benefit entitlement and unemployment duration the role of policy endogeneity abstract the potential duration of benefits is generally viewed as an important determinant of unemployment duration this paper evaluates a unique policy change that prolonged entitlement to regular unemployment benefits from 30 weeks to a maximum of 209 weeks for elderly individuals in certain regions of austria in the evaluation we explicitly account for the fact that the program was an endogenous policy response to deteriorating labor market conditions for older workers in certain regions and sectors the main results are i rebp reduced the transition rate to jobs by 17 ii accounting for endogenous policy adoption is important and quantitatively significant

examining the relationship between visual attention and stated preferences a discrete choice experiment using eye tracking abstract we examine the relationship between visual attention and stated preferences derived from a discrete choice experiment focussing on consumer preferences regarding country of origin food labels we employ a bayesian infinite mixture logit to derive results that reveal patterns of respondent heterogeneity that would not be captured assuming that random parameters take a specific distributional form our results reveal weak relationships between the eye tracking data our stated preference results and various attribute use questions although respondents with higher levels of visual attendance value specific attributes more highly the strength of the relationship is fairly weak therefore whilst we maintain that eye tracking is useful we argue that there needs to be greater clarity about the aims and purpose of using eye tracking in stated preference research

time is money time pressure incentives and the quality of decision making many decisions in economics and finance have to be made under severe time pressure furthermore payoffs frequently depend on the speed of decision making as for instance when buying and selling stocks in this paper we examine the influence of time pressure and time dependent incentive schemes on the quality of decision making in an experimental beauty contest game we find that convergence to equilibrium is faster and payoffs are higher under low time pressure than under high time pressure interestingly time dependent payoffs under high time pressure lead to significantly quicker decision making without reducing the quality of decisions

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

job search requirements for older unemployed transitions to employment early retirement and disability benefits we use a recent policy change in the netherlands to study how changes in search requirements for the older unemployed affect their transition rates to employment early retirement and sickness disability benefits the reform becoming effective on january 1 2004 requires the elderly to formally report their job search efforts to the employment office in order to avoid a temporary cut in benefits before the new law was passed unemployed individuals were allowed to stop all search activity at the moment they turned 57 5 estimating various duration models using difference in difference and regression discontinuity approaches we find that for several groups of individuals who are affected by the policy change the stricter search requirements significantly increases their entry rate into employment however we also find evidence of a higher outflow to sickness disability insurance schemes a presumably unwanted side effect of the policy change

lottery choice incentives complexity and decision time this paper reports the results of an experiment on lottery choice in which decision cost is measured as decision making time a simple decision cost model motivates this measurement and the experiment and predicts relationships between incentive mechanism manipulations and decision making time which are borne out in the experiment the decision cost model also suggests that decisions will change in the face of the incentive manipulations in the experiment this suggestion is borne out in a complex decision making environment but not in a simple one specification tests demonstrate that observed changes in subjects behavior are not merely due to changes in subject specific error variance one may conclude from this that the payoff dominance problem is a real issue in complex decision making experiments copyright 1993 by royal economic society

unemployment assistance and transition to employment in argentina abstractin 2001 2 argentina experienced a wrenching economic crisis plan jefes implemented in may 2002 was argentina s institutional response to the increase in unemployment and poverty triggered by the crisis the program provided a safety net and appears to have protected some families against indigence despite this success the continued existence of the program which provides benefits to eligible unemployed individuals for an unlimited duration may have unappealing consequences reliance on the plan may reduce the incentive to search for work and in the long run may damage individual employability and perpetuate poverty motivated by these concerns this article examines the effect of participating in plan jefes on the probability of exiting unemployment regardless of the data set the specification and the empirical approach the article shows that plan enrollees are at least 14 percentage points less likely to transit to employment as compared to individuals who applied but did not join the

more on laspeyres price index abstract in a recent article selvanathan economics letters 1991 35 35 38 uses the stochastic approach to derive the laspeyres price index and its standard error in this paper we extend this approach by allowing for systematic changes in relative prices

the effects of changes of the job offer arrival rate on the duration of unemployment generally it is acknowledged that changing the job offer arrival rate has two opposite effects on unemployment duration for a basic job search model sufficient conditions on the wage offer distribution have been derived ensuring that one of the effects dominates however these are not satisfied for the popular families of wage offer distributions here i show that the conditions can be weakened at virtually no cost the set of distributions satisfying the new conditions is considerably larger than the set previously established in particular it includes all wage offer distribution families that are popular in structural empirical research

the dual process drift diffusion model evidence from response times we introduce a model of response time and choice that borrows from two distinct psychological traditions as in dual process models rapid automatic decisions are qualitatively different from considered decisions as in the drift diffusion model delayed considered decisions occur when confidence hits a threshold level we conduct a simple experiment in which our hybrid model matches key properties of the data as our model predicts decision times are bimodal automatic decisions are of far lower quality than considered decisions and automatic decisions are more prevalent when prior information improves thereby raising their quality jel d83 d87 c91

uncertainty in currency mispricing abstractdeclaring a currency to be mispriced is fraught with uncertainties in this article these uncertainties are explicitly recognized in a model of pricing a homogeneous commodity around the world this allows for a common driver of prices due to a base currency effect and country specific factors that lead to departures from absolute ppp on account of income differences local taxes and charges etc this approach leads to estimates of currency mispricing whose significance can be tested in the usual way using big mac prices we show that the approach has advantages over the popular big mac index to currency valuation

is there a threat effect of labour market programmes a study of almp in the danish ui system this article focuses on unemployed individuals reaction to compulsory labour market programmes prior to participation in denmark after having received ui benefits for a given period of time continued benefits are made conditional on participation in a labour market programme i estimate individuals reaction to compulsory programmes using legislative changes in the duration of benefits period as identification i find that compulsory programmes do indeed motivate individuals to find employment prior to participation the effect is large and is even comparable in size to the effect of benefits exhaustion found in studies of american ui systems

purchasing power parity and relative price variability evidence from the 1970s abstract one curious fact to emerge from the return to flexible exchange rates in the 1970s was the failure of empirical tests of simple versions of the purchasing power parity ppp doctrine this paper seeks to establish whether that observed poor performance of ppp can be attributed to uncertainty regarding the rate of inflation due to the large variations in relative prices experienced during the 1970s the evidence is found to be unsupportive of the notion

the impact of the potential duration of unemployment benefits on the duration of unemployment abstract this paper examines the impact of the potential duration of unemployment insurance ui benefits on unemployment in the united states first we use a large sample of household heads to examine differences in the unemployment spell distributions of ui recipients and nonrecipients sharp increases in the escape rate from unemployment both through recalls and new job acceptances are apparent for ui recipients around the time of benefits exhaustion such increases are not apparent at similar points of spell duration for nonrecipients second our analysis of accurate administrative data from 12 states indicates that a one week increase in potential benefit duration increases the average duration of the unemployment spells of ui recipients by 0 16 to 0 20 weeks

do benefit cuts boost job finding swedish evidence from the 1990s in june 1995 the swedish parliament decided to cut the replacement rate in unemployment insurance from 80 percent to 75 percent a change that took effect on january 1 1996 this paper examines h

an equilibrium model of search unemployment this paper develops a simple general equilibrium model with sequential search in which a nondegenerate wage offer distribution is endogenously determined we use this model to analyze the comparati

neuroeconomic foundations of economic choice recent advances neuroeconomics combines methods and theories from neuroscience psychology economics and computer science in an effort to produce detailed computational and neurobiological accounts of the decision making process that can serve as a common foundation for understanding human behavior across the natural and social sciences because neuroeconomics is a young discipline a sufficiently sound structural model of how the brain makes choices is not yet available however the contours of such a computational model are beginning to arise and given the rapid progress there is reason to be hopeful that the field will eventually put together a satisfactory structural model this paper has two goals first we provide an overview of what has been learned about how the brain makes choices in two types of situations simple choices among small numbers of familiar stimuli like choosing between an apple or an orange and more complex choices involving tradeoffs between immediate and future consequences like eating a healthy apple or a less healthy chocolate cake second we show that even at this early stage insights with important implications for economics have already been gained

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

the allocation of time in decision making we study the allocation of time across decision problems if a decision maker 1 has noisy estimates of value 2 improves those estimates the longer he or she analyzes a choice problem and 3 allocates time optimally then the decision maker should spend less time choosing when the difference in value between two options is relatively large to test this prediction we ask subjects to make 27 binary incentive compatible intertemporal choices and measure response time for each decision our time allocation model explains 54 of the variance in average decision time these results support the view that decision making is a cognitively costly activity that uses time as an input allocated according to cost benefit principles

duration dependence versus unobserved heterogeneity in treatment effects swedish labor market training and the transition rate to employment summary the effect of a treatment on the hazard rate of a duration outcome may depend on the elapsed time since treatment in addition treatment effects may be heterogeneous across agents the former gives rise to duration dependence of the treatment effect whereas unobserved heterogeneity gives rise to spurious duration dependence of the observable hazard rate we develop a model allowing for duration dependence and unobserved heterogeneity in the treatment effect the model incorporates a timing of events model and allows for selectivity on unobservables we prove identification exploiting variation in the timing of treatment and outcome in the application we analyze the effects of the swedish vocational employment training program on the individual transition rate from unemployment to work we demonstrate the appropriateness of the approach by studying the enrollment process the data cover the population and include multiple unemployment spells for many individuals the results indicate a large significantly positive effect on exit to work shortly after exiting the program the effect at the individual level diminishes after some weeks when taking account of the time spent in the program the effect on the mean unemployment duration is small copyright 2012 john wiley sons ltd

a testable theory of imperfect perception we provide a new characterization of bayesian expected utility maximization the novel feature of the model is our separation of actions from prizes the signature of the resulting theory is the impossibility of raising utility by switching wholesale from one action to another we provide applications to robustness to the recovery of utility from choice data and to model

the stochastic approach to price index numbers an expository note abstract the present paper provides an objective basis for selecting the best among four commonly used price index numbers namely the laspeyres price index the paasche price index the simple aggregative price index and the simple arithmetic mean of price relatives the criterion is developed within a stochastic framework that also enables researchers to test hypotheses about the index numbers themselves the paper also provides nonparametric interpretations of these indices

variance estimation for price indexes from a two stage sample with rotating panels estimation of price indexes in the united states is generally based on complex rotating panel surveys the sample for the consumer price index for example is selected in three stages geographic areas establishments and individual items with 20 of the sample being replaced by rotation each year at each period a time series of data is available for use in estimation this article examines how to best combine data for estimation of long term and short term changes and how to estimate the variances of the index estimators in the context of two stage sampling i extend the class of estimators introduced by valliant and miller of laspeyres indexes formed using sample data collected from the current period back to a previous base period linearization estimators of variance for indexes of long term and short term change are derived the theory is supported by an empirical simulation study using two stage sampling of establishments and items from a population derived from u s bureau of labor statistics

the effects of unemployment compensation in general equilibrium with search unemployment it is shown that when the effects of an increase in unemployment subsidies are studied in a general equilibrium framework unemployment increases far less than in a partial partial model in fact the result may very well be a decrease in unemployment if the general equilibrium forces are strong enough in the model used in this paper an increase in unemployment compensation unambiguously decreases the rate of unemployment copyright 1990 by the editors of the scandinavian journal of economics

reduction in the long term unemployment of the elderly a success story from finland in finland the elderly unemployed are allowed to collect unemployment benefits up to the age of 60 when they can retire via a particular unemployment pension in 1997 the eligibility age of persons benefiting from this scheme was raised from 53 to 55 we consider changes in the risk of unemployment unemployment durations and the exit states before and after the reform in the duration analysis a flexible treatment design is adopted by allowing for quantile treatment effects we apply three different non and semiparametric methods which all produce robust and coherent results since the reform the group aged 53 54 has had a lower risk of unemployment shorter unemployment durations and higher exit rates to employment and it is no longer distinguishable from the group aged 50 52 we estimate the amount of unemployment benefits saved due to the reform

an empirical examination of the sources of changes over time in the job finding rate using reservation wages and rejected wage offers we consider a structural dynamic job search model where nonstationarity originates from the change over time in the benefit level the job offer arrival rate and the wage offer distribution the model is estimated on the french sample of the echp taking advantage of direct observation of reservation wages rejected job offers and associated rejected wages we find that the offered wages deteriorate rapidly 13 8 over six months 19 2 over one year and 30 over two years and that changes in the wage offer distribution are the unique source of negative duration dependence in the hazard

does unemployment compensation affect unemployment duration abstract we use a flexible hazard rate model with unrestricted spell duration and calendar timeeffects to analyse a dataset including all norwegian unemployment spells during the1990 s the dataset provides a unique access to conditionally independent variation inunemployment compensation we find that a marginal increase in compensation re duces the escape rate from unemployment significantly irrespective of business cycleconditions and spell duration the escape rate rises sharply in the months just prior tobenefit exhaustion while men are more responsive than women with respect to mar ginal changes in compensation women are most responsive with respect to benefitexhaustion keywords unemployment spells business cycles unemployment compensation non parametric duration analysis jel classification c41 j64 the ragnar frisch centre for economic research oslo we wish to thank the re search council of norway for financial support and christian brinck harald goldstein costas meghir espen moen steinar strom rolf aaberge and three anonomyous referees for helpful comments cor respondence to knut roed the ragnar frisch centre for economic research gaustadalleen 21 0349oslo norway e mail knut roed frisch uio no

the swedish unemployment experience by international standards unemployment in sweden remained remarkably low throughout the 1970s and the 1980s in the early 1990s however the unemployment rate increased sharply and hit double digit levels the paper argues that the steep rise in unemployment was mainly the result of a series of adverse macroeconomic shocks partly self inflicted by bad policies and partly caused by unfavourable international developments the extremely contractionary monetary policy in 1992 appears to have had strong and long lasting effects on unemployment institutional factors do not appear as convincing explanations of the steep rise in unemployment in the early 1990s

labor market effects of unemployment insurance design with the emergence of the great recession unemployment insurance ui is once again at the heart of the policy debate in this paper we review the recent theoretical and empirical evidence on the labor market effects of ui design we also discuss policy issues related to ui design including the structure of benefits the role of liquidity constraints and the pros and cons of a ui system in which the generosity of ui benefits is varying over the business cycle finally we identify potential areas of future research

on the origins of risk taking in financial markets risk taking in financial markets is highly correlated between parents and their children however little is known about the extent to which these relationships are genetic or determined by environmental factors we use data on stock market participation of swedish adoptees and relate this to the investment behavior of both their biological and adoptive parents we find that stock market participation of parents increases that of children by about 34 and that both pre birth and post birth factors are important however once we condition on having positive financial wealth we find that nurture has a much stronger influence on risk taking by children and the evidence of a relationship between stock holding of biological parents and their adoptive children becomes weaker we find similar results when we study the share of financial wealth that is invested in stocks this suggests that a substantial proportion of the transmission of risk behavior from parents to children is environmentally determined

decision time consideration time and status quo bias economists increasingly appreciate the value of studying the time taken to make decisions in order to provide insights into decision makers choices this article shows that studying how time is allocated among individual options is also valuable in helping researchers to understand the impact default options have on decision makers attention allocation as approximated by how the time is allocated the study of this impact generates new insights into the well known choice phenomenon of status quo bias which typically refers to decision makers tendency to stick to a default option by designing a series of novel experiments i find that this bias arises even when the choice is among prizes of fixed monetary value expressed in arithmetic form i also find asymmetric attention i e more time devoted to default options and strikingly asymmetric choice errors specifically decision makers fail to select an alternative better than the default 28 of the time while they incorrectly select an alternative worse than the default only 11 of the time and provide evidence supporting a causal relationship between asymmetric attention and asymmetric errors jel d03 d12 d83

unemployment insurance in welfare states the impacts of soft duration constraints based on a major reform of norwegian unemployment insurance ui we examine the behavioral impacts of soft and hard ui duration constraints a constraint is interpreted as hard if a claimant cannot rely on any form of income support after exhaustion and as soft if ui is replaced by follow on benefits or participation in active labor market programs almp we find that both hard and soft constraints raise the job hazard significantly with surprisingly similar spikes at ui exhaustion participation in almp raises the probability of eventually finding a job but at the cost of lengthening the overall job search period

political sustainability and the design of social insurance this paper examines how the issue of political support affects the design of social insurance it distinguishes between redistributive character and size of social protection three main results emerge first it may be appropriate to adopt a system which is less redistributive than otherwise optimal in order to ensure political support for an adequate level of coverage in the second voting stage second supplementary private insurance may increase the welfare of the poor even if it is effectively bought only by the rich third the case for prohibiting supplementary private insurance may become stronger when the efficiency of private insurance markets increases

monitoring job offer decisions punishments exit to work and job quality unemployment insurance systems include the monitoring of unemployed workers and punitive sanctions if job search requirements are violated we analyze the causal effect of sanctions on the ensuing job quality notably on wages and occupational level we use swedish data and estimate duration models dealing with selection on unobservables we also develop a theoretical job search model that monitors job offer rejection versus job search effort the empirical results show that after a sanction the wage rate is lower and individuals move more often to a part time job and a lower occupational level incurring human capital losses

an evaluation of the swedish system of active labour market programmes in the 1990s we investigate the presence of short and long term effects from joining a swedish labor market program vis a vis more intense job search in open unemployment overall the impact of the program system is found to have been mixed joining a program has increased employment rates among participants a result robust to a misclassification problem in the data on the other hand it has also allowed participants to remain significantly longer on unemployment benefits and more generally in the unemployment system this being particularly the case for those entitled individuals entering a program around the time of their unemployment benefits exhaustion

a superpopulation theory approach to the design of price index estimators with small sampling biases this article uses simple superpopulation models to examine estimators for long and short term laspeyres price relatives based on pps samples

generalized theil tornqvist indices with applications to international comparisons of prices and real output the theil tornqvist index number is widely used for binary comparisons of prices output and productivity this paper describes various generalizations of the theil tornqvist index for purposes of multilateral spatial comparisons due to caves christensen and diewert and more recent further generalizations due to prasada rao and selvanathan based on the stochastic approach to index numbers the applicability of the new index numbers is demonstrated using international comparison data on private consumption expenditure and manufacturing sector output

volatility and stock price indexes the stochastic approach to index numbers has been successfully applied to the estimation of inflation the world interest rate and international competitiveness one distinct advantage of this approach is that it provides the whole distribution of the index not simply one value in this article we extend the stochastic approach to the estimation of a stock market index we demonstrate how this approach can be used to identify redundant stocks that do not contribute significantly to the overall index for index tracking purposes these stocks can be safely excluded

when the going gets tough financial incentives duration of unemployment and job match quality in the aftermath of the great recession the spanish government reduced the replacement rate rr from 60 percent to 50 percent after 180 days of unemployment for all spells beginning on or after july 15 2012 using social security data and a differences in differences approach we find that reducing the rr by ten percentage points or 17 percent increases workers odds of finding a job by 41 percent relative to similar workers not affected by the reform to put it differently the reform reduced the mean expected unemployment duration by 5 7 weeks or 14 percent implying an elasticity of 0 86 a regression discontinuity approach indicates that the reform increased the job finding rate by 26 percent we find strong behavioral effects as the reform reduced the expected unemployment duration right from the beginning of the unemployment spell while the reform had no effect on wages it did not decrease other measures of post displacement job match quality after 15 months the reform decreased unemployment insurance expenditures by 16 percent about one half of which are explained by job seekers behavioral changes

the measurement of inflation a stochastic approach the stochastic approach to index number theory views each commodity price change as an independent observation on the underlying rate of inflation so that inflation can be estimated by averaging over all the prices this article extends the approach by a allowing for sustained changes in relative prices b showing the link with divisia index numbers and c deriving standard errors for the inflation estimates the results are illustrated with australian data

the world real interest rate stochastic index number perspectives abstract in a recent paper gagnon and unferth 1995 is there a real world interest rate j int money finance 14 845 855 test the hypothesis of real interest rate equality by regressing real interest rates for all major countries on dummy variables for each country and each period we show that this model can be interpreted as an application of the stochastic approach to index numbers this approach leads to estimates of and standard errors for the real rate for the world as a whole which have appealing index number interpretations and foundations we also extend gagnon and unferth s approach by weighting countries to recognise their differing importance in the world economy in terms of relative gdp and trade weighting does not lead to appreciable changes in the results however when the wpi which gives more prominence to goods entering into international trade is used as the deflator our results indicate that real rates are equalized internationally

unemployment questions and some answers in more or less every country in the oecd unemployment was lower in the decades following the second world war than in any other period of comparable length either before or since for example in britain unemployment has exceeded 5 in every peacetime decade from 1850 onwards except for the 1950s and 1960s alternatively as we can see in table 1 p 779 average unemployment in the 1980s and 90s is higher generally much higher than in the 1960s in every country considered why this is so is one of the questions which underlies this paper a second question which is also illustrated in the unemployment numbers presented in table 1 p 779 concerns the causes of the enormous variation in unemployment rates across the oecd countries as we shall see these are difficult questions the first in particular is one for which we do not have a complete answer by this i do not mean that we do not have theories which are broadly consistent with these numbers in fact we have theories consistent with more or less any numbers what we lack is a satisfactory empirical explanation of the time series pattern of oecd unemployment in what follows we remain focused on these two questions first considering the theoretical background and then looking at some possible answers we finish with some speculative conjectures on the first question

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

measuring cpi s reliability the stochastic approach to index numbers revisited the reliability measurement of the consumer price index cpi has recently drawn much attention as the index number has been criticized for its inaccuracy in accessing the degree of inflation this article centers on providing a new regression specification that can help better gauge the cpi s reliability more specifically based on the stochastic approach to index numbers we argue that the conventional treatment of the systematic changes in relative prices should be made time variant we therefore propose a more comprehensive regression specification by including additional dummies that represent different general inflation rate levels and business cycle phases under this framework we are more capable of avoiding possible misspecifications in the regression equation as was experienced by clements and izan 1987 it also allows us to better answer the keynes critic regarding the stochastic approach to index numbers the empirical results of australia and the us are used to validate the merit of

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

the equilibrium impact of unemployment insurance on unemployment evidence from a non linear policy rule abstract we estimate the macro effect of an increase in the generosity of unemployment insurance ui on unemployment in sweden using regional data the national ui benefit formula features a benefit ceiling and a statutory replacement rate and does not take regional wage differentials into account changes in the national rules are useful for identification since a change in the benefit ceiling for example has a greater impact on ui generosity in a high wage region than in a low wage region because a greater fraction of the workforce will be affected by the benefit ceiling in the high wage region we implement this identification strategy using data for the swedish municipalities over the time period 1992 2014 our estimates suggest that the macro elasticity of an increase in ui on unemployment is around 3 this is twice as large as the corresponding micro elasticity which we estimate to 1 4 1 5 using data from the same time period

unemployment duration and economic incentives a quasi random assignment approach abstract we investigate how economic incentives and spell duration affect hazard rates out of insured unemployment we take into account that insured unemployment not always ends in employment but also in disability training programs or benefit sanctions our empirical basis is norwegian register data containing variation in economic incentives and spell duration similar to that of random assignment experiments we find that the employment and benefit sanction hazards are negatively affected by the unemployment insurance replacement ratio but that the effects vary considerably among individuals there is negative duration dependence in the employment hazard and positive duration dependence in the disability hazard

estimating incentive and welfare effects of nonstationary unemployment benefits the distribution of unemployment duration in our equilibrium matching model with spell dependent unemployment benefits displays time varying exit rates building on semi markov processes we translate these rates into an expression for the aggregate unemployment rate structural estimation using german microdata allows us to discuss the effects of an unemployment benefit reform hartz iv the reform reduced unemployment by less than 0 1 percentage points contrary to general beliefs the net wage for most skill and regional groups increased taking the insurance effect of unemployment benefits into account however the reform is welfare reducing for 76 of workers

aggregation of price risk over commodities an economic index number approach this article extends the economic theory of index numbers to the aggregation of price risk over commodities in production superlative indexes of aggregate price risk are related to tornqvist and fisher type output quantity indexes an application to major crops in manitoba illustrates the empirical importance of the analysis

some evidence on the international inequality of real interest rates abstract this paper undertakes econometric tests of the hypothesis that ex ante real interest rates are equal across countries with highly integrated capital markets the issue is of practical importance because the violation of real rate equality is a necessary condition for monetary policy to influence the open economy through the real interest rate channel although an empirical literature concerning real rate equality already exists previous investigators have focused on pre tax real rates this paper contributes to the literature by attempting to incorporate the effects of taxation into the analysis

the brain as a hierarchical organization based on recent neuroscience evidence we model the brain as a dual system organization subject to three conflicts asymmetric information temporal hori zon and incentive salience under the first and second conflicts we show that the uninformed system imposes a positive link between consumption and labor at every period furthermore decreasing impatience endogenously emerges as a consequence of these two conflicts under the first and third conflicts it becomes optimal to set a consumption cap finally we discuss the behavioral implications of these rules for choice bracketing and expense tracking and for consumption over the life cycle jel dil d74 d82 d87 d91

resource allocation in the brain when an individual performs several tasks simultaneously processing resources must be allocated to dierent brain systems to produce energy for neurons to re following the evidence from neuroscience we model the brain as an organization in which a coordinator allocates limited resources to the brain systems responsible for the dierent tasks systems are privately informed about the amount of resources necessary to perform their task and compete to obtain the resources the coordinator arbitrates the demands while satisfying the resource constraint we show that the optimal mechanism is to impose to each system with privately known needs a cap in resources that depends negatively on the amount of resources requested by the other system this allocation can be implemented using a biologically plausible mechanism finally we provide some implications of our theory i performance can be awless for suciently simple tasks ii the dynamic allocation rule exhibits inertia current allocations are increasing in past needs and iii dierent cognitive tasks are performed by dierent systems only if the tasks are suciently important

the substitution bias of the laspeyres price index an analysis using estimated cost of living indexes the most commonly used measure of the cost of living the consumer price index cpi published by the bureau of labor statistics is essentially a laspeyres price index it is well known however that a laspeyres price index provides an upward biased estimate of the cost of living because in keeping the same base period basket of goods as weights it does not take into account substitution among commodities induced by relative price changes the magnitude of the bias is an empirical question which is the focus of this study an estimate of the substitution bias may be obtained by taking the difference between the laspeyres price index and an estimated true cost of living index the true cost of living index cli is based on the theory of consumer demand it is the ratio of the minimum expenditures under two different price regimes necessary to maintain a constant level of utility as opposed to the constant basket of goods in the laspeyres index the size of the bias depends on two factors 1 the size of consumption substitution elasticities if there is no commodity substitution then the cli and laspeyres index coincide regardless of changes in relative prices and 2 the magnitude of relative price changes if all prices move together then the cli and laspeyres index again coincide regardless of the size of substitution elasticities in order to compute a true cli it is necessary to specify a particular utility function and estimate the parameters of the resulting system of demand equations see for example louis phlips p 135 several estimates of the magnitude of the substitution bias have appeared in the literature but all previous studies suffer from a common weakness they are all based on a very small number of commodities essentially because of econometric problems involved in estimating large systems of demand equations in one group of studies demand models have been estimated using highly aggregated data in which total consumption is grouped into four to nine aggregate commodites such as housing durables or clothing arthur goldberger and theodore gamaletsos for example estimate the linear expenditure system les demand model using data on five aggregate goods for several european countries and compare the resulting cli for one of the countries greece to the corresponding laspeyres price index tran van hoa estimates costof living indexes for six australian provinces using data on nine aggregate goods phlips cites work by r sanz ferrer who computed a cli for belgium from data on eight aggregate commodities in such studies using highly aggregated data the estimate of the substitution bias may be understated because the aggregation obscures substitution in consumption within categories which is perhaps more prevalent than substitution between gross aggregates another shortcoming of these three aggregate studies is the fact that they use only a single demand system and hence do not explore the sensitivity of the cli to a priori u s bureau of labor statistics the groundwork for this study was my dissertation i would like to thank the chairman and members of my committee r robert russell llad phillips and robert deacon for their support and helpful suggestions and jack triplett robert pollak richard j mcdonald and a referee for valuable comments on an earlier version the views expressed are my own and do not necessarily reflect the policies of the bureau of labor statistics for a theoretical discussion of cost of living indexes see robert pollak 1971b and paul samuelson and subramanian swamy

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

a survey of measurement biases in price indexes abstract this paper reviews the literature on measurement error in the major us price indexes the consumer price index cpi the producer price index rpi and the gross domestic product gdp deflators we take as our point of departure triplett s 1975 survey and focus on the studies of measurement error that have appeared since then we review the problems of substitution bias quality bias new goods bias and outlet substitution bias that are generally considered to be the main sources of error in price indexes the bulk of the paper is devoted to problems in the cpi and ppi as the gdp deflators tend to be based mainly on the components of these series we find that there has been surprisingly little work on the problem of overall measurement error in any of these price indexes and we conclude that there is very little scientific basis for the commonly accepted notion that measured inflation at 2 to 3 percent a year is consistent with price stability

the effects of housing allowance benefit levels on recipient duration evidence from the swedish 1997 reform how the duration of housing allowance spells varies with the generosity of the housing allowance system carries important policy implications in 1997 the swedish housing allowance system implemented a drastic reform which substantially affected claimants who were couples with children in terms of their financial incentives to utilise housing allowance benefits however at the same time the 1997 reform largely left single parent claimants unaffected exploiting the quasi experimental feature of this reform this paper analyses the impacts of benefit shrinkage on couple with children recipients exit hazards using the dd difference in difference estimation strategy careful attention is given to measuring interaction effects appropriately in non linear models the findings in this paper suggest that the 1997 reform led to a sharp increase in the leaving speed of the recipients in the couples with children category

computation of standard errors for geary khamis parities and international prices a stochastic approach one of the areas receiving little attention in the past in index number theory is providing standard errors for the index number estimates recently clements and izan and selvanathan used the stochastic approach to index numbers to derive standard errors for the rate of inflation and laspeyres and paasche index numbers in this article we use this approach to compute standard errors associated with purchasing power parities computed using geary khamis aggregation procedure in the international comparisons project of the united nations we assess the quality of the standard errors using efron s bootstrap technique

the effect of unemployment compensation on unemployment duration in germany in west germany during the 1980s law changes cut the level of unemployment compensation for the unemployed without children and extended the duration of unemployment insurance for unemployed aged over 41 analysis of these changes using the german socioeconomic panel shows that transitions from unemployment for those under 49 were particularly responsive to extensions of unemployment insurance the implied elasticity for escapes of men to employment is similar to estimates for men in the united states suggesting that differences in the potential duration of unemployment insurance only partially explain the difference in spell lengths between germany and the united states

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

search and satisficing many everyday decisions are made without full examination of all available options and as a result the best available option may be missed we develop a search theoretic choice experiment to study the impact of incomplete consideration on the quality of choices we find that many decisions can be understood using the satisficing model of herbert simon 1955 most subjects search sequentially stopping when a satisficing level of reservation utility is realized we find that reservation utilities and search order respond systematically to changes in the decision making environment jel d03 d12 d83

unemployment benefit duration and incentives in britain how robust is the evidence abstract recent years have seen considerable advances in the econometric treatment of micro data in models of unemployment duration this paper examines the evidence from such models concerning the effects of unemployment benefits on incentives to work in britain widely accepted results of a small but significant benefit effect are reproduced using a sample of 1 231 unemployed men however these results are only found when benefit receipt is assumed to follow a hypothetical pattern which is shown to be unrealistic and over generous when more realistic calculations of benefits are used no benefit effect is found the paper also argues that search theory is of little help in determining the choice between competing functional forms and explanatory variables results concerning benefits are shown to be sensitive to the latter