vacancies unemployment and the phillips curve abstract the canonical new keynesian phillips curve has become a standard component of models designed for monetary policy analysis however in the basic new keynesian model there is no unemployment all variation in labor input occurs along the intensive hours margin and the driving variable for inflation depends on workers marginal rates of substitution between leisure and consumption in this paper we incorporate a theory of unemployment into the new keynesian theory of inflation and empirically test its implications for inflation dynamics we show how a traditional phillips curve linking inflation and unemployment can be derived and how the elasticity of inflation with respect to unemployment depends on structural characteristics of the labor market such as the matching technology that pairs vacancies with unemployed workers we estimate on us data the phillips curve generated by the model while we can reject the baseline new keynesian phillips curve in favor of the search frictions specification we show it is still too stylized to fully describe the dynamics of firms marginal costs

new keynesian perspectives on labor market dynamics abstract we find that demand shocks play an important role for business cycle fluctuations in unemployment and job vacancies the reason is that those shocks give a strong incentive to demand constrained firms to adjust production and thereby labor input furthermore we argue that whether real wage rigidity a la hall 2005 employment fluctuations with equilibrium wage stickiness american economic review 95 50 65 helps explain the remaining part of the unemployment volatility puzzle depends critically on assumptions regarding the form of the wage bargain between firms and workers real wage rigidity tends to generate volatility in employment only in the case in which hours are chosen efficiently if on the other hand the real wage is allowed to affect firms s choices of hours directly the feature of real wage rigidity loses its ability to increase employment volatility

the efficiency of local government the role of privatization and public sector unions abstract local governments spend roughly 1 6 trillion per year to provide a variety of public services ranging from police and fire protection to public schools and public transit however we know little about public sector s productivity in delivering key services public bus service represents a standardized output for benchmarking the cost of local government service provision among the top twenty largest cities there exists significant dispersion in the operating cost per bus mile with the highest being more than three times as high as the lowest using a regression discontinuity design we estimate the cost savings from privatization and explore the political economy of why privatization rates are lower in high cost unionized areas our analysis suggests that fully privatizing all bus transit would generate cost savings of approximately 5 7 billion or 30 of total u s bus transit operating expenses the corresponding increased use of public transit from this cost reduction would lead to a gain in social welfare of 524 million at minimum and at least 26 000 additional transit jobs

growth deforestation and the efficiency of the redd mechanism this paper assesses the long term impacts of an international transfer called the reduced emissions from deforestation and degradation redd mechanism which aims at preserving tropical forests of the recipient economy this two sector economy faces a dilemma between economic growth and deforestation the rural sector can substitute reproducible capital for agricultural land whereas the manufacturing sector only requires capital the model shows that the redd mechanism has a non monotonic effect on steady state welfares for low transfer schemes the agricultural output increases with the transfer even though less land is under cultivation for high transfer schemes the increase in the transfer may not offset the decrease in the agricultural output the open loop symmetric nash equilibrium in a dynamic deforestation game predicts that redistributing the transfer among a finite number of producers is less efficient in reducing deforestation than in the social optimum

inventories rational expectations and the business cycle abstract the simplest macroeconomic models in which markets clear instantaneously and expectations are rational preclude the existence of business cycles that is of serially correlated deviations of output from trend this paper studies one of several mechanisms that can be used to make these so called new classical models produce business cycles the mechanism is the gradual adjustment of inventory stocks two macroeconomic models of inventory holdings are formulated both imply first that current output should be a decreasing function of the stock of inventories and second that inventories once perturbed from equilibrium levels should adjust only gradually these two features are then embedded into an otherwise standard macroeconomic model in which markets clear instantaneously and expectations are rational two principal conclusions are reached first disturbances such as unanticipated changes in money will set in motion serially correlated deviations of output from trend second if desired inventories are sensitive to the real interest rate then even fully anticipated changes in money can affect real variables

global warming irreversibility and learning a number of economists have argued that the literature on the irreversibility effect implies that current abatement of greenhouse gas emissions should be greater when there is the possibility of obtaining better information in the future about the potential damages from global warming than when there is no possibility of obtaining better information in this paper we show that even the simplest model of global warming does not satisfy either of epstein s 1980 sufficient conditions so it is not possible to use epstein s analysis to tell whether the irreversibility effect applies to models of global warming we derive an alternative sufficient condition for the irreversibility effect to hold

uncertainty and markets for renewable resources abstract the market allocation of renewable resources is examined when growth rates are affected by random disturbances given free access to a renewable resource environmental disturbances are shown to affect the biological survival of the resource the optimal solution is then examined and it is shown to be achieved by a competitive allocation when property rights are clearly defined given rational expectations or a complete set of contingent futures markets the stochastic dynamics are shown in each case to differ considerably from the deterministic model

explaining the appearance and success of open space referenda many communities in the united states have begun enacting policies to preserve open space often through local voter referenda new jersey sponsors such municipal action through the green acres program by providing funding and low interest loans to towns that choose to increase property taxes and spend the money raised on open space preservation for the purposes of conservation and or recreation this paper endeavors to understand which factors contribute to the appearance and success of these measures although previous literature has examined this issue this is the first study to account for spatial dependence spatial autocorrelation and to explore dynamic issues through survival analysis the traditional two stage model from the literature is extended by incorporating a bayesian spatial probit for the first stage and a maximum likelihood spatial error model in the second stage a cox proportional hazard model is used to examine the timing of referenda appearance spatial dependence is found in the second stage of the analysis indicating that future studies should account for its influence there is no strong evidence for spatial dependence or correlation in the first stage the survival model is found to be a useful complement to the traditional probit analysis of the first stage

why do households without children support local public schools linking house price capitalization to school spending while residents receive similar benefits from many local government programs only about one third of all households have children in public schools we argue that capitalization of school spending into house prices can encourage even childless residents to support spending on schools we identify a proxy for the extent of capitalization the supply of land available for new development and show that towns in massachusetts with little undeveloped land have larger changes in house prices in response to a plausibly exogenous spending shock towns with little available land also spend more on schools we extend these results using data from school districts in 46 states showing that per pupil spending is positively related to the percentage of developed land this positive correlation persists only in districts where the median resident is a homeowner and is stronger in districts with more elderly residents who do not use school services and have a shorter expected duration in their home our findings support models in which capitalization encourages the provision of durable local public goods and provides an additional reason why some elderly support local school spending

sensitivity of job destruction to vintage and tenure effects matching models with endogenous job destruction typically deliver excessively volatile job destruction and moderate volatility of vacancies in our model vintage and tenure eects promote the creation of new matches that are temporarily more productive while reducing the survival of temporarily less productive matches this cleansing eect pro duces a counter cyclical in ow into unemployment removes the strong response of job destruction to productivity shocks and generates a downward sloping beveridge curve as in the data the model also generates more volatility in vacancies the job nding rate and labour market tightness

standing tiebout on his head tax capitalization and the monopoly power of local governments much of the public finance literature argues that localgovernments behave competitively due to residents ease of exitand entry the model presented here challenges this widespreadconclusion though it is costless to relocate to anotherlocality the presence of tax capitalization makes it impossiblefor land owners to avoid monopolistic pricing of public servicesby moving land owners can only choose between paying the taxdirectly or paying it indirectly in the form of a lower sale valuefor their housing if they exit in consequence the only realcheck on local governments comes through imperfectly functioningelectoral channels

the cyclicality of separation and job finding rates this paper uses cps gross flow data to analyze the business cycle dynamics of separation and job finding rates and to quantify their contributions to overall unemployment variability cyclical changes in the separation rate are negatively correlated with changes in productivity and move contemporaneously with them while the job finding rate is positively correlated with and tends to lag productivity contemporaneous fluctuations in the separation rate explain between 40 and 50 percent of fluctuations in unemployment depending on how the data are detrended this figure becomes larger when dynamic interactions between the separation and job finding rates are considered

strategic information manipulation in duopolies abstract this paper studies a duopoly market in which firms can draw inferences concerning uncertain market demand from observations of their outputs and market price firms may adjust their outputs away from myopically optimal levels to affect the informativeness of the market price because firms quantities are observed firms can manipulate the extent to which belief revision occurs rather than the direction in which beliefs are revised as in signal jamming models we develop conditions and present examples under which the value of information is positive and negative and under which firms will increase or decrease quantity to manipulate information journal of economic literature classification numbers d80 l13

a direct test of the homevoter hypothesis abstract we propose a methodology that facilitates a direct test of the homevoter hypothesis which posits that homeowners vote in favor of public projects they perceive increase residential property values and against those that do not first we estimate how pre referendum events that signal a higher probability that the public project will be undertaken impact local residential property values before the referendum is held these pre referendum impacts are considered noisy signals to homeowners about the market s assessment of the net marginal benefits of the project second we aggregate these market signals to the precinct level and relate them to precinct level voting results concerning the proposed project we apply this two step approach to the 2004 referendum in arlington texas for a publicly subsidized stadium for the nfl dallas cowboys the analysis supports the homevoter hypothesis and establishes a possible methodology for future evaluations in this small but growing empirical literature

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

do capitalization effects for public goods reveal the public s willingness to pay this article develops a welfare theoretic framework for interpreting evidence on the impacts of public programs on housing markets we extend rosen s hedonic model to explain how housing prices capitalize exogenous shocks to public goods and externalities the model predicts that trading between heterogeneous buyers and sellers will drive a wedge between these capitalization effects and welfare changes we test this hypothesis in the context of changes in measures of school quality in five metropolitan areas results from boundary discontinuity designs suggest that capitalization effects understate parents willingness to pay for public school improvements by as much as 75

toward a theory of vacancies we attempt to further characterize the search strategies of the employer in the article we discuss how characteristics of the employer or conditions that the employer faces affect the optimal search strategies and the probability of filling a vacancy in each period semiparametric and parametric methods are used to estimate hazard rates of filling vacancies the results suggest that for the given sample of vacancies the general form of the hazard function is nonmonotonic additionally the results suggest that those employers who have advance notice of the vacancy may search longer than those employers who do not

job matching and propagation in the u s labor market the vacancy unemployment ratio and employment react sluggishly to productivity shocks we show that the job matching model in its standard form cannot reproduce these patterns due to excessively rapid vacancy responses extending the model to incorporate sunk costs for vacancy creation yields highly realistic dynamics creation costs induce entrant firms to smooth the adjustment of new openings following a shock leading the stock of vacancies to react sluggishly

private information wage bargaining and employment fluctuations shimer 2005 pointed out that although we have a satisfactory theory of why some workers are unemployed at any given time we don t know why the number of unemployed workers varies so much over time the basic mortensen pissarides 1994 model does not generate nearly enough volatility in unemployment for plausible parameter values this paper extends the mortensen pissarides model to allow for informational rents productivity is subject to publicly observed aggregate shocks and to idiosyncratic shocks that are seen only by the employer it is shown that there is a unique equilibrium provided that the idiosyncratic shocks are not too large the main result is that small fluctuations in productivity that are privately observed by employers can give rise to a kind of wage stickiness in equilibrium and the informational rents associated with this stickiness are sufficient to generate relatively large unemployment fluctuations

the problem of the commons still unsettled after 100 years the problem of the commons is more important to our lives and thus more central to economics than a century ago when katharine coman led off the first issue of the american economic review as the us and other economies have grown the carrying capacity of the planet in regard to natural resources and environmental quality has become a greater concern particularly for commonproperty and open access resources the focus of this article is on some important unsettled problems of the commons within the realm of natural resources there are special challenges associated with renewable resources which are frequently characterized by open access an important example is the degradation of openaccess fisheries critical commons problems are also associated with environmental quality a key contribution of economics has been the development of market based approaches to environmental protection these instruments are key to addressing the ultimate commons problem of the twenty first century global climate change jel q15 q21 q22 q25 q54

why do different wage series tell different stories the average wage is a key aspect of economic well being in a society several alternative wage measures based upon official government statistics are available to analysts although these series always have differed in their relative levels since the mid 1970 s their trends have diverged markedly this paper which summarizes and updates our earlier work abraham et al 1998 has several goals to describe several commonly used hourly wage series to characterize differences in their trends and to evaluate alternative explanations for these differences

a dynamic game of emissions pollution with uncertainty and learning we introduce learning in a dynamic game of international pollution with ecological uncertainty we characterize and compare the feedback non cooperative emissions strategies of players when the players do not know the distribution of ecological uncertainty but they gain information learn about it we then compare our learning model with the benchmark model of full information where players know the distribution of ecological uncertainty we find that uncertainty due to anticipative learning induces a decrease in total emissions but not necessarily in individual emissions further the effect of structural uncertainty on total and individual emissions depends on the beliefs distribution and bias moreover we obtain that if a player s beliefs change toward more optimistic views or if she feels that the situation is less risky then she increases her emissions while others react to this change and decrease their emissions

flexibility learning and irreversibility in environmental decisions a bayesian approach the bayes decision is characterized and studied for a two period decision problem involving a proposed resource development project it is assumed that development is irreversible and that expectations about benefits and costs during the second period vary with experiences resulting from the first period action the amount and types of learning achieved depend upon the particular action taken during the first period flexible sequential decision procedures are compared with fixed once and for all decisions it is shown that under this specification optimal development decisions are not necessarily more conservative when a sequential procedure is used the possibility of reneging on a fixed decision is formally specified and studied

do local government fiscal spillovers exist evidence from counties municipalities and school districts abstract numerous theories posit that the fiscal decisions of one jurisdiction influence the fiscal decisions of its neighbors the main contribution of this paper is to address empirical difficulties in testing for spillovers using a regression discontinuity design on a newly collected dataset i utilize close elections from this large dataset of local referenda in ohio to isolate the effect of exogenous increases in taxation and spending of one jurisdiction on neighbors fiscal decisions for all jurisdictional types and referenda revenue sources bonds income property and sales tax there is no evidence of spillovers and relatively small effects can be ruled out

evaluating the performance of the search and matching model abstract does the search and matching model fit aggregate u s labor market data while the model has become an important tool of macroeconomic analysis recent literature pointed to some significant failures in accounting for the data this paper aims to answer two questions i does the model fit the data and if so on what dimensions ii does the data fit the model i e what are the data which are relevant to be explained by the model the analysis shows that the model fits certain specifications of the data on many dimensions though not on all this includes capturing the high persistence and high volatility of most of the key variables the negative co variation of unemployment and vacancies and the behavior of the worker job finding rate a key role in this fit is played by the convexity of hiring costs and the stochastic properties of the separation rate the latter is a major component of the rate discounting the future value of the job worker match the paper offers a workable empirically grounded version of the model for the analysis of aggregate u s labor market dynamics

a theory of wages and labor demand with intra firm bargaining and matching frictions this article provides a model of labor market equilibrium with search and within firm strategic bargaining we yield explicit closed form solutions with heterogeneous labor inputs and capital the solution exhibits overemployment we show that higher relative bargaining power for some groups of workers may lead to overemployment relative to other groups with such other groups being underemployed instead if they have a lower relative bargaining power similarly the hold up problem between capitalists and employees does not necessarily lead to underinvestment in physical capital beyond the neo classical analysis firms are the field of several strategic interactions between capital owners and labor between marginal employees and incumbents and more generally between different groups with various bargaining positions within the firm it is usually considered that the bargaining power of workers entails an employment level that is lower than in a competitive labor market and any increase in the bargaining power of workers raises unemployment these results are true for a wide class of models and notably in the now standard framework to analyze unemployment namely search and matching models of pissarides 2000 however stole and zwiebel 1996a 1996b show that the above results are totally changed in the intra firm bargaining model where employees engage in individual wage negotiation with the firm in fact under the assumption that contract incompleteness does not enable either party to commit to future wages and employment decisions they show that intra firm bargaining yields no rent for employees and gives rise to overemployment compared to a competitive labor market the basic idea of stole and zwiebel is that a firm with a diminishing marginal productivity of labor can decrease the bargained wage which increases in the marginal productivity of labor by raising employment in stole and zwiebel s setting firms overemploy strategically up to the point where workers get their reservation wage

search nash bargaining and rule of thumb consumers abstract this paper analyses the effects of introducing two typical keynesian features namely rule of thumb rot consumers and consumption habits into a standard labour market search model rot consumers use the margin that hours and wage negotiation provides them to improve their lifetime utility by narrowing the gap in utility with respect to ricardian consumers this margin for intertemporal optimisation has not been studied yet because this class of restricted agents has been mainly used in models with no equilibrium unemployment our approach allows for a deeper study of the effects of shocks on vacancies unemployment hours wages and how they interact as habits increase rot consumers find it optimal after a positive technology shock to negotiate lower hours and higher wages and this mechanism reduces the simulated correlation between the real wage or productivity and total hours to values closer to those obtained empirically thus with the interaction of rot consumers and consumption habits the labour market search model improves significantly in reproducing some of the stylised facts characterising the us labour market

a test for allocative efficiency in the local public sector abstract this paper develops a test for pareto efficiency in the local public sectorusing the analytical result that aggregate property value is maximized at the public output level which satisfies the samuelson condition for efficiency by using cross section data it is possible to deduce whether a representative community provides its public goods in a property value maximizing and hence efficient fashion the empirical results show no systematic tendency to either under or over provide public goods in a sample of massachusetts communities

who benefits from environmental regulation evidence from the clean air act amendments abstract using geographically disaggregated data and exploiting an instrumental variable strategy we show that contrary to conventional wisdom the benefits of the 1990 clean air act amendments caaa were progressive the caaa created incentives for local regulators to target the initially dirtiest areas for cleanup creating heterogeneity in the incidence of air quality improvements that favored lower income households based on house price appreciation households in the lowest quintile of the income distribution received annual benefits from the program equal to 0 3 of their income on average during the 1990s over twice as much as those in the highest quintile

the effect of implicit contracts on the movement of wages over the business cycle evidence from micro data in this paper we address the question of whether wages are affected by labor market conditions in a manner more consistent with a contract approach than with a standard spot market model from a simple implicit contract model we derive implications about the links between wages and past labor market conditions using individual data from the current population survey and the panel study of income dynamics we find that an implicit contract model with costless mobility describes these links better than either a simple spot market model or an implicit contract model with costly mobility

the value of school facility investments evidence from a dynamic regression discontinuity design author s cellini stephanie riegg ferreira fernando rothstein jesse abstract despite extensive public infrastructure spending surprisingly little is known about its economic return in this paper we estimate the value of school facility investments using housing markets standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow margins we extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices student achievement and district composition our results indicate that california school districts underinvest in school facilities passing a referendum causes immediate sizable increases in home prices implying a willingness to pay on the part of marginal homebuyers of 1 50 or more for each 1 of capital spending these effects do not appear to be driven by changes in the income or racial composition of homeowners and the impact on test scores appears to explain only a small portion of the total housing price effect c 2010 by the president and fellows of harvard college and the massachusetts institute of technology

strategic exploitation with learning and heterogeneous beliefs abstract we study the effect of learning with heterogeneous beliefs on the exploitation of a renewable common pool resource to that end we extend the great fish war model of levhari and mirman 1980 to a learning environment in which several agents interact strategically and learn about the distribution of the stochastic evolution of the resource we find that the effect of anticipation of learning with heterogeneous beliefs is twofold first the anticipation of learning makes future payoffs more uncertain which induces the agents to decrease present exploitation due to the precautionary motive second under heterogeneity of beliefs there is a differential informational externality that induces the agents to increase or decrease present exploitation we also perform a comparative analysis on the cournot nash equilibrium with learning by studying the effect of optimism and riskiness on resource exploitation

uncertainty learning and heterogeneity in international environmental agreements this paper concerns the formation of international environmental agreements under uncertainty about environmental damage with different models of learning complete learning partial learning or no learning the results of the existing literature are generally pessimistic the possibility of either complete or partial learning generally reduces the level of global welfare that can be achieved from forming an iea relative to no learning that literature regards uncertainty as a parameter common to all countries so that countries are identical ex ante as well as ex post in this paper we extend the literature to the case where there is no correlation between damage costs across countries each country is uncertain about a particular parameter in our case the benefit cost ratio drawn from a common distribution but ex post each country s realized parameter value is independently drawn consequently while countries remain identical ex ante they may be heterogeneous ex post we show that this change reinforces the negative conclusions about the effects of partial learning on international environmental agreements but under certain conditions moderates the negative conclusions about the effects of complete learning

unemployment insurance takeup rates and the after tax value of benefits the recent decline in the unemployment insurance ui takeup rate has puzzled researchers using administrative data with accurate information on the potential level and duration of benefits we examine whether a separating employee receives ui we find a strong positive effect of the benefit level on takeup and smaller effects of the potential duration and the tax treatment of benefits simulations indicate that the recent inclusion of ui in the income tax base can account for most of the previously unexplained decline in ui receipt

property value capitalization and municipal open space referenda this paper first develops a theory of demand for land conservation in the presence of price effects due to both amenity creation and housing supply restriction three hypotheses designed to distinguish demand for amenities from homeowner rent seeking are based upon 1 renters 2 the quality of another locally provided good schools and 3 spatial autocorrelation of funding across municipalities econometric results suggest an observable degree of demand for open space measures is nonenvironmental in motivation efficiency and policy implications are discussed along with a recommendation for benefit cost analysis capable of separating nonrival amenities from other interests to certify open space measures jel h41 q24

institutions and performance in european labour markets taking a fresh look at evidence this paper presents a selective survey of the recent literature on labour market institutions and offers new empirical eu based evidence on the impact of labour market reforms on employment and labour market adjustment although the literature traditionally treats labour market institutions as exogenous attention shifted recently towards understanding the underlying causes of specific institutional arrangements as a consequence the literature highlights the great importance of an efficient policy design exploiting these interactions wisely and identifies general principles for achieving an efficient policy design at both macro and micro levels although empirical evidence does not show a major change in terms of intensity of labour market reform after the setting of the economic and monetary union and the creation of the euro the reforms aiming at strengthening the labour market attachment of vulnerable groups tend to have been successful both in raising their employment and increasing labour market adjustment

a traditional interpretation of macroeconomic fluctuations under the traditional interpretation of macroeconomic fluctuations aggregate demand shocks move output and prices in the same direction while aggregate supply shocks move output and prices in opposite directions this paper examines the joint behavior of u s output unemployment prices wages and nominal money and asks whether it is consistent with this interpretation the answer is a qualified yes

search in the product market and the real business cycle empirical evidence suggests that most firms operate in imperfectly competitivemarkets we develop a search matching model between wholesalers and retailers firms face search costs and form long term relationships price bargain results in both wholesaler and retailer markups depending on firms relative bargaining power we simulate the model to explore the role of product market search frictions in business cycles we show that the way search costs are modelled is crucial to provide a realistic picture of firms business environment and improve the cyclical properties of an otherwise standard real business cycle model

strategic exploitation of a common resource under environmental risk abstract we study the effect of environmental risk on the extraction of a common resource using a dynamic and non cooperative game in which an environmental event impacts the renewability and the quality of the resource we show that the anticipation of such an event has an ambiguous effect on extraction and the tragedy of the commons a risk of a reduction in the renewability induces the agents to extract less today while a risk of a deterioration in the quality has the opposite effect moreover when environmental risk induces conservation the tragedy of the commons is worsened

an embarrassment of riches confronting omitted variable bias and multiscale capitalization in hedonic price models abstract many researchers have addressed concerns of omitted variable bias in hedonic price models through the use of spatial fixed effects we argue that this approach does not consider the biases introduced by effects that overlap the zone of capitalization for nonmarket goods we show this bias can dominate the usual omitted variable bias using data on developer provided open space we control for multiscale capitalization and omitted variables simultaneously by extending the hausman taylor estimator where the panel component of the estimator is defined over repeated transactions within neighborhoods rather than the traditional definition following a unique cross sectional unit through time

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances

theory ahead of language in the economics of unemployment this paper discusses from the perspective of modern theories of unemployment several unemployment concepts that have been used over the years it argues that many of these concepts are of limited value and are dominated by a few simple concepts that are basic in the analysis of stochastic general equilibrium models

employment efficiency and sticky wages evidence from flows in the labor market i consider three views of the labor market in the first wages are flexible and employment follows the principle of bilateral efficiency workers never lose their jobs because of sticky wages in the second wages are sticky and inefficient layoffs do occur in the third wages are also sticky but employment governance is efficient i show that the behavior of flows in the labor market strongly favors the third view in the modern u s economy recessions do not begin with a burst of layoffs unemployment rises because jobs are hard to find not because an unusual number of people are thrown into unemployment

residential land use regulation and the us housing price cycle between 2000 and 2009 abstract in a sample covering more than 300 cities in the us from january 2000 to july 2009 we find that more restrictive residential land use regulations and geographic land constraints are linked to larger booms and busts in housing prices the natural and man made constraints also amplify price responses to the subprime mortgage credit expansion during the decade leading to greater price increases in the boom and subsequently bigger losses contrary to prior literature our findings indicate a significant link between supply inelasticity and price declines during the bust whereas glaeser et al 2008 found little evidence of such a relationship from an earlier downturn from 1989 to 1996

contracts job experience and cyclical labor market adjustments longitudinal estimates of the variability of individual wages hours and weeks worked over the course of changing demand states are provided for all workers generally and for workers of varied levels of job experience emphasis is placed on that part of job experience represented as years on current job a commonly used proxy for the magnitude of firm specific skills interpretation of resulting estimates in the context of the labor market contracting literature is attempted generally significant procyclical patterns are found for real weekly wages weekly hours and weeks worked the extent of weekly wage variability is much greater than is generally suggested in the literature furthermore workers with greater tenure exhibit greater cyclical wage and hours variability and less weeks variability finally empirical distinctions are drawn separately for white collar and blue collar as well as union and nonunion workers

on the job search and cyclical unemployment crowding out vs vacancy effects incorporating on the job search otjs into a real business cycle model has been shown to increase the cyclical volatility of unemployment using a particularly simple model of otjs we show that the increased search of employed workers during expansions induces firms to open more vacancies but also crowds out unemployed workers in the job search resulting in an ambiguous overall effect on unemployment volatility we show analytically and numerically that the difference between the employer s share of the match surplus with an employed versus an unemployed job seeker determines the degree to which otjs increases unemployment volatility we use this result to re consider some related papers of otjs and explain the amplification of volatility they obtain finally we show that a plausible calibration of the otjs model allows us to reproduce most significant features of the us labor data

optimal monetary policy in a new keynesian model with job search abstract this paper studies the implications for optimal monetary policy of introducing job search into the new keynesian framework using the linear quadratic approach described by benigno and woodford 2008 we derive a utility based loss function that indicates that the goals of policymakers can be represented by the stabilization of inflation output employment and labor market tightness we characterize the policy that is optimal from a timeless perspective complete inflation stabilization is optimal if the distortions caused by monopolistic competition and search externalities are eliminated in cases where search externalities prevail either in or out of the steady state complete inflation stabilization is no longer optimal and the optimal responses of inflation to aggregate shocks may depend on labor market fundamentals

u s labor market dynamics revisited the picture of u s labor market dynamics is opaque empirical studies have yielded contradictory findings and debates have emerged regarding their implications this paper aims at clarifying the picture which is important for the understanding of the operation of the labor market for the study of business cycles for the explanation of wage behavior and for the formulation of policy the paper determines what facts can be established what are their implications and what remains to be further investigated the main contributions made here are i listing of data facts that can be agreed upon these indicate that there is considerable cyclicality and volatility of both accessions to employment and separations from it hence both are important for the understanding of the business cycle ii presenting the business cycle facts of key series iii pointing to specific gaps in the data picture disparities in the measurement of the sizeable flows between employment and the pool of workers out of the labor force disagreements about the relative volatility of job finding and separation rates across data sets and the fact that the fit of the gross flows data with net employment growth data differs across studies and is not high the definite characterization of labor market dynamics depends upon the closing of these data gaps

why are wages cyclical in the 1970 s this article investigates cyclicality in real wages between 1969 and 1982 using panel study of income dynamics data there is little evidence that movements in and out of the labor market induced aggregate wage cyclicality during these years however cyclicality in the movement of workers between heterogeneous labor market sectors affected aggregate wage cyclicality while sector location is important sector selectivity is not correlated with wages yet even within sectors cyclicality is present in real wages over this time period and is the result of cyclicality in overall wage levels as well as in the coefficients associated with particular worker characteristics

unemployment participation and worker flows over the life cycle we estimate and report life cycle transition probabilities between employment unemployment and inactivity for male workers using current population survey monthly files we assess the relative importance of each probability in explaining the life cycle profiles of participation and unemployment rates using a novel decomposition method a key robust finding is that most differences in participation and unemployment over the life cycle can be attributed to the probability of leaving employment and the probability of transiting from inactivity to unemployment while transitions from unemployment to employment the job finding probability play secondary roles we then show that a simple life cycle extension of a three state labor search model with leisure shocks can qualitatively replicate the empirical unemployment and participation life cycle profiles without introducing age or worker heterogeneity in market abilities we conclude that models that seek to explain life cycle work patterns should not ignore transitions to and from inactivity

investing in schools capital spending facility conditions and student achievement abstract public investments in repairs modernization and construction of schools cost billions however little is known about the nature of school facility investments whether it actually changes the physical condition of public schools and the subsequent causal impacts on student achievement we study the achievement effects of nearly 1400 capital campaigns initiated and financed by local school districts comparing districts where school capital bonds were either narrowly approved or defeated by district voters overall we find little evidence that these school capital campaigns improve student achievement event study analysis focused on the students actually affected by large campus renovations also generates very precise zero estimates of achievement effects thus u s school capital campaigns financed by local districts the predominant method through which facility investments are made may be a limited tool for realizing substantial gains in student achievement or closing achievement gaps

threatening thresholds the effect of disastrous regime shifts on the non cooperative use of environmental goods and services abstract this paper presents a tractable dynamic game in which agents jointly use a resource the resource replenishes fully but collapses irreversibly if the total use exceeds a threshold the threshold is assumed to be constant but its location may be unknown consequently an experiment to increase the level of safe resource use will only reveal whether the threshold has been crossed or not if the consequence of crossing the threshold is disastrous i e independent of how far the threshold has been exceeded it is individually and socially optimal to update beliefs about the threshold s location at most once the threat of a disastrous regime thereby facilitates coordination on a cautious equilibrium if the initial safe level is sufficiently valuable the equilibrium implies no experimentation and coincides with the first best resource use the less valuable the initial safe value the more the agents will experiment for sufficiently low initial values immediate depletion of the resource is the only equilibrium when the regime shift is not disastrous but the damage depends on how far threshold has been exceeded experimentation may be gradual

business cycles and labor market search the quantitative implications of labor market search for economic fluctuations are evaluated in the context of a real business cycle model incorporating labor market search into the model is found to improve its empirical performance along several dimensions in particular hours now fluctuate substantially more than wages and the contemporaneous correlation between hours and productivity falls in addition the model replicates the observation that output growth displays positive autocorrelation at short horizons overall the empirical results suggest that the labor market search environment embodies a quantitatively important propagation mechanism copyright 1996 by american economic association

assessing the efficiency of local open space provision abstract this paper tests the efficiency of local provision of land conservation i examine how housing prices which capitalize open space amenities and future tax obligations change after municipalities vote on referendums for conservation spending using a dynamic regression discontinuity based on voting outcomes results suggest that average housing prices increase about 0 68 1 12 for every 1000 per household of open space spending authorized which indicates inefficiency and underprovision of conservation i also examine tax capitalization and supply side explanations for estimated capitalization

tiebout sorting and neighborhood stratification tiebout s classic 1956 paper has strong implications regarding stratification across and within jurisdictions predicting in the simplest instance a hierarchy of internally homogeneous communities ordered by income typically urban areas are less than fully stratified and the question arises how much do departures from standard tiebout assumptions contribute to observed within neighborhood mixing this paper quantifies the separate effects of employment geography via costly commuting and preferences for housing attributes on neighborhood stratification it does so using an equilibrium sorting model estimated with rich census micro data simulations based on the model and credible preference estimates show that counterfactual reductions in commuting costs lead to marked increases in racial and education segregation and to a lesser degree increases in income segregation given that households now find it easier to locate in neighborhoods with like households while turning off preferences for housing characteristics increases racial segregation especially for blacks doing so reduces income segregation indicating that heterogeneity in the housing stock serves to stratify households based on ability to pay further we show that differences in housing help to accentuate differences in the consumption of local amenities

real wages and the business cycle the objectives of this review are threefold 1 to characterize the empirical literature on the cyclical behavior of real wages 2 to identify the sources of the differences in results across studies and 3 to enumerate key factors that determine the cyclicality of real wages given a host of measurement and methodological issues drawing firm conclusions is difficult but several generalizations can be made the estimated cyclicality of real wages depends crucially on the time period of analysis and the choice of whether to examine the production or the consumption wage composition effects play an important but complicated role as well

mismatch shocks and unemployment during the great recession summary we investigate the macroeconomic consequences of fluctuations in the effectiveness of the labor market matching process with a focus on the great recession we conduct our analysis in the context of an estimated medium scale dynamic stochastic general equilibrium model with sticky prices and equilibrium search unemployment that features a shock to the matching efficiency or mismatch shock we find that this shock is not important for unemployment fluctuations in normal times however it plays a somewhat larger role during the great recession when it contributes to raise the actual unemployment rate by around 1 3 percentage points and the natural rate by around 2 percentage points the mismatch shock is the dominant driver of the natural rate of unemployment and explains part of the recent shift of the beveridge curve copyright 2016 john wiley sons ltd

employment protection reform in search economies the design of employment protection legislation epl is of particular importance in the european debate on the contours of labor market reform in this article we appeal to an equilibrium unemployment model to investigate the virtues of epl reform which reduces the red tape and legal costs associated with layo s and introduces a u s style experiencerating system which we model as a combination of a layo tax and a payroll subsidy the reform considered shows that it is possible to improve the e ciency of employment protection policies without a ecting the extent of worker protection on the labor market these results are consistent with the conventional wisdom that experience rating is desirable not only as an integral component of unemployment compensation nance as most studies acknowledge but also as part and parcel of a virtuous epl system

labor and the market value of the firm what role does labor play in a firm s market value we explore this question using a production based asset pricing model with frictions in the adjustment of both capital and labor we posit that hiring of labor is akin to investment in capital and that the two interact with the interaction being a crucial determinant of the time series behavior of market value we use aggregate u s corporate sector data to estimate firms optimal hiring and investment decisions and the consequences for firms value the model generates a good fit of the data we decompose the estimated market value thereby quantifying the link between firms value and gross hiring flows employment gross investment flows and physical capital we find that a conventional specification quadratic adjustment costs for capital and no hiring costs performs poorly hiring and investment flows unlike employment and capital stocks are volatile and both are essential to account for market value volatility a key result is that firms value embodies the value of hiring and investment over and above the capital stock

using market valuation to assess public school spending abstract we examine whether school expenditures are valued by potential residents and whether the current level of public school provision is inefficient by estimating the effect of state education aid on residential property values we find evidence that overall state aid is valued by potential residents and that school districts do not overspend on education however we find that districts may overspend in areas where residents have fewer schooling options but find no difference in efficiency by the degree of district unionization one interpretation of these results is that increased competition may reduce overspending on public schools in some areas

labor search and matching in macroeconomics abstract the labor search and matching model plays a growing role in macroeconomic analysis this paper provides a critical selective survey of the literature four fundamental questions are explored how are unemployment job vacancies and employment determined as equilibrium phenomena what determines worker flows and transition rates from one labor market state to another how are wages determined what role do labor market dynamics play in explaining business cycles and growth the survey describes the basic model reviews its theoretical extensions and discusses its empirical applications in macroeconomics the model has been developed against the background of difficulties with the use of the neo classical frictionless model of the labor market in macroeconomics its success includes the modelling of labor market outcomes as equilibrium phenomena the reasonable fit of the data and when inserted into business cycle models improved performance of more general macroeconomic models at the same time there is evidence against the nash solution used for wage setting and an active debate as to the ability of the model to account for some of the cyclical facts

the determinants of equilibrium unemployment the paper takes the search and matching model of the aggregate labor market to the data it tests the model s empirical validity and employs structural estimation to generate a characterization of the optimal behavior of firms and workers the model is applied to israeli data that are uniquely suited for this kind of empirical investigation the structural estimates are used to quantify the frictions embodied in the model including the costs of search the congestion and trading externality effects and the matching process a calibration simulation analysis then studies the effect of several key variables on equilibrium unemployment

voting on open space what explains the appearance and support of municipal level open space conservation referenda in the united states abstract numerous communities in the united states have been willing to use public funds to protect open space the amount of money allocated for open space protection by local and state governments exceeds the budget of the largest federal land protection program in the u s the conservation reserve program this paper analyzes what types of municipalities hold open space referenda and the level of support for these referenda factors that increased the probability of a municipality holding an open space referendum from 2000 to 2004 were large population low population density rapid growth of the surrounding area and highly educated and environmentally concerned residents increases in median household income up to 100 000 increased the likelihood of a vote but further increases in income beyond 100 000 decreased the likelihood for municipalities holding an open space referendum factors that increased support for passage of the referendum were rapid growth low unemployment rates highly educated residents and no new taxes given high levels of support for open space referenda 76 of municipal level referenda held from 2000 through 2004 passed the spatial pattern of locally managed open space will be largely determined by the factors that affect referenda appearance on a municipal ballot this conclusion suggests that locally managed conservation hotspots will cluster around fast growing affluent communities with highly educated residents such hotspots may or may not align with overall conservation priorities non governmental and environmental organizations should focus efforts on helping communities in locally managed conservation coldspots secure open space

in search of a stylised fact do real wages exhibit a consistent pattern of cyclical variability the paper surveys the studies on the cyclical behaviour of real wages published from the twenties onwards the traditional simple neoclassical model of the labour market suggests that real wages tend to move countercyclically however from a theoretical viewpoint there are few reasons to expect this behaviour once the simple model is extended to account for imperfect competition uncertainty lagged responses or contracting between firms and workers empirical studies give different answers to the problem the contributions reviewed in the paper are arranged roughly in a chronological order the interwar period the postwar pre econometric studies the econometric work using aggregate data the evidence produced on the basis of longitudinal data the analyses of the shock responsiveness of real wages and finally the most recent papers attempting a reconciliation of the somewhat conflicting evidence derived from aggregate and panel data

do voters affect or elect policies evidence from the u s house there are two fundamentally different views of the role of elections in policy formation in one view voters can affect candidates policy choices competition for votes induces politicians to move toward the center in this view elections have the effect of bringing about some degree of policy compromise in the alternative view voters merely elect policies politicians cannot make credible promises to moderate their policies and elections are merely a means to decide which one of two opposing policy views will be implemented we assess which of these contrasting perspectives is more empirically relevant for the u s house focusing on elections decided by a narrow margin allows us to generate quasi experimental estimates of the impact of a randomized change in electoral strength on subsequent representatives roll call voting records we find that voters merely elect policies the degree of electoral strength has no effect on a legislator s voting behavior for example a large exogenous increase in electoral strength for the democratic party in a district does not result in shifting both parties nominees to the left politicians inability to credibly commit to a compromise appears to dominate any competition induced convergence in policy

effects of reduction in working hours on a model with job creation and job destruction this article shows how with certain modifications to a standard real business cycle rbc model and with certain qualified responses in the short and long term a policy of reduction in the number of working hours can have positive effects on activity and employment the modifications required to bring about these results include specification of the working day existence of the creation and destruction of employment and differentiation between inactivity and unemployment results reveal that any measures taken to reduce the number of working hours must take into consideration the productivity levels of working hours to thus ensure that the consequences of such a policy are positive not only for employment but also in all other macroeconomic variables

matching models under scrutiny an appraisal of the shimer puzzle abstract two papers have recently questioned the quantitative consistency of the search and matching model shimer has argued that a textbook matching model is unable to explain the cyclical variation of unemployment and vacancies in the us economy costain and reiter have found the existence of a trade off in the model s performance any attempt to change the calibrated values to improve the model s ability to predict the business cycle jeopardizes its predictions of the impact of unemployment benefits on unemployment in surveying the literature originating in these findings i distinguish three different avenues that have been followed to correct the model change in wage formation change in the calibration and changes in the model specification the last approach seems to achieve the best results both from a business cycle and from a microeconomic viewpoint

macroeconomic policy lessons of labor market frictions abstract the paper explores the consequences of macroeconomic policy for labor market outcomes in the presence of frictions it shows how policy may be useful in over riding frictions as well as how it might generate adverse outcomes a partial equilibrium empirically grounded model is used to simulate policy effects the key results are that policy has effects on the stochastic behavior of key variables measures that reduce unemployment also reduce its persistence and increase the volatility of vacancies hiring subsidies and unemployment benefits have substantial effects on labor market outcomes while employment subsidies or wage tax reductions are not very effective policy instruments

homevoters vs leasevoters a spatial analysis of airport effects we use a public referendum on a new aviation concept in berlin germany as a natural experiment to analyze how the interaction of tenure and capitalization effects influences the outcome of direct democracy processes we distinguish between homevoters i e voters who are homeowners and leasevoters i e voters who lease their homes we expect that homevoters would be more likely to support initiatives that positively affect the amenity value of a neighborhood because some of the related benefits of leasevoters are neutralized by adjustments in market rents likewise homevoters would be more likely to oppose initiatives that negatively affect the amenity value of a neighborhood our empirical results are consistent with these expectations implying that public votes on local public goods do not necessarily reflect the spatial distribution of welfare effects in mixed tenure environments

time series representations of economic variables and alternative models of the labour market accepting the hypothesis that the time series facts of the aggregate labour market may be summarized by the linear autoregressive and moving average representations of wages prices unemployment and interest rates implies that a useful theory ought to lead to predictions about these representations following this approach this paper first catalogues many of the time series facts about the aggregate labour market and then compares them against alternative models of the labour market based on the intertemporal substitution and staggered contract hypotheses