incentives productivity and labor contracts the relationship between age earnings profiles and worker incentives is examined by contrasting wage and salary workers with the self employed it is argued that the steepness of wage and salary workers age earnings profiles reflects the desire to provide work incentives to those workers since self employed workers do not face this agency problem they are used as a benchmark to gauge productivity empirical support of the proposition is provided and the effects of human capital accumulation are separated empirically from incentive effects the most important conclusion is that under some strong assumptions most of the slope in age earnings profiles is accounted for by the desire to provide incentives rather than by on the job training

job tenure and joblessness of displaced workers selective search where unemployed job losers confine their job seeking efforts to matches in the pre separation sector has attracted considerable attention as a possible source of high and persistent unemployment however this idea is questionable

clearinghouse banks and banknote over issue abstract the paper presents a model of banks as clearinghouses of private debt where money is used as the means of payment implications of the model include i the private provision of banknotes or a discount window may be needed to avoid the insufficient debt clearing that results from an inflexible currency stock and ii an uncontrolled total money stock may result in a multiplicity of equilibria including an inflationary banknote over issue

payments systems and monetary policy abstract a dynamic spatial model is constructed where there is a role for money and for centralized payments arrangements and where there are aggregate fluctuations driven by fluctuations in aggregate productivity with decentralized monetary exchange and no centralized payments arrangements there is price level indeterminacy and the equilibrium allocation is inefficient a private clearinghouse arrangement improves efficiency but produces a real indeterminacy the pricing of daylight overdrafts is irrelevant for the equilibrium allocation efficiency is achieved with a zero nominal interest rate on overnight central bank lending or through private overnight interbank lending

technological change and retirement decisions of older workers according to human capital theory technological change will influence the retirement decisions of older workers in two ways first workers in industries with high rates of technological change will retire later if there is a net positive correlation between technological change and on the job training second an unexpected change in the rate of technological change will induce older workers to retire sooner because the required amount of retraining will be an unattractive investment we matched industry data on productivity growth and occupational data on required training with data from the national longitudinal surveys of older men to test these hypotheses our results support both hypotheses

understanding the macroeconomic impact of illiquidity shocks in the united states in this paper we empirically investigate the role of stock market illiquidity shocks stemming from amihud s illiquidity measure in explaining u s macroeconomic fluctuations from 1973 to 2018 we find that the impact of illiquidity shocks on economic activity is substantial and historical decomposition analysis shows that cumulative illiquidity shocks were an essential contributor to the prolonged economic slump of the great recession moreover our identified illiquidity shocks represent a distinct source of macroeconomic instability this suggests that illiquidity shocks measured by the stock price impacts may contain more information than other types of shocks in recent studies such as financial shocks and uncertainty shocks jel c32 e32

a test of lazear s theory of delayed payment contracts according to lazear workers and firms enter into long term implicit contracts that discourage shirking and malfeasance by shifting compensation to the end of the contract such delayed payment contracts are less likely to occur in jobs in which it is comparatively simple to monitor worker effort this paper uses data from the national longitudinal survey and the dictionary of occupational titles to test that hypothesis in particular it tests whether jobs that involve repetitive tasks tend to be characterized by an absence of pensions mandatory retirement long job tenures and high wages for older workers

payment economics studying the mechanics of exchange abstract the five papers that follow this essay were presented at the federal reserve bank of richmond s conference on payment economics held october 23 24 2000 in williamsburg virginia the conference was motivated by the convergence of lines of research in monetary and banking theory that are focused on the institutional arrangements that facilitate exchange at the same time central bank policymakers concerned about the efficiency implications of their involvement in and regulation of clearing and settlement arrangements increasingly seek an economic understanding of these activities it appears that a distinct and coherent field of inquiry is emerging focused on the mechanics of exchange this field which we call payment economics studies both the instruments agents use to make payments and the central role of bank intermediation in facilitating the use of private liabilities in exchange

unemployment insurance recall expectations and unemployment outcomes this paper empirically examines the importance of explicitly accounting for the layoff rehire process in the analysis of unemployment outcomes in the united states we find that the spells of individuals who initially expect to be recalled account for much more of the unemployment of unemployment insurance ui recipients than do spells actually ending in recall our results indicate that the recall and new job escape rates from unemployment have quite different time patterns and are often affected in opposite ways by explanatory variables we also find that the probability of leaving unemployment both through recalls and new job finding increases greatly around the time that ui benefits lapse over the past fifteen years many studies have empirically analyzed the determinants of individual unemployment spell durations in the united states much of this literature has used a job search framework in which the unemployed are viewed as permanently displaced workers who are unattached to jobs the possibility of recall to a former job a process not requiring search has been omitted from explicit consideration in the majority of these studies 2 an explicit treatment of the layoff rehire process is necessary for a proper understanding of the determinants of unemployment durations and of the impacts of unemployment policies in the united states for at least three reasons first temporary layoffs in which workers are often rehired by their original employers are a quantitatively quite important feature of the u s labor market 3 second expectations concerning the likelihood of recall are likely to affect the responses of employers and unemployed workers to labor market interventions such as reemployment bonuses and subsidies

a divisible search model of fiat money this paper extends the kiyotaki wright search model of fiat money to allow for divisible money and goods the extension allows me to examine the standard issues in monetary economics such as the neutrality and superneutrality of money by severing the artificial link in the kiyotaki wright model between the money supply and the number of money holders it is shown that money is neutral but not superneutral money growth generates a trading opportunity effect it changes the fraction of different agents in the economy and hence changes the probability with which agents have a successful match in addition money growth has a negative effect on the real money balance that is familiar in walrasian monetary models the balance of the two effects can imply a positive optimal money growth rate

bank regulation as an antidote to price level instability abstract we use an overlapping generations model with a risky storage technology to describe a new type of sunspot equilibrium characterized by excessive price level volatility and overinvestment in stored goods the features of this equilibrium lead us to interpret it as involving speculation and as arising when banks create excessive quantities of money this interpretation provides welfare justification for imposing quantity limits on the bank money stock we argue that the monetary regime established in england under peel s act imposed such a quantity limit our findings support quantity theorists traditional view that the possibility of overissue provides a rationale for bank regulation

a model of the federal reserve act under the international gold standard system abstract freeman am econom rev 86 1996a 1126 shows that an elastic money supply enhances the efficiency of monetary equilibrium by clearing default free debts at par value in the domestic credit market this research adds a foreign exchange market to freeman s model and extends his analysis into a two country model in which the arrival rates of agents are not equal between the two countries in this model an elastic money supply in the foreign exchange market to clear the exchange of fiat monies at gold standard parity accompanied by an elastic money supply in the domestic credit market could improve the efficiency of monetary equilibrium

a theory of wage dynamics a dynamic equilibrium model of long term implicit labour contracts under incomplete but symmetric information is developed workers are assumed to be risk averse and of unknown ability or productivity risk neutral firms learn as do workers about each worker s productivity by observing the worker s output over time it is shown that equilibrium contracts provide for wages which never decline with age and increase only when the worker s market value increases above his current wage in addition to characterizing the equilibrium wage contract we also derive some of its implications for the behaviour of aggregate wages across various groups of workers these implications explain some findings in the recent empirical literature on ageearnings profiles in particular our model can explain why earnings may be positively related to experience even after controlling for productivity as some empirical studies have indicated

survival duration of plants evidence from the us petroleum refining industry abstract this paper presents a duration analysis on the survival of us petroleum refining plants for the 1981 1986 period when the industry as a whole declines in response to the decontrol of crude oil markets the purpose is to examine the duration dependence and determinants of post deregulation plant lifetimes the weibull model with the correction for unobserved individual heterogeneity provides a better fit to the data empirical results show that plant size age regulatory subsidies technology use and multiplant coordination are key determinants of refinery life duration after deregulation in addition major integrated oil companies tend to make timely restructuring via refinery closures and sales the interactive effects of size and technology use and of multiplant coordination and integrated organization are also important to the refinery survival

financial crises bank risk exposure and government financial policy a macroeconomic model with nancial intermediation is developed in which the intermediaries banks can issue outside equity as well as short term debt this makes bank risk exposure an endogenous choice the goal is to have a model that can not only capture a crisis when banks are highly vulnerable to risk but can also account for why banks adopt such a risky balance sheet in the rst place we use the model to assess quantitatively how perceptions of fundamental risk and of government credit

costly employment contract renegotiation and the labor mobility of young men the distinction of quits and permanent layoffs remains a contentious issue in the labor economics literature basically there appear two contrasting views of such turnover while both interpretations of turnover are derived from job matching models that assume wealth maximizing behavior of workers and firms each involves different assumptions about the feasibility of individual labor contract negotiations following hire on the one hand application of the coase theorem to employment contracts implies that turnover will occur only when the value of the worker s product in some alternative employment exceeds current job productivity since the actual division of the job match rent is assumed costlessly renegotiable only the presence of a truly more productive job assignment would prevent the renegotiation of the current rent sharing contract to the mutual benefit of both worker and firm the likelihood of a job change is thus directly related to the level of total match productivity irregardless of whether the worker in response to some later survey question characterizes the separation as a quit or permanent layoff according to this formulation of worker and firm attachments quits and permanent layoffs are at least in any sense relevant to actual resource allocation indistinguishable an implication of this model is of course that mobility enhances productivity see gary becker elisabeth landes and robert michael 1977 counter to this view stand models of job matching that suggest that the presence of transactions costs in the form of costly contract renegotiations preclude any easy application of the coase theorem to employment contracts most forcefully advocated by masanori hashimoto 1981 these models of job matching imply that quits and permanent layoffs are different the difference results from the fact that with costly contract renegotiation mobility is to a large extent determined by the actual rent sharing agreement formulated at the beginning of employment according to this view then the total value of the match does not exclusively determine job change and thus not all mobility is productivity augmenting this paper offers a model of job matching with costly post hire negotiations in some aspects similar to that of hashimoto but with particular relevance to the population of young workers only beginning their labor force participation while hashimoto s discussion concentrates on longer term firmspecific training decisions the current model focuses on the period immediately following hire when worker productivity is to a large extent governed by endowed capabilities rather than determined by learning on the job the theoretical focus on inexperienced workers as well as the corresponding youthful composition of the empirical sample are motivated to control for unobserved factors such as firm specific human capital stocks as much as possible in further contrast to hashimoto s emphasis the model yields empirical implications concerning the role of wages in the determination of mobility that contrast to the implications of an otherwise similar zero negotiations cost model of job matching derivation of the empirical implications concerning the relationship of wages to quits and layoffs represents the primary contribution of this paper finally empirical results are presented that at least for a sample of very young men over a short period of time department of economics university of houston houston tx 77004 i thank finis welch dan mitchell and the referee for comments on an earlier version of this paper

the industrial mobility of displaced workers this article uses a two industry model of unemployment duration and job search to estimate rates of transition of displaced workers from unemployment to employment distinguishing between employment in a worker s previous industry and in other industries the competing risks model allows inferences about search strategies to be drawn from data concerning employment outcomes and allows tests of some fundamental implications of search theory there is evidence that improvements in the prospects for employment in their previous industry induce displaced workers to reduce search intensity or increase reservation wages in other industries

financial intermediation business failures and real business cycles in this paper a general equilibrium business cycle model is construct ed that when subjected to real disturbances mimics observed qualita tive comovements among real output money business failures risk pr emia intermediary loans and prices in contrast monetary disturban ces generate cycles that have several inconsistencies with empirical evidence thus providing support for real business cycle theory at th e expense of monetary theories of the business cycle financial inter mediation arises endogenously in the model and intermediation matters for business cycle behavior a credit supply mechanism acts in tande m with an intertemporal substitution effect in propagating stochastic disturbances copyright 1987 by university of chicago press

is the behavior of hours worked consistent with implicit contract theory this paper examines the determinants of hours worked when employment relationships are influenced by risk sharing considerations the environment considered is an extension of the standard symmetric information risk sharing model that allows for the possibility of enforcement problems on the part of both the employer and the employee we show that this class of risk sharing models unambiguously predicts hours to be influenced by wages only through an income effect using data from the psed we find evidence in favor of this extended version of the risk sharing model

declining job security this article defines and analyzes job security in the context of implicit contracts designed to overcome incentive problems in the employment relationship contracts of this nature generate predictions concerning the relationship between job security parameters such as worker seniority and sectoral economic conditions and the probability of separations to test these predictions i estimate binomial and multinomial models of job separations using panel study of income dynamics psid data for the years 1976 93 the results are consistent with a decline over time in the incentives to maintain existing employment relationships for male workers and for skilled white collar women

currency elasticity and banking panics theory and evidence existing models of banking panics contain no role for monetary factors and fail to explain why some banking systems experienced panics while others did not a monetary model is constructed where seasonal variations in the demand for liquidity and credit play a critical role in generating banking panics these panics occur when there are restrictions on the issue of currency in private banks but they do not occur if banks are unrestricted empirical evidence from canada and the united states for the period 1880 1910 is largely consistent with the predictions of the model

a theory of quits and layoffs with efficient turnover this paper answers the efficient turnover literature s long silence regarding the quit layoff distinction treating quits as worker initiated separations and layoffs as firm initiated separations i establish that the existence of layoffs is compatible with optimizing workers and firms forming and dissolving employment matches to exploit all the gains from trade the efficient turnover approach is shown to be consistent with many empirical regularities that distinguish quits from layoffs structural implications of the model are tested on data from the psid

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

collateral free lending with risk contingent credit for agricultural development indemnifying loans against pulse crop price risk in india this article addresses the problem of collateral free lending in the context of agricultural development we investigate a viable alternative to traditional credit products through the development of risk contingent credit for operating loans and farm mortgages and apply the concept to agricultural loans for pulse crops in india risk contingent credit mitigates business and financial risk by reducing debt obligations depending on the embedded commodity options whose payoffs are linked with commodity price fluctuations we analyze daily commodity spot prices for pulse crops in india and show how risk contingent structured financial instruments can be priced in practice

on money as a medium of exchange we analyze economies in which individuals specialize in consumption and production and meet randomly over time in a way that implies that trade must be bilateral and quid pro quo nash equilibria in trading strategies are characterized certain goods emerge endogenously as media of exchange or commodity money depending both on their intrinsic properties and on extrinsic beliefs there are also equilibria with genuine fiat currency circulating as the general medium of exchange we find that equilibria are not generally pareto optimal and that introducing fiat currency into a commodity money economy may unambiguously improve welfare velocity acceptability and liquidity are discussed

payments systems design in deterministic and private information environments abstract the first setup we study is a deterministic model with spatial separation where we consider alternative payments systems institutions and their implications for allocation and welfare a payments system with period by period settlement in outside money improves on decentralized exchange an efficient allocation is supported by a payments system where settlement is not imposed in the second model there is random matching and unobserved productivity shocks and preference shocks we explore how risk should be shared optimally in this economy and interpret the results in terms of how actual payments systems should operate journal of economic literature classification numbers e4 e5

interest rates collateral and de interlinkage a micro study of rural credit in west bengal this study based on a primary field survey in rural west bengal analyses the terms and conditions of the differentiated structure of rural credit with the advent of capitalist agriculture within the interventionist state the sample households are classified according to the economic classes of patnaik as well as the standard acreage criterion the possibility of interlinkage between credit and all other structures is remote the average rate of interest is inversely related to ascending class status there is a systematic association between rate of interest and the value of collateral on the one hand and marketability of collateral and interest rates on the other

flexible parametric estimation of duration and competing risk models in this paper we specify and estimate a flexible parametric proportional hazards model the model specification is flexibly parametric in the sense that the baseline hazard is non parametric while the effect of the covariates takes a particular functional form we also add parametric heterogeneity to the underlying hazard model specification we specify a flexible parametric proportional competing risks model which permits unrestricted correlation among the risks unemployment duration data are then analysed using the flexible parametric duration and competing risks specifications we find an important effect arising from the exhaustion of unemployment insurance and significantly different hazards for the two types of risks new jobs and recalls

rediscounting under aggregate risk abstract this paper compares three institutions that offer an elastic currency open market operations a discount window and a private banknote issuing clearinghouse in an economy with financial markets otherwise hampered by a lack of liquidity when this economy is subject to aggregate financial shocks these alternative forms of central banking are shown to differ in their implications for risk sharing interesting implications include i central bank losses and monetary innovations that are part of an efficient equilibrium and ii desirable quantity restrictions at the discount window

segmentation collateral undervaluation and the rate of interest in agrarian credit markets some evidence from two villages in south india this paper examines certain issues pertaining to the structure of agrarian credit markets in developing countries using empirical evidence on credit transactions from two villages in south india first the bases for the segmentation between formal and informal sectors of the credit market are identified as being 1 the type of collateral offered on credit contracts and 2 the purpose for which credit is taken secondly the paper shows the occurrence of a systematic association between rates of interest and types of collateral the evidence supports the hypothesis that lower marketability of collateral security and hence higher undervaluation increases the rate of interest charged on a loan thirdly the evidence shows an inverse relationship between the value of land owned by a borrower and the rate of interest on a credit contract copyright 1991 by oxford university press

microfinance and investment a comparison with bank and informal lending summary comparing the impact of different types of credit on households investment in bangladesh we find that loans from microfinance institutions are likely to be channeled toward non agricultural activities while both informal and bank lending are associated to a higher expenditure in agricultural inputs estimated effects are net of the differences in the amount borrowed interest rates and collateral results suggest that features which are specific to microfinance such as tight repayment schedules and land based eligibility rules may reduce the suitability of this source of funds for the farming sector

payment system settlement and bank incentives in this article we consider the relative merits of net versus gross settlement of interbank payments net settlement economizes on the costs of holding non interest bearing reserves but increases moral hazard problems the put option value of default under net settlement can also distort banks investment incentives absent these distortions net settlement dominates gross although the optimal net settlement scheme may involve a positive probability of default article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

monetary policy in a channel system abstract channel systems for conducting monetary policy are becoming increasingly popular despite its popularity the consequences of implementing policy with a channel system are not well understood we develop a general equilibrium framework of a channel system and study the optimal policy a novel aspect of the channel system is that a central bank can tighten or loosen its policy without changing its policy rate this policy instrument has so far been overlooked by a large body of the literature on the optimal design of interest rate rules

money and interest in a cash in advance economy the authors analyze an aggregative general equilibrium model in which the use of money is motivated by a cash in advance constraint applied to purchases of a subset of consumption goods the system is subject to both real and monetary shocks which are economy wide and observed by all they develop methods for verifying the existence of characterizing and explicitly calculating equilibria copyright 1987 by the econometric society

the seasonal cycle and the business cycle almost all recent research on macroeconomic fluctuations has worked with seasonally adjusted or annual data this paper takes a different approach by treating seasonal fluctuations as worthy of study in their own right our results show that seasonal fluctuations are an important source of variation in all macroeconomic quantity variables but are small or entirely absent in both real and nominal price variables the timing of the seasonal fluctuations consists of increases in the second and fourth quarters a large decrease in the first quarter and a mild decrease in the third quarter the paper demonstrates that with respect to each of several major stylized facts about business cycles the seasonal cycle displays the same characteristics as the business cycle in some cases even more dramatically than the business cycle that is we find that at seasonal frequencies as well as at business cycle frequencies output movements across broadly defined sectors move together the timing of production and the

time varying effects of recall expectation a reemployment bonus and job counseling on unemployment durations a simple search model that includes the possibility of recall provides predictions as to the changing effects of recall expectations a bonus offer and job counseling on new job finding rates over time using data from the new jersey unemployment insurance reemployment demonstration project njuirdp i find evidence for an initial positive effect of the bonus offer which diminishes over time new job finding rates are found to be negatively affected by higher initial recall expectations this effect also diminishes over time and evidence suggests that job counseling is successful in speeding up this process

implicit interest rates usury and isolation in backward agriculture the unusually high interest rates in many backward agricultural regions have been a source of some puzzlement to economists adding to this puzzle is the fact that these rates can take on a wide range of values often within the same region one important question is why arbitrage between sectors does not lead to more homogeneous and lower interest rates the traditional answer to this is in terms of lender s risk it is argued that moneylenders in backward regions face a great risk of default and once this is taken into account the effective interest rate turns out to be no higher than its counterpart in the organised sector consequently there is no real room for arbitrage and the high interest rates are equilibrium prices while this explanation may be of use in some situations it is in general inadequate and can even be misleading the reason which novelists describing rural india have repeatedly written about is that in these financial transactions the lender s risk frequently ranges from minimal to non existent because the personalised relation between the borrower and the lender enables the latter to extract the defaulted loan in the form of asset transfers from the borrower in a somewhat stylised manner these deals could be thought of as follows a peasant takes a loan from his employer keeping some of his assets like land a standing crop or even the promise of labour services as security or collateral a collateral price is then fixed this is the conversion price used to calculate the amount of collateral that has to be relinquished to the lender given a certain amount of default clearly the lower the collateral price the larger the quantity of collateral that the peasant has to forfeit hence the underpricing of collateral amounts to the charging of an implicit interest a widespread feature of rural credit markets reported in many diverse studies bardhan and rudra 1978 myint 1964 raj 1981 roth 1979 and sivakumar 1978 to mention just a few is the underpricing of collateral an interesting attempt to bring collateral explicitly into a model of usury was made by bhaduri 1977 see also 1983 who argued that one of the reasons why landlords raise interest rates is in fact to encourage default and to claim ownership of the asset kept as collateral a sharp contrast to the lender s risk model this hypothesis has deservedly received much attention 1

a unified framework for monetary theory and policy analysis search theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential however tractable versions of these models typically make strong assumptions that render them ill suited for monetary policy analysis we propose a new framework based on explicit micro foundations within which macro policy can be studied the framework is analytically tractable and easily quantifiable we calibrate the model to standard observations and use it to measure the cost of inflation we find that going from 10 percent to 0 percent inflation is worth between 3 and 5 percent of consumption much higher than previous estimates

works councils and employment growth in german establishments using data from german manufacturing establishments this article examines the relationship between works councils and employment growth taking the endogeneity of councils into account the estimates show a positive growth effect of works councils this suggests that the performance enhancing voice role of german works councils dominates their monopoly role moreover the findings of this study support the hypothesis that workers are more likely to implement a council to protect their quasi rents when the establishment is facing a long term crisis copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

did american welfare capitalists breach their implicit contracts during the great depression preliminary findings from company level data it has been claimed that american employers experiments in private welfare capitalism collapsed during the great depression giving place to the welfare state and industrial unionism recent studies however reveal considerable differences in experience across firms the author of this study who characterizes private welfare capitalism as a set of human resource management practices constituting an implicit contract equilibrium tests the implications of implicit contract theory using data from fourteen leading manufacturing firms the repudiation of implicit contracts she finds was positively correlated with the severity of the depression s impact experienced by firms and negatively correlated with the effectiveness of internal enforcement mechanisms instituted by firms furthermore she finds that greater breaches of implicit contracts were associated with greater employee support for industrial unions and more explicit employment contracts concluded under the new deal a comparative case study c

real time gross settlement and the costs of immediacy abstract using a neoclassical monetary model we investigate the welfare cost of a payment system that operates as a real time gross settlement rtgs system we illustrate how the cost of such systems ultimately derives from the credit constraints imposed by rtgs the effects of these constraints can be undone if the central bank makes intraday credit freely available if intraday credit is only available on a collateralized basis however rtgs will always impose a liquidity cost

cyclical fluctuations and sectoral reallocation evidence from the psid abstract this paper documents the correlation between permanent sectoral reallocation and the business cycle using data from the michigan panel study of income dynamics we find that the outflow of workers from goods to services accelerates during recessions the flow from services to stable employment in surables accelerates during booms we also document the contribution of sectoral reallocation to total unemployment permanent switchers account for about a quarter of the total weeks of unemployment during booms this proportion rises to nearly 40 duing recessions

delayed payment contracts and a firm s propensity to hire older workers there are jobs for which firms employ older workers but tend not to hire new older workers this may be attributable in part to implicit contracts that discourage worker shirking and malfeasance by shifting compensation to the end of the contract such delayed payment contracts can introduce a form of fixed costs into the employment relationship much as with hiring and training costs these fixed costs lead firms to hire primarily young long term workers while firms employ older workers workers who are serving out the last years of their contract they tend not to hire them this paper presents empirical evidence that is consistent with this argument

unconventional economic policies and sentiment an international assessment this paper estimates using bayesian and global vars the spillover effects of unconventional fiscal and monetary policies implemented in the united states and in the eurozone during the last decade consumer confidence and investor sentiment indicators are introduced in the models in order to highlight the signalling channel in the responses to economic policy innovations in times of crisis our results reveal that consumer and investor perceptions of innovative economic measures are relevant to study the pass through of economic policies to the real sector in times of crisis and zero lower bound interest rates in particular the signalling channel plays an important role in successful unconventional economic policies moreover if unconventional economic policies have an impact abroad the effects are similar to those measured in the domestic country region consequently coordination and transparency are a prerequisite for ensuring short term growth after a global financial crisis

do hostile takeovers reduce extramarginal wage payments hostile takeovers may have significant implications for long term employment contracts if they facilitate the opportunistic expropriation of extramarginal wage payments we test the expropriation hypothesis by studying the relationship between proxies for extramarginal wage payments and subsequent hostile takeover activity this paper improves on existing research by using firm and establishment level data from a salary survey of employers in addition we observe characteristics of wage and employment structures both before and after the occurrence of a hostile takeover and hence can see whether the data are consistent with reductions in extramarginal wage payments following such takeovers results from this ex post experiment provide evidence consistent with the hypothesis that hostile takeovers result in reductions of extramarginal wage payments to more tenured workers mostly through cutbacks in senior positions at firms with relatively steep wage profiles

unemployment insurance and unemployment spells this paper tests the effects of the level and length of unemployment insurance benefits on unemployment durations the paper particularly studies individual behavior during the weeks just prior to when benefits lapse higher unemployment insurance benefits are found to have a strong negative effect on the probability of leaving unemployment however the probability of leaving unemployment rises dramatically just prior to when benefits lapse individual data are used with accurate information of spell durations and the level and length of benefits the semiparametric estimation techniques used in the paper yield more plausible estimates than conventional approaches and provide useful diagnostics copyright 1990 by the econometric society

liquidity business cycles and monetary policy this paper presents a model of monetary economy with dier ences in liquidity across assets our purpose is to study how aggre gate production and asset prices uctuate with shocks to productivity and liquidity in so doing we examine what role government policy might have through open market operations that change the mix of assets held by the private sector we also show that certain apparent anomalies of asset markets are in fact normal features of a monetary economy in which the circulation of money is essential for a better allocation of resources

seniority sectoral decline and employee retention an analysis of layoff unemployment spells we investigate the effect of tenure on employee retention under varying labor market conditions using a competing risks analysis of recall and new job acceptance applied to layoff unemployment spell data from waves 15 and 16 1982 83 of the panel study of income dynamics we find that adverse conditions sectoral employment decline significantly reduce the positive tenure effect on recall probabilities this result is consistent with firm default on delayed payment contracts and does not appear to reflect the effect of technological change on the value of firm specific investments

the macroeconomics of shadow banking we propose a dynamic macroeconomic model of nancial intermediation in an environment where households demand liquid assets in contrast to the literature intermediaries can issue equity without any friction in normal times intermediaries maximize liquidity creation by levering up the collateral value of their assets a process we call shadow banking a rise in uncertainty causes investors to demand liquidity in bad states intermediaries respond by simultaneously deleveraging and substituting toward safe liabilities shadow banking eectively shuts down prices fall and investment plummets the model generates amplication via endogenous collateral runs as well as ight to quality eects the model s macroeconomic eects are consistent with a slow economic recovery even when and especially when intermediary capital is high we analyze the impact of several policy interventions in the areas of unconventional monetary policy and regulatory reform

liquidity a new monetarist perspective this essay surveys the new monetarist approach to liquidity work in this literature strives for empirical and policy relevance plus rigorous foundations questions include what is liquidity is money essential in achieving desirable outcomes which objects can or should serve in this capacity when can asset prices differ from fundamentals what are the functions of commitment and collateral in credit markets how does money interact with credit and intermediation what can and should monetary policy do the research summarized emphasizes the micro structure of frictional transactions and studies how institutions like monetary exchange credit arrangements or intermediation facilitate the exchange process

the recall and new job search of laid off workers a bivariate proportional hazard model with unobserved heterogeneity workers who lose their jobs can become re employed either by being recalled to their previous employers or by finding new jobs workers chances for recall should influence their job search strategies so the rates of exit from unemployment by these two routes should be directly related we solve a job search model to establish in theory a negative relationship between the recall and new job hazard rates we look for evidence in the psid by estimating a semi parametric competing risks model with explicitly related hazards we find only a small negative behavioral relationship between recall and new job hazard rates

market institutions trust and norms exploring moral economies in nigerian food systems informal market institutions and small scale traders are responsible for feeding nigerian cities this study analyses a range of economic relationships and institutions that have evolved in the context of inadequate formal institutions such as banks and legal contracts through examining both personal relationships and institutional based trust the paper explores the role of moral norms trust is shown to be related to sanctions information on other parties and a range of norms that are drawn on both calculatively and habitually the perceived moralities of different forms of institution such as credit systems trader associations and commission agents are also examined

interactions between institutional and informal credit agencies in rural india in an attempt to expand rural credit and displace the village moneylender india created a system of rural cooperatives in the 1950s and expanded branch banking into rural areas in the 1970s this article examines how these measures affected the rural market it begins with the question of how large the expansion of institutional credit has been and the extent to which it has dislodged the village and nonresident moneylenders a detailed comparison of three major surveys of the indian rural credit market suggests that in various guises the moneylender is still a major source of loans the article also examines the weak evidence on intermediation between the formal and informal sectors a formal model of the interaction between the informal moneylender and institutional lender is constructed under a variety of assumptions about the exclusivity of loan contracts and the competitive structure of the informal sector the conclusions are drawn together in the form of five proposals for public policy

toward explaining earlier retirement after 1970 this study investigates why after 15 years of virtual stability u s labor force participation rates for men aged 55 to 64 fell by approximately 20 from 1970 through 1986 the author s analysis of rule changes in the social security system and pension plans suggests that part of this reduction was caused by an increase in social security benefits by almost 50 during the 1970s half of which is not reflected in legislation which worked to create unexpected wealth effects similar to those that characterized the system during the early 1950s but an equally important cause was a widespread change in private pension plan rules toward encouraging earlier retirement these conclusions challenge the common notion that earlier retirement is largely a supply side phenomenon

the impact of the threat of bankruptcy on the structure of compensation this article builds and tests a model of the impact of a firm s bank ruptcy probability on its propensity to offer deferred compensation schemes using 1983 current population survey data we find that ceteris paribus lower failure rates raise the incidence of pensions for nonunion workers outside manufacturing further we find some evidence that among those workers with a pension a higher industry failure rate steepens tenure earnings profiles jointly controlling for union nonunion and pension no pension selectivity such a result suggests that workers discount implicit promises of future earnings increases by the likelihood that the firm will not survive