repeated moral hazard and contracts with memory the case of risk neutrality we consider a repeated moral hazard problem where both the principal and the wealth constrained agent are risk neutral in each of two periods the agent can exert unobservable effort leading to success or failure incentives provided in the second period act as carrot and stick for the first period so that the effort level induced in the second period is higher after a first period success than after a failure if renegotiation cannot be prevented the principal may prefer a project with lower returns i e a project may be too good to be financed or similarly an agent can be overqualified this article offers a new perspective on dynamic moral hazard problems consider a riskneutral principal who can hire a risk neutral but wealth constrained agent the agent can exert unobservable effort which increases the likelihood of success in the one shot problem there is a well known trade off between effort incentives and rent extraction which leads to a downward distorted effort level compared to the first best solution we extend the standard model by assuming that there is a second period in which the principal can make an investment to continue the project and the agent can again exert unobservable effort it turns out that there are several interesting insights that so far have escaped the literature on repeated moral hazard which was focused on the case of risk averse agents in particular if the principal can commit not to renegotiate the second period incentives can be used to partially circumvent the limited liability constraint in the second period the principal induces the agent to choose a particularly high effort level following a first period success and a particularly low effort level following a first period failure the prospect of a higher second period rent following a first period success motivates the agent to exert more effort in the first period i e rents in the second period act as reward and punishment for the first period it should be emphasized that we assume no technological impact of a first period success or failure on the second period technology nevertheless an optimal dynamic contract exhibits memory hence if an outsider observed today a principal agent pair that was successful and another identical pair that was not successful he would be right to predict that the first pair also is more likely to succeed tomorrow in other words a serial correlation across periods which we sometimes refer to as a hot hand effect is generated endogenously merely based on incentive considerations 2

intratemporal substitution and government spending in this paper we examine the idea that a general model of consumption should allow for the direct effect of government expenditures in a two good permanent income model we show given an assumed preference specification that there is a cointegration restriction implied by an intraperiod first order condition of the model this restriction leads to a linear deterministic cointegration relation between government spending private consumption and their relative price that is supported by the data using this restriction to recover the preference parameters we estimate the intraperiod elasticity of substitution for both government and private consumption to be about 0 9 overall we find consistent empirical evidence in support of our model

the swedish unemployment experience abstract since the 1960s sweden has sustained a remarkably low unemployment rate while the average duration of unemployment spells has been increasing over time this pattern is reproduced in an equilibrium search model incorporating progressive income taxes generous unemployment compensation and a program for preventing unemployed workers from abusing the system our analysis raises concerns about how well the swedish system is equipped to handle the current situation of high unemployment

experimental evidence on unemployment insurance work search policies this paper describes findings from an experimental evaluation of alternative work search policies in the unemployment insurance ui program we find that the no work search treatment significantly increased ui receipt relative to the standard work search approach by 3 3 weeks and 265 per claimant and that the treatment with the most intensive requirements reduced ui payments by one half of a week or 70 per claimant the results suggest that work search requirements reduce ui spells by increasing the nonmonetary costs of remaining on ui rather than enhancing job search abilities we also find little treatment effects for wages earnings or total income suggesting that an increase in the nonmonetary costs of continued ui receipt are associated with more intensive job search rather than a reduction in the reservation wage

optimality of workfare with heterogeneous preferences with the standard non linear income taxation framework with heterogeneity of preferences in this paper the optimality of workfare as a screening tool is examined it is assumed that workfare does not serve as a human capital investment participation is mandatory and administrative costs are negligible imposing alternative cardinalizations on individuals utilities allows for the possibility that the government optimally redistributes income to or from high disutility of labour individuals under either case it is never optimal to impose workfare on these individuals it is also shown that non productive workfare can be an e cient policy tool in contrast to the results found in besley and coate 1995 brett 1998 and beaudry and blackorby 1997 jel classification h21 h23 optimalite du workfare en presence de preferences heterogenes l auteur examine l timalite du workfare en tant qu instrument de tamisage a l aide du cadre conceptuel traditionnel d imposition non lineaire des revenus en presence de preferences heterogenes on postule que le workfare n est pas un processus d investissement en capital humain que la participatioun est obligatoire et que les couts d administration sont negligeables quand on postule aussi des utilites cardinales differentes pour les individus il devient possible pour le gouvernement de redistribuer optimalement les revenus en faveur ou au detriment des individus pour qui le travail a une tres grande desutilite dans l un et l autre cas on montre que le workfare n est jamais une politique optimale on montre aussi que le workfare dans des activites non productives peut etre un instrument de politique publique e cient contrairement a ce qu a rment besley et coate 1995 brett 1998 et beaudry et blackorby 1997

lessons from the u s unemployment insurance experiments recent social experiments have evaluated two reforms of the unemployment insurance ui system reemployment bonuses and job search programs the bonus experiments show that economic incentives affect the length of ui receipt and provide weak evidence that an earlier return to work does not decrease earnings the experiments do not show the favorability of a permanent bonus program as they ignore its effect on the number of the claimants the job search experiments test several more promising reforms nearly all of the combinations of services and increased enforcement reduce ui receipt and have favorable cost benefit analyses earnings often increase though the estimates are imprecise

public debt overhangs advanced economy episodes since 1800 exceeds 90 percent of nominal gdp on a sustained basis such public debt overhang episodes are associated with lower growth than during other periods even more episodes are associated with lower growth than during other periods even more striking among the 26 episodes we identify 20 lasted more than a decade the long striking among the 26 episodes we identify 20 lasted more than a decade the long duration belies the view that the correlation is caused mainly by debt buildups during duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions the long duration also implies that the cumulative shortfall business cycle recessions the long duration also implies that the cumulative shortfall in output from debt overhang is potentially massive these growth reducing effects of in output from debt overhang is potentially massive these growth reducing effects of high public debt are apparently not transmitted exclusively through high real interest high public debt are apparently not transmitted exclusively through high real interest rates in that in eleven of the episodes interest rates are not materially higher rates in that in eleven of the episodes interest rates are not materially higher

sovereign debt sustainability in advanced economies we develop a measure of maximum sustainable government debt for advanced economies how much investors are willing to lend to a country s government depends on the country s expected primary surplus the level and volatility of its rate of growth and how much debt the government expects to be able to raise in the future for the purpose of servicing the debt it seeks to raise today we provide a simple formula that computes a country s maximum sustainable debt msd as a function of four easy to estimate parameters we further compute a country s theoretical probability of default pd as a function of its debt to gdp ratio we nally calibrate our measures for 23 oecd countries and test the relation between sovereign yield spreads and our theoretical pd at prevailing debt levels we nd it to be strongly statistically signicant jel h63

debt and growth new evidence for the euro area abstract against the background of the euro area sovereign debt crisis our paper investigates the relationship between public debt and economic growth and adds to the existing literature in the following ways first we use a dynamic threshold panel methodology in order to analyse the non linear impact of public debt on gdp growth second we focus on 12 euro area countries for the period 1990 2010 therefore adding to the current discussion on debt sustainability in the euro area our empirical results suggest that the short run impact of debt on gdp growth is positive and highly statistically significant but decreases to around zero and loses significance beyond public debt to gdp ratios of around 67 this result is robust throughout most of our specifications in the dynamic and non dynamic threshold models alike for high debt to gdp ratios above 95 additional debt has a negative impact on economic activity furthermore we can show that the long term interest rate is subject to increased pressure when the public debt to gdp ratio is above 70 broadly supporting the above findings

unemployment insurance and male unemployment duration in canada a model of unemployment duration is estimated with weekly micro data on canadian men entitlement provisions in the unemployment insurance program and demand conditions are found to have a significant effect on the probability of leaving unemployment the probability of a worker leaving unemployment declines with the duration of unemployment holding unemployment insurance entitlement constant when entitlement is allowed to vary the probability of leaving first falls and then generally rises with unemployment duration these results are robust with respect to allowing for person specific unobserved heterogeneity and alternative specifications of duration dependence

minimum wage effects on labor market outcomes under search matching and endogenous contact rates building upon a continuous time model of search with nash bargaining in a stationary environment we analyze the effect of changes in minimum wages on labor market outcomes and welfare although minimum wage increases may or may not lead to increases in unemployment in our model they can be welfare improving to labor market participants on both the supply and demand sides of the labor market we discuss identification of the model using current population survey data on accepted wages and unemployment durations and show that by incorporating a limited amount of information from the demand side of the market it is possible to obtain credible and precise estimates of all primitive parameters we show that the optimal minimum wage in 1996 depends critically on whether or not contact rates can be considered to be exogenous and we note that the limited variation in minimum wages makes testing this assumption problematic

output effects of government purchases the theoretical analysis focuses on the distinction between temporary and permanent movements in government purchases under plausible conditions the temporary case involves an output response that is positive less than one to one with the change in government purchases and larger than that generated by an equal sized but permanent shift in purchase the equilibrium real rate of return rise in the temporary case but changes little in the permanent one defense purchases are divided empirically into permanent and temporary components by considering the role of temporary wars no temporary shifts in nondefense purchases were isolated empirical results verify an expansionary output effect for temporary purchases that exceeds that of permanent purchases the results for some other expectational hypotheses are found to be generally supportive of the theory

productivity gains from unemployment insurance this paper argues that unemployment insurance increases labor productivity by encouraging workers to seek higher productivity jobs and by encouraging rms to create those jobs we use a quantitative model to investigate whether this eect is comparable in magnitude to the standard moral hazard eects of unemployment insurance our model economy captures the behavior of the u s labor market for high school graduates quite well with unemployment insurance more generous than the current u s level unemployment would increase by a magnitude similar to the micro estimates but because the composition of jobs also changes total output and welfare would increase as well

unemployment duration unemployment benefits and labor market programs in sweden abstract standard search theory as well as some empirical evidence suggest that an unemployed individual s probability of entering employment increases as he approaches the time when unemployment benefits are due to expire this pattern may not carry over to a country like sweden where labor market programs are targeted at the long term unemployed at risk of benefit exhaustion the paper examines transitions out of unemployment using data on unemployed individuals in sweden a semi parametric competing risks model for transitions to employment labor market programs and non participation is estimated there is some evidence that the exit rate from unemployment to employment increases as benefit exhaustion is approached

why does private consumption rise after a government spending shock recent empirical evidence suggests that private consumption is crowded in by government spending this outcome violates existing macroeconomic theory according to which the negative wealth effect brought about by a rise in public expenditure should decrease consumption

the effects of the unemployment insurance payroll tax on wages employment claims and denials abstract following a 13 year period when all employers in washington paid the same unemployment insurance ui tax rate washington was forced to adopt an experience rated tax system in 1985 we use this natural experiment to explore both tax incidence and the effects of experience rating we find that industry average tax rates are largely passed on to workers through lower earnings however our estimates imply that a firm can shift much less of the difference between its tax rate and the industry average rate our results also indicate that experience rating reduces turnover and ui claims and increases claim denials

demand side management and european environmental and energy goals an optimal complementary approach demand side management dsm in electricity markets could improve energy efficiency and achieve environmental targets through controlled consumption for the past 10 years or so dsm programmes have registered significant results however detailed analysis of its real impact as observed by a large number of pilot studies suggests that such programmes need to be fine tuned to suit clearly identified conditions this study aims to provide recommendations for the instruments to be used to prompt demand response with a view to maximizing energy and environmental efficiencies of various countries the present study suggests that different dsm models should be deployed depending on the specific generation mix in any given country beside the natural benefits from cross borders infrastructures dsm improves the flexibility and reliability of the energy system absorbing some shock on generation mix we show efficiency increases with demand response but at a decreasing rate so according to rebound and report effects simple dsm tools could be preferred

the role of shocks and institutions in the rise of european unemployment the aggregate evidence two key facts about european unemployment must be explained the rise in unemployment since the 1960s and the heterogeneity of individual country experiences while adverse shocks can potentially explain much of the rise in unemployment there is insufficient heterogeneity in these shocks to explain cross country differences alternatively while explanations focusing on labour market institutions explain current heterogeneity well many of these institutions pre date the rise in unemployment based on a panel of institutions and shocks for 20 oecd nations since 1960 we find that the interaction between shocks and institutions is crucial to explaining both stylised facts

public investment in infrastructure in a simple growth model abstract in this paper we examine the implications for capital accumulation when infrastructure enters as an external input into private production functions in our model infrastructure is nonexclusive but may exhibit varying degrees of nonrivalry revenues from uniform taxes on capital and labor income are used to finance public investment in infrastructure we show that the optimal tax rate is independent of the degree of nonrivalry when production exhibits constant returns to augmentable factors the equilibrium displays constant growth for most parameters the growth rate depends on the population size under decreasing returns the optimal trajectory exhibits monotonic convergence to a steady state level

moral hazard and limited liability the real effects of contract bargaining abstract i examine the standard assumption in the moral hazard agency literature that the principal has all the bargaining power at the contract offer stage when the agent has limited liability as is often the case in practice the contract changes according to the distribution of bargaining power and consequently so does the agents effort implications of this result are examined

workfare or welfare abstract social welfare and workfare programs are considered in the context of an optimal income tax model both regressively and progressively weighted utilitarian social welfare functions are considered optimal program design can entail individuals foregoing productive employment opportunities for progressive social welfare functions regressive social welfare functions lead to overemployment

raiding opportunities and unemployment this article studies the impact of raiding opportunities in a labor market in which worker abilities differ recruiting firms can either raid an elsewhere employed worker of known ability by bidding up his wage or go through costly search to find a good worker among the unemployed in equilibrium all types of workers experience unemployment high ability workers involuntarily the raiding opportunities give rise to involuntary unemployment without changing the basic properties of the competitive model and thus suggest new implications of various institutional parameters on unemployment in particular unemployment compensation minimum wages wage taxation and search requirements

private and government consumption with liquidity constraints abstract economic theory predicts that liquidity constraints and substitutability or complementarity between private and government consumption result in excess sensitivity of private consumption to income and government consumption respectively using annual data we estimate these excess sensitivity parameters for each of 54 countries and show that they not only have sensible values but are also correlated with several variables in ways consistent with economic theory our findings imply that the degree of substitutability between government services and private consumption depends negatively on the fraction of government spending that goes to national defense we also find that liquidity constraints typically exist and they are affected positively by output variability and negatively by the saving rate

do customer information programs reduce household electricity demand the irish program abstract we study empirically the effectiveness of a customer information program to decrease energy demand by increasing efficient electricity use this demand side management dsm program aims at reducing the lack of information on the customers side that is documented in related literature we study the irish dsm program which is particularly well suited to investigate this issue as strategic behavior is ruled out in this setting for both customers and suppliers on the customers side because information programs allow only for a limited substitution of own effort on the producers side because the specificity of the irish case left no room for strategic behavior we find that providing customers with information reduced overall electricity demand by roughly 7 as well as reducing demand fluctuations over the year further we find that the dsm program had a larger impact upon long run demand with consumers short run demand behavior not being changed significantly

unemployment vs mismatch of talents reconsidering unemployment benefits we develop an equilibrium search matching model with risk neutral agents and two sided ex ante heterogeneity unemployment insurance has the standard effect of reducing employment but also helps workers to get a suitable job we show through calibrations how the mere difference on unemployment insurance when countries experience a common skilled biased technological shock may result in differences in unemployment productivity growth and wage inequality these results are consistent with the contrasting performance of the labour market in europe and the united states in the last twenty five years the model is used to address some political economy issues

evaluation of the effect of the power of one campaign on natural gas consumption abstract in this paper we study an advertising campaign launched by the irish government to induce more energy efficient behaviour and we assess its effect on residential natural gas consumption we first analyse changes in the daily consumption of natural gas and find that advertising leaflets had a significant but short lived effect on natural gas consumption we find no persistent effect of the campaign we then study three surveys administered to 1000 consumers prior to and during the campaign this repeated cross section allows us to determine that the efficiency campaign has increased awareness of behaviours that curb natural gas consumption however we do not find any significant effect of the campaign on self reported natural gas saving behaviour

smart meter devices and the effect of feedback on residential electricity consumption evidence from a natural experiment in northern ireland abstract using a unique set of data and exploiting a large scale natural experiment we estimate the effect of real time usage information on residential electricity consumption in northern ireland starting in april 2002 the utility replaced prepayment meters with advanced meters that allow the consumer to track usage in real time we rely on this event account for the endogeneity of price and payment plan with consumption through a plan selection correction term and find that the provision of information is associated with a decline in electricity consumption of 11 17 we find that the reduction is robust to different specifications selection bias correction methods and subsamples of the original data the advanced metering program delivers reasonably cost effective reductions in carbon dioxide emissions even under the most conservative usage reduction scenarios

optimal firm size taxes and unemployment abstract we analyze a model similar to the standard implicit contracting framework but assume that the size of the firm the number of workers under contract is endogenous some well known predictions from contract theory with firm size fixed exogenously are reversed in particular a result obtained by feldstein concerning unemployment insurance does not hold when firm size is chosen optimally he concludes an increase in experience rating the extent to which firms pay for unemployment benefits through their taxes reduces unemployment while we show that it increases unemployment under reasonable conditions

is the threat of reemployment services more effective than the services themselves evidence from random assignment in the ui system we examine the effect of the worker profiling and reemployment services system this program profiles unemployment insurance ui claimants to determine their probability of benefit exhaustion and then provides mandatory employment and training services to claimants with high predicted probabilities using a unique experimental design we estimate that the program reduces mean weeks of ui benefit receipt by about 2 2 weeks reduces mean ui benefits received by about 143 ana increases subsequent earnings by over 1 050 most of the effect results from a sharp increase in early ui exits in the treatment group relative to the control group jel j650

unemployment insurance and involuntary unemployment the case of adverse selection abstract this paper studies the private and public provision of unemployment insurance in a model where equilibrium unemployment results from the use of the wage as a worker selection device it is shown that private provision will not occur essentially because those workers most desired by a firm place least value on such coverage respecting the same informational constraints public provision necessarily gives rise to some distortions in participation decisions but nonetheless is welfare improving in the aggregate

the provision of incentives in firms i ncentives are the essence of economics despite many wide ranging claims about their supposed importance there has been little empirical assessment of incentive provision for workers the purpose of this paper is to critically overview existing work on the provision of incentives since the interests of workers and their employers are not always aligned a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm s interest this literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers these include piece rates options discretionary bonuses promotions profit sharing efficiency wages deferred compensation and so on my objective here is to evaluate this literature in the light of a growing empirical literature on compensation where possible i will address the literature from two perspectives first an underlying assumption of this literature is that individuals respond to contracts that reward performance accordingly i consider whether agents behave in this way and whether these responses are always in the firm s interest second i address whether firms write contracts with these responses in mind in other words do contracts look like the predictions of the theory incentives are provided to workers

the theory of optimal law enforcement the economic literature on optimal law enforcement is very recent becker s seminal paper on crime and law enforcement dates from 1968 and most papers which are the focus of this survey have been published in the last ten years the core result presented by becker is the following the probability and the severity of punishment deter crime therefore the fine should be maximal since it is a costless transfer whereas the probability of detection and conviction is costly much of the recent work has attempted to show why becker s result may not hold

optimal unemployment insurance in search equilibrium should unemployment benefits be paid indefinitely at a fixed rate or should the rate decline or increase over a worker s unemployment spell we examine these issues using an equilibrium model of search unemployment the model features worker firm bargaining over wages free entry of new jobs and endogenous search effort among the unemployed the main result is that an optimal insurance program implies a declining benefit sequence over the spell of unemployment numerical calibrations of the model suggest that there may be nontrivial welfare gains associated with switching from an optimal uniform benefit structure to an optimally differentiated system

should unemployment benefits decrease with the unemployment spell abstract in this paper we investigate whether unemployment benefits should decrease with the unemployment spell in a model where both job search intensity and wages are endogenous wages are set by collective agreements bargained by insiders it is shown that a more declining time sequence of unemployment benefits leads to wage increases when the tax rate is given such an effect may imply an increase in unemployment and counteracts the response of job search intensity that can be found in standard job search models with a given wage distribution calibration exercises suggest that it costs twice as much in terms of welfare loss for the long term unemployed workers to reduce the unemployment rate by 1 when wages are endogenous than in the standard job search model

repeated moral hazard the role of memory commitment and the access to credit markets abstract the dynamic dimension introduces new questions in moral hazard models thus the roles of memory and commitment have recently raised a marked interest the goal of this paper is to discuss and clarify the issues at hand and to present some new results we show that two conditions are necessary for the optimal long term contract to be implementable via spot contracts first the long term optimum should be renegotiation proof second spot contracts should provide efficient consumption smoothing we discuss how the availability of credit to the agent affects these two prerequisites we also study the hitherto neglected case in which the repetition of the moral hazard problem generates hidden information at recontracting dates the optimal renegotiation proof contract then implements the minimum effort level unless it involves randomized savings

government spending and private consumption some international evidence this paper investigates the relationship between private consumption and publicly provided goods and services for a number of countries the empirical results show that in the aggregate private and government consumption are best described as complementary in the sense that an increase in one raises the marginal utility of the other the strength of this relationship is shown to be negatively affected by the government size these findings are robust across all specifications tried copyright 1994 by ohio state university press

job matching when employment contracts suffer from moral hazard abstract we consider a job matching model where the relationships between firms and wealth constrained workers suffer from moral hazard specifically effort on the job is non contractible so that parties that are matched negotiate a bonus contract higher unemployment benefits affect the workers outside option the latter is improved for low skilled workers hence they receive a larger share of the surplus which strengthens their effort incentives and increases productivity effects are reversed for high skilled workers moreover raising benefit payments affects the proportion of successful matches which induces some firms to exit the economy and causes unemployment to increase

how changes in financial incentives affect the duration of unemployment this paper studies how changes in the two key parameters of unemployment insurance the benefit replacement rate rr and the potential benefit duration pbd affect the duration of unemployment to identify such an effect we exploit a policy change introduced in 1989 by the austrian government which affected various unemployed workers differently a first group experienced an increase in rr a second group experienced an extension of pbd a third group experienced both a higher rr and a longer pbd and a fourth group experienced no change in the policy parameters we find that unemployed workers react to the disincentives by an increase in unemployment duration and our empirical results are consistent with the predictions of job search theory we use our parameter estimates to split up the total costs to unemployment insurance funds into costs due to changes in the unemployment insurance system with unchanged behaviour and costs due to behavioural responses of unemployed workers our results indicate that costs due to behavioural responses are substantial

endogenous adverse selection and unemployment insurance in this paper we consider how the presence of private information may explain the failure of the private sector to provide unemployment insurance in particular we show how the interaction of private information regarding employees preferences for work with the unobservable level of effort exerted on the job may explain the absence of private unemployment insurance we also reflect on the implications of our findings for the role of the public sector in providing unemployment insurance

does high public debt consistently stifle economic growth a critique of reinhart and rogoff we replicate reinhart and rogoff 2010a and 2010b and find that selective exclusion of available data coding errors and inappropriate weighting of summary statistics lead to serious miscalculations that inaccurately represent the relationship between public debt and gdp growth among 20 advanced economies over 1946 2009 countries with public debt gdp ratios above 90 averaged 2 2 real annual gdp growth not 0 1 as published the published results for i median gdp growth rates for the 1946 2009 period and ii mean and median gdp growth figures over 1790 2009 are all distorted by similar methodological errors although the magnitudes of the distortions are somewhat smaller than with the mean figures for 1946 2009 contrary to reinhart and rogoff s broader contentions both mean and median gdp growth when public debt levels exceed 90 of gdp are not dramatically different from when the public debt gdp ratios are lower the relationship between public debt and gdp growth varies significantly by period and country our overall evidence refutes rr s claim that public debt gdp ratios above 90 consistently reduce a country s gdp growth

unemployment insurance in theory and practice a hallmark of modern labor economics is the close interplay between the development of theory data sources and econometric testing the evolution of the economic analysis of unemployment insurance provides a good illustration new theoretical approaches in particular job search theory have inspired a large amount of empirical research some of it methodologically innovative and most of it highly relevant for economic policy the paper presents a broad survey and an assessment of the economic analysis of unemployment insurance as it has evolved since the 1970s

unemployment duration and the restart effect some experimental evidence in this paper we analyse the effect of ihe restart programme in the united kingdom this programme consisis of an interview of tbe long term unemployed to counsel them on effective job search failure to attend the interview carries the threat of the cessation of unemployment benefits the results using experimental data indicate that the programme has a significant effect of reducing unemployment duration estimation of an independent competing risks model distinguishing between exits from unemployment to a job a training placement or to signing off unemployment benefit shows that the channels through which restart works differs according to exit type

payments or persuasion common pool resource management with price and non price measures we use lab experiments to study policies that address common pool resource overuse we look at a price mechanism specifically a pigouvian subsidy and four non price interventions the non price policies are information alone information with a normative message communication alone and normative messages with communication allowed in all experiment sessions no intervention occurs in the first seven and last seven rounds allowing us to examine the effects of introducing and taking away a policy the subsidy leads to near efficient extraction but surprisingly leads groups that were not over extracting to also reduce extraction this over compliance decreases efficiency although on net the subsidy is the most efficiency enhancing intervention information provision communication normative appeals and normative appeals combined with communication all reduce over extraction though by less than the subsidy without exacerbating over compliance however the effects of information alone and communication alone are small and not robust the non price policies cause a decline in over extraction of from 0 549 information to 11 441 normative appeals with communication these effects are of the same order of magnitude as the effects seen in major field studies of conservation messaging the subsidy has the worst persistence properties after the intervention ceases while normative messages with communication have the best

optimal workfare with voluntary and involuntary unemployment this paper addresses the welfare implications of introducing workfare into unemployment benefit policy we consider a population composed of employed and unemployed workers and of individuals who do not seek employment job search behavior is unobservable which means that voluntarily unemployed individuals can claim unemployment insurance ui benefits intended for unemployed workers as a consequence pecuniary benefit schemes underinsure workers against unemployment we show that requiring unproductive activities workfare in exchange for ui benefits may generate a pareto improvement by facilitating better unemployment insurance for workers and we characterize the situations where this is the case

public spending endogenous growth and endogenous fluctuations abstract this article studies indeterminacy and endogenous growth in a simple one sector model of capital accumulation endowed with inelastic labor supply in which the presence of public goods creates positive externalities both in the production and the consumption sectors because of increasing returns in the utility function the economy exhibits not only perpetual growth but also indeterminacy and therefore endogenous stochastic growth fluctuations the possibility of sunspot equilibrium growth paths is shown to be consistent with plausible parameter values journal of economic literatureclassification numbers e32 o41 h40

optimal unemployment insurance this paper considers the design of an optimal unemployment insurance system the problem is modeled as a repeated principalagent problem involving a risk averse agent the unemployed worker and a risk neutral principal which cannot monitor the agent s search effort the optimal long term contract subject to the associated incentive constraints is characterized this contract involves a replacement ratio that decreases throughout the unemployment spell and a wage tax after reemployment that under some mild regularity conditions increases with the lenght of the unemployment spell some numerical results are presented that suggest that the gains from switching to this optimal unemployment insurance scheme could be quite large the performance of this optimal contract is also compared to alternative liquidity provision mechanisms

performance pay and wage inequality an increasing fraction of jobs in the u s labor market explicitly pay workers for their performance using bonus pay commissions or piece rate contracts using data from the panel study of income dynamics we show that compensation in performance pay jobs is more closely tied to both observed and unobserved productive characteristics of workers than compensation in non performance pay jobs we also find that the return to these productive characteristics increased faster over time in performance pay than in non performance pay jobs we show that this finding is consistent with the view that underlying changes in returns to skill due for instance to technological change induce more firms to offer performance pay contracts and result in more wage inequality among workers who are paid for performance thus performance pay provides a channel through which underlying changes in returns to skill get translated into higher wage inequality we conclude that this channel accounts for 21 of the growth in the variance of male wages between the late 1970s and the early 1990s and for most of the increase in wage inequality above the eightieth percentile over the same period

growth and public debt what are the relevant trade offs the interplay between growth and public debt is addressed considering a barro type 1 endogenous growth model where public spending is financed through taxes on income and public debt debt is assumed to be a fixed proportion of gdp which is used as a policy parameter by the government we first show that when debt is a large enough proportion of gdp two distinct bgps may co exist one being indeterminate therefore local and global indeterminacy may arise and self fulfilling expectations appear as a crucial ingredient to understand the impact of debt on growth and on macroeconomic fluctuations we then exhibit two types of important trade off associated with self fulfilling expectations first we show that the lowest bgp is always decreasing with respect to the ratio of debt gdp while the highest one is increasing as a result depending on the bgp selected by agents expectations the relationship between debt and growth is not always negative second we show that the highest bgp which provides the highest welfare is always locally indeterminate while the lowest is always locally determinate therefore depending on the expectations of agents when debt is increasing large fluctuations associated to self fulfilling believes may occur and be associated at the same time with welfare losses if there is a coordination on the low steady state finally a simple calibration exercise allows to provide an understanding of the recent experiences of many oecd countries

the design of income maintenance programmes this paper provides a comprehensive treatment of a basic income maintenance problem for a group of individuals who differ in their income generating abilities it stresses the impact that imperfect information about such abilities has on programme design the analysis serves two purposes first we are able to unify the theoretical literature on the income maintenance problem second we examine the impact of allowing the government to impose workfare on recipients of income support in addition to being of policy interest this is a theoretically challenging problem since it requires solving a multi dimensional screening problem the solution that we find is strikingly simple it separates the poor into two categories with the lower income groups subject to workfare while facing a 100 marginal tax rate on earnings the second group does no public work and is offered a benefit schedule which taxes earnings at a lower rate

on the unprofitability of utility demand side conservation programmes abstract this paper analyses the economic prospects of demand side conservation programmes the essence of various proposals is that conservation measures should be a part of least cost planning at least if marginal production costs are high and consumers decisions are distorted market failures the weakness of this literature is that it assumes that the consumers remain passive when the utilities invest in conservation this paper remedies this deficiency and considers strategic interactions between consumers and a public utility stackelberg equilibria it will be shown that strategic interactions render unprofitable demand side conservation programmes that appear profitable by conventional criteria the reason is that rational consumers will respond strategically to the prevalence of utility sponsored conservation programmes by minimizing their own expenses for energy efficiency

public debt and growth heterogeneity and non linearity we study the long run relationship between public debt and growth in a large panel of countries our analysis builds on theoretical arguments and data considerations in modelling the debt growth relationship as heterogeneous across countries we investigate the debt growth nexus adopting linear and non linear specifications employing novel methods and diagnostics from the time series literature adapted for use in the panel we find some support for a negative relationship between public debt and long run growth across countries but no evidence for a similar let alone common debt threshold within countries

mobility costs frictional unemployment and efficiency with imperfect job information flows it is plausible that the distribution of job offerings becomes more attractive when there are more vacancies and more unemployed with word of mouth communication this condition is derived given this condition steady state equilibrium is not efficient with welfare increased by the introduction of unemployment compensation even though all agents are risk neutral in this way workers become more selective in the jobs they accept

the impact of household behavioral changes on ghg emission reduction in lithuania abstract it is commonly understood that households must change their behavior to reduce problems related increased energy consumption and climate change therefore in the search of cheap ghg emission reduction measures households are an important target group because they are responsible for more than 20 of total energy consumption in developed countries in addition waste management and responsible consumption of products are the key issues in ghg emission reduction the aim of the paper is to assess ghg emission reduction potential in households in terms of behavioral changes towards sustainable consumption the review of literature on analysis of households behavioral changes impact on ghg emission reduction was performed the daily survey of household agenda and energy use records were performed in lithuania for two scenarios baseline and ghg emission reduction scenario including energy saving ghg emission reduction potential in household was assessed based on daily survey data and energy consumption records by applying carbon calculator based on modified coefficients evaluated ghg emission reduction potential in households was compared with ghg emission reduction potentials in other sectors of lithuania based on analysis performed in the paper the tools to promote household behavioral changes towards sustainable consumption were proposed

efficient unemployment insurance this paper constructs a tractable general equilibrium model of search with risk aversion an increase in risk aversion reduces wages unemployment and investment unemployment insurance has the opposite effect insured workers seek high wage jobs with high unemployment risk an economy with risk neutral workers achieves maximal output without any unemployment insurance but an economy with risk averse workers requires a positive level of unemployment insurance to maximize output therefore moderate unemployment insurance not only improves risk sharing but also increases output

estimating energy conservation patterns of greek households abstract this paper develops an empirical model to investigate the main determinants of household energy conservation patterns in greece employing cross section data in the empirical analysis household energy conserving choices models are employed using a discrete and a latent trait variable respectively as a dependent variable the results show that socio economic variables such as consumers income and family size are suitable to explain differences towards energy conservation preferences in addition the results suggest that electricity expenditures and age of the respondent are negatively associated with the number of energy conserving actions that a consumer is willing to adopt finally other variables such as environmental information feedback and consciousness of energy problems are characteristics of the energy saver consumer by evaluating consumer s decision making process with regards to energy conservation measures we are able to formulate and propose an effective energy conservation framework for greece an energy policy framework is among the main prerequisites not only to achieve sustainable development but also to maintain consumers quality of life

an empirical analysis on the substitutability between private consumption and government purchases abstract this paper estimates substitutability of government purchases for private consumption using an optimal consumption model the utility function features several types of nonseparabilities the paper finds that gmm estimates are affected by the specification of nonseparability between private consumption and government purchases by the restriction of time separability and by the measurement of real interest rates

demand side management by electric utilities in switzerland analyzing its impact on residential electricity demand abstract in this paper we use panel data from a survey conducted on 30 utilities in switzerland to estimate the impact of demand side management dsm activity on residential electricity demand using the variation in dsm activity within utilities and across utilities over time we identify the impact of dsm programs and find that their presence reduces per customer residential electricity consumption by around 5 if we consider monetary spending the effect of a 10 increase in dsm spending causes a 0 14 reduction in per customer residential electricity consumption the cost of saving a kilowatt hour is around 0 04chf while the average cost of producing and distributing electricity in switzerland is around 0 18chf per kilowatt hour we conclude that current dsm practices in switzerland have a statistically significant effect on reducing the demand for residential electricity

the economic future of europe after three years of near stagnation the mood in europe is definitely gloomy many doubt that the european model has a future in this paper i argue that things are not so bad and there is room for optimism over the last thirty years productivity growth has been much faster in europe than in the united states productivity levels are roughly similar today in the european union and in the united states the main difference is that europe has used some of the increase in productivity to increase leisure rather than income while the united states has done the opposite still not everything is well unemployment is still high and europe suffers from inefficient regulation here also however there is more action than often perceived and a wide ranging reform process is taking place this process is driven by reforms in financial and product markets reforms in those markets are in turn putting pressure for reform in the labor market reform in the labor market is slowly taking place but not without political tensions these tensions dominate the news but they are a symptom of change not a reflection of immobility

the impacts of energy efficiency policies meta analysis abstract this paper attempts to quantitatively summarize the existing empirical evidence on the effects of energy efficiency policies on energy demand and on the price of associated durable goods as well as to identify the main factors that systematically affect the estimated impacts to this end a meta regression analysis of the effects of energy efficiency policies is carried out on the basis of an extensive review of the existing literature selecting those studies that analyze the impact of energy efficiency policies with respect to a business as usual setting taking into account the econometric problems associated with this type of analysis intra class correlation cross sectional dependence publication bias in pursuit of robust outcomes the results show that the studies analyzing the effects of energy efficiency policies estimate a significant impact of these policies on energy demand 10 5 8 8 and the price of related durable goods 7 9 6 the main factors that influence results are the policy instrument the targeted sector the type of country the analyzed period the consideration of free riders and the type of analysis data and publication energy demand and the sector and analyzed period price of durables

the demand for electricity in israel quarterly data for israel are used to compare and contrast three dynamic econometric methodologies for estimating the demand for electricity by households and industrial companies these are the dynamic regression model and two approaches to cointegration ols and maximum likelihood since we find evidence of seasonal unit roots in the data we also test for seasonal cointegration we find that the scale elasticities are similar in all three approaches but the ols price elasticities are considerably lower moreover ols suggests non cointegration the paper concludes by stochastically simulating the drms to calculate upside risk in electricity demand

improving incentives in unemployment insurance a review of recent research abstract this paper provides a review of the recent literature on how incentives in unemployment insurance can be improved we are particularly concerned with three instruments i e the duration of benefit payments or more generally the time sequencing of benefits monitoring in conjunction with sanctions and workfare our reading of the theoretical literature is that the case for imposing a penalty on less active job search is fairly solid a growing number of empirical studies including randomized experiments are in line with this conclusion

optimal unemployment insurance abstract we investigate the design of an optimal unemployment insurance program using an equilibrium search model calibrated using data from the reemployment bonus experiments there are three main conclusions first insurance considerations suggest that the potential duration of ul benefits would be unlimited under an optimal program second if the potential duration to benefits were unlimited current replacement rates in the u s about 0 5 would probably be about right third the optimal replacement rate rises as the potential duration of benefits is increasingly limited reaching 1 when the potential duration of benefits is limited to 32 weeks