nonstationarity in job search theory generally structural job search models are taken to be stationary in this paper models are examined in which every exogenous variable can cause nonstationarity for instance because its value is dependent on unemployment duration a general differential equation that describes the evolution of the reservation wage over time is derived as an empirical illustration a nonstationary structural model is estimated that focuses on the consequences of a downward shift in the level of benefits it appears that the elasticity of duration with respect to the level of benefits after the shift is much larger than the elasticity with respect to the level before the shift this paper examines the movement of a job seeking individual s reservation wage over time in a general nonstationary job search model also results concerning comparative dynamics of the reservation wage and the distribution of the duration of unemployment are derived as an empirical illustration a nonstationary structural model is estimated the nonstationarity originates from the decrease in the level of benefits when unemployment duration equals two years from the results some detailed policy recommendations can be deduced as one is able to distinguish the effect of a change in the level of benefits in the first two years of unemployment from the effect of a change in the level after that period recently the use of job search models for the analysis of unemployment duration has become widespread the reduced form approach in empirical studies see e g lancaster 1979 in which only the hazard of the duration distribution is estimated is gradually being replaced by a more structural approach the latter way of modelling is characterized by the explicit use in empirical analysis of the reservation wage equation as stated by the theory e g yoon 1981 lancaster and chesher 1983 lynch 1983 narendranathan and nickell 1985 and van den berg 1988 use the complete theoretical framework of job search theory to make inferences about search behaviour however the structural models used in these studies are stationary this implies that variables like unemployment benefits or the rate of arrival of job offers are assumed to be constant over the spell of unemployment which is often at variance with reality what is more various reduced form empirical studies indicate a significant durationdependence of the re employment probability which is generally interpreted as evidence in favour of the presence of nonstationarity see e g blau and robins 1986 kooreman and ridder 1983 lancaster 1979 and narendranathan nickell and stern 1985 consequently there is a need to model reservation wage movements over time based on a nonstationary theoretical framework

time preference and international lending and borrowing in an overlapping generations model two economies represented by diamond type overlapping generations models and differing only in their pure rates of time preference are joined together capital formation balance of payments behavior and welfare are compared under autarky and openness with a positive natural rate of growth the low time preference country runs a current account surplus in the steady state but not necessarily outside it if preexisting capital is not shiftable between countries integration in the world economy makes the high time preference country worse off in the short run the ranking of stationary utility levels under autarky and openness is ambiguous

closing large open economy models abstract a large class of international business cycle models admits multiple locally isolated deterministic steady states if the elasticity of substitution between traded goods is sufficiently low i explore the conditions under which such multiplicity occurs and characterize the dynamic properties in the neighborhood of each steady state models with standard incomplete markets portfolio costs a debt elastic interest rate or an overlapping generations framework allow for multiple steady states if the model features multiple steady states under financial autarchy if the excess demand for the foreign traded good is increasing in the good s own price in a given steady state the equilibrium dynamics around this steady state are unbounded otherwise the dynamics are bounded and unique by contrast with uzawa type preferences the steady state is always unique and the associated equilibrium dynamics are always bounded and unique the same results obtain under complete markets

sources of fluctuations in hours worked for canada germany japan and the u s a sign restriction var approach abstractthis study empirically examines the sources of fluctuations in hours worked in canada germany japan and the u s it is particularly motivated by gali s 1999 var study which demonstrates that a positive technology shock reduces hours worked at least in the short run however in the present study a technology shock is identified without recourse to gali s long run restriction which has been subject to active controversy furthermore this study uncovers other important sources of fluctuations in hours worked to reflect the concern raised by numerous studies that technology shocks leave most variations in hours worked unexplained specifically there are six shocks underlying our model and they are identified using a set of sign restrictions the empirical results confirm that in all four countries a positive technology shock significantly reduces hours worked this technology shock along with labor supply and demand shocks accounts for most of the short term variations in hours worked

maximum score estimates of the determinants of residential mobility implications for the value of residential attachment and neighborhood amenities abstract this paper uses a semiparametric empirical technique maximum score to estimate the determinants of the decision of low income renters to move out of their dwelling the maximum score estimates prove to be far more precise than probit estimates the estimates are used to show that low income residents highly value remaining in their dwelling in addition these estimates are used to illustrate an alternative method to measure willingness to pay for neighborhood amenities which we argue to be superior to hedonic based wtp measures

hedonic wages and labor market search this article investigates the consequences of labor market search for the theory of hedonic wages we find that the introduction of search has surprising consequences for the theory of hedonic wages in particular we demonstrate that the equilibrium distribution of wage and nonwage amenity bundles generally bears little resemblance to workers underlying preferences a consequence of this analysis is that estimates of workers marginal willingness to pay derived from the conventional hedonic wage methodology are biased in addition we demonstrate that search generates differences between firm level and employee level data that can cause substantial deviations in the estimates of hedonic wage equations

the workers value of the remaining employment contract duration this paper introduces and applies a method for estimating workers marginal willingness to pay for job attributes employing data on job search activity worker s willingness to pay for the remaining duration of the employment contract is derived we provide evidence that workers attach substantial value to the remaining contract duration a temporary worker with a remaining contract of 6 months is willing to pay about 10 of the wage to increase the contract by one month

workers marginal costs of commuting abstract this paper applies a dynamic search model to estimate workers marginal costs of commuting including monetary and time costs using data on workers job search activity as well as moving behaviour for the netherlands we provide evidence that on average workers marginal costs of one hour of commuting are about 17 euro

offer heterogeneity in a two state model of sequential search the econometric method in the c flinn and j heckman 1982 study for estimating a markovian model of search unem ployment and job tenure is further augmented by introducing a possibi lity that jobs may differ by separation rates or nonwage attributes a set of reservation wages is obtained as a solution to the value fun ctions differences in reservation wages estimate the compensating no nwage utility differentials among jobs the unemployment spell distri bution is characterized as one of competing risk based on which type of job is finally accepted the model is implemented using data from the employment opportunities pilot project copyright 1988 by mit press

an empirical test of the theory of on the job search preunemployment search is the fundamental labor market process generating beneficial effects of advance notice yet theory indicates that workers receiving notice may not search whereas others may search even without advance notice our weighted results

a structural dynamic analysis of job turnover and the costs associated with moving to another job this paper provides an empirical analysis of the labor market behavior of employed individuals using a structural on the job search model the costs associated with moving to another job are allowed to be nonzero and may depend on the wage level it is shown that under certain conditions the optimal strategy has the reservation wage property the model is estimated using data on job durations and subjective responses concerning the search strategy the results reveal some strong sources of inflexibility of the labor market copyright 1992 by royal economic society

inflation and unemployment the world economy today is vastly different from the 1930s when seymour harris the chairman of this meeting infected me with his boundless enthusiasm for economics and his steadfast confidence in its capacity for good works economics is very different too both the science and its subject have changed and for the better since world war ii but there are some notable constants unemployment and inflation still preoccupy and perplex economists statesmen journalists housewives and everyone else the connection between them is the principal domestic economic burden of presidents and prime ministers and the major area of controversy and ignorance in macroeconomics i have chosen to review economic thought on this topic on this occasion partly because of its inevitable timeliness partly because of a personal interest reaching back to my first published work in 1941

short run and long run welfare implications of free trade the author considers a two factor capital and labor two good consumption and investment goods one country overlapping generations model for the case in which the closed economy follows an efficient path the author proves that if trade lowers raises the relative price of the capital intensive good the current old people who only own capital lose gain from the opening of the economy while all subsequent generations whose only endowment is labor benefit lose from it it is also shown that the country gains from trade in the sense that the generations made better off by trade can compensate those that lose from the opening of the economy

flexible contracts and subjective well being theory suggests that when workers choose between permanent and flexible contracts their utility should tend to equalize across contract types new estimates of job satisfaction show the critical role played by unmeasured worker heterogeneity they reveal that flexible contracts are a strong negative determinant of satisfaction with job security but are often a positive determinant of other dimensions of job satisfaction as a consequence flexible contracts have either a weak negative influence or no influence on overall job satisfaction moreover flexible contracts generally have no impact on overall life satisfaction of the employed these results appear broadly consistent with the presence of equalizing differences jel j28 j41

compensating wage differentials and shift work preferences we study if there are compensating wage differentials paid for shift work using french matched employer employee data for male full time blue collar workers there is a significant shift premium of 16 that has a significant impact on shift work choice

exchange rate systems and macroeconomic stability abstract we examine macroeconomic stability and the properties of the international transmission of business cycles under three exchange rate systems a flexible a unilateral peg ems and a single currency emu the subjects of study are germany and france in france macroeconomic volatility under emu is comparable to that under a flexible exchange rate system but considerably lower than that under ems in germany output volatility is significantly higher under ems relative to the flexible regime and increases even further under emu inflation though becomes more stable emu also induces a strong negative international transmission of country specific supply shocks and amplifies their role this fact may complicate ecb policymaking

compensating differentials for shift work a model analyzing the choice of shift is developed and estimated using data from two supplements to the current population survey the findings show a positive wage premium for shift work that varies with personal characteristics and there is strong evidence showing the importance of self selection as workers with low potential daytime earnings are more likely to choose night work and supplement their earnings the findings demonstrate that cross section estimates of wage premiums for union membership and firm size are biased upward because they pick up some of the compensating differential for shift work

bilateral trade elasticities this paper estimates income and price elasticities for bilateral world trade in addition to testing the properties of the error terms the dynamic specification and the assumption of parameter constancy the analysis presents the first application of the bank spectrum estimator to bilateral trade flows for all countries the paper finds that bilateral trade elasticities exhibit enough of a dispersion to suggest that the direction of trade is sensitive to changes in income and prices using the bilateral elasticities as raw data the analysis obtains the associated multilateral estimates and finds that they are both consistent with the literature and suitable to addressing questions involving multilateral trade but the evidence also reveals that sole reliance on multilateral elasticities conceals valuable information for both policy applications and empirical analyses of international trade copyright 1990 by mit press

time to implement and aggregate fluctuations in this paper we slightly modify the canonical rbc model by adding an implementation lag in the technology to reproduce the fact that consumption is a leading indicator of output indeed we assume that agents have today some information on the realization of the technology shock that will occur tomorrow today inventions are known and give information on the innovations which will be implemented tomorrow the model is estimated and tested on us data by a simulated method of moments using some suitable reconstructed data that are compatible with that model the results are in favor of this implementation lag hypothesis the model is not rejected by us post war data

trade elasticity of substitution and equilibrium dynamics abstract the empirical literature provides a wide range of estimates for trade elasticities at the aggregate level recent contributions in international macroeconomics suggest that low implied values of the trade elasticity may play an important role in understanding the disconnect between international prices and real variables however a standard model of the international business cycle displays multiple locally isolated equilibria if the trade is sufficiently low the main contribution of this paper is to compute and characterize some dynamic properties of these equilibria in simulations the presence of multiple equilibria is shown to imply a volatile and persistent real exchange rate

estimating workers marginal willingness to pay for job attributes using duration data this paper develops and applies a method for estimating workers marginal willingess to pay for job attributes when workers job choices are characterized by imperfect information and labor market search as an application this paper analyzes the job durations of white males using data from the national longitudinal survey youth cohort and the dictionary of occupational titles estimates of workers willingness to pay derived from the job duration model are compared with those derived from an hedonic wage model

understanding the dynamic effects of government spending on foreign trade abstract using vector autoregressions on u s time series the present paper documents the effects of fiscal policy on foreign trade an increase in government spending significantly depreciates the nominal exchange rate appreciates the terms of trade and increases net exports exposed to the same spending shock a new keynesian general equilibrium model is shown to match qualitatively the response of relative prices the response of net exports in contrast depends on the intra and intertemporal elasticities of substitution and the degree of home bias in private spending an accommodating monetary policy dampens but does not alter the response of net exports

r d and aggregate fluctuations the research and development r d sector is considered one of the main driving forces of sustainable growth in the long run the sector however also shows excessive volatility which raises interesting questions regarding the sources of this volatility as well as the nature of the relation between the sector and aggregate fluctuations using data from the united states bureau of economic analysis and national science foundation we show that technology innovations are the main source of fluctuations in r d investment while r d technology shocks are important in driving aggregate output fluctuations after taking nominal innovations into consideration such as shocks in monetary policy and inflation capital investment specific shocks explain 70 percent of fluctuations of r d investment while r d technology shocks explain 30 percent of the variation in the output of the non r d sector technology innovations jointly explain most of the variation of output in the r d sector and 78 percent of the variation of output in the rest of the economy

flexible prices and the business cycle business cycles models with flexible prices face two major empirical challenges one regards observed output dynamics the positive short run autocorrelation in gnp growth and the hump shaped trend reverting output response to transitory shocks cogley and nason 1995 the other regards the alleged persistent decline in employment following a positive technology shock gali 1999 no determinate model with flexible prices has so far been able to address all of the cogley nason gali challenges we show that the standard rbc model can do so if it contains a signal extraction problem involving permanent and temporary supply shocks

a dynamic specific factors model of international trade in a dynamic economy land and capital serve not only as factors of production but as assets which individuals use to transfer income from working periods to retirement changes in the terms of trade and in the endowments of fixed factors do not necessarily have the same effects on factor prices and on the composition of output as they do in a static framework changes in these variables affect both total savings and the amount of savings that is diverted toward investment in capital results derived from the traditional specific factors model are more likely to emerge when the sector using land as a factor of production has a higher labor share than the sector using capital in this case the land using sector dominates factor markets more than asset markets once the roles for land and capital as assets are recognized the possibility of natural resource booms that reduce steady state welfare arises at the same time an increase in population can raise steady state welfare

technology shocks and employment recent empirical work has suggested that in response to a positive technology shock employment shows a persistent decline we show that the standard open economy flexible price model can generate a negative response of employment to a positive technology shock and can also match the negative conditional correlation between productivity and employment quite well if trade elasticities are low while the model also has good overall properties it fails to generate sufficient procyclicality in employment this finding indicates that the rbc model faces a tension between accounting for the negative response of employment to technology shocks and simultaneously maintaining that technology shocks are the major source of business cycle fluctuations

labor supply preferences hours constraints and hours wage tradeoffs in a labor market with tied hours wage packages and wage dispersion for a particular type of job constrained workers may be willing to sacrifice wage gains for better hours when changing jobs likewise workers may accept jobs offering undesirable hours only if the associated wage gains are large we investigate this issue empirically by examining whether overemployment and underemployment on the initial and new job affects the relation between hours changes and wage changes for quitters our results generally support the view that an individual requires compensation to work in a job that given the individual s particular preferences offers unattractive hours

on the job search some empirical evidence from britain abstract this paper considers evidence from the labour force survey concerning job search by employed workers the unconditional probability of observing on the job search is decomposed into the product of two constituent probabilities upon which maximum likelihood estimation is performed the analysis facilitates the identification of who searches and whether search takes place in work or from unemployment temporary or part time employment encourages continued search by men but not women skilled workers search more than the unskilled and demonstrate a preference for employed search inter industry wage relativities encourage search on the job job tenure is a significant determinant of the quality of a job match and the subsequent likelihood that on the job search is undertaken employed job seekers adopt search strategies that are more readily integrated into a working environment

valuing risk in the workplace market price willingness to pay and the optimal provision of safety the theory of compensating wage differentials attributable to adam smith suggests that jobs with disagreeable characteristics will command high wages ceteris paribus most empirical tests of this theory with hedonic wage equations implicitly assume that workers willingness to pay for risk reduction safety in the workplace through diminished wages and market valuations of the price of these reductions are equivalent it is shown that this is not the case within the manufacturing sector where willingness to pay exceeds the price cost of risk reduction at current levels of risk exposure implications for implied value of life estimates are also examined copyright 1990 by mit press

an empirical model of employed search unemployed search and nonsearch the 1969 1971 national longitudinal surveys data on young men were used to study the employed worker s choice among employed search unemployed search and not searching for a new job we assume that an unobserved variable search intensity governs this choice such that unemployed search involves a greater intensity than employed search which of course is associated with greater intensity than nonsearch the principal results are that current wages seniority collective bargaining coverage employment outside construction and employment by government are each ceteris paribus negatively associated with search intensity further each of these variables lowers the probability of not searching and raises the probabilities of employed and unemployed job search

search hedonic prices and housing demand the conventional model of the housing market does not take into account the search process for a suitable housing unit based on a dynamic search theory this paper develops and estimates a truncated regression model of the rental housing market with stochastic and unobserved truncation points the author s model provides a joint estimation of the hedonic rice and the reservation rent equations the results turn out to be superior to the ordinary least squares estimates of either the traditional housing demand function or the hedonic price equation copyright 1992 by mit press

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite