income inequality capitalism and ethno linguistic fractionalization we examine the relationship between capitalism and income inequality for a large sample of countries using an adjusted economic freedom index as proxy for capitalism our results suggest that there is no robust relationship between economic freedom and gini coefficients based on gross income subsequently we analyze the relationship between income redistribution and ethno linguistic fractionalization we find that the impact of ethno linguistic fractionalization on income redistribution is conditional on the level of economic freedom countries that have a high degree of fractionalization redistribute income less while capitalist countries that have a low degree of fractionalization redistribute income more

public health spending old age productivity and economic growth chaotic cycles under perfect foresight abstract this paper analyses the dynamics of a double cobb douglas economy with overlapping generations and public health investments that affect the supply of efficient labour of the old aged it is shown that the positive steady state of the economy is unique moreover we provide necessary and sufficient conditions for the emergence of endogenous deterministic complex cycles when individuals are perfectly foresighted interestingly i the equilibrium dynamics shows rather complicated phenomena such as a multiplicity of bubblings depending on the size of the public health system and ii the higher the degree of thriftiness the likelier an economy is exposed to endogenous fluctuations because the need to save when young to support consumption when old is reduced

long term growth and short term economic instability when learning by doing is at the origin of growth the long run growth rate should be negatively related to the amplitude of the business cycle if human capital accumulation is increasing and concave in the cyclical component of production empirical evidence strongly supports this nding for industrialized countries and european regions using the standard control variables we nd that countries and regions that have a higher standard deviation of growth and of unemployment have lower growth rates the result does not come from an e ect of instability on investment the negative relation however does not hold for non industrialized countries for which learning by doing may not to be the main engine of growth 2000 elsevier science b v all rights reserved jel classixcation o40 e32

experimentation and job choice in this article we examine optimal job choices when jobs differ in the rate at which they reveal information about workers skills we then analyze how the optimal level of experimentation changes over a worker s career and characterize job transitions and wage growth over the life cycle using the dictionary of occupational titles merged with the national longitudinal survey of youth 1979 we then construct an index of how much information different occupations reveal about workers skills and document patterns of occupational choice and wage growth that are consistent with a trade off between information and wages

occupation induced status social norms and economic growth abstract we analyse a monetary growth model where entrepreneurs borrow funds to invest in projects that produce capital goods in addition to their varying pecuniary returns different projects also vary with respect to the status they confer to the entrepreneurs who operate them we show that i social status increases the growth rate but this effect is mitigated by a social norm that inversely links overall levels of employment in the high return project with the status conferred to it ii the combined effect of social status and inflation is a source of transitional dynamics in an environment where such dynamics would not emerge if considerations of occupational prestige were absent iii when the social norm affects social status the economy s dynamics may be manifested in the form of endogenous volatility iv the presence and characteristics of social status can generate a negative correlation between volatility and growth

labor market flows in the cross section and over time many theoretical models of labor market search imply a tight link between worker flows hires and separations and job gains and losses at the employer level we use rich establishment level data to assess several theoretical models and to study the relationship between worker flows and jobs flows hires quits and layoffs exhibit strong highly nonlinear relationships to employer growth rates in the cross section simple statistical models of these relationships greatly improve our ability to account for fluctuations in aggregate worker flows and enable us to construct synthetic measures of hires separations quits and layoffs back to 1990

status the distribution of wealth and growth we analyze a simple model of endogenous growth in which individuals care about both consumption and their rank in the distribution of wealth we show that the steady growth rate of the economy increases with both the strength of the status seeking motive and the initial equality of the wealth distribution contrary to the basic model of endogenous growth the equilibrium growth rate is not necessarily smaller than in the social optimum and we identify the circumstances under which the two coincide

money and growth an alternative approach this paper takes an alternative approach to the topic of money and growth by developing a model in which the effects of sustained capital accumulation on an evolving system of payments in addition to the conventional effects of sustained inflation on growth are examined while the effects of inflation on growth are small the effects of growth on the monetary system are substantial the results are consistent with ideas about money and growth contained in work that predates that of james tobin and miguel sidrauski as well as with evidence that money and asset demands vary systematically within economies as they develop copyright 1994 by american economic association

industry specific capital and the wage profile evidence from the national longitudinal survey of youth and the panel study of income dynamics using data from the national longitudinal survey of youth 1979 96 and the panel study of income dynamics 1981 91 i seek to determine whether there is any net positive return to tenure with the current employer once we control for industry specific capital including total experience in the industry as an additional explanatory variable i show that the return to seniority is markedly reduced using gls while it virtually disappears using iv gls at both the one digit and three digit levels therefore it seems that what matters most for the wage profile in terms of human capital is industry specificity not firm specificity

inflation volatile public spending and endogenously sustained growth i construct a model of an economy whose government finances volatile public spending via money creation the model jointly accounts for the emergence of some well known empirical observations specifically it predicts a negative correlation between output growth and policy volatility furthermore given that both the mean and the variance of the inflation rate are elevated by fluctuations in public spending the model provides a novel theoretical justification for the simultaneous negative correlation of long run growth with both average inflation and inflation variability the model also supports the view that policy volatility reduces social welfare

risk sharing and growth the role of precautionary savings in the education model while the risk amelioration literature suggests that risk sharing channels savings into risky but productive technologies and hence favours growth models focused on precautionary savings reverse this conclusion we solve by means of numerical techniques a model based on human capital accumulation through education and find that the increase in precautionary savings makes labour more productive in the goods sector and draws resources from education which is the growth leading activity hence we establish a result favourable to financial integration even in a model where precautionary savings play an important role

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

social status and economic performance a survey abstract this survey combines ideas and results from sociology and economics recognizing that economic decisions are often shaped by social concerns and influences based on the sociological literature we define social status and describe its measurement we then describe the role of social status in economic analysis of saving and consumption wages and economic growth we review recent work on status determination in equilibrium including evolutionary models we conclude with some remarks on the need for further interaction between sociology and economics

occupational and job mobility in the us we propose a new methodology to measure worker mobility across occupations and jobs in the us building on the limited longitudinal dimension of monthly cps data for the period 1979 2006 we find that about 3 5 of male workers employed in two consecutive months report different three digit occupations this rate is procyclical mildly rising in the 1980s and falling after 1995 we also revise upward current estimates of aggregate job to job mobility since 1994 from 2 7 to 3 2 of employment per month despite extreme similarity of average levels and time series behavior occupational and job mobility are only weakly correlated

wealth seeking reconsidered abstract if individuals are interested in their relative wealth position they engage in contests for wealth this leads to a steady state with overaccumulation in a simple growth model it is shown that if some individuals are engaged in wealth seeking activity but others are not the latter might benefit however wealth seeking is not welfare enhancing under usual assumptions concerning production technology the steady state equilibrium is characterized by a marginal productivity of capital that is below the steady state rate of time preference and by emergence of a class structure

a dynamic analysis of educational attainment occupational choices and job search this article examines career choices using a dynamic structural model that nests a job search model within a human capital model of occupational and educational choices wage growth occurs in the model because workers move between firms and occupations as they search for suitable job matches and because workers endogenously accumulate firm and occupation specific human capital simulations performed using the estimated model reveal that both self selection in occupational choices and mobility between firms account for a much larger share of total earnings and utility than the combined effects of firm and occupation specific human capital

social status education and growth this paper investigates the implications of social rewards on the allocation of talent in society and consequently on the process of economic growth we consider two sources of heterogeneity among workers nonwage income and innate ability a greater emphasis on status may induce the wrong individuals that is those with low ability and high wealth to acquire schooling causing workers with high ability and low wealth to leave the growth enhancing industries this crowding out effect taken alone discourages growth growth may be enhanced by a more egalitarian distribution of wealth which reduces the demand for status

indeterminacy and increasing returns abstract we investigate properties of the one sector growth model with increasing returns under two organizational structures capable of reconciling the existence of aggregate increasing returns with competitive behavior by firms the first involves input externalities the second involves monopolistic competition we show for parameters in close accord with recent literature on real business cycles that the model displays an indeterminate steady state that can be exploited to generate a model of business fluctuations driven by self fulfilling beliefs in our first class of models growth is generated by exogenous increases in factor productivity in the second class the marginal product of capital is large enough for endogenous growth journal of economic literature classification numbers e00 e3 o40

on relative wealth effects and the optimality of growth abstract we present a model of endogenous growth in which a desire for social status lead individuals to care about their relative wealth the growth rate of the economy is socially optimal if the status motive is sufficiently important but the presence of status seeking may also lead to excessive growth

learning your comparative advantages we introduce an equilibrium labor market model where workers gradually learn about their unobserved production abilities while engaged in a productive activity occupation workers observe their output and extract information that allows them to make inferences about their unobserved aptitudes because workers are learning about themselves their output informs them not only about their productivity in their current occupation but about their likely productivity in other occupations as well as workers acquire more information they self select into the occupations in which they expect to perform best and their wages increase returns to experience here capture improved job selection by workers as they sort through occupations and learn

money banking and capital formation we consider a monetary growth model in which banks arise to provide liquidity in addition there is a government that issues not only money but interest bearing bonds these bonds compete with capital in private portfolios when the government fixes a constant growth rate for the money stock we show that there can exist multiple nontrivial monetary steady states one of these steady states is a saddle while the other can be a sink moreover paths approaching a steady state can display damped endogenous fluctuations and development trap phenomena are common across different steady states low capital stocks are associated with high nominal interest rates the latter signal the comparative inefficiency of the financial system also increases in the steady state inflation rate can easily reduce the steady state capital stock journal of economic literatureclassification numbers e13 e44 e50 g20 o16

the extent and cyclicality of career changes evidence for the u k using quarterly data for the u k from 1993 through 2012 we document that the extent of worker reallocation across occupations or industries a career change in the parlance of this paper is high and procyclical this holds true after controlling for workers previous labour market status and for changes in the composition of who gets hired over the business cycle our evidence suggests that a large part of this reallocation reflect excess churning in the labour market we also find that the majority of career changes come with wage increases during the economic expansion wage increases were typically larger for those who change careers than for those who do not during the recession this is not true for career changers who were hired from unemployment our evidence suggests that understanding career changes over the business cycle is important for explaining labour market flows and the cyclicality of wage growth

equilibrium loan contracts and endogenous growth in the presence of asymmetric information abstract this paper considers an endogenous growth model in which an informational asymmetry exists between capital producing borrowers and lenders as to the borrower s ability to successfully operate an investment project in contrast to previous models of this genre the lender can induce self selection either by rationing a fraction of borrowers or by using a costly screening technology or by a mix of the two the equilibrium contract s form and the growth rate of output are mutually dependent and are jointly determined the effect of the lower cost of screening on the growth rate of output has been considered we show that a decline in the screening cost paradoxically may lower the growth rate of output only when a threshold level of sophistication is crossed will the benefit of an advanced financial sector become evident in a higher growth rate

inequality and risk taking behaviour this paper investigates social in uences on attitudes to risk and ofiers an evolutionary explanation of risk taking by young low ranked males becker murphy and werning 2005 found that individuals about to participate in a status tournament may take fair gambles even though they are risk averse in both wealth and status here their model is generalised by use of the insight of hopkins and kornienko 2010 that in a tournament or status competition one can consider equality in terms of the status or rewards available as well as in initial endowments while becker et al found that risk taking is increasing in the equality of initial endowments it is found here that it is increasing in the inequality of rewards in the tournament further it is shown that the poorest will be risk loving if the lowest level of status awarded is su ciently low thus the disadvantaged in society rationally engage in risky behavior when social rewards are su ciently unequal finally as greater inequality in terms of social status induces gambling it can cause greater inequality of wealth

what should i be when i grow up occupations and unemployment over the life cycle abstract why is unemployment higher for younger individuals we address this question in a frictional model of the labor market that features learning about occupational fit in order to learn the occupation in which they are most productive workers sample occupations over their careers because young workers are more likely to be in matches that represent a poor occupational fit they spend more time in transition between occupations through this mechanism our model can replicate the observed age differences in unemployment which as in the data are due to differences in job separation rates

money social status and capital accumulation in a cash in advance model this paper presents an infinite horizon model of optimal capital ac cumulation with the social status concern and the cash in advance constraint when the cash in advance constraint applies to both consumption and investment money is not supemeutral if only consumption is subject to the cash in advance constraint inflation increases capital accumulation

the u shapes of occupational mobility using administrative panel data on the entire danish population we document a new set of facts characterizing occupational mobility for most occupations mobility is u shaped and directional not only low but also high wage earners within an occupation have a particularly large probability of leaving their occupation and the low high earners tend to switch to new occupations with lower higher average wages exceptions to this pattern of two sided selection are occupations with steeply rising declining productivity where mainly the lower higher paid workers within this occupation tend to leave the facts conflict with several existing theories that are used to account for endogeneity in occupational choice but it is shown analytically that the patterns are explained consistently within a theory of vertical sorting under absolute advantage that includes learning about workers abilities

learning and life cycle patterns of occupational transitions individuals experience frequent occupational switches during their lifetime and initial worker characteristics are predictive of future patterns of occupational switching we construct a quantitative model of occupational choices with worker learning and occupation specific productivity shocks to match life cycle patterns of occupational transitions and quantify the value of occupational mobility and learning for the average 18 year old worker the value of being able to switch occupations is about 67 months of the maximum wage he or she could earn in the model and the value of a worker learning his or her type is about 32 months of this maximum wage

on the determinants of political polarization in this article we aim to identify the main determinants of political polarization using bayesian model averaging to overcome the problem of model uncertainty we find that the level of trust within a country and the degree of income inequality are the most robust determinants of political polarization

the equilibrium distribution of income and the market for status this paper explores the implications for risk taking behavior and the equilibrium distribution of income of assuming that the desire for status positions is a powerful motive and that it raises the marginal utility of consumption in contrast to previous analyses we consider the case in which status positions are sold in a hedonic market we show that such a complete hedonic market in status positions can be perfectly replicated by a simpler arrangement with a status good and a social norm that assigns higher status to those that consume more of this good the main result is that for a wide range of initial conditions the equilibrium distribution over income status and consumption is the same that this allocation requires inequality of income and consumption and that this allocation coincides with the optimum of a utilitarian planner

human capital specificity evidence from the dictionary of occupational titles and displaced worker surveys 1984 2000 measures of four basic skills constructed from the dictionary of occupational titles are used to examine the source of human capital specificity the measures are used to characterize the skill portfolio of each job and to construct distance measures between jobs wage losses in the displaced worker surveys are shown to be more closely associated with switching skill portfolios than switching industry or occupation code per se these switches represent large decreases in the skill portfolio in the postdisplacement job the recent evidence for industry specific capital is reexamined the results suggest a difference between fluid and crystallized skills

some consequences of credit rationing in an endogenous growth model an endogenous growth model is developed where all investment is financed via credit extension there is also an adverse selection problem in loan markets so that in equilibrium credit rationing arises endogenously the result is that equilibrium levels of credit rationing and real growth rates are jointly determined in this context several changes in the environment can have unusual consequences for instance improvements in the technology for producing capital can reduce growth because of their adverse impacts on credit rationing for similar reasons various government investment subsidies can be growth reducing this phenomenon is often observed empirically

occupational mobility and wage inequality in this article we argue that wage inequality and occupational mobility are intimately related we are motivated by our empirical findings that human capital is occupation specific and that the fraction of workers switching occupations in the u s was as high as 16 a year in the early 1970 s and had increased to 21 by the mid 1990 s we develop a general equilibrium model with occupation specific human capital and heterogeneous experience levels within occupations we find that the model calibrated to match the level of occupational mobility in the 1970 s accounts quite well for the level of within group wage inequality in that period next we find that the model calibrated to match the increase in occupational mobility accounts for over 90 of the increase in wage inequality between the 1970 s and the 1990 s the theory is also quantitatively consistent with the level and increase in the short term variability of earnings copyright wiley blackwell

keeping one step ahead of the joneses status the distribution of wealth and long run growth assuming that the utility of each agent depends on its relative wealth position in the society this chapter constructs an endogenous growth model it is shown that even if the subjective discount rates differ across agents there exists a unique balanced growth equilibrium in which each agent owns a positive share of the world wealth it is also shown that if the agents are identical then an increase in savings incentives always raises the long run growth rate but if they are heterogeneous then an increase in savings incentives may lower the long run growth rate

rising occupational and industry mobility in the united states 1968 97 we document and analyze the high level and the substantial increase in worker mobility in the united states over the 1968 97 period at various levels of occupational and industry aggregation this is important in light of the recent findings that human capital of workers is largely occupation or industry specific to control for measurement error in occupation and industry coding we develop a method that utilizes the psid retrospective occupation industry supplemental data files we emphasize the importance of our findings for understanding a number of issues such as the changes in wage inequality aggregate productivity job stability and life cycle earnings profiles

occupational specificity of human capital we find that returns to occupational tenure are substantial everything else being constant 5 years of occupational tenure are associated with an increase in wages of 12 20 moreover when occupational experience is taken into account tenure with an industry or employer has relatively little importance in accounting for the wage one receives this finding is consistent with human capital being occupation specific

habit persistence in overlapping generations economies under pure exchange abstract this paper analyzes the implications of habit persistence preferences for savings and equilibrium dynamics in the context of an overlapping generations model under pure exchange we show that habit persistence can convert an economy which otherwise has no role for government currency into an economy where there does exist a role for such currency further the increased saving induced by habit persistence implies that governments are able to float higher levels of deficits in such economies relative to economies without habit persistence the paper also shows that relative to standard preferences habit persistence preferences cause the savings function to become decreasing in the rate of interest at lower values for relative risk aversion this is of particular interest since the paper demonstrates that this result is closely related to the relative success of models with habit persistence in explaining the equity premium puzzle journal of economic literatureclassification numbers e21 e32

the spirit of capitalism and stock market prices in existing theory wealth is no more valuable than its implied consumption rewards in reality investors acquire wealth not just for its implied consumption but for the resulting social status max m weber 1958 refers to this desire for wealth as the spirit of capitalism the authors examine both analytically and empirically implications of weber s hypothesis for consumption savings and stock prices when investors care about relative social status propensity to consume and risk taking behavior will depend on social standards and stock prices will be volatile the spirit of capitalism seems to be a driving force behind stock market volatility and economic growth copyright 1996 by american economic association

volatility and development why is gdp growth so much more volatile in poor countries than in rich ones we identify four possible reasons i poor countries specialize in more volatile sectors ii poor countries specialize in fewer sectors iii poor countries experience more frequent and more severe aggregate shocks e g from macroeconomic policy and iv poor countries macroeconomic fluctuations are more highly correlated with the shocks of the sectors they specialize in we show how to decompose volatility into these four sources quantify their contribution to aggregate volatility and study how they relate to the stage of development we document the following regularities first as countries develop their productive structure moves from more volatile to less volatile sectors second the level of specialization declines with development at early stages and slowly increases at later stages of development third the volatility of country specific macroeconomic shocks falls with development fourth the covariance between sector specific and country specific shocks does not vary systematically with the level of development we argue that many theories linking volatility and development are not consistent with these findings and suggest new directions for future theoretical work

relative consumption relative wealth and growth abstract in a growth model where individuals care about their social status measured both by consumption and wealth comparisons we show that status comparison in wealth heightens economic growth while status comparison in consumption may affect negatively economic growth

job matching and occupational choice this paper presents a model of job matching the generalizes the existing literature by allowing for different jobs types or occupations such differences affect the value of job specific experience inducing a career profile where certain types are sampled before others more specifically the analysis shows that it is optimal for the young and inexperienced to gravitate toward jobs exhibiting a certain kind of risk then after deriving the equilibrium job turnover rate for an economy in which people do not switch occupations panel data are used to estimate its underlying parameters the hypothesis that people do not switch occupations is rejected against the alternative that they do thus providing empirical support for the theoretical extension undertaken here

cross country evidence on the link between volatility and growth this paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations in a sample of ninety two countries as well as a sample of oecd countries the authors find that countries with higher volatility have lower growth the addition of standard control variables strengthens the negative relationship the authors also find that government spending induced volatility is negatively associated with growth even after controlling for both time and country fixed effects copyright 1995 by american economic association