dynamics and seasonality in quarterly panel data this article presents an empirical analysis of the dynamics of individual earnings using spanish quarterly earnings i propose a new econometric methodology to control for the seasonality in my dataset moreover i apply this methodology to the study of earnings mobility in spain using transition probabilities among earnings quintiles for the period 1985 1996 i find substantial mobility from one year to the next however earnings changes are basically among adjacent quintiles workers with university education are more mobile than workers with primary and secondary education on the other hand i observe greater negative mobility among earnings quintiles and more persistence of low earnings situations in the 1990s especially for workers with primary education

the cyclicality of the user cost of labor abstract the user cost of labor is the expected difference between the present discounted value of wages paid to a worker hired in the current period and that paid to a worker hired in the next period analogous to the price of any long term asset the user cost not wage is the relevant price for a firm that is considering adding a worker i construct its counterpart in the data and estimate that it is substantially more procyclical than average wages or wages of newly hired workers i demonstrate an application of the finding using the textbook search and matching model

real wages in the business cycle and the theory of income distribution an unresolved conflict between theory and facts in mainstream macroeconomics the focus of this article is the recurring tension between mainstream macroeconomics and observed facts in connection with the difficult task of providing explanations of the business cycle consistent both with the traditional theory of income distribution and with the empirical evidence concerning the co movements of real wages and employment over the cycle the attempts to reconcile facts and theory have led to the continuous introduction of specific and arguably ad hoc hypotheses in contrast with the search for greater theoretical rigour claimed by the various streams of macroeconomic modelling subsequent to the neo classical synthesis in addition the specific assumptions introduced in the models or their implications are in turn often contradicted or at best not confirmed by subsequent empirical research it is suggested in the conclusions that the difficulty of keeping together in a simple and consistent framework theory and facts reflects the flawed theoretical foundations of mainstream theory

evolving wage cyclicality in latin america a vector autoregression model with time varying coefficients is used to examine the evolution of wage cyclicality in four latin american economies brazil chile colombia and mexico during the period 1980 2010 wages are highly pro cyclical in all countries up to the mid 1990s except in chile wage cyclicality declines thereafter especially in brazil and colombia this decline in wage cyclicality is in accordance with declining real wage flexibility in a low inflation environment controlling for compositional effects caused by changes in labor force participation along the business cycle does not alter these results

emerging stock markets portfolio capital flows and long term economie growth micro and macroeconomic perspectives abstract the paper examines two major components of financial liberalization stock market development and portfolio capital flows in the context of less developed countries the paper considers microeconomic and macroeconomic perspectives on their implications for long term development and economic growth it concentrates on 1 a the role of stock markets in financing corporate growth 2 b the implications of stock market volatility for resource allocation and productive efficiency and 3 c the interactions between the foreign exchange and stock markets in the context of economic shocks its policy recommendations are that ldcs should promote bank based systems influence the scale and composition of capital inflows and prevent a market for corporate control from emerging

real myths and a monetary fact in their paper business cycles real facts and a monetary myth kydland and prescott federal reserve bank of minneapolis quarterly review 14 1990 present a series of statistics generated by using the hodrick prescott filter which they define as the business cycle facts prescott federal reserve bank of minneapolis quarterly review 10 1986 argued that the facts are immune to the method of detrending however even if we use the hodrick prescott filter we can get a set of facts that differ in important ways from those in kydland and prescott 1990 in particular we can generate the conventional wisdom that real wages are acyclical very different relative volatilities of consumption investment and output and m1 leading the cycle in addition we note that the other important fact generated by kydland and prescott the countercyclicality of prices was not actually a new result

procyclical labour productivity a closer look at a stylized fact at 4 digit united states manufacturing industry level we find evidence suggesting that the stylized fact of procyclical labour productivity should be treated with great caution we use the nber manufacturing productivity database to investigate the relationship between hourly labour productivity and real output for 450 industries for the years 1958 91 labour productivity is significantly procyclical in 63 of industries and acyclical in 36 in the latter respect a high proportion of investment goods industries display acyclical productivity cross section regressions are carried out that seek to explain the interindustry distribution of cyclicality the analysis attributes a significant role to variations in materials costs as a proxy for fluctuations in factor utilization

the cyclicality of real wages within employer employee matches using data from the panel study of income dynamics the author examines the cyclicality of wages within employer employee matches for the years 1970 91 recent research on wage cyclicality has suggested that wages are very procyclical tending to rise and fall with economic upturns and downturns even for workers who remain with the same employer the author finds however that the evidence for wage procyclicality within the matches he examines is rather weak except for the small group of workers who were paid by piece rate or commissions despite having acyclical wage rates men who were paid hourly had earnings movements that were very procyclical salaries exhibited little cyclicality but salaried workers who had income sources from bonuses commissions or overtime had procyclical earnings the results suggest that the increasing prevalence of incentive based pay will increase the procyclicality of wages within matches

interest rates exchange rates and present value models of the current account this paper develops a testable intertemporal model of the current account that allows for variable interest rates and exchange rates these additional variables are channels through which external shocks may influence the domestic current account the restrictions from the theoretical model are subjected to present value tests using quarterly data from three small open economies the paper finds that including the interest rate and exchange rate improves the fit of the intertemporal model over what was found in previous studies the model predictions better replicate the volatility of current account data and better explain historical episodes of current account imbalance

financial openness sudden stops and current account reversals in this paper i use a panel data set to investigate the mechanics of sudden stops of capital inflows and current account reversals i am particularly interested in four questions a what is the relationship between sudden stops and current account reversals b to what extent does financial openness affect the probability of a country being subject to a current account reversal in other words do restrictions on capital mobility reduce the probability of such occurrences c does openness both trade openness and financial openness play a role in determining the effect of current account reversals on economic performance i e gdp growth and d does the exchange rate regime affect the intensity with which reversals affect real activity the empirical analysis shows that sudden stops and current account reversals have been closely related the econometric analysis suggests that restricting capital mobility does not reduce the probability of experiencing a reversal current account reversals in turn have had a negative effect on real growth that goes beyond their direct effect on investment the regression analysis indicates that the negative effects of current account reversals on growth will depend on the country s degree of trade openness more open countries will suffer less in terms of lower growth relative to trend than countries with a lower degree of trade openness on the other hand the degree of financial openness does not appear to be related to the intensity with which reversals affect real economic performance the empirical analysis also suggests that countries with more flexible exchange rate regimes are able to accommodate better shocks stemming from a reversal than countries with more rigid exchange rate regimes this abstract was borrowed from another version of this item

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

nominal wage rigidity in contract data a parametric approach using wage agreements reached in the canadian unionized sector during 1976 99 a period of high as well as exceptionally low inflation we consider how histograms of wage adjustment changed as inflation reached the low levels of the 1990s the histograms and parametric tests suggest that wage adjustment is characterized by downward nominal rigidity and significant spikes at zero there is some evidence of modest menu cost effects we examine whether the rigidity features of wage adjustment are sensitive to indexation provisions and investigate whether the distinction between short and long contracts is useful

are there election cycles in wage agreements an analysis of german public employees in this article the possibility of nordhaus political wage cyclesin the west german public services during 1961 1965 is investigated since wage negotiations are centralized one might expect a systematicallyhigher wage increase shortly before a federal election a regression ofwage increases from 30 consecutive public sector pay contracts is run onan election variable and several additional explanatory variables thenull of no election influence is rejected for worker wage increases theestimated increase in wages due to an imminent election is predicted to bein the range of 2 5 to 3 percentage points

spot market wages implicit contracts and technological change skill level evidence from finland this article investigates the relevance of the theories of implicit contracts and spot market model to the skill level wages in finland we use linked worker firm panel data over the period from 1991 to 2004 which included major institutional and technological changes we find similar patterns in the wage flexibility of primary and highly educated workers their wages increased with the decreasing spot market unemployment rate after the eu membership still exhibiting some weak backward linkages the wages of the secondary educated did not follow the decreasing spot market unemployment but instead some signs of the full commitment risk sharing were found

stock markets and development this paper asks if financial development especially stock market development affects the level and or the growth rate of economic activity it finds a substantial effect on both current wisdom suggests that the growth effects of financial intermediation could be either permanent or transitory for instance the greenwood jovanovic 1990 henceforth gj model has an ak stucture with no diminishing returns to the reproducible factor and a permanent exogenous improvement in financial structure would cause a permanent increase in the rate of growth on the other hand if the returns to the reproducible factor did diminish better intermediation could lead only to level effects since one should not a priori exclude either growth effects or level effects we shall look for both our search for growth effects will use the gj model our search for level effects will rely on an amended version of the mankiw romer and weil 1992 henceforth mrw structure

why are the wages of job changers so procyclical evidence on wage cyclicality shows job changers have more procyclical wages than job stayers previous work argued this arises because workers gain greater access to jobs in sectors such as manufacturing that offer high wages this article argues that workers who switch jobs in booms enter temporary jobs with unemployment risk and are merely compensated for subsequent losses i demonstrate that the two explanations can be distinguished using the relationship between unemployment insurance and wage cyclicality among job changers the evidence supports the compensation hypothesis that is that job changers might not experience real gains from higher paying jobs in booms

sudden stops sectoral reallocations and the real exchange rate abstract a sudden stop of capital flows into a developing country tends to be followed by a rapid switch from trade deficits to surpluses a depreciation of the real exchange rate and decreases in output and total factor productivity substantial reallocation takes place from the nontraded sector to the traded sector we construct a multisector growth model calibrate it to the mexican economy and use it to analyze mexico s 1994 95 crisis when subjected to a sudden stop the model accounts for the trade balance reversal and the real exchange rate depreciation but it cannot account for the decreases in gdp and tfp extending the model to include labor frictions and variable capital utilization we still find that it cannot quantitatively account for the dynamics of output and productivity without losing the ability to account for the movements of other variables

the cyclicality of consumption wages and employment of the public sector in the euro area this study empirically examines the business cycle behaviour of public consumption and its main components the public wage bill including its breakdown into compensation per employee and public employment and intermediate consumption in the euro area aggregate euro area countries and a group of selected non euro area organization for economic co operation and development oecd countries denmark sweden the uk japan and the us it looks across a large number of variables and methods using annual data from 1960 to 2005 it finds robust evidence supporting that public consumption wages and employment co move with the business cycle in a pro cyclical manner with 1 2 year lags notably for the euro area aggregate and euro area countries the findings reflect mainly the correlation between cyclical developments but also point to an important role of pro cyclical discretionary fiscal policies

the voracity effect abstract we analyze an economy that lacks a strong legal political institutional infrastructure and is populated by multiple powerful groups powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock in equilibrium this leads to slow economic growth and a voracity effect by which a shock such as a terms of trade windfall perversely generates a more than proportionate increase in fiscal redistribution and reduces growth we also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks jel f43 o10 o23 o40

the analytics of svars a unified framework to measure fiscal multipliers ticities implied by the identification schemes generate a large dispersion in the estimates of tax and spending multipliers second i estimate fiscal multipliers consistent with prior distributions of the elasticities computed by a variety of empirical strategies and by employing a simple dynamic stochastic general equilibrium model i document three findings for the u s for the period 1947 2010 first the impact tax multiplier is close to 0 second the impact spending multiplier ranges between 0 35 and 1 third there is a large uncertainty in the estimates of fiscal multipliers at longer horizons yet the probability that the spending multiplier is larger than the tax multiplier is above 0 65 for up to three years after policy interventions

robust stylized facts on comovement for the spanish economy the suggestion of obtaining stylized facts on comovement on the basis of prewhitened time series proposed in andre et al 2002 is further developed first some examples are shown on the robustness of the method second the relevance of such a proposal is tested by revisiting some of the existing stylized facts on comovement for the spanish economy in dolado et al 1993

inflation risk premia in the term structure of interest rates this paper estimates the size and dynamics of inflation risk premia in the euro area based on a joint model of macroeconomic and term structure dynamics information from both nominal and index linked yields is used in the empirical analysis our results indicate that the inflation risk premium on euro area 10 year nominal yields was approximately equal to 20 basis points on average over the 1999 2007 period the inflation premium has also been subject to moderate but statistically significant fluctuations for the post 2003 period in which reliable index linked bond prices are available our results suggest that increases in the raw break even inflation rate above 2 the upper bound of the european central bank s definition for price stability have mostly reflected variations in the inflation risk premium while long term inflation expectations have remained well anchored

employment composition and the cyclical behaviour of the aggregate real wage this article investigates the relation between the cyclical behaviour of employment composition and the weighted average aggregate real wage in the usa cyclicality of employment composition arises in the context of two competing explanations of business cycle theory the human capital investment and profitability models consistent with the implications of the profitability theory the relative share of labour hours for older age 25 more highly skilled and paid workers declines faster during recessions compared to younger age 16 19 and 20 24 less skilled and lower paid workers this result coupled with the downward flexibility of teenage real wages reinforces the procyclical reduction in the aggregate real wage during recessions interestingly the decline in the relative share of workers age 25 during recessions is not accompanied by a corresponding significant decline in their nominal or real wages thus most of the adjustment during cyclical downturns appears to result in a reduction

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

macroeconomic fluctuations in developing countries some stylized facts this paper documents the main stylized features of macroeconomic fluctuations and business cycle regularities for a group of 12 developing countries cross correlations between domestic industrial output and a large group of macroeconomic time series including government revenue and expenditure wages inflation money velocity private sector credit international trade and exchange rates are presented the effects of industrial country economic conditions on output fluctuations in these countries are also analyzed the robustness of the results is examined using three detrending procedures a modified hodrick prescott filter the baxter king band pass filter and a nonparametric technique overall the results show some similarities between macroeconomic fluctuations in developing and industrial countries e g procyclical real wages and counter cyclical variation in government expenditure but also some important differences in business cycle characteristics e g countercyclical variation in the velocity of monetary aggregates

testing a present value model of the current account evidence from us and canadian time series abstract this paper presents a simple model of current account determination based upon the permanent income hypothesis of private consumption behavior under rational expectations the model employs a representative national agent who is forward looking and can borrow and lend at a constant world interest rate a present value relationship for the current account is derived and its implications are tested on post war data for the united states and canada testing is done using the framework developed by campbell and shiller 1987 which allows the forcing variables in the model to be difference rather than trend stationary our empirical results indicate the most stringent restrictions of the present value model are strongly rejected by the us and canadian data however less formal procedures suggest the consumption smoothing model has some ability to track the dynamic behavior of the us current account jel f32

present value tests of an intertemporal model of the current account abstract this paper first demonstrates that in a simple intertemporal open economy model the current account is equal to the expected decline of the present discounted value of net output of a country net output is defined as gross domestic product less the sum of investment plus government spending it then uses econometric methods for present value models to analyze the current account for four countries in two of these countries the model does a satisfactory job of explaining the current account

on the solvency of nations cross country evidence on the dynamics of external adjustment we test the hypothesis that net foreign asset positions are consistent with external solvency and examine the dynamics of external adjustment using data for 50 countries over the 1970 2006 period our analysis adapts bohn s 2007 error correction reaction function approach which tests for a negative long run relationship between net exports nx and net foreign assets nfa as a sufficiency condition for the intertemporal budget constraint to hold to a dynamic panel framework pooled mean group pmg and mean group error correction estimation yield evidence of a statistically significant negative response of nx to nfa moreover we cannot reject the hypothesis that the response is largely homogeneous across countries our sensitivity analysis shows that the countries with relatively weaker fundamentals need to respond more strongly to the changes in nfa to keep their nfas on a sustainable path

monetary policy and real wage cyclicality this article points to the potential role of monetary policy in affecting the degree of real wage cyclicality we show that the degree and direction of real wage cyclicality is determined by the interaction of i the returns to scale in production ii the nature of aggregate shocks and iii monetary policy given that production technology is fairly constant in the short run we suggest that variations in the real wage output covariance depend largely on the combination of the latter two identifying well documented monetary policy phases in six major organization for economic co operation and development oecd countries and accounting for both aggregate demand and supply shocks we provide empirical evidence to support our main theoretical claim

the financial development and growth nexus a meta analysis this is the accepted manuscript the final version is available from wiley at http onlinelibrary wiley com doi 10 1111 joes 12086 abstract

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

stock markets banks and growth panel evidence this paper investigates the impact of stock markets and banks on economic growth using a panel data set for the period 1976 98 and applying recent gmm techniques developed for dynamic panels on balance we find that stock markets and banks positively influence economic growth and these findings are not due to potential biases induced by simultaneity omitted variables or unobserved country specific effects

search frictions matching aggregate and establishment observations abstract we estimate a search model to match hours employment vacancies and unemployment at the micro and macrolevels we establish a set of facts concerning the variability of unemployment and vacancies in the aggregate and the distribution of net employment growth and the comovement of hours and employment growth at the establishment level a search model with non convex costs of posting vacancies establishment level profitability shocks and a contracting framework to set hours provides a structure to understand these observations the estimated model is able to capture both the aggregate and establishment level facts

tax base variability and procyclical fiscal policy in developing countries abstract based on a sample of 56 countries we show that fiscal policy in the g7 countries appears to be acyclical while fiscal policy in developing countries is procyclical i e fiscal policy is expansionary in good times and contractionary in bad times to explain this puzzle we develop an optimal fiscal policy model in which running budget surpluses is costly because they create pressures to increase public spending given this distortion a government that faces large fluctuations in the tax base as is the case for developing countries will find it optimal to run a procyclical fiscal policy

are european business cycles close enough to be just one abstract we propose a comprehensive methodology to characterize the business cycle comovements across european economies and some industrialized countries without imposing any given model but trying to leave the data speak we develop a novel method to show that there is no evidence of a european economy that acts as an attractor to the other economies of the area we show that the establishment of the monetary union has not significantly increased the level of comovements across euro area economies finally we are able to explain an important proportion of the distances across their business cycles using macrovariables related to the structure of the economy to the directions of trade and to the size of the public sector

imperfectly competitive labour markets and the productivity puzzle abstract we integrate imperfectly competitive labour markets in a dynamic macromodel in accordance with empirical evidence we find that temporary shocks are consistent with little real wage and large employment responsiveness while permanent shocks affect real wages and not employment

financial structure and economic growth recent empirical work on financial structure and economic growth analyzes multi country dataset in panel and or cross section frameworks and concludes that financial structure is irrelevant we highlight their shortcomings and re examine this issue utilizing a time series and a dynamic heterogeneous panel methods our sample consists of fourteen countries tests reveal that cross country data cannot be pooled financial structure significantly explains output levels in most countries the results are rigorously scrutinized through bootstrap exercises and they are robust to extensive sensitivity tests we also test for several hypotheses about the prospective role of financial structure and financial development on economic growth

business cycle models aggregation and real wage cyclicality a substantial literature has developed to estimate the true cyclicality of real wages that is composition bias free two major issues are addressed in this article aggregation of heterogeneous workers and potential bias in the measurement of the labor input a general analysis of the biases is presented and alternative approaches in the literature are nested in a single framework estimates based on an efficiency units concept that avoids the usual aggregation problems are presented composition bias underestimates the usual parameters of interest unless both the price and the quantity of the labor input are adjusted appropriately

electoral cycles and the earnings of federal bureaucrats this paper analyzes the relationship between the timing of federal elections and the pay raises received by civilian employees of the federal government the theoretical framework discusses how electoral wage cycles are generated as a result of optimizing behavior on the part of voters bureaucrats and the government the empirical analysis uses a time series of wage rates for the twenty eight largest federal agencies over the period 1961 1978 the study indicates that pay hikes during the presidential election year are significantly greater about 2 to 3 percent higher than bureaucratic pay raises in other years

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

fiscal policy and monetary integration in europe fiscal policy economists policy makers and the media often argue that the maastricht treaty and the stability and growth pact make it difficult for governments of emu countries to stabilize their economies with appropriate fiscal policy and to provide adequate public investment our empirical analysis offers little support to this view discretionary budget deficits have actually become more counter cyclical in emu countries after the maastricht treaty as well as in the other eu and non eu industrialized countries we study and while public investment has declined recently in emu countries a similar tendency is apparent in other countries and started well before the maastricht treaty was signed jordi gali and roberto perotti

explaining procyclical male female wage gaps abstract our analysis based on the national longitudinal survey of youth for the 1978 1999 period concludes that men s greater representation in cyclical occupational groups such as craftsmen operatives and laborers more than accounts for the gap between men and women in the cyclicality of real wages

the cyclical behaviour of fiscal policy evidence from the oecd this paper addresses the topic of cyclicality in scal policy in particular we show that the level of cyclicality varies across spending categories and across oecd countries in line with leading theories of scal cyclicality we show that countries with volatile output and dispersed political power are the most likely to run procyclical scal policies wage government consumption is highlighted as the most important channel by which these variables affect scal cyclicality

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

fiscal policy in general equilibrium this paper studies four classic fiscal policy experiments within a quantitatively restricted neoclassical model the authors main findings are as follows 1 permanent changes in government purchases can lead to short run and long run output multipliers that exceed one 2 permanent changes in government purchases induce larger effects than temporary changes 3 the financing decision is quantitatively more important than the resource cost of changes in government purchases and 4 public investment has dramatic effects on private output and investment these findings stem from important dynamic interactions of capital and labor absent in earlier equilibrium analyses of fiscal policy copyright 1993 by american economic association

the comovement between output and prices abstract in this paper i analyze the comovement of us prices and output in the postwar period i use a new set of statistics to characterize the comovement between variables the statistics capture important information about the dynamics in the system the estimation procedure does not require assumptions about the order of integration or the types of assumptions needed for var decompositions i find that the comovement between output and prices is positive in the short run and negative in the long run i show that a model in which demand shocks dominate in the short run and supply shocks dominate in the long run can explain these empirical results while sticky price models with only demand shocks cannot

the earnings of immigrant men in canada job tenure cohort and macroeconomic conditions using eleven cross sectional surveys spanning 1981 92 the authors compare the earnings of immigrant and native born men in canada apparently recent immigrant cohorts have suffered no decline in earnings job tenure is found to be a strongly significant determinant of earnings previous estimates of immigrant earnings differentials which have not incorporated job tenure information may partly reflect differences in tenure between immigrants and the native born when the sample is restricted to pairs of surveys that are close to the census survey years the estimates of cohort effects are sensitive to the choice of survey years one possible explanation for that sensitivity is suggested by the finding that macroeconomic conditions are a statistically significant determinant of the rate of assimilation of recent immigrants

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

spatial dynamics and heterogeneity in the cyclicality of real wages neither the issue of how local and aggregate labor markets interact over time nor the issue of how heterogeneity by education race and other factors interacts with these spatial dynamics has prev

retrospectives real and money wage rates abstract in the general theory john maynard keynes held money and real wage rates move in opposite directions in expansion prices increase faster because of increasing costs and a rise in the proportion of product going to profits neoclassical economists held similarly money illusion of workers supported their common view the author s 1938 article rather showed a procyclical pattern significant to macroeconomic models of the economy contemporary literature with new elements of compensation and new measures of wages supports a slightly procyclical relationship increased output and employment in expansion do not require lower real wages

the turkish current account deficit during the 2011 2015 period turkey s current account deficit as a percentage of gross domestic product gdp was one of the largest among the organization for economic co operation and development countries in this paper we examine if this deficit can be considered optimal using the engel and rogers s approach in this framework the current account of a country is determined by the expected discounted present value of its future share of world gdp relative to its current share a country whose income is anticipated to rise relative to the rest of the world is expected to borrow now and run a current account deficit our findings suggest that turkey s current account deficit in 2015 may be considered optimal if the turkish economy s share in the world economy could continue to grow at rates similar to the past or to the predictions from professional forecasts the same approach however indicates that the current account deficit in 2011 at its peak was unlikely to be optimal jel f32 f41 f43

cyclical behavior of real wages in japan this paper studies the cyclicality of aggregate real wages in japan by using both static and dynamic approaches i measure comovements between real wages and business cycle indicators this paper finds that while real wages constructed using the consumer price index and the gdp deflator are procyclical real wages constructed using the producer price index are countercyclical this result is robust to the data and methods used to compute the comovements

wage rigidity in canadian collective bargaining agreements the authors search information on the provisions of 10 947 wage contracts signed in the canadian unionized sector between 1976 and 1999 for evidence of downward nominal wage rigidity the disinclination of wages to fall in nominal dollars below their established level over the sample period real wage reductions were common but nominal wage reductions were rare the probability of downward nominal wage rigidity increased substantially during low inflation periods during such periods apparently there was no reduction in the incidence of real wage cuts but the magnitude of those cuts was modest suggesting a lesser ability of wages to adjust to labor market conditions than at other times

cyclical effects of government s employment and goods purchases distinguishing between the goods purchase and employee compensation components of government spending is important shocks to government goods purchases and shocks to government employment have the opposite effects on private output private employment and private investment moreover with this distinction in place quantitative analysis reveals that government spending is no longer a significant driving source of the u s business cycle on the contrary the components of government spending are procyclical in the u s data primarily because of their positive responses to the output fluctuations generated by technology shocks copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

high and low frequency variations and the cyclical behaviour of real wages the conflicting empirical evidence on the cyclicality of real wages may be a result of the fact that the measure of comovements employed in the literature is affected by coherence among non business cycle variations in the data by recursively removing components the degree to which long and short term cycles contaminate the existing evidence is studied while confirming many of the results of the current literature it is found that evidence of cyclicality is affected more by long rather than by short term components even though the data have been detrended by a number of different methods it has been suggested in the literature that wages become more countercyclical as the deflators used represent less finished bundles of goods this study shows that this result is robust to the removal of components from either end of the spectrum

cyclical quality adjustment in the labor market 1 introductionthe u s unemployment rate fell to very low levels during the 1990s even more impressively the unemployment rate for minorities and less educated individuals fell disproportionately convergence of relative unemployment rates in expansions and divergence in recessions has been a feature of the u s economy over the last 30 years there are many possible reasons for this feature for example if the costs of hiring and firing less skilled labor are low one would expect these individuals to have very procyclical employment in this paper i explore an alternative model when there is an excess supply of labor high skilled people take jobs that would normally be occupied by less skilled people in expansions the process reverses with less skilled workers getting access to jobs that they would normally not attain i refer to this process as cyclical quality adjustment reder 1955 p 834 was one of the first to discuss how hiring standards adjust to business cycle conditions quality variations in labor markets arise through upgrading and downgrading of members of the labor force relative to the jobs they are to fill when applicants become scarce employers tend to lower the minimum standards upon which they insist as a condition for hiring a worker to fill a particular job and vice versa when applicants become plentiful since then many papers have developed this idea theoretically and many economic commentators appear to share this view of the labor market for example the economic report of the president states that a strong labor market is particularly important to less advantaged groups in the labor market such as workers with less education younger workers racial and ethnic minorities and immigrants when employers find it hard to fill vacancies they are more willing to hire and train workers whom they might pass over when they have fewer openings and an abundance of applicants council of economic advisors 1999 p 103 likewise the expansion during the 1990s spawned many newspaper articles about the improvement in the types of jobs available to less skilled applicants however there is little systematic empirical work about changes in job assignment in the united states over the business cycle the empirical work in this paper seeks to redress this situation cyclical assignment changes are important for many reasons as mentioned earlier job upgrading is a potential explanation for the greater cyclical variation of employment experienced by less skilled workers it is well known that the unemployment rates of less skilled individuals and minorities are more countercyclical relative to more skilled individuals clark and summers 1981 kydland 1984 keane and prasad 1993 hoynes 1999 the standard explanation for this effect is that low ability workers are more likely to be laid off in downturns because training and hiring costs are lower for these workers no commensurate attention has been paid to the issue of how the decision of who to hire changes over the business cycle however assignment models present a natural explanation for the greater procyclicality of employment of the less skilled both the adjustment cost hypothesis and the upgrading hypothesis imply that less skilled workers will have more procyclical employment empirically they are distinguishable because the upgrading explanation implies that jobs obtained by comparable workers should vary systematically over the cycle the adjustment cost hypothesis relates to the composition of those whose jobs are terminated second these mechanisms suggest a reason why wages are particularly procyclical for job changers recent studies using panel data have indicated that the wages of job starters are much more procyclical than the wages of workers who do not change jobs researchers have suggested various explanations for this result beaudry and dinardo 1991 and macleod and malcomson 1993 present contracting models in which the wages of job starters depend on the state of the labor market when they join the firm

measuring the cyclicality of real wages how important is the firm s point of view there is a growing consensus among economists that real wages in the postwar united states have been procyclical greatly bolstering technology driven theories of business cycles at the expense of more classical models this paper makes the point that technological movements in firm s labor demand curves should be tested with a wage that is deflated by the firm s own price of output with appropriate controls for intermediate inputs and with respect to the cyclical state of the firm s own industry as opposed to the state of the aggregate economy failure to control for these factors is found to lead to substantial overrejection of the classical model in detailed industry data with controls for changes in worker composition i find that a vast majority of sectors have paid real product wages that vary inversely that is countercyclically with the state of their industry

data watch the panel study of income dynamics by collecting annual economic and demographic information from a large and representative sample of u s households for over a quarter century the panel study of income dynamics has compiled a remarkably useful set of microdata this article describes the psid and how its unique longitudinal and in some cases intergenerational features have been used for studies of intertemporal models of labor supply wages employment and job tenure consumption poverty dynamics extended family behavior and the intergenerational transmission of economic status

international capital mobility amongst the major industrialised countries too little or too much this paper examines capital flows among the major industrialized countries with a view to assessing m feldstein and c horioka s 1980 claim that international capital mobility is limited it argues that saving investment correlation tests are inherently flawed and proposes an alternative methodology for testing the degree of international capital mobility it finds that capital flows have been excessive in the sense that they are driven by speculative forces rather than by economic fundamentals copyright 1995 by royal economic society

a survey of recent developments in the literature of finance and growth this paper provides a survey of the recent progress in the literature of financial development and economic growth the survey highlights that most empirical studies focus on either testing the role of financial development in stimulating economic growth or examining the direction of causality between these two variables although the positive role of finance on growth has become a stylized fact there are some methodological reservations about the results from these empirical studies several key issues unresolved in the literature are highlighted the paper also points to several directions for future research

stock markets and development a re assessment abstract this paper re examines the empirical relationship between stock markets and economic growth in contrast with atje and jovanovic stock markets and development european economic review 37 pp 632 640 1993 it finds no hard evidence that the level of stock market activity helps to explain growth in per capita output estimating their model using current investment rather than lagged investment suggests that the stock market effect may be weaker than they found two stage least squares is used to circumvent the possible endogeneity of current investment the sample is divided into developed and less developed countries for the less developed sample the stock market effect as with the full sample is at best very weak for the developed countries however stock market activity does have some explanatory power

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

why is fiscal policy often procyclical many countries especially developing ones follow procyclical fiscal policies namely spending goes up taxes go down in booms and spending goes down taxes go up in recessions we provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for less than benevolent government to appropriate rents voters have incentives similar to the starving the leviathan classic argument and demand more public goods or fewer taxes to prevent governments from appropriating rents when the economy is doing well we test this argument against more traditional explanations based purely on borrowing constraints with a reasonable amount of success

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

equity markets and growth cross country evidence on timing and outcomes 1980 1995 abstract the rapid expansion of organized equity exchanges in both emerging and developed markets has prompted policymakers to raise important questions about their macroeconomic impact yet the need to focus on recent data poses implementation difficulties for econometric studies of dynamic interactions between stock markets and economic performance in individual countries this paper overcomes some of these difficulties by applying recent developments in the analysis of panels with a small time dimension to estimate vector autoregressions for a set of 47 countries with annual data for 1980 1995 after describing recent theories on the role of stock markets in growth and considering a pure cross sectional empirical approach our panel vars show leading roles for stock market liquidity and the intensity of activity in traditional financial intermediaries on per capita output the findings underscore the potential gains associated with developing deep and liquid financial markets in an increasingly global economy

on the effects of ranking by unemployment duration abstract we propose a theory based on the firm s hiring behavior that rationalizes the observed significant decline of callback rates for an interview and exit rates from unemployment and the mild decline of reemployment wages over unemployment duration we build a directed search model with symmetric incomplete information on worker types and non sequential search by firms sorting due to firms testing of applicants in the past makes expected productivity fall with duration which induces firms to rank applicants by duration in equilibrium callback and exit rates both fall with unemployment duration in our numerical exercise using u s data we show that our model can replicate quite well the observed falling patterns with the firm s ranking decision accounting for a sizable part

the relative adjustment of wages and prices direct tests within a multiple equation system in order to assess the relative rigidity of the aggregate price level and the nominal wage rate most researchers have focused on the implied behaviour of the real wage rate in response to a purely demand disturbance the present work examines the explicit behaviour of the two variables and is therefore able to analyse the variables short run responses within the context of their defined long run behaviour while the paper reports evidence of long run stability in the real wage rate additional evidence is presented which supports both sticky price and sticky wage models the determining factor is the choice of lag

public or private sector wage leadership an international perspective whether a government acts as a wage leader placing pressure on private sector wages more open to competition or whether it plays a passive role and merely follows wage negotiations in the private sector there are important implications for macroeconomic development particularly in small open economies and or countries that are members of a monetary union such as those of the european monetary union with the notable exception of the case of sweden opinion on this issue is still divided in this paper we look at public and private sector wage interactions from an international perspective 18 oecd countries we focus on the causal two way relationship between public and private wage setting confirming that the private sector on the whole appears to have a stronger influence on the public sector rather than vice versa however we also find evidence of feedback effects from public wage setting which affect private sector wages in a number of countries when the private sector takes the lead on wages there are few feedback effects from the public sector while public wage leadership is typically accompanied by private sector feedback effects

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

a comparison of the cyclical behavior of union and nonunion wages in the united states this paper presents an extensive analysis of the behavior of union and nonunion wages over the business cycle using quasi panels developed from the current population survey in an attempt to resolve or reconcile competing claims about the cyclical behavior of union and nonunion wages union wages were roughly as procyclical as nonunion wages were prior to the early 1980s substantial reductions in union wage procyclicality since then are associated with reductions in the procyclical exercise of bargaining power

interaction between economic and financial development this paper presents a model of financial and economic development which assumes the consumption of real resources by the financial sector financial development occurs endogenously as the economy reaches a critical threshold of economic development compared to financial autarky financial intermediaries allocate savings net of their costs of operation to more productive investments whenever the technology financed by intermediaries is more capital intensive than that operated in financial autarky the growth effect of financial development is ambiguous as a result financial development may be unsustainable however when financial development is sustainable the credit market becomes more competitive and more efficient over time and this could eventually contribute to economic growth nonetheless given monopolistic competition in the financial sector the level of entry into the credit market is generally inefficient for instance with diminishing returns to specialisation entrants might be too few at the early stages of economic development and too many later on

do r d tax incentives lead to higher wages for r d workers evidence from the netherlands this paper examines the impact of the dutch r d tax incentive scheme on the wages of r d workers we construct firm specific r d tax credit rates that vary over time following variations in the dutch r d tax incentive program using instrumental variables we estimate a wage sharing model with an unbalanced firm level panel data covering the period 1997 2004 the elasticity of the r d wage with respect to the fraction of the wage supported by the fiscal incentives scheme is estimated at 0 2 in the short run and 0 24 in the long run

the effect of implicit contracts on the movement of wages over the business cycle evidence from the national longitudinal surveys a 1991 study by paul beaudry and john dinardo found evidence of internal labor markets that augment incumbent workers wages when the external labor market is tight when unemployment is low and shield their wages when it is slack current wages they found depend on the tightest labor market conditions observed since a worker was hired not current labor market tightness or labor market tightness at the time of hiring this paper replicates and extends that research using data from six cohorts of the national longitudinal surveys that together span more than three decades as well as an estimation framework more robust than that in the original study the author finds strong support for beaudry and dinardo s key prediction supplementary regressions confirm other implications of the theory as well recently at least the effect of implicit contracting on wages has been similar for men and women

economic shocks and labor market flexibility we test how labor markets adjust to large but temporary economic shocks in a context in which such shocks are common using an individual level panel from 1 140 philippine municipalities over 26 quarters we find that workers in areas affected by strong typhoons experience reductions in hours worked and hourly wages without evidence of layoffs the results are strongest for formal wage paying jobs we argue that those results are best explained by implicit contracts where workers and firms share risks we provide extensive qualitative data suggesting that employment contracts in the philippines allow for such flexibility abstract from author

tenure business cycle and the wage setting process abstract we analyze the interaction between job tenure and external labor market conditions in wage determination first we introduce a model that combines job matching with business cycle effects as the employment relationship progresses the worker appropriates a portion of the value of the match specific human capital she accumulates gradually becoming shielded from the cyclical variations in external labor market conditions the employment relationship is progressively internalized then we present empirical evidence supporting this prediction the elasticity of wages to the unemployment rate decreases with tenure this finding is robust to different specifications that allow for job heterogeneity and it contributes to the interpretation of recent evidence of changes in the effect of the business cycle on wages

computing white stylized facts on comovement abstract stylized facts concerning the comovements between two economic variables as measured by the cross correlation function of the two filtered variables reflect a mixture of both the existing cross correlation between the variables and the autocorrelation structure of each of them the autocorrelation structure in turn crucially depends on the filtering procedure we propose an alternative method of obtaining stylized facts based on the cross correlation function of the prewhitened time series which only depends on the purely stochastic components of the series and the cross effects between them the relevance of such an approach is tested by revisiting some of the facts reported by kydland and prescott federal reserve bank of minneapolis quarterly review 1990 3

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