international control of subsidies and countervailing duties the range and number of cases of administered protection in the 1 980s suggests that it has begun to play an important role in shaping international trade flows as most of such cases are brought by the united states against developing country exporters they are also a matter of concern for developing countries in the uruguay round of trade negotiations the internationally negotiated code on subsidies and countervailing duties is ambiguous in its definition of legal subsidies and thus in the appropriate use of countervailing duties because the code is applied at the national level there is considerable pressure by domestic producers on administering agents to increase the use of such protective measures through the adoption of provisional measures while the investigation is being conducted and through the interpretation of criteria for coverage given that the most successful developing countries have been those which adopt the most neutral policies toward imported and domestic goods and between sectors domestically the very biased application of the subsidies and the trade policy distortions common in the countries examined together with the frequency of countervailing actions against the subsidies suggest that developing countries would benefit from abandonment of the subsidies in september of 1986 the world s trading nations agreed to begin a new round of multilateral trade negotiations to be called the uruguay round the previous negotiations the tokyo round ended in 1979 in the six intervening years 1980 85 seven countries and the european community eec initiated 1 155 antidumping cases there were also 425 antisubsidy cases half a hundred safeguards cases and several hundred other trade practice cases resulting from national attempts to interpret and enforce various international agreements table 1 the sheer number of such cases suggests that the terms and conditions on which goods are traded across national boundaries are being affected by the outcomes of such administrative processes as much as by the gradual unrolling of the tariff reductions agreed at the tokyo round the general agreement on tariffs and trade gatt and the codes which

overlapping generations and environmental control abstract this paper sets forth a continuous time olg model in order to analyze intertemporal trade offs in the use of environmental resources this theoretical framework proves to be particularly appropriate in examining the externalities arising from consumer heterogeneity and disconnectedness across generations we characterize the trade off between capital accumulation and the environment and derive the conditions for an optimal fiscal policy the role of government intervention is twofold first it has to achieve intergenerational equity compatibly with a time consistent social welfare criterion second it has to correct the intertemporal market failures due to the selfish behavior of each generation

sustainability policy and environmental policy a theoretical representative agent economy with a depletable resource stock polluting emissions and productive capital is used to contrast environmental policy which internalises externalised environmental values with sustainability policy which achieves some form of intergenerational equity the obvious environmental policy comprises an emissions tax and a resource stock subsidy each equal to the respective external cost or benefit sustainability policy comprises an incentive affecting the choice between consumption and investment and can be a consumption tax capital subsidy or investment subsidy or a combination thereof environmental policy can reduce the strength of the sustainability policy needed more specialised results are derived in a small open economy with no environmental effects on utility

another reconciliation between economists and forestry experts olg arguments foresters often claim that the goal of good forest policy is to have a sustained forest yield or even a maximum sustainable yield they also claim that people wish to save a few extra trees for their children this bequest motive is not modelled in the standard approach to the optimal rotation problem in this paper we present a standard version of an overlapping generation model augmented with a simple tree technology we show in particular that the market equilibrium can be dynamically inefficient and that a bequest motive in terms of trees can correct for the overaccumulation of capital that causes the inefficiency the bequest motive also enables us to account for a harvesting intensity varying with age young people typically cut more than elderly people in spite of a perfect capital market

the political economy of environmental taxes with an aging population this paper develops a two period overlapping generations model with environmental externalities and uncertain lifetimes and studies how two sources of population aging greater longevity and a lower rate of population growth affect the politically determined environmental tax and the quality of the environment it is shown that greater longevity and a lower rate of population growth have entirely different effects on these factors greater longevity has no effect on the environmental tax and has a non positive effect on the environmental quality whereas a lower rate of population growth has a negative effect on the tax and has a positive effect on the quality in addition the political decision making on the tax leads to an inefficient allocation of capital and environmental quality

the return of the reciprocitarians us trade policy today we are always willing to be trade partners but never trade patsies president ronald reagan state of the union message washington 1987

environmental quality public debt and economic development this article analyzes the consequences on capital accumulation and environmental quality of environmental policies financed by public debt a public sector of pollution abatement is financed by a tax or by public debt we show that if the initial capital stock is high enough the economy monotonically converges to a long run steady state on the contrary when the initial capital stock is low the economy is relegated to an environmental poverty trap we also explore the implications of public policies on the trap and on the long run stable steady state in particular we find that government should decrease debt and increase pollution abatement to promote capital accumulation and environmental quality at the stable long run steady state finally a welfare analysis shows that there exists a level of public debt that allows a long run steady state to be optimal

exchange rate volatility and japan u s commodity trade an asymmetry analysis exchange rate volatility is said to affect trade flows in either direction when increased volatility is separated from decreased volatility asymmetric analysis reveals even more support for the fact that both increased volatility and decreased volatility affect trade flows in either direction we add to this new literature by considering 57 industries that trade between japan and the us in addition to providing evidence of asymmetric response of their trade flows to a measure of exchange rate volatility our approach identifies industries that could benefit from increased exchange rate volatility and those that could be hurt similarly we identify industries that could benefit from decreased volatility and those that could be hurt the overall conclusion is the adverse effects of dollar yen volatility on the trade between the two countries

intertemporal equilibria and exhaustible resources an overlapping generations approach abstract this paper presents a general equilibrium model of an abstract intertemporal economy with overlapping generations production possibilities and capital investment under the constraint of a nonreproducible natural resource the model provides for institutionally mandated asset transfers between successive generations under the assumption that each generation has perfect foresight concerning future prices and economic conditions competitive exchange supports a multiplicity of pareto efficient equilibria that correspond to particular asset transfer regimes the achievement of a desirable distribution of welfare between present and future generations requires that the asset transfer regime be chosen according to a social welfare function or explicit distributional criterion economic efficiency per se is insufficient to ensure social optimality these results have important implications for resource planning in the real world where policy makers and the public at large are often highly concerned over the potential impacts of current resource utilization on the welfare of future generations

optimal tax rules and public sector efficiency with an externality in an overlapping generations model abstract this paper examines optimal tax rules and public sector efficiency integrating them in a second best world with pollution by using an overlapping generations model the second best world is characterized by the comparative statics of green preferences the main results obtained are as follows first the marginal cost of public funds may be reduced by the externalities regardless of the choice of taxes second optimal environmental and non environmental tax rules are additively and directly affected by the dynamic efficiency of capital accumulation per unit labour decal and indirectly by it through the efficiency of the public sector environmental taxes going beyond pigovian ones may be welfare improving if the decal is improved by the environmental tax even optimal non environmental tax rules should additively and directly counter the dynamics of pollution to consider the income effects of the optimal tax system for the future third the additivity property or the principle of targeting does not hold even in the absence of incentive compatibility constraints the essential reasons for this are clarified as follows distortions that should be countered by taxes that is the income effects of the optimal tax system and the decal in this model break the equality between optimal environmental taxes and the externalities measured by governments finally growing environmental concerns may in fact increase pollution the inverse relationship between environmental and labour income taxes may not hold

an ecological economic assessment of deregulation of international commerce under gatt this paper discusses the ecological economic implications of deregulation of trade as promoted by the general agreement on tariffs and trade gatt 1 this includes both environmental2 and socio economic factors such as standards of living and equity we outline fifteen overlapping problems with deregulation or free trade we argue that many environmental problems cannot be resolved equitably efficiently or sustainably by unregulated markets and that there is no alternative to public intervention in certain situations we repeat the 1987 brundtland commission s question of how far into international trade should regulation penetrate wced 1987 the commission s call for gatt s environmental reform 3 has not yet been heeded

altruism intergenerational transfers of time and bequests abstract this paper uses a standard two period overlapping generation model to examine the behavior of an economy where both intergenerational transfers of time and bequests are available while bequests have been examined extensively time transfers have received little or no attention in the literature assuming a log linear utility function and a cobb douglas production function we derive an explicit solution for the dynamics and show that altruistic intergenerational time transfers can take place in presence of a binding non negativity constraint on bequests we also show that with either type of transfers capital is an increasing function of the intergenerational degree of altruism however while with time transfers the labor supply of the young increases with the degree of altruism with bequests it may decrease

exploring the interaction between stock price index and exchange rates an asymmetric threshold approach this article examines the impact of stock market news on the foreign exchange markets of usa canada and uk employing an innovative extension of the asymmetric threshold model of apergis and miller 2006 under this framework we can disentangle the reaction of foreign exchange market to bad or good news and small or large news of stock returns our comprehensive daily data set spans the period from january 1990 to june 2014 using a cointegration and error correction model we document the existence of a causal relationship between stock market and foreign exchange markets most interestingly our results derived from the asymmetric threshold model confirm that the relationship between stock and foreign exchange markets is sensitive to short term good or bad news and short term small or large news our findings entail significant implications for policymakers governments risk managers and international investors

the theoretical developments initiated by haberler but named for pigou do not provide sufficient grounds for rejecting keynes s key theoretical proposition this paper examines a claim made in the introduction to milton friedman s presidential address to the american economic association and that is now taken for granted in orthodox economics according to friedman the theoretical developments initiated by haberler but named for pigou provide sufficient grounds for rejecting keynes s key theoretical proposition and the economics of keynes in its entirety the problem with this claim is that it turns out given the scrutiny that it clearly deserves to be false the theoretical developments initiated by haberler but named for pigou do not provide sufficient grounds for rejecting keynes s key theoretical proposition and thus the economics of keynes as a whole there is no legitimate rationale for believing in other words even in a world of flexible prices that the system will tend naturally toward a position of equilibrium at full employment

forestry and the bequest motive abstract with an overlapping generations model for trees and humans it is shown that in a small open timber producing economy both in a setting where the economy is planned in order to maximize an intertemporal social welfare function and in a decentralized market economy long term forest investments should be evaluated by their net present value this is so provided that the existing generation has some if even very small concern for the well being of the next generation a review of empirical studies among nonindustrial private forest owners in the u s and in sweden gives support to the suggestion that this mechanism based on a tinge of altruism may be more important in promoting long term silvicultural investments than the incentives given by existing land markets

institutional traps and economic growth this article s point of departure is that low quality institutions concentration of political power and material wealth and underdevelopment are persistent over time its analytical model views an equal distribution of political power as a commitment device to enhance institutional quality thereby promoting growth the politically powerful coalition contemplates relinquishing of its power through democratization weighing this advantageous consequence against the limit on own appropriative ability that it entails the possibility of two developmental paths is exhibited with concentration of political and economic power low quality institutions and slow growth and a more equal distribution of political and economic resources high quality institutions and faster growth

consumption asymmetry and the stock market empirical evidence abstract this paper examines whether u s stock market value affects consumption asymmetrically using cointegration and error correction methodology the results confirm that stock market value asymmetrically affects real per capita consumption negative news affects consumption more than positive news

new ways of looking at old issues inequality and growth abstract the paper uses new cross country data on income and asset land distribution to show that i there is a strong negative relationship between initial inequality in the asset distribution and long term growth ii inequality reduces income growth for the poor but not for the rich and iii available longitudinal data provide little support for the kuznets hypothesis policies that increase aggregate investment and facilitate acquisition of assets by the poor might thus be doubly beneficial for growth and poverty reduction

on the intergenerational allocation of natural resources it is known hartwick and others that under standard assumptions a society that invests in reproducible capital the competitive rents on its current extraction of exhaustible resources will enjoy a consumption stream constant in time it is shown here that this result can be interpreted as saying that an appropriately defined stock of capital including the initial endowment of resources is being maintained intact and that consumption can be interpreted as the interest on that patrimony this seems like a useful rule of thumb for policy

from real estate to consumption the role of credit markets in the usa the aim of this article is to test whether the credit market conditions affect the strength of transmission of real estate wealth effects on household consumption in the us economy although many different works have dealt with the analysis of the existence of a real estate wealth effect most of them as a reaction to the dramatic increase of housing prices in several oecd countries there are only few papers analysing whether the consumption response depends on the positive or negative sign of the wealth shock and as far as we know none of them takes the effects of credit market conditions on that asymmetric response into account this article tries to fill the existing gap in the literature on this matter from an econometric perspective we estimate the asymmetries in the consumption response within the momentum threshold autoregressive model m tar proposed by enders and siklos 2001 but following stevans 2004 it is applied to a multivariate framework the main results show that the credit mar

a new data set measuring income inequality this article presents a new data set on inequality in the distribution of income the authors explain the criteria they applied in selecting data on gini coefficients and on individual quintile groups income shares comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage although differences in the definition of the underlying data might still affect inter temporal and international comparability based on this new data set the authors do not find a systematic link between growth and changes in aggregate inequality they do find a strong positive relationship between growth and reduction of poverty

inequality and growth in the united states evidence from a new state level panel of income inequality measures i introduction rising income inequality in the united states over the past quarter century is well documented see e g gottschalk 1997 krueger 2003 levy and murnane 1992 piketty and saez 2003 whether and by how much this change in inequality is associated with a change in economic performance is an important question yet recent empirical work has been largely inconclusive positive relationships between income inequality and economic growth have been found by partridge 1997 2005 using a panel of states and by forbes 2000 using a panel of countries empirical work by panizza 2002 and quah 2001 however has found little or no stable relationship between inequality and growth the results appear to be extremely sensitive to the econometric specification additionally barro 2000 has found evidence that the relationship is nonlinear with inequality being positively related to growth among wealthier countries like the united states but negatively related to growth among low income countries much of this recent empirical literature was initiated by the important work of deininger and squire 1996 who constructed a large cross national panel of inequality measures containing several time series observations for each nation spaced over multiple decades a parallel empirical literature also emerged using u s state level data with income inequality measures typically spaced at 10 yr intervals see e g panizza 2002 partridge 1997 2005 both the state level and the cross national empirical literatures benefited by exploiting the more advanced panel data econometrics afforded by the large n small t panel dimensions in this paper we offer a new more comprehensive panel of state level income inequality measures and use this panel to reevaluate the empirical inequality growth relationship 1 this panel has the unique feature of being large in both n and t with annual observations of the 48 contiguous states for the entirety of the postwar period 1945 2004 for nearly all the states in the panel the share of income held by the top decile experienced a prolonged period of stability after world war ii followed by a substantial increase during the 1980s and 1990s these state level trends appear to closely replicate the overall trends in aggregate u s inequality found by piketty and saez 2003 exploiting the large and balanced size of our inequality panel we explore the long run relationship between inequality and growth via three alternative dynamic panel error correction estimators the fixed effects fe estimator the mean group mg estimator of pesaran and smith 1995 and the pooled mg estimator of pesaran shin and smith 1999 the greater homogeneity of state level data helps mitigate the difficulty in adequately capturing structural differences across international panels of earlier studies such as forbes 2000 and barro 2000 corruption levels labor market flexibility tax neutrality tradition of entrepreneurship and many other factors are only poorly measured if at all barro 2000 1011 and these sources of heterogeneity are much more likely to contribute to omitted variable bias across countries than across states the results from our analysis indicate that the long run relationship between the top decile share of income and economic growth is positive in nature moreover an evaluation of several alternative income inequality measures suggests that this positive relationship is driven primarily by the concentration of income in the upper end of the income distribution the structure of the paper is as follows section ii presents the new panel of annual state level inequality measures and includes an important discussion of its key limitations section iii then offers an empirical investigation on the impact of income inequality on the growth rate of real income per capita finally section iv offers a brief set of conclusions

is aging harmful to the environment how does aging affect the environment we analyze this question using anoverlapping generations model featuring uncertain lifetimes andenvironmental externalities we show that whether aging is harmful to theenvironment depends on the curvature of utility function which ismeasured by the degree of relative risk aversion we also explore theimplication of the results for environmental policy in an aging society

new issues in the uruguay round and beyond the general agreement on tariffs and trade gatt is a treaty establishing a framework of rules and principles for policies affecting merchandise trade it also provides a forum in which sovereign states periodically engage in reciprocal trade liberalisation and rule making 2 as a result of substantial reductions in tariffs through periodic rounds of multilateral negotiations rule making has gradually become as if not more important than liberalisation per se starting with the kennedy round i964 7 but especially in the tokyo i973 9 and uruguay i986 rounds an increasing number of agenda items involved the negotiation of rules and disciplines for specific trade related domestic policies rather than further reductions in tariffs and other border measures rules pertaining to product standards subsidies and government procurement were prominent items on the agenda of the tokyo round the uruguay round further expanded the multilateral negotiating agenda by adding trade related investment measures trims trade related intellectual property rights trips and measures affecting the contestability of service markets the trend for multilateral trade negotiations to address domestic policies shows no sign of abating calls for a post uruguay round negotiation have identified issues such as competition policy foreign direct investment fdi regulations innovation policies and the interaction between trade and environmental policies as possible topics for discussion 3 in part the steady agenda expansion reflects changes in the structure of the global economy the managerial and technological innovations of the last decade such as just in time inventory management and the increased tradeability of services created pressures for greater specialisation and geographical splintering of production this in turn made regulations pertaining to services fdi transfer of technology and protection of intangible assets more important for both governments and firms flows associated with services fdi and intellectual property ip are smaller than merchandise trade but are quite substantial table i reveals that global merchandise trade in i990 was 3 5 trillion while world trade in commercial services was about 820 billion global receipts for ip were some 33 billion and income flows

do exchange rate changes have symmetric or asymmetric effects on the trade balances of asian countries abstractrecently the linear ardl approach was modified and a non linear version of the same approach that is used mostly to assess asymmetric effects of some exogenous variables on the dependent variable was introduced the non linear model was recently used by one study to show that indeed exchange rate changes have asymmetric effects on the trade balance of a few advanced countries the same was demonstrated for transition economies by another study in this article we provide additional asymmetric effects from seven asian economies by showing that in most cases we find evidence of short run and long run asymmetric effects of exchange rate changes on the trade balance like other studies our findings are country specific

existence uniqueness and stability of equilibrium in an overlapping generations model with productive capital abstract this paper analyzes the existence uniqueness and stability of a steady state equilibrium in an overlapping generations model with productive capital it is shown that for any feasible set of well behaved preferences there exists a production function that satisfies the inada conditions under which the economy experiences global contraction and the steady state equilibrium is characterized by the absence of production and consumption the study establishes a strengthened inada condition which is necessary to preclude global contraction and sufficient conditions for the existence of a unique and globally stable non trivial steady state equilibrium

the effect on income distribution of development the growth rate and economic strategy abstract an analysis of cross section and time series data for 83 countries confirms some and contradicts other work on income distribution new findings include a dualistic socio political system is highly unfavorable for equality neither the extent of government intervention in the economy nor the rate of manufactured exports are systematically related to income distribution the analysis confirms that there is no systematic relationship between equality and the rate of economic growth educational participation and a reduction in the share of primary exports in gdp are both favorable for equality there is some support for the kuznets hypothesis that inequality increases as per capita income rises to about 400 and then declines with further income increase but the empirical support is not strong and may be weakening over time these findings lead to more optimistic conclusions then other work that rapid growth in a mixed economy is quite consistent with unchanged or even improved income distribution even at early stages of development

myopia liquidity constraints and aggregate consumption a simple test this note conducts a simple test for myopia and liquidity constraints in aggregate u s consumption the test exploits the fact that under myopia consumption should be equally sensitive to predictable income declines and increases while under liquidity constraints consumption should be more sensitive to predictable income increases than to declines using quarterly postwar data the author shows that aggregate consumption is in fact more sensitive to predictable income declines than increases this perverse asymmetry is inconsistent with both myopia and liquidity constraints but is qualitatively consistent with recent theoretical work incorporating loss aversion into intertemporal preferences

asymmetric effects of interest rate changes the role of the consumption wealth channel this article examines the role of the consumption wealth channel in explaining asymmetric effects of monetary policy changes towards this end we draw upon available literature on the consumption function and behavioural finance to construct a framework for asymmetric effects of monetary policy caused by the impact of wealth changes on aggregate consumption we then employ data from the uk to examine the validity of the proposed framework in the context of a liberalized economy with easy access to consumer credit wealth reduction due to monetary tightening is expected to have weaker impact on spending than increase in wealth our results validate the above hypothesis

stock market wealth and consumer spending martha starr mccluer this article investigates the effects of stock market wealth on consumer spending traditional macroeconometric models estimate that a dollar s increase in stock wealth boosts consumption by three to seven cents with the substantial 1990s rise in stock prices the nature and magnitude of this wealth effect have been much debated after describing the issues and previous research i present new evidence from a well known consumer survey the results are broadly consistent with life cycle saving and a modest wealth effect most stockholders reported no appreciable effect of stock prices on their saving or spending but many mentioned retirement saving in explaining their behavior jel e21 e30 d12 i introduction the relationship between stock market wealth and consumer spending has been a subject of long standing interest traditional macroeconometric models estimate that a dollar s increase in household wealth boosts consumer spending by three to seven cents per year such an effect is consistent with predictions from a simple life cycle model in which consumers spend more over their lifetimes in response to higher wealth however the stock market is known to play a role as a passive predictor of information thus it is also possible that stock prices simply lead aggregate economic activity without any short run change in spending induced by changes in wealth understanding the response of spending to changes in wealth is important for determining how stock market fluctuations affect the macroeconomy the question also bears directly on theories of saving behavior and on the issue of retirement preparedness by today s workers the experience of the past few years provides an interesting opportunity to revisit this issue stock prices increased substantially in the 1990s with the standard poor s 500 more than doubling from 1994 to 1997 and rising another 44 through 1999 at the same time stock ownership broadened considerably mostly through mutual funds and retirement accounts so that a large number of households likely experienced wealth gains the increase in wealth might be expected to boost consumer spending and lower the saving rate and indeed these trends occurred however it is hard to separate the influence of the wealth effect from other factors that also would have promoted spending such as strong income growth and favorable labor market conditions this article presents some new evidence on the response of spending to changes in wealth the data come from the michigan survey research center src survey of consumers an ongoing nationally representative survey of u s households in interviews conducted between july and september 1997 households owning stock were asked special questions about their spending and saving the questions covered a number of factors that may influence the effect of wealth on spending including the value and form of stockholdings stock price expectations concerns about retirement and perceptions of income uncertainty in brief the results are broadly consistent with life cycle saving and a modest wealth effect the vast majority of stockholders reported no appreciable effect of stock prices on their spending or saving but many mentioned retirement saving in explaining their behavior the next section reviews previous research on the relationship between stock market wealth and consumer spending the third section describes the data from the michigan survey and the fourth presents the results a final section summarizes and concludes ii background and previous research to frame the discussion it is useful to review how an unexpected increase in wealth would affect consumption in a simple lifecycle model this model though restrictive in its assumptions provides valuable intuition about the propensity to consume unexpected stock gains consequences of refinements to the model are discussed below

intertemporal preferences and intergenerational equity considerations in optimal resource harvesting abstract optimal resource harvesting decisions are reexamined in light of a distinction between personal discount rates reflecting individuals rate of time preference and generational discount rates reflecting considerations of equity for future generations the discount rates have partially counteracting effects upon the optimal harvesting decisions and upon the optimal distribution of benefits in any one period for instance it is the generational discount rate that determines the potential for economically optimal extinction of a renewable resource by distinguishing the two discount rates it is possible to give each generation equal consideration while still allowing for individual impatience

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

the trend behavior of alternative income inequality measures in the united states from 1947 1990 and the structural break this article tests the hypothesis that the time series process of income inequality has experienced a structural break the timing of the structural break is treated as an unknown parameter to be estimated from the data because it is not possible to associate a single episodic policy event with the break year and to avoid bias in favor of a unit root hypothesis if the break was near the selected year for several measures of income inequality a segmented trend model is more appropriate to account for the fundamentals affecting the behavior of income inequality as opposed to a stochastic trend model

the great crash and the onset of the great depression this paper argues that the collapse of stock prices in october 1929 generated temporary uncertainty about future income which led consumers to forgo purchases of durable goods that the great crash generated uncertainty is evidenced by the decline in surety expressed by contemporary forecasters that this uncertainty affected consumer behavior is shown by the fact that spending on consumer durables declined drastically in late 1929 while spending on perishable goods rose slightly this effect is confirmed by the fact that there is a significant negative relationship between stock market variability and the production of consumer durables in the prewar era

a new database on human capital stock in developing and industrial countries sources methodology and results abstract the paper describes the techniques and data adopted for the construction of a new series of estimates of the stock of education in 85 countries over 28 years 1960 1987 the series are built from enrollment data using the perpetual inventory method adjusted for mortality estimates are corrected for grade repetition among school goers and country specific drop out rates for primary and secondary students enrollment data series used start as far back as 1930 for most countries and even earlier for others this reduces the need for backward extrapolation of enrollments to provide the initial estimates of the investment inventory

the effects of emission permits on growth and the environment we develop an overlapping generations model of growth and the environment in which industrial firms produce environmentally harmful emissions a government controls the emissions by assigning emission quotas to firms and permits could be issued and freely traded as financial instruments across firms on the basis of the quotas we show that an environmental policy that decreases an aggregate number of emission quotas could degenerate economic growth and lower environmental quality in the long run we also show the implications of this result for environmental policy

self enforcing intergenerational social contracts for pareto improving pollution mitigation we consider in an overlapping generations model with an environmental externality a scheme of contracts between any two successive generations under each contract agents of the young generation invest a share of their labor income in pollution mitigation in exchange for a transfer in the second period of their lives the transfer is financed in a pay as you go manner by the next young generation different from previous work we assume that the transfer is granted as a subsidy to capital income rather than lump sum we show that the existence of a contract which is pareto improving over the situation without contract for any two generations requires a sufficiently high level of income in a steady state with social contracts in each period the pollution stock is lower compared to a steady state without contracts analytical and numerical analysis of the dynamics under nash bargaining suggests that under reasonable conditions also steady state income and welfare are higher delaying the implementation of a social contract for too long or imposing a contract with too low mitigation can be costly net income may inevitably fall below the threshold in finite time so that pareto improving mitigation is no longer possible and the economy converges to a steady state with high pollution stock and low income and welfare in the second part of the paper we study a game theoretic setup taking into account that credibly committing to a contract might not be possible we show that with transfers granted as a subsidy to capital income there exist mitigation transfer schemes which are both pareto improving and give no generation an incentive to deviate from any of its contracts even in a dynamically efficient economy social contracts coexist with private savings

endogenous aspirations growth and the rise of environmental concerns abstract in this paper we analyze the implications of assuming that the intensity of aspirations is endogenous in accordance with empirical evidence consumption aspirations decrease with capital accumulation while environmental ones increase we show that such a change in the intensity of aspirations gives rise to a u shaped relationship between capital accumulation and environmental quality we also study the implications of our assumption concerning the optimal allocation and show that the steady state capital stock can be larger or smaller than the one corresponding to the modified golden rule in addition for realistic parameter values the decentralization of the optimal allocation requires the implementation of a maintenance investment subsidy and a lump sum transfer from the old to the young generation

optimal growth with pollution how to use pollution permits abstract we study the optimal growth path and its decentralization in an overlapping generation model in the presence of externalities decentralization of an optimal path needs some specific taxes in addition to lump sum transfers the introduction of a market for permits neutralizes the external environmental effects we show that there is a unique management of permits such that the equilibrium coincides with the optimal path all permits should be auctioned i e no permits should be given to firms this conclusion is in contradiction with the usual practice of grandfathering

incentive equilibrium in an overlapping generations environmental game we consider two overlapping generations that want to coordinate their strategies of working consuming and controlling pollution since the cooperative solution is not an equilibrium and hence is not a self enforcing contract a mechanism is required to sustain it we show how incentive strategies and the resulting incentive equilibrium could provide such a mechanism we also derive the conditions that ensure the credibility of these strategies

resolving intergenerational conflict over the environment under the pareto criterion abstract climate change policies create intergenerational winners and losers because the costs come first and the benefits later in such cases kaldor hicks cost benefit analysis seeks potential pareto improvements by showing the hypothetical potential for the winners to compensate the losers via lump sum transfers in their absence once a costly climate policy is actually implemented it unleashes distortions and general equilibrium effects rendering unclear whether kaldor hicks potential improvements lead to actual improvements we study policies which once implemented would pass the pareto test that no generation subsequent to policy action be made worse off than before we develop a stylized climate economy model in which production by the current generation generates pollution which damages production for future generations over time the business as usual bau economy gets increasingly polluted consumption falls and generational welfare levels decline a government introduces costly pollution abatement and finances it via distorting taxes and the sale of debt green bonds pollution levels start to decline generating downstream welfare gains which may be taxed without hurting anyone in a pareto sense to help finance the policy and pay off the debt along the transition every generation faces less pollution consumes more and is happier than if life had continued in the bau world

trade protectionism in australia its growth and dismantling protection from import competition was a defining feature of the birth of the australian federation in 1901 for the next 70 years the extent of protection grew and broadened from mainly tariffs to also involving import licencing after world war ii there was a one off 25 across the board cut in tariffs in 1973 and some dismantling of agricultural subsidies but that was followed by the re imposition of import quotas for the most protected manufactured goods then in the mid 1980s a new reformist government began a long process of dismantling all protection as part of an overall economic reform program that also involved de regulation privatization and moving to a flexible exchange rate the rewards included three decades of faster economic growth and an unprecedented rise in australians living standards this paper provides a history of economic thought on the pros and cons of protectionism for the small distant natural resource rich australian economy and a survey of the literature on the extent effects and political economy reasons behind the growth of australian protection and its eventual dismantling

life expectancy and the environment we present an olg model in which life expectancy and environmental quality dynamics are jointly determined agents may invest in environmental care depending on how much they expect to live in turn environmental conditions affect life expectancy as a result our model produces a positive correlation between longevity and environmental quality both in the long run and along the transition path eventually multiple equilibria may also arise some countries might be caught in a low life expectancy low environmental quality trap this outcome is consistent with stylized facts relating life expectancy and environmental performance measures we also discuss the welfare and policy implications of the inter generational externalities generated by individual choices finally we show that our results are robust to the introduction of growth dynamics based on physical or human capital accumulation c 2009 elsevier b v all rights reserved

what can new survey data tell us about recent changes in distribution and poverty it has been claimed that in recent times the poor have lost ground both relatively and absolutely even when average levels of living have risen this article tests that claim using household surveys for 67 developing and transitional economies over 1981 94 it finds that changes in inequality and polarization were uncorrelated with changes in average living standards distribution improved as often as it worsened in growing economies and negative growth was often more detrimental to distribution than positive growth overall there was a small decrease in absolute poverty although with diverse experiences across regions and countries almost always poverty fell with growth in average living standards and rose with contraction

intergenerational altruism and the environment we construct an overlapping generations model of pollution externality in which individuals are altruistically linked to their offspring as in barro 1974 it is shown that steady state consumption may be a decreasing function of the intergenerational degree of altruism despite individuals altruism the competitive equilibrium is not optimal we thus study the social optimum and show that it can be decentralized

the kuznets process and the inequality development relationship abstract in his classic paper on economic growth and income inequality kuznets discussed the process of population shift from traditional to modern activities as the basis for a theory of distributional change during the course of development in this paper we present a formalization of the kuznets process conduct a general analysis of distributional change under this process and derive the functional forms of and conditions for a turning point in the inequality development relationship for six commonly used indices of inequality the functional form appropriate to each index is then estimated using cross section data on 60 developing and developed countries finally some extensions to the initial formalization of the kuznets process are considered

risk bearing and the theory of income distribution this paper develops the stochastic theory of distribution with a dynamic model which focuses on the role of incomplete insurance in generating inequality unlike previous work our approach takes explicit account of the reason for market incompleteness in modeling agents behaviour in particular the amount of risk borne is endogenous using a model of growth with altruism in which agents are risk averse and there is moral hazard we show that lineage wealth follows a markov process which converges globally to an ergodic distribution this also represents the long run population distribution of wealth we discuss the role of particular assumptions such as availability of production loans and unboundedness of utility in yielding the qualitative properties of the distribution of wealth the choice of occupation and the prevention of poverty traps

the saving and investment nexus for china evidence from cointegration tests the saving and investment nexus as postulated by feldstein and horioka fh 1980 is revisited the saving investment correlation for china is estimated over the periods 1952 1998 and 1952 1994 the latter culminating in a period of fixed exchange rate regime amongst the key results it is found that saving and investment are correlated for china for both the period of the fixed exchange rate and the entire sample period with high saving investment correlation the results suggest that the chinese economy is in conformity with the fh hypothesis this is a valid outcome for in china capital mobility was fairly restricted over the 1952 1994 period as indicated by the relatively low foreign direct investment

factor shares and savings in endogenous growth in models of steady investment driven growth an individual s propensity to save depends on how much of his income is drawn from accumulated factors of production capital rather than from nonaccumulated factors when agents are heterogeneous in this respect growth oriented policies have distributional consequences and in the absence of lump sum redistribution their implementation faces political constraints if the median voter is capital poor relative to the economy s representative agent political interactions tend to slow down growth when policy acts on capital s income share and tend to accelerate it when investment subsidies are the policy instrument of choice copyright 1993 by american economic association

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

inequality and growth in the united states is there asymmetric response at the state level a previous study that tried to assess the impact of economic growth on income inequality in the u s used state level data and an ardl panel model to conclude that economic growth worsens income in

irreversibility and uncertainty cause an intergenerational equity efficiency trade off abstract two important policy goals in intergenerational problems are pareto efficiency and sustainability i e intergenerational equity we demonstrate that the pursuit of these goals is subject to an intergenerational equity efficiency trade off our analysis highlights two salient characteristics of intergenerational problems and policy i temporal irreversibility i e the inability to revise one s past actions and ii uncertainty of future consequences of present actions in human environment systems we employ a two non overlapping generations model that combines an intragenerational production decision on the use of circulating capital and a non renewable resource with a negative intergenerational externality as an unforeseen contingency if initially unknown problems become apparent and policy is enacted after irreversible actions were taken policy making faces a fundamental trade off between ex post pareto efficiency and sustainability that is one can achieve either one of these two goals but not both

asymmetric response of the us india trade balance to exchange rate changes evidence from 68 industries the relationship between the trade balance and the exchange rate continues to attract attention by international economists and has entered into new territory mostly due to advances in econometric methods the introduction of asymmetric error correction modelling and asymmetric cointegration using the nonlinear ardl approach of shin et al festschrift in honor of peter schmidt econometric methods and applications springer 2014 281 as compared to the symmetric and linear ardl approach of pesaran et al journal of applied econometrics 2001 16 289 has led us in a new direction to discover relatively better results we apply these methods to the bilateral trade balance model of each of the 68 industries that trade between india and the usa the nonlinear approach not only provides more support to the j curve effect but also yields support in favour of short run and long run asymmetric effects of exchange rate changes in most of the industries

an overlapping generations model of growth and the environment this article analyzes the potential conflict between economic growth and the maintenance of environmental quality in an overlapping generations model short lived individuals make decisions which have long lasting effects on both factor productivity and the environment the model provides a theoretical explanation of observed correlations between environmental quality and income whereby economic growth is associated first with declines then improvements in environmental quality it suggests circumstances in which multiple pareto ranked steady state equilibria may arise and in which sustained growth of both capital and environmental quality may occur overmaintenance of the environment analogous to dynamically inefficient overaccumulation of capital may emerge copyright 1994 by royal economic society

business cycle asymmetry a deeper look this paper distinguishes two types of asymmetry in business cycles deepness and steepness deepness is defined as the characteristic that troughs are further below trend than peaks are above most previous research has focused exclusively on steepness which refers to cycles in which contractions are steeper than expansions a test for deepness is proposed and applied to u s post war quarterly unemployment real gnp and industrial production evidence of deepness is found for unemployment and industrial production while the evidence for real gnp is weaker previous evidence of steepness in unemployment is confirmed

explaining international and intertemporal variations in income inequality this paper explores the propositions that income inequality is relatively stable within countries and that it varies significantly among countries a new and expanded data set provides broad support for both propositions drawing on a political economy and capital market imperfection arguments to explain the intertemporal and international variation in inequality the empirical analysis shows that the predicted variables associated with the first argument a measure of civil liberties and the initial level of secondary schooling and the second argument a measure of financial depth and the initial distribution of land are indeed important determinants of inequality this paper explores two propositions regarding income inequality they are first income inequality is relatively stable within countries and second it varies significantly across countries to illustrate note that the gini coefficient in india remained almost constant for forty years 1951 92 with mean 32 6 and standard deviation 2 0 2 in contrast the variation in gini coefficients across countries is large 61 9 in honduras in 1968 compared with 17 8 in bulgaria in 1976 if substantiated these propositions have potentially significant implications for poverty the significance of the first is obvious barring any fundamental socio political change poverty reduction will depend crucially on the rate of economic growth given this the significance of the second is that in inegalitarian economies the poor will enjoy a smaller share of any national increment in income than in more egalitarian ones drawing on a new and expanded data set on inequality deininger and squire 1996a the first of the paper s three sections conducts standard statistical tests of the two propositions the sample comprises 573 observations on the most common measure of inequality the gini coefficient for 49 developed and developing countries covering the period 1947 94 the results broadly confirm our two propositions specifically analysis of variance anova shows that about 90 of the total variance in the gini coefficients

stock market wealth and consumption this paper explores the link between changes in the aggregate value of corporate stock and changes in consumer spending it presents data on the distribution of corporate stock ownership based on the 1998 survey of consumer finances it also uses time series evidence on the comovement of stock market wealth and various categories of consumer spending to calibrate the wealth effect it concludes that in the year after a change in stock market values consumer spending is likely to rise by between one and two cents for each dollar increase in the value of corporate stock

on the concavity of the consumption function at least since keynes 1935 many economists have had the intuition that the marginal propensity to consume out of wealth declines as wealth increases nonetheless standard perfect certainty and certainty equivalent versions of intertemporal optimizing models of consumption imply a marginal propensity to consume that is unrelated to the level of household wealth we show that adding income uncertainty to the standard optimization problem induces a concave consumption function in which as keynes suggested the marginal propensity to consume out of wealth or transitory income declines with the level of wealth