existence of competitive equilibrium with incomplete markets abstract the existence of competitive equilibrium is proved for a model with incomplete futures markets the security returns in this model are denominated in terms of units which represent certain composite commodities specific to events

money and prices under uncertainty we study whether monetary economies display nominal indeterminacy equivalently whether monetary policy determines the path of prices under uncertainty in a simple stochastic cash in advance economy we find that indeterminacy arises and is characterized by the initial price level and a probability measure associated with state contingent nominal bonds equivalently monetary policy determines an average but not the distribution of inflation across realizations of uncertainty the result does not derive from the stability of the deterministic steady state and is not affected essentially by price stickiness nominal indeterminacy may affect real allocations in cases we identify our characterization applies to stochastic monetary models in general and it permits a unified treatment of the determinants of paths of inflation copyright 2005 wiley blackwell

extrinsic uncertainty and the informational role of prices abstract we study a financial economy with finitely many states of private information there are two agents informed and uninformed we define agents expectations on future equilibrium prices as a probability distribution over k distinct values i e we introduce k extrinsic events we show that there are open sets of economies with nonrevealing and also with partially revealing equilibria for an appropriate choice of self fulfilling price expectations observable equilibrium prices are signal invariant journal of economic literature classification numbers d52 d82 d84

value of information in competitive economies with incomplete markets we study the value of public information in competitive economies with incomplete markets we show that generically the welfare effect of a change in the information available prior to trading can be in any direction there exist changes in information that make all agents better off and changes for which all agents are worse off in contrast for any change in information a pareto improvement is feasible that is attainable by a planner facing the same informational and asset market constraints as agents in this sense the response of competitive markets to changes in information is typically not socially optimal

the structure of financial equilibrium with exogenous yields the case of incomplete markets1 this paper presents an analysis of the structure of competitive equilibrium in a model whose principal feature is incomplete financial markets formulated in the spirit of arrow specifically the overall payoffs or returns from financial instruments are assumed to be fixed or predetermined independently of the operation of the economy and these instruments are assumed to be fewer in number than required to span all potential spot markets for commodities our main result establishes that market incompleteness generates a corresponding degree of allocation indeterminateness suppose there are n 1 spot markets but only 0 m n linearly independent financial instruments so that the deficiency in financial markets is 0 n n m n then subject to some relatively innocuous technical qualifications the set of equilibrium allocations contains a smooth n dimensional submanifold we also indicate how real indeterminacy may increase when returns for example the market price and promised interest on an ordinary bond are treated as variables rather than parameters

rural nonfarm employment and incomes in latin america overview and policy implications abstract rural nonfarm employment rnfe and incomes rnfi are crucial to latin american rural households the 11 rural household income studies in this volume reviewed in this paper use 1990s data and show that rnfi averages 40 of rural incomes rnfi and rnfe have grown quickly over the past three decades the review of evidence provided some surprising departures from traditional images of nonfarm activities of latin american rural households in terms of shares of rural incomes 1 nonfarm wage incomes exceed self employment incomes 2 rnfi far exceeds farm wage incomes 3 local rnfi far exceeds migration incomes 4 service sector rnfi far exceeds manufactures rnfi these findings suggest the need for more development program attention to wage employment in the service sector versus the traditional focus on small enterprise manufactures moreover poor households and zones tend to have higher shares in their incomes but lower absolute levels of rnfi as compared to richer households and zones the rnfe of the poor tend to be the low paid nonfarm equivalent of semi subsistence farming raising the capacity of the poor to participate in the better paid types of rnfe is crucial via employment skills training education infrastructure credit finally rnfe has grown fastest and been most poverty alleviating where there are dynamic growth motors in particular in the agricultural sector but also in tourism links to urban areas mining and forestry this means that developing rnf jobs cannot be done at the expense of programs promoting agricultural development

equivariant general equilibrium theory abstract the main purpose of this paper is to investigate the properties of a version of the general equilibrium model where symmetry considerations are explicitely taken into account this version called the equivariant model is shown to be a natural framework to study sunspot equilibria the problem of sunspot equilibria can then be viewed as one of symmetry breaking existence of asymmetric or sunspot equilibria is addressed through the dual approach of price income equilibrium analysis that splits the problem of breaking symmetries into two separate easier problems

global order and the new economic policy in india the post colonial formation of the small scale sector using a class focused marxist approach we elucidate the adopted position of indian small scale sector as a devalued other within the adopted development paradigm that accords primacy to capital and west in the background of this understanding of small scale sector we demonstrate how the new economic policy in the era of globalization could be theorized as a tool to obtain the post colonial hegemony of capital over the small scale sector copyright the author 2008 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

intersectoral transfer growth and inequality in rural ecuador abstract in this paper we study intersectoral transfer and its impact on the distribution of income in ecuador we find that income shares between farm and nonfarm activities are roughly equal on average although the rich in rural areas typically receive a greater share of income from nonfarm sources thus decomposing inequality by income source reveals that a rise in nonfarm incomes increases inequality drawing on a new method to estimate local level distributional outcomes growth of the high productivity nonfarm sector is observed to have a strong and positive association with average consumption and inequality growth of the low productivity nonfarm sector is associated with little change in either average income or income inequality irrespective of subsector growth of the nonfarm sector is associated with a substantial fall in poverty

a class of monotone economies in which rational expectations equilibria exist but prices do not reveal all information abstract some economies having excess demands which depend monotonically on agents information signals are examined if there are no multiple market clearing prices then these economies have strict rational expectations equilibria in which equilibrium prices alone do not transmit all information

interrogating inclusive growth formal informal duality complementarity conflict i find through analyses of across state across industry over state and pooled data involving state and time on the indian economy that the behaviour of the urban informal unorganised sector is explained by the modern formal organised sector besides petty agriculture but the vast rural informal sector is like surplus population associated only with petty agriculture i also show there could be interactions between the formal sector and modern agriculture these empirical relations are analysed and theoretical departures from the literature are identified i propose using a structuralist kaleckian framework with accumulation in the formal sector a large part of petty agriculture is modernised or converted to suit the needs of accumulation and thereby we have a long run drain of resources from petty agriculture and hence from informal sectors as well however even under such a resource drain the urban informal sector may sustain or expand due to productivity advantages and due to pull from the formal sector at the cost of its rural counterpart in the short run when the formal sector and hence the urban informal sector expand or when the government promotes the urban or productive part of informal economy a basic conflict between urban and rural informal sectors is exposed given the generic agricultural supply constraint thus the paradigms of inclusive growth and development management are questioned copyright oxford university press

implicit contracts moral hazard and unemployment this paper considers a firm whose marginal revenue product of labor is a random variable we derive the form of an optimal long term contract between workers and the firm under the assumption that labor s marginal product is observed by the firm but not by the workers we show that the existence of asymmetric information causes unemployment to be greater than in a situation where information about labor s marginal product is public or where employment is determined in spot markets in particular unemployment can occur when the marginal product of labor exceeds the reservation wage

general equilibrium with endogenously incomplete financial markets abstract the present paper studies a class of general equilibrium economies with imperfectly competitive financial intermediaries and price taking consumers intermediaries optimally choose the securities they issue and the bid ask spread they charge financial intermediation is costly and hence markets are endogenously incomplete an appropriate equilibrium concept is developed and existence is proved competitive equilibria for this class of economies display full indexation of securities payoffs and monetary neutrality even if intermediaries are restricted to issue nominal securities and financial markets turn out to be incomplete this is in sharp contrast with the indeterminacy and non neutrality results established in the literature for incomplete markets economies with exogenously given nominal securities journal of economic literaturclassification numbers d52 g20

rational expectations in microeconomic models an overview abstract this paper is an expository introduction to several topics of current research in the general equilibrium theory of rational expectations more specifically we discuss the existence of exact and approximate rational expectations equilibria the implementation of equilibria the behavior of learning and smoothing processes by which traders construct expectations from repeated observations of the market and the lagged use of the information revealed by prices in an intertemporal sequence of markets the purpose of this discussion is to introduce papers on these topics appearing in the journal of economic theory symposium on rational expectations in microeconomic models

currencies and the allocation of risk the welfare effects of a monetary union in a general equilibrium model with incomplete asset markets nominal securities and mean variance preferences a monetary union is desirable when the gain from eliminating excess volatility of nominal variables exceeds the cost of reducing the number of currencies with which to hedge risks copyright 1998 by american economic association

impact of off farm income on food expenditures in rural bangladesh an unconditional quantile regression approach this study examines the effects of off farm income on food expenditures of rural bangladeshi households our analysis yields unbiased estimates of the unconditional impact of off farm income on food expenditures and reveals the heterogeneous effects that occur across the distribution of total food consumption expenditures the findings suggest that the impacts of off farm income are uniformly positive across the unconditional quantile regression and significantly increase food consumption expenditures for all quantiles except for the 25th quantile in addition we found that schooling experience and location of the household increase the food expenditures of rural households most importantly this article argues that female headed rural households in which the female works off the farm tend to have significantly lower food expenditures

prices asset markets and indeterminacy abstract competitive equilibrium allocations are indeterminate when the net trades in commodities are constrained while the asset market is incomplete the model encompasses economies with deferred payment for commodities economies with nominal assets and economies with bundling of commodities and assets journal of economic literature classification numbers d50 d52

ambiguity aversion and incompleteness of financial markets it is widely thought that incomes risks can be shared by trading in financial assets but financial assets typically carry some risk idiosyncratic to them hence disposing incomes risk using financial assets will involve buying into the inherent idiosyncratic risk however standard theory argues that diversification would reduce the inconvenience of idiosyncratic risk to arbitrarily low levels this argument is less robust than what standard theory leads us to believe ambiguity aversion can exacerbate the tension between the two kinds of risks to the point that classes of agents may not want to trade some financial assets thus theoretically the effect of ambiguity aversion on financial markets is to make the risk sharing opportunities offered by financial markets less complete than it would be otherwise

equilibria with options existence and indeterminacy abstract this paper studies an economy in which trading takes place in spot commodity markets and incomplete futures markets for assets of various types there are real assets stocks or commodity futures options on real assets and a riskless nominal bond we show that for a generic set of economies parametrized by consumers endowments and structure of real assets there exists an equilibrium moreover we show that generically the set of equilibrium allocations of commodities contains a manifold of a high dimension even if the market structure is potentially complete i e the number of assets including options equals or exceeds the number of states of nature and the arrow debreu equilibrium can be achieved through sequential trading in spot and futures markets there are multiple inefficient equilibria without full rank of the asset payoff matrix

decentralized industrialization and rural development evidence from taiwan after 3 decades of growth widespread poverty persists in underdeveloped countries one of the major characteristics of the poor is that a disproportionate number of them are located in rural areas since a large number of the rural poor have limited or no access to productive agricultural land raising agricultural productivity alone may be insufficient to reduce rural poverty consequently attention has now turned to rural nonfarm activities as a possible source of rural employment and income this paper uses evidence from taiwan to show that the level of rural nonfarm ac

allocative effects of financial assets and the long run neutrality of money when markets are incomplete abstract we analyze the allocative role of money as a numeraire in an intertemporal general equilibrium model with incomplete financial markets and nominal financial instruments it is shown that regardless of their return specification nominal assets in net supply increase the consumption risk and trigger an endogenous monetary process which diminishes the influence of these assets on the equilibrium allocation through time the nonneutrality of money claimed in the recent literature is a temporary phenomenon only asymptotically the traditional neutrality theorems are valid

stationary monetary equilibria in overlapping generations models with incomplete markets abstract the objective of this paper is to study the stationary monetary equilibria of a stochastic overlapping generations model with a general incomplete asset structure it is proved that a stationary equilibrium with a nonzero price of money generically exists and is locally isolated when there is outside money for an open set of economies there is an equilibrium with positive money prices in all states the equilibrium is also given a neat characterisation in terms of the properties of the underlying state prices with only inside money there will instead be a continuum of equilibria journal of economic literature classification numbers d52 d90 e40

an inquiry into the development process of village industries the case of a knitwear cluster in northern vietnam abstract while village industries are known to have high potential to grow their growth process has seldom been analysed this study explores the development process of a rapidly growing village based garment cluster in northern vietnam we found that both the human capital and social capital measured by the kinship ties with overseas vietnamese traders of the proprietors facilitated their innovative entry into new export markets furthermore general human capital acquired by schooling and specific human capital acquired by management experience are found to have contributed to the adoption of a vertically integrated production system which in turn contributed to enhanced enterprise performance

complementarity between import competition and import promotion abstract growth in the import competing output is usually accompanied by a decline in the volume of imports of the product this result may change when we consider intermediate goods we develop a multi sector general equilibrium model to show that larger local output of an intermediate good may also imply larger imports of the same journal of economic literature classification numbers f1 f11 f13

market uncertainty correlated and sunspot equilibria in imperfectly competitive economies first version received june 1988 final version accepted november 1990 eds an imperfectly competitive economy is very prone to market uncertainty including uncertainty about the liquidity or thickness of markets we show in particular that there exist stochastic equilibrium outcomes in nonstochastic market games if and only if the endowments are not pareto optimal we also provide a link between extrinsic uncertainty arising in games e g correlated equilibria and extrinsic uncertainty in market economies e g sunspot equilibria a correlated equilibria to the market game is either a sunspot equilibrium or a non sunspot equilibrium to the related securities games but the converse is not true in general

growth and distress in a south indian peasant economy during the era of economic liberalisation this article analyses the impact of agricultural liberalisation on different farming classes in the region of telangana in south india the region has been witnessing significant growth in real agricultural output over the last 15 years at the same time as nss national sample survey household survey data indicate there have been significant welfare declines not only for marginal farmers and landless labour but for other groups as well there have also been more than a thousand farmer suicides between 1998 and 2002 i argue in this article that during the liberalisation period that is post 1990 agricultural growth and increased distress have become mutually intertwined i use the terms growth inducing distress and distress inducing growth to explain this apparent paradox

the structure of sunspot equilibria the role of multiplicity this paper examines the structure of sunspot equilibria in a standard two period exchange economy with real assets we show that for a generic choice of utility functions and endowments there exists an open set of real asset structures whose payoffs are independent of sunspots such that the economy with this asset structure has a regular sunspot equilibrium an important implication of our result is that the multiplicity of non sunspot equilibria is not necessary for the existence of sunspot equilibria our technique is general and can be applied to show the existence of sunspot equilibria in other frameworks this paper analyses the structure of sunspot equilibria in a standard two period competitive exchange economy with more than one consumption good in each period and a real asset which pays a bundle of commodities there is no uncertainty except for sunspots we show that for an open and dense subset of the set of utility functions and endowments there exists an open set of real asset structures with payoffs independent of sunspots such that the resulting economy with an asset structure in this set has a regular sunspot equilibrium we also show that this result is tight in the space of utility functions endowments and asset structures there is in fact an open set of economies for which sunspot equilibria do not exist moreover our argument provides a systematic method which allows us to find generically all the sunspot equilibria of a given economy thus it can be used as a tool for studying the global structure of the set of sunspot equilibria not just the existence of a sunspot equilibrium the dependence of the existence of sunspot equilibria on the particular specification of the payoff of the asset provides an interesting contrast with the fact that the set of equilibrium allocations of the underlying certainty economy does not depend on the asset structure recall that when markets are complete preferences and endowments completely determine the set of competitive equilibria in our setting markets are complete in the underlying certainty economy so if payoffs change the price of the asset will change accordingly but there is no effect on the equilibrium consumption of the certainty economy thus the fundamentals of the certainty economy are the distribution of endowments and preferences among consumers and our result implies that the existence of sunspot

a sparsity based model of bounded rationality this article defines and analyzes a sparse max operator which is a less than fully attentive and rational version of the traditional max operator the agent builds as economists do a simplified model of the world which is sparse considering only the variables of first order importance his stylized model and his resulting choices both derive from constrained optimization still the sparse max remains tractable to compute moreover the induced outcomes reflect basic psychological forces governing limited attention the sparse max yields a behavioral version of basic chapters of the microeconomics textbook consumer demand and competitive equilibrium i obtain a behavioral version of marshallian and hicksian demand arrow debreu competitive equilibrium the slutsky matrix the edgeworth box roy s identity and so on the slutsky matrix is no longer symmetric nonsalient prices are associated with anomalously small demand elasticities because the consumer exhibits nominal illusion in the edgeworth box the offer curve is a two dimensional surface rather than a one dimensional curve as a result different aggregate price levels correspond to materially distinct competitive equilibria in a similar spirit to a phillips curve the arrow debreu welfare theorems typically do not hold this framework provides a way to assess which parts of basic microeconomics are robust and which are not to the assumption of perfect maximization jel codes d01 d03 d11 d51

options sunspots and the creation of uncertainty we present two examples in which the addition of an option market leads to sunspot equilibria despite the fact that no sunspot equilibria exist without the market these examples highlight limitations in two prevalent views of option markets it is often assumed that option markets help complete otherwise incomplete markets we demonstrate that they can instead increase the number of events agents wish to insure against as in black and scholes it is often assumed that option markets are redundant we demonstrate that an option market may not be redundant even when markets were complete before its introduction

trade and revelation of information abstract we consider an economy with asymmetric information and two types of agents fully informed and uninformed uninformed agents update their information observing equilibrium prices and the equilibrium levels of other agents excess demand we show that for a generic set of economies there are rational expectations equilibria which are partially revealing on an open dense set of signals of positive lebesgue measure provided that the dimension of the signal space is sufficiently larger than the dimension of the commodity space

a role for monetary policy when prices reveal information an example in an example monetary policy can determine the information revealed by prices and thus it can be effective monetary policy that varies only with public information can guarantee the full revelation of information at equilibrium which is optimal full indexation need not attain full revelation and as a consequence need not implement an optimal allocation

transformation of the rural economy in the philippines 1988 2006 abstract this research explores the changing structure of the rural economy in the philippines from 1988 to 2006 we found that the expansion and upgrade of infrastructure such as electricity and roads and investment in secondary and tertiary education are important factors that induced the economic transformation of the rural economy the importance of higher education as an entry requirement to the nonfarm labor market has declined over time indicating that the rural nonfarm sector has been increasingly providing employment opportunities to the unskilled and the uneducated who form the bulk of the rural poor

regionalism and the bias against agriculture in less developed countries panel survey data play a crucial role in producing estimates on welfare dynamics as well as insights into transformation processes in developing economies panel survey data are indispensable for effective policy advice for poverty reduction and growth fielding and maintaining a good quality panel survey requires investment in financial and technical resources as well as careful planning especially in developing countries statistical techniques can also be employed to produce estimates on poverty dynamics as an alternative methodology but a new hybrid approach can combine the advantages of both methods

economic reforms in india since 1991 has gradualism worked opinions on the causes of india s growth deceleration vary world economic growth was slower in the second half of the 1990s and that would have had some dampening effect but india s dependence on the world economy is not large enough for this to account for the slowdown critics of liberalization have blamed the slowdown on the effect of trade policy reforms on domestic industry however the opposite view is that the slowdown is due not to the effects of reforms but rather to the failure to implement the reforms effectively this in turn is often attributed to india s gradualist approach to reform which has meant a frustratingly slow pace of implementation however even a gradualist pace should be able to achieve significant policy changes over ten years this paper examines india s experience with gradualist reforms from this perspective

explanations of unemployment economists commonly distinguish between two sorts of unemployment roughly speak ing the involuntarily unemployed workers are unwillingly out of work i e they feel that they would be better off with jobs on the other hand the voluntarily unemployed workers prefer to be out of work for any of a wide variety of reasons e g because they are searching or training for a job or because they choose leisure over work

informal employment in developing countries opportunity or last resort there is an ongoing debate among researchers and policy makers whether informal sector employment is a result of competitive market forces or labor market segmentation more recently it has been argued that none of the two theories sufficiently explains informal employment but that the informal sector shows a heterogenous structure for some workers the informal sector is an attractive employment opportunity whereas for others rationed out of the formal sector the informal sector is a strategy of last resort to test the empirical relevance of this hypothesis we formulate an econometric model which allows for several unobserved segments within the informal sector and apply it to the urban labor market in cote d ivoire

the generic existence of rational expectations equilibrium in the higher dimensional case abstract the study of the generic existence of rational expectations equilibrium has concentrated on three cases according to whether the space of states of private information has dimension less than equal to or greater than the price space previous results have shown that in the first case fully revealing equilibria exist generically and in the second case there are open sets of environments with no equilibrium this paper shows that in the third case there is a residual set of environments which permits equilibria which are arbitrarily close to fully revealing

a general equilibrium analysis of option and stock market interactions the traditional pricing methodology in finance values derivative securities as redundant assets that have no impact on equilibrium prices and allocations this paper demonstrates that when the market is incomplete primary and derivative asset markets generically interact the valuation of derivative and primary security prices depend on the contractual characteristics of the derivative assets available in a version of the mossin mean variance model the authors analyze an equilibrium in which a call option derivative asset is traded and the equilibrium stock price primary asset increases when the options market is opened copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

notes on sequence economies transaction costs and uncertainty abstract a sequence economy is an economy with trade at every date and state it is inessential if its equilibria coincide with those of the corresponding arrow debreu economy we examine some of the conditions for essentiality 1 if there are transaction costs then even if all states of nature are spanned by the securities the economy is generically essential 2 in the absence of transaction costs we show by examples that spanning is neither necessary nor suficient for inessentiality the former because some state distinctions may be irrelevant the latter because of possible multiple spot equilibria for a given state 3 we speculate on the possibility that price contingent securities might complete the markets and more generally on the idea of endogenous uncertainty journal of economic literature classification number c62

stochastic equilibria with incomplete financial markets abstract we demonstrate the existence of equilibria with incomplete financial markets for stochastic economies whose information structure is given by an event tree restricting attention to purely financial securities those paying in units of account e g dollars financial markets may be incomplete some consumption streams may be impossible to obtain by any trading strategy securities may be individually precluded from trade at arbitrary states and dates sufficient conditions for the existence of stochastic equilibria are continuous convex strictly monotonic preferences and strictly positive aggregate endowments these conditions are weakened a corollary states that any regime of security prices precluding arbitrage can be embedded in an equilibrium

inflation stabilization risk in economies with incomplete asset markets abstract in economies with high inflation nominal financial markets disappear in the context of a general equilibrium model with incomplete asset markets this paper shows that this phenomenon can be explained by an inflation process characterized by a high expected inflation coupled with a low probability of a stabilization of the price level and that the disruption of trade in nominal contracts is socially costly

sequentially complete markets remain incomplete we show by means of an example that the result of arrow arrow k j 1953 le role des valeurs boursieres pour la repartition la meilleure des risques econometrie 41 47 cnrs paris translated as the role of securities in the optimal allocation of risk bearing review of economic studies 31 91 96 is problematic when there exist multiple equilibrium continuations to the initial period component of an intertemporal equilibrium

insiders and outsiders in wage determination a firm starts with a group of insiders or seasoned workers there is also a large pool of outsiders who are initially less productive but are transformed into insiders after one period of employment the firm gains from having a large pool of insiders some of whom may be laid off in bad years insiders gain from keeping their numbers small if the insiders set their wage unilaterally they will choose a path that in this extreme case prevents employment of outsiders even if future employment prospects are good if the wage path is set by bilateral bargaining the extra advantage to the firm permits employment of some outsiders in some situations

partial revelation with rational expectations we exhibit a partially revealing rational expectations equilibrium where no individual knows the state of the world or the quantities traded by any other individual c 1998 academic press

unemployment and the efficiency wage hypothesis there has been much recent discussion of the reasons why prices in certain markets and in particular in labour markets may not adjust to eliminate excess supply the absence of speedy adjustment of prices is an essential feature of the recent models of disequilibrium macroeconomics but for the most part no explanation for this absence is provided from within those models one explanation that has been around in the literature for some time and has been receiving increasing attention recently is the efficiency wage hypothesis initially applied to developing economies see leibenstein i957 it has more recently been adapted to developed economies by weiss i 980 and used in the context of a keynesian macroeconomic model by hart i 980 similar concepts have been applied to the credit market by stiglitz and weiss i98i the purpose of the present paper is to explore further the conditions under which the notion of an efficiency wage is applicable and can provide an explanation of involuntary unemployment the essential feature of the efficiency wage hypothesis is that the productivity of a firm s employees increases as their wage is increased at least over an economically relevant part of its range if the wage paid by the firm is denoted by w the number of employees by l and the productivity of each employee by p w where p w o then the effective labour force of the firm e can be represented by

the rural non farm sector issues and evidence from developing countries abstract the rural non farm sector has traditionally been viewed as a low productivity sector which produces low quality goods it is often expected to wither away as a country develops recent years have seen a shift away from this position towards recognition that the rural non farm sector can and often does contribute to economic growth rural employment poverty reduction and a more spatially balanced population distribution this paper reviews the literature on the conceptual and empirical underpinnings of this more recent perspective focussing on the experience in developing countries the paper documents the size and heterogeneity of the sector pointing to evidence that in many countries the sector is expanding rather than declining the issues associated with measuring the sector s economic contribution are discussed followed by empirical assessments for several countries and regions the distributional impact of non farm earnings is examined and it is found that a pro poor impact while by no means inevitable can be considerable the sector s trajectory over time in different settings is reviewed and the scope for and experience of various policy interventions is discussed

the organisational morphology of rural industries and its dynamics in liberalised india a study of west bengal the paper presents an empirical investigation into alternative forms of organisation of rural industries and their dynamics in the post reform period of india by means of a field survey carried out in the state of west bengal in 2001 02 the selected industries handloom brassware hornware clay works conchshell and lac works all belong to traditional crafts the major organisational forms are independent units and tied units the latter being tied to traders and or master enterprises for raw materials and work orders each of which account for more than 40 of our sample units the third form cooperative units is clearly in the decline tied units appear to define the upcoming trend bringing the forces released by liberalisation e g the growth of exports drawn to the level of village artisans in particular the system appears to be a vehicle for product differentiation and innovation both of which are very much evident in our study area copyright the author 2008 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

equilibrium in economies with incomplete financial markets abstract this paper analyses an exchange economy in the absence of arrow debreu complete markets it is assumed that trading takes place in the sequence of spot markets and futures markets for securities payable in units of account unlimited short selling in securities is allowed a general equilibrium in such an economy is a set of current and future prices contingent on uncertain events and a set of individual plans such that all markets are cleared the existence of such an equilibrium is proved under usual assumptions this is in contrast to the case of futures markets for contingent futures commodities where an equilibrium may not exist the optimality of equilibrium allocations is also discussed

agriculture in the process of development a micro perspective abstract this paper compares national level data from india with 40 years of household panel data from rural india to track sectoral changes in employment and income as well as examine the hypothesis of induced innovation in agricultural production in the national data india appears to be in the midst of a structural transformation the share of agriculture in gdp and employment has shrunk while agricultural output continues to grow this productivity growth appears to adhere to the induced innovation hypothesis as productivity per hectare has increased more rapidly than productivity per worker many of the same patterns exist in the household data tracking households across time i observe agricultural output has increased despite more households engaging in off farm labor household agricultural production is highly specialized and has increased its reliance on improved inputs however while agricultural income has grown industrial and service income has remained stagnant and the relative income of these households has declined in recent years

generic existence of completely revealing equilibria for economies with uncertainty when prices convey information conditions which imply the existence of strict rational expectations equilibria for most static pure exchange economies where prices convey information about the state of the world are analyzed information is aggregated and transmitted by prices because agents have different initial information and maximize the conditional expectation of state dependent utility functions major results state that if with probability one agents characteristics do not vary too much as the state of the world varies then generically there exist equilibrium price functions which reveal all initial information more precisely if the support of the image measure is contained in a compact c1 manifold satisfying some technical conditions which is of sufficiently low dimension relative to the number of commodities then existence of completely revealing equilibria is generic any economy satisfying these assumptions can be approximated by a sequence of economies which also obey these assumptions and have completely revealing equilibrium price functions slight perturbations do not destroy the existence property

equilibrium in economies with financial markets uniqueness of expectations and indeterminacy abstract we consider two period pure exchange economies with uncertainty and complete or incomplete asset markets assets are nominal if the number of agents and of period zero commodities is large enough there is a dense residual set of economies parametrized by utility functions such that for each pair of distinct financial equilibria spot zero equilibrium prices are different agents observing first period equilibrium prices can formulate exact forecasts on future equilibrium prices notwithstanding the real indeterminacy of the set of financial equilibria if the asset market is complete the result is true for an open and dense set of economies journal of economic literatureclassification numbers d52 d80

testing for time variation in an unobserved components model for the u s economy abstract this paper analyzes the amount of time variation in the parameters of a reduced form empirical macroeconomic model for the u s economy we decompose output inflation and unemployment in their stochastic trend and business cycle gap components with the latter linked through the phillips curve and okun s law a novel bayesian model selection procedure is used to test which parameters vary over time and which components exhibit stochastic volatility using data from 1959q2 to 2014q3 we find substantial time variation in okun s law while the phillips curve slope appears to be stable stochastic volatility is found to be important for cyclical shocks to the economy while the volatility of permanent shocks remains stable

equilibrium indeterminacy in a model of constrained financial markets i present a general equilibrium model with incomplete markets in which assets pay in units of a numeraire good in this economy agents are constrained to negotiate the same amount of assets in different states of the world different from the standard result of economies with real assets equilibrium indeterminacy can arise depending on the structure of the financial markets equilibrium fails to be unique when it is not possible to transfer wealth between states in which consumers trade a pair of assets that face the same restriction

job security work incentives and unemployment this paper analyzes how firms can use job security as an incentive mechanism the author examines how macroeconomic job security measured by the reemployment probability may affect productivity differently from microeconomic job security measured by the probability of being retained the authors describe the circumstances under which job security stimulates work effort then incumbent workers insiders may have an opportunity to raise their wages above the market clearing level without being replaced by unemployed workers outsiders in this context involuntary unemployment can arise copyright 1988 by the editors of the scandinavian journal of economics

real indeterminacy with financial assets abstract it is shown that in a two period general equilibrium securities model where assets pay in money the generic dimension of the set of equilibrium allocations in the incomplete market situation is s 1 where s is the number of assets hence the degree or real indeterminacy is independent of the number of assets this result requires beyond fewer assets than states that the number of traders be larger than the number of securities and that the asset return matrix be in general position the generic dimension for arbitrary returns matrix is also obtained it is argued in addition that the presence of real or mixed assets does not by itself lower the degree of indeterminacy

insider trading in a rational expectations economy it is often argued that efficiency considerations require society to freely permit insider trading in this article an opposing efficiency argument is formalized the model incorporates an investment stage followed by a trading stage if outsiders expect insiders to take advantage of them in trading outsiders will reduce their investment the insiders loss from this diminished investor confidence may more than offset their trading gains consequently a prohibition on insider trading may effect a pareto improvement insiders are made better off if they can precommit not to trade on their privileged information govemment regulation accomplishes exactly this jel 022 026 313 the traditional rationale articulated for insider trading regulation and other securities law is that such rules promote confidence in markets indeed president franklin d roosevelt justified the first major u s securities legislation by saying it should give impetus to honest dealing in securities and thereby bring back public confidence similar language is still invoked half a century later in connection with enforcement efforts against insider trading and in proposals for tightened stock

asset pricing and the role of money in an intergenerational economy this note is an attempt to check the robustness of money in the utility function miuf models the parametrization of the utility of money is an ad hoc constraint on the economic model which does not reveal its underlying relation to the parameters of the environment such as tastes technology and endowments from which it arises in particular the various parametrizations do not suggest any interpretation in terms of different roles for money in the exchange process it thus appears that the usefulness of miuf models in economic theory depends critically on the issue of whether or not their qualitative properties are sensitive to the specification of money in the utility function we show that important qualitative conclusions hinge critically on the time specification of the monetary variables which are included in the utility function in particular the ability of common stocks to provide protection against inflation resulting from monetary and real shocks respectively depends sensitively on the way the liquidity services of money are parametrized in the individual preferences

equilibrium in capm without a riskless asset in the mean variance capm without a riskless asset the possibility of satiation sometimes leads to non existence of general equilibrium moreover because portfolio preferences are not necessarily monotone equilibrium asset prices when they exist may be negative or zero to demonstrate the possibility of non existence and to develop an intuitive understanding of when and why equilibrium does or does not exist this paper fully investigates the special case of utility functions linear in mean and variance and partially extends the results to the general case

economic reform and informal wage a general equilibrium analysis abstract we attempt to trace the consequences of liberal economic policies on informal wage in a general equilibrium model with formal informal labor markets wage differential vertical linkage and restricted capital movement in particular we show that the informal wage representing income for a vast segment of unskilled labor may actually increase even if more people are employed in the informal segment this also confirms that a contraction in the formal sector employment and the consequent expansion in the informal segment do not necessarily imply impoverishment of the existing set of informal workers

agricultural productivity growth rural economic diversity and economic reforms india 1970 2000 a salient theme in d gale johnson s work is the importance of agricultural development for general prosperity and for economic diversification e g johnson 2000 johnson has also noted that most of the world s poor are engaged in farming so that a key focus of development policy is to raise the incomes of farmers from a global perspective increasing the productivity of agriculture given the fixity of land is necessary for both poverty reduction and the development of the nonagricultural sector at the level of the world agricultural productivity gains poverty reduction and the growth of the nonfarm sector are complements however the question remains whether these observations imply that every poor country should focus its public resources on agricultural development in order to raise the incomes of people now engaged in farming and whether such a policy is necessary for obtaining economic diversity in this article we use the experience of india over the past 30 years to address the issue of whether agricultural technical change actually leads to economic diversification and income growth within the rural sector in the context of an open economy country in which there are cross area trade and capital flows we focus in particular on the rural sector because this is the sector in which linkages between agricultural and nonagricultural sectors are thought to be the strongest we exploit the fact that india has maintained a policy of openness with respect to agricultural technology over this period permitting and actively supporting agricultural development and has moved to a reformed regime in which goods are traded and capital is more mobile in the 1990s evidence on the relationship between agricultural growth and nonfarm

another look at the east asian miracle this article examines the main ingredients of the east asian success story in each subphase of its post war transition growth process it focuses mainly on taiwan china with comparative side glances at the republic of korea the initial conditions facing the region were favorable especially in taiwan china the early import substitution subphase was unusually mild and contributed to the emergence of strong linkages between agricultural and nonagricultural activities subsequently flexible labor markets human capital policies and major macro and structural policy reforms culminated in an increasingly export oriented industrialization effort once labor surpluses were ultimately exhausted government policies accommodated taiwan china s entry into the technological era of the 1970s and 1980s during the past four decades of a signally successful transition growth effort public policies in east asia have consistently accommodated the changing needs of the economy rather than guide its path directly copyright 1995 by oxford university press

portfolio choice exchange rates and indeterminacy consider an exchange economy under uncertainty the asset market is incomplete there are fewer assets a than states of nature s assets are nominal and are denominated in n distinct currencies competitive equilibria are distinct if the associated allocations are distinct an economy displays k degrees of indeterminacy if the set of distinct competitive equilibria contains a k dimensional open set generically the economy displays ns a n 1 n degrees of indeterminacy

rural nonagricultural activities in development theory and application abstract this paper focusses on the potentially important role of rural nonagricultural activity in the development process using the hymer resnick z goods model as a point of departure we first show that its pessimistic conclusions are based on rather restrictive assumptions as applied to the colonial period we relax these assumptions indicating the theoretical possibility of a substantially more positive scenario for that period subsequently we analyze the role of z goods traditional and nontraditional in the post independence era again distinguishing between archetypal pessimistic and optimistic cases finally the comparative historical experience of the philippines and taiwan is brought to bear to illustrate the argument empirically

perils of unconventional monetary policy abstract unconventional monetary policy by relaxing restrictions on the composition of the balance sheet of the central bank compromises control over the stochastic path of inflation or in open economies over the stochastic path of exchange rates if the composition of the balance sheet is unrestricted then the path of inflation is indeterminate this is the case under pure quantitative easing where the target is the size of real money balances in contrast credit easing policies restrict the composition of the portfolio by targeting a specific expansion in the maturity profile of bonds bought and thus can implement a determinate path of inflation the composition of the portfolios traded by monetary fiscal authorities also determines premia in asset and currency markets

non farm activity household expenditure and poverty reduction in rural vietnam 2002 2008 summary diversifying into non farm activities has been suggested as an effective way out of poverty for rural households in developing countries using the vietnamese household living standards surveys of 2002 2004 2006 and 2008 we test this claim and investigate the effect of non farm sector involvement on poverty and expenditure growth our endogeneity corrected estimates show that an additional household member involved with non farm activity reduces the probability of poverty by 7 12 and increases the household expenditure by 14 over a two year period our findings also indicate that non farm involvement reduces the hours worked on farm but not the household agricultural income

the firm as a community explaining asymmetric behavior and downward rigidity of wages abstract this paper models the firm as a community a la akerlof akerlof g a 1980 a theory of social custom of which unemployment may be one consequence quarterly journal of economics 94 749 775 to account for asymmetric behavior and in particular downward rigidity of wages it is shown that through social interaction among workers in the firm community wage cuts can give rise to a large discontinuous fall in labor productivity known as catastrophe furthermore this large fall in labor productivity will persist or display inertia known as hysteresis even if the wages are restored to the pre cut level and beyond our catastrophe hysteresis finding with respect to wage cuts can rationalize the downward rigidity of wage behavior and is consistent with the interview evidence of fragile worker morale emphasized by bewley bewley t f 1999 why wages don t fall during a recession harvard university press cambridge and others in explaining why employers are sensitive to and refrain from cutting worker pay

the determination of union and non union wage rates abstract if in a partially unionised economy union workers force up their absolute wage rate how does this affect the wage paid in the non union sector this paper suggests a simple answer first in a small open economy a rise in the union wage will raise the non union wage secondly in a closed economy or one with some monopoly power in world trade a rise in the union wage seems likely to depress the non union wage

endogenous price fluctuations in an optimizing model of a monetary economy this paper demonstrates that an optimizing model of a monetary economy can produce perfect foresight equilibria in which the price level fluctuates forever cyclically or chaotically fluctuating equilibria are more likely to exist when the rate of money supply growth is high furthermore the set of equilibrium prices may have a complicated topological structure which poses a more serious problem concerning the validity of comparative statics method than any sort of indeterminacy previously discussed in the literature copyright 1991 by the econometric society

the revelation of information and self fulfilling beliefs abstract at a rational expectations equilibrium ree individuals are assumed to know the map from states to prices this hypothesis has two components that agents agree consensus and that they have point expectations degeneracy we consider economies where agents beliefs are described by a joint distribution on states and prices and these beliefs are fulfilled at equilibrium beliefs are self fulfilling if every price in the support of the distribution is an equilibrium price the corresponding equilibria are beliefs equilibria be the further restriction that agents have the same beliefs results in common beliefs equilibria cbe we study the relationship between be cbe and ree thus isolating the role of consensus and of degeneracy in achieving rational expectations journal of economic literatureclassification numbers d51 d82

partially revealing rational expectations equilibrium in a competitive economy abstract a class of pure exchange economies is considered in which some agents are informed of private information and others are uninformed existence of a partially revealing rational expectations equilibrium ree is proved without restricting attention to particular functional forms for utility functions and probability distributions without introducing noise into the model and without departing from the standard definition of ree the equilibrium is robust in the sense that if the primitives of the economy are slightly perturbed the economy continues to have a qualitatively similar ree with somewhat stronger assumptions placed on the economy the equilibrium is also the unique measurable ree

stationary equilibria with incomplete markets and overlapping generations recent work on general equilibrium models with incomplete financial markets has demonstrated that when assets pay off in units of account equilibrium prices and allocations are indeterminate the equilibria in such models are also generically constrained suboptimal a central planner can typically reallocate assets in such a way as to pareto dominate the competitive equilibrium in this paper the authors consider an overlapping generations model with incomplete markets in which one asset is fiat money they show that when outside money has value in equilibrium the stationary equilibrium prices and allocations are both locally isolated and constrained optimal copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

existence of equilibrium in capm abstract in the mean variance capital asset pricing model capm non monotonicity of preferences may lead to satiation and short selling as well as satiation may lead to non existence of equilibrium this paper identifies several sets of sufficient conditions for equilibrium to exist the nature of the central conditions is to impose bounds on the investors degree of risk aversion as measured by the marginal rate of substitution between mean and standard deviation of return these bounds do not need to hold globally but only in a relevant range of portfolios or combinations of mean and standard deviation

on trees and logs abstract in this paper we contrast the main workhorse model in asset pricing theory the lucas 1978 tree model lt model to a benchmark model in financial equilibrium theory the real assets model ra model it is commonly believed that the two models entail similar conclusions since the lt model is a special case of the ra model but this is simply wrong implications of these models can be strikingly at odds indeed under the widely used log linear specification of households preferences we show that for a large set of initial endowments the lt model even with potentially complete financial markets admits only peculiar financial equilibria in which the stock market is completely degenerate in that all stocks offer the same investment opportunity and yet allocation is pareto optimal we investigate why the lt model is so much at variance with the ra model and uncover new results on uniqueness of financial equilibria and introduction of portfolio constraints obtaining in the lt model but not in the ra model