shocks

the economics of roscas and intrahousehold resource allocation this paper investigates individual motives to participate in rotating savings and credit associations roscas detailed evidence from roscas in a kenyan slum nairobi suggests that most roscas are predominantly composed of women particularly those living in a couple and earning an independent income to explain this phenomenon we propose an argument based on conflictual interactions within the household participation in a rosca is a strategy a wife employs to protect her savings against claims by her husband for immediate consumption the empirical implications of the model are then tested using the data collected in kenya

why dowry payments declined with modernization in europe but are rising in india in contrast to most dowry oriented societies in which payments have declined with modernization those in india have undergone significant inflation over the last five decades this paper explains the difference between these two experiences by focusing on the role played by caste the theoretical model contrasts caste and non caste based societies in the former there exists an inherited component to status caste that is independent of wealth and in the latter wealth is the primary determinant of status modernization is assumed to involve two components increasing average wealth and increasing wealth dispersion within status or caste groups the paper shows that in caste based societies the increases in wealth dispersion that accompany modernization necessarily lead to increases in dowry payments whereas in non caste based societies increased dispersion has no real effect on dowry payments and increasing average wealth causes the payments to decline

multiple steady states and endogenous fluctuations with increasing returns to scale in production abstract the purpose of this paper is to study the influence of the elasticity of capital labor substitution and of the labor supply elasticity on the existence of multiple pareto ranked stationary equilibria local indeterminacy bifurcations and expectations driven fluctuations in economies with external and internal increasing returns to scale in production this is done through general geometrical methods that do not depend upon particular specifications for preferences and technology for the sake of concreteness the analysis focuses on the model with heterogeneous agents and financial constraints presented in woodford j econ theory 40 1986 128 137 and extended by grandmont pintus and de vilder capital labor substitution and competitive nonlinear endogenous business cycles crest working paper 9728 1997 to account for capital labor substitution increasing returns to scale are incorporated in two different market structures an economy with aggregate production externalities and perfectly competitive markets an economy with increasing returns internal to the firm and imperfect competition in the product s market s only journal of economic literature classification numbers c61 e32

the impact of divorce laws on marriage specific capital this article considers how divorce law alters the incentives for couples to invest in their marriage focusing on the impact of unilateral divorce laws on investments in new marriages differences across states between 1970 and 1980 provide useful quasi experimental variation with which to consider incentives to invest in several types of marriagespecific capital spouse s education children household specialization and home ownership i find that adoption of unilateral divorce regardless of the prevailing property division laws reduces investment in all types of marriage specific capital considered except home ownership in contrast results for home ownership depend on the underlying property division laws

the saving behaviour of a two person household the facts that wives are typically younger than their husbands and that women typically live longer than men imply that wives may have more incentive to save for old age than do husbands a theoretical model of the determination of household saving and portfolio choice is introduced which takes into account differences in preferences for saving the most important result is that the level and the composition portfolio of saving and the time path of consumption are dependent on the distribution of income within the household women typically live longer than men and wives are typically younger than their husbands these two facts imply that preferences about saving for old age in married households with forward looking members may differ between husband and wife this paper presents a theoretical analysis of saving and portfolio behaviour if the members of the household have differ ent preferences over future consumption as compared to current consump tion the analysis stands in contrast to unitary models of household intertemporal allocation which assume that the household has a single utility function thus this paper is a contribution in a novel context to the burgeoning literature on intra household decision making the base case analysis is for a simple two person husband and wife1 two period model in which there is only one asset saving it is assumed that because of the two facts given at the start of the introductory paragraph the husband discounts the future more than the wife in section ii the implications of a non cooperative decision making process for the base case are derived see ulph 1988 for a non cooperative model of demand and

sticky prices as coordination failure this paper links the coordination failure and menu cost approaches to the microeconomic foundations of keynesian macroeconomics if a firm s desired price is increasing in others prices then the gain from price adjustment after a nominal shock is greater if others adjust this strategic complementarity leads to multiple equilibria in the degree of rigidity welfare may be much higher in the equilibria with less rigidity thus nominal rigidity arises from a failure to coordinate price changes jel e12 e30 keynesian macroeconomics waned in the 1970 s because economists grew disenchanted with its weak microeconomic foundations the central difficulty was that keynesian models were based on ad hoc rigidities in nominal wages and prices the 1980 s produced two approaches to reviving keynesian theory the menu cost literature n gregory mankiw 1985 george akerlof and janet yellen 1985 seeks to provide rigorous explanations for nominal rigidities these papers argue that small frictions in price setting are enough to produce large nominal rigidities in contrast the coordination failure literature russell cooper and andrew john 1988 abandons nominal rigidities and seeks alternative foundations for keynesian models the central idea is that many economic activities such as production e g john bryant 1983 trade e g peter diamond 1982 and investment e g nobuhiro kiyotaki 1988 exhibit synergism or strategic complementarity one agent s optimal level of activity depends positively on others activity strategic complementarity can lead to multiple equilibria with high activity equilibria superior to low activity equilibria thus an economy may be stuck in an underemployment equilibrium even though a superior equilibrium exists models with nominal rigidities and models with coordination failures are often presented as competing paradigms 1 this paper shows that this view is incorrect we take a step toward unifying the foundations of keynesian economics by showing that the two sets of ideas are highly complementary nominal rigidity arises from a failure to coordinate price changes this failure has the essential features of coordination failures in previous models flexibility in one firm s price increases the incentives for other firms to make their prices flexible this strategic complementarity leads to multiple equilibria in the degree of nominal rigidity equilibria with less rigidity more active price adjustment are often pareto superior to equilibria with more rigidity these results contribute to our understanding both of coordination failure and of nominal rigidity the range of keynesian phenomena explained by coordination failures is greatly expanded previous coordination failure models contain only real variables and thus ascribe no role to monetary policy or other determinants of nominal spending our results suggest that coordination failure is at the root of inefficient nonneutralities of money theories of nominal rigidities gain new empirical and policy im

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

specialization and the big push abstract in this paper we consider industrialization as the situation in which economy achieves high productivities by an increase in the degree of specialization we study it by introducing intermediate goods sectors in the murphy shleifer vishny model of the big push and show the existence of multiple pareto ranked equilibria

static and intertemporal household decisions we discuss the most popular static and dynamic models of household behavior our main objective is to explain which aspects of household decisions different models can account for using this insight we describe testable implications identification results and estimation findings obtained in the literature particular attention is given to the ability of different models to answer various types of policy questions

corporate debt overhang and macroeconomic expectations one way in which corporate financial structure affects macroeconomic performance is by creating debt overhang debt overhang occurs when existing debt deters new investment because the benefits from new investment will go to the existing creditors not to the new investors if the economy is booming debt overhang will not bind because the returns to investing are high if the economy is stagnant debt overhang will bind because the returns to investing are low as a result high levels of debt can create multiple expectational equilibria in which animal spirits determine economy activity copyright 1995 by american economic association

optimal procurement strategies for online spot markets abstract spot markets have emerged for a broad range of commodities and companies have started to use them in addition to their traditional long term procurement contracts forward contracts in comparison to forward contracts spot markets offer products at essentially negligible lead time but typically command a higher expected price for this added flexibility while also exhibiting substantial price uncertainty in our research we analyze the resulting procurement challenge and quantify the benefits of using spot markets from a supply chain perspective we develop and solve mathematical models that determine the optimal order quantity to purchase via forward contracts and the optimal quantity to purchase via spot markets we analyze the most general situation where commodities can be both bought and sold via a spot market and derive closed form results for this case we compare the obtained results to the reference scenario of pure contract sourcing and we include results for situations where the use of spot markets is restricted to either buying or selling only our approaches can be used by decision makers to determine optimal procurement strategies based on key parameters such as demand and spot price volatilities correlation between demand and spot prices and risk aversion the results of our analysis demonstrate that significant profit improvements can be achieved if a moderate fraction of the commodity demand is procured via spot markets the results also show that companies who use spot markets can offer a higher expected service level but that they might experience a higher variability in profits than companies who do not use spot markets we illustrate our analytical results with numerical examples throughout the paper

multi family households in a labour supply model a calibration method with application to poland models of cooperative and noncooperative behaviour opened the household black box and allowed for individual treatment of partners in couples however labour supply literature has so far largely ignored a broader issue the distinction of single versus multi family complex households we propose a method to account for multi family household structure by borrowing from recent applications of the collective model to identify the degree of sharing we assume that each household is characterized by a between family sharing parameter which is calibrated on estimated preferences observed labour market status and other characteristics we apply the method to polish labour market data

sourcing decisions with capacity reservation contracts abstract by committing to long term supply contracts buyers seek to lower their purchasing costs and have products delivered without interruption when a long term contract is available suppliers are less pressured to find new customers and can afford to charge a price lower than the prevailing spot market price we examine sourcing decisions of a firm in the presence of a capacity reservation contract that this firm makes with its long term supplier in addition to the spot market alternative this contract entails delivery of any desired portion of a reserved fixed capacity in exchange for a guaranteed payment by the buyer we investigate rational actions of the two parties under two different types of periodic review inventory control policies used by the buyer the two number policy and the base stock policy when typical demand probability distributions are considered inclusion of the spot market source in the buyer s procurement plan significantly reduces the capacity commitments from the long term supplier

using scheduled ordering to improve the performance of distribution supply chains we study a supply chain with one supplier and many retailers that face exogenous end customer demands the supplier and the retailers all try to minimize their own inventory related costs in contrast to the retailers newsvendor type ordering behavior under which retailers may place orders freely in every period we propose two scheduled ordering policies the scheduled balanced ordering policy sbop and the scheduled synchronized ordering policy ssop under both the sbop and ssop retailers are allowed to order freely only in one period of an ordering cycle and receive fixed shipments in other periods retailers take turns to order freely under the sbop while under the ssop all retailers order freely in the same period with the average supply chain cost per period as the performance measure we identify mathematical conditions under which scheduled ordering policies outperform the newsvendor type ordering through a large scale numerical study we find that scheduled ordering policies are most effective when i the supplier s holding and expediting costs are high and the retailer s backorder cost is small ii the end customer demand variance and correlation are high and iii the supplier s capacity is high in addition we observe that the behavior of the ssop often complements that of the sbop whereas the sbop is better than ssop when the supplier s capacity is low and when the end customer demand correlation level is high the ssop is better when the opposite conditions prevail

gender agricultural production and the theory of the household virtually all models of the household assume that the allocation of resources is pareto efficient within many african households agricultural production occurs on many plots controlled by different members of the household pareto efficiency implies that factors should be allocated efficiently across these plots i find in contrast that plots controlled by women are farmed much less intensively than similar plots within the household controlled by men the estimates imply that about 6 percent of output is lost because of inefficient factor allocation within the household the paper suggests a new approach to modeling intrahousehold allocation consistent with the empirical results

microeconomic uncertainty and macroeconomic indeterminacy we propose a stylized intertemporal macroeconomic model wherein the combination of decentralized trading and microeconomic uncertainty taking the form of privately observed and uninsured idiosyncratic shocks creates an information problem between agents and generates indeterminacy of the macroeconomic equilibrium for a given value of the economic fundamentals the economy admits a continuum of equilibria that can be indexed by the sales expectations of firms at the time of investment the walrasian equilibrium is one of these possible equilibria but it is reached only if firms are optimistic enough with a weaker degree of optimism equilibrium output employment and real wages will be lower than in the walrasian equilibrium moreover the range of possible equilibria will depend positively on the wage elasticity of the labour supply and on the magnitude of the information problem between buyers and sellers in our case the variance of the idiosyncratic shocks stochastic simulations performed on a calibrated version of the model show that pure demand expectation shocks may generate business cycle statistics that are not inconsistent with the observed ones 2006 elsevier b v all rights reserved

shopping externalities and self fulfilling unemployment fluctuations we propose a novel theory of self fulfilling fluctuations in the labor market a firm employing an additional worker generates positive externalities on other firms because employed workers have more income to spend and have less time to shop for low prices than unemployed workers we quantify these shopping externalities and show that they are sufficiently strong to create s complementarities in the employment decisions of different firms and to generate multiple rational expectations equilibria equilibria differ with respect to agents rational expectations about future unemployment we show that negative shocks to agents expectations lead to fluctuations in vacancies unemployment labor productivity and the stock market that closely resemble those observed in the us during the great recession

credit traps and credit cycles we develop a simple macroeconomic model of credit market imperfections with heterogeneous investment projects the projects differ in productivity the investment requirement and the severity of agency problems behind the borrowing constraints a movement in borrower net worth shifts the composition of the credit between projects with different productivity levels thereby causing endogenous investment specific technological change furthermore such endogenous technological change in turn affects borrower net worth these composition effects could give rise to credit traps credit collapse leapfrogging credit cycles and growth miracles in the dynamics of the aggregate investment and borrower net worth jel e22 e44 o33

economic behavior marriage and fertility two lessons from polygyny abstract this paper derives and estimates an index of the relative importance of children in marriage by comparing the effect of husband s income on the actual number of wives in the household with the demand for wives derived from the number of children in the household moreover the paper presents the monogamy bias as a possible explanation for often observed low or negative income effects on fertility

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

the economics of dowry and brideprice payments between families at the time of marriage existed during the history of most developed countries and are currently pervasive in many areas of the developing world these payments can be substantial enough to affect the welfare of women and a society s distribution of wealth recent estimates document transfers per marriage amounting to six times the annual household income in south asia rao 1993 and four times in sub saharan africa dekker and hoogeveen 2002 this paper first establishes some basic facts about the prevalence and magnitude of marriage payments it then discusses how such patterns vary across countries depending upon economic conditions societal structures institutions and family characteristics such payments have also evolved within societies over time for example in some periods such payments have risen sharply in some cases payments have shifted from the grooms sides to the brides and vice versa also property rights over such payments have sometimes shifted between marrying partners and parental generations economists who have only recently begun to work on the topic have focused on explaining these facts the second part of the paper addresses this economic literature though considerable insight into many of the facts has been gained many of the existing economic explanations are weakly convincing and many puzzles remain one crucial difficulty is that solid data in this field have been extremely rare the descriptions of marriage payments in this paper are synthesized from a patchwork of studies across periods places and even epochs and there are doubtless numerous cases which remain undocumented thus the paper

polygyny fertility and savings sub saharan africa has a high incidence of polygyny it is also the poorest region of the world in this paper i ask whether banning polygyny could play any role for development using a quantitative model of polygyny i find that enforcing monogamy lowers fertility shrinks the spousal age gap and reverses the direction of marriage payments polygyny leads to high bride prices to ration women which makes buying wives and selling daughters a good investment thus crowding out investment in physical assets for reasonable parameter values i find that banning polygyny decreases fertility by 40 percent increases savings by 70 percent and increases output per capita by 170 percent

economics of development and the development of economics the purpose of this paper is to restore some historical perspective by highlighting the many contributions of development economics to the rest of economics we will point out to the younger generations how some of the glittering ideas they currently play with originally came from that now neglected field and how in some cases they have rediscovered with great fanfare insights that were well known in the development literature familiarity with which would have enriched their own work

business cycles theory evidence and policy implications this paper looks at recent advances in the study of aggregate fluctuations the emphasis is on three prominent areas of research the stochastic growth model economies which exhibit macroeconomic complementarities and models that emphasize heterogeneity each section of the paper outlines the theory examines relevant empirical evidence and then discusses some policy implications of the analysis

women s labor supply and marital choice this paper hypothesizes that value of time and consequently labor force participation can vary with circumstances specific to a marriage or a marriage market wives traits valued in the marriage market are expected to be associated with lower labor force participation whereas husbands traits valued in the marriage market are expected to be associated with lower participation rates on the part of wives evidence for these hypotheses is found on the basis of regressions of labor force participation for a sample of israeli married women inclusion of traits valued in the marriage market and marital sorting patterns increases the explanatory power of the regressions

a theory of marriage formality the case of guatemala a theory of marriage formality which regards formality as an indication of commitment and loyalty is explained and tested using multiple regressions on data from the 1974 rand incap survey of 6 guatemalan ladino communities it is argued that a trade off exists between formality and the material benefits a woman receives in return for providing services to a man similar to the trade off between monetary returns and job stability found in the labor market the relations between husbands and wives are described in terms of the concepts of supply demand and market equilibrium and derived hypotheses concerning the factors leading to various combinations of marriage formality and material compensation for wife services are proposed 2 subsamples of women in the 6 guatemalan communities are compared for a range of socioeconomic indicators following which a series of regressions using formal marriage or informal unions as the dependent variable are carried out the major finding is that a marriage ceremony has tangible consequences in terms of material benefits a woman can obtain through marriage as predicted by the theory women with more physical and human assets and men with fewer such assets are more likely to marry formally rather than to live together informally

threshold behavior and aggregate fluctuation this paper concerns a propagation mechanism in an economy where many individuals follow a threshold rule and interact with a positive feedback we derive an asymptotic distribution of the propagation size when the number of the agents tends to infinity the propagation distribution exhibits a slower convergence to a deterministic value than it would if the agents followed a smooth adjustment policy this gives rise to significant aggregate fluctuations in a finite lumpy adjusting economy even when the agents are hit by small independent shocks

celestial marriage and earthly rents interests and the prohibition of polygamy abstract just prior to the civil war the u s government set out on a relentless campaign to eliminate polygamy within the mormon church this paper offers evidence that the political restrictions on the practice of polygamy were the result of rent seeking by potential beneficiaries of such laws the edmonds act of 1882 polygamy created benefits for women but reduced the welfare of most men in a time period when only adult males had the franchise

a test of collective rationality for multi person households abstract this paper provides a test of efficiency of consumption decisions in households with many decision makers it also presents a method of determining the number of these decision makers information on some distribution factors is needed to implement this approach

monopolistic competition dynamic inefficiency and asset bubbles abstract we emphasise the importance of the market structure to determine whether dynamic inefficiency is possible in a closed economy we analyse alternative monopolistic competition frameworks where the existence of pure profit involves the presence of an asset market when entry is blockaded dynamic inefficiency is prevented as each firm uses a discount rate higher than the output growth rate in evaluating future profits when entry is free but involves sunk costs we need to distinguish between the possibility of asset bubbles and dynamic inefficiency the condition for the latter being more stringent if entry costs increase with per capita output dynamically inefficient equilibria are possible only when population grows

imperfectly competitive cycles with keynesian and walrasian features abstract we consider a multi sector overlapping generations model with oligopolistic firms in the output markets and wage setting trade unions in the labour markets a coordination problem between firms creates multiple temporary equilibria which are either walrasian or of the keynesian unemployment type there exist many deterministic and stochastic equilibrium cycles fluctuating between keynesian recession and walrasian boom periods with arbitrarily long phases in each regime the cycles are in accordance with certain empirical regularities money is neutral and superneutral but appropriate countercyclical fiscal policies stabilize the cycles in a textbook keynesian way

indeterminacy and endogenous fluctuations with arbitrarily small externalities abstract in this paper we study the occurrence of local indeterminacy endogenous fluctuations and bifurcations in a simple non monetary 2 period overlapping generations economy in which people do not consume when young with capital labor substitution elastic labor supply and productive externalities we show that in contrast with the local dynamics generated by many one sector models of capital accumulation studied in the current literature local indeterminacy and therefore stationary stochastic equilibria driven by self fulfilling beliefs sunspots as well as multiple stationary equilibria are pervasive phenomena when the elasticity of input substitution is large and when the size of externalities is arbitrarily small we also demonstrate that when externalities are arbitrarily small the cobb douglas production function often used for its analytical tractability in many models is structurally unstable it is always associated with uniqueness of the steady state but any small perturbation of the elasticity of input substitution leads to the existence of two stationary equilibria which may be close to each other with the consequence that the dynamics may be qualitatively very different from those originated in the unit elasticity case journal of economic literature classification numbers e32 c62

multiple expectational equilibria under monopolistic competition this paper shows that a monopolistically competitive economy with real investment can have multiple rational expectations equilibria one is associated with entrepreneurs optimistic expectations about future demand another with entrepreneurs pessimism it also shows that an optimistic expectational equilibrium pareto dominates a pessimistic equilibrium an investment subsidy can be beneficial both by reducing the original underinvestment distortion and by changing firms expectations from pessimistic to optimistic the most important assumption is increasing returns to scale and monopolistic competition makes increasing returns consistent with each producer s optimization

strategic complementarity slows macroeconomic adjustment to temporary shocks i introduction starting with the work of diamond 1982 hart 1982 and bryant 1983 a number of authors have employed models which use potential coordination failure to show that many features of the keynesian framework can be captured in models consistent with the microfoundations approach 1 for example in the context of a search model diamond demonstrates the existence of equilibria with too low a level of aggregative activity hart captures this feature and the simultaneous existence of multipliers in a model of monopolistic competition while technological interactions are the crucial element of bryant s analysis one reason to refer to these seemingly diverse set of papers as a single literature is that all the models are in fact driven by the presence of the same factor strategic complementarity a macroeconomic model which exhibits strategic complementarity is simply one where the larger is aggregate production the larger is the incentive for any particular agent to produce cooper and john 1988 first demonstrated that the presence of strategic complementarity is a characteristic of all of the models mentioned above and persuasively argue that this is the critical feature which lies behind the finding of keynesian type results in this paper we argue that strategic complementarity is also important in understanding the dynamic response of economies to temporary shocks in particular we find that strategic complementarity is potentially an important factor in understanding why an economy may return only slowly to steady state behavior after a temporary shock that is given the presence of any of a variety of factors which would cause the economy not to instantaneously return to full employment after a temporary shock e g adjustment costs associated with changing the capital stock the speed with which the economy returns to steady state behavior is negatively related to the degree of strategic complementarity in the environment related analyses are those of haltiwanger and waldman 1989 bomfim and diebold 1992 and baxter and king 1990 the first two papers consider models wherein some agents are characterized by adaptive or regressive expectations while others am characterized by rational expectations among other findings these analyses demonstrate that the speed with which the economy returns to steady state behavior after a temporary shock is negatively related to the degree of strategic complementarity in the economy 2 we argue that the relationship between strategic complementarity and the dynamic response to temporary shocks is more general than is suggested by these papers in their analyses temporary shocks have long term effects because some of the agents make systematic mistakes when forming expectations here it is argued that given any of a variety of factors which would cause temporary shocks to have long term effects there is a negative relationship between adjustment speed and the degree of strategic complementarity baxter and king consider a world where because of productive externalities the economy exhibits increasing returns at the economy wide level using simulation techniques they show first that the presence of increasing returns serves to increase the output volatility exhibited by the economy in response to shocks and second that after a one time shock the return to steady state behavior is slower in a world characterized by increasing returns baxter and king do not discuss their results in terms of strategic complementarity however it is easy to show that one way of introducing strategic complementarity is to assume that the economy exhibits increasing returns at the economy wide level our paper suggests that what is central in baxter and king s study is not the introduction of increasing returns per se but rather that the introduction of increasing returns is one way of introducing strategic complementarity that is baxter and king s findings can be thought of as a manifestation of the central point of the current paper

monopolistic competition transaction costs and multiple equilibria abstract this paper analyzes the role of transactions costs in a macroeconomic model of monopolistic competition if there is sufficient increasing returns to scale in transaction technology the economy exhibits multiple equilibria even if the production technology is constant or decreasing returns to scale

polygyny women s rights and development many sub saharan african countries are extremely poor it has been argued that the marriage system in particular polygyny is one contributing factor to the lack of development in this region however enforcing monogamy has proved to be very difficult in this paper i argue that transferring the right of choosing a husband from fathers to daughters might be an alternative policy that could potentially be easier to enforce i use a calibrated general equilibrium model of polygyny to analyze such a policy i find that giving daughters more choices has similar economic effects as a ban on polygyny both policies decrease the return on wives for men and thereby raise the incentive to invest in alternative assets this increases the capital stock and hence gdp per capita quantitatively however i find that enforcing monogamy has much larger effects jel e0 o11 o55 j12 j13