what is the optimal immigration policy migration jobs and welfare abstract we study the immigration policy that maximizes the welfare of the native population in an economy where the government designs an optimal redistributive welfare system and supplies public goods we show that when the government can design different tax systems for immigrants and natives free immigration is optimal it is also optimal to use the tax system to encourage the immigration of high skill workers and discourage that of low skill workers when immigrants and natives must be treated alike banning low skill immigration and allowing free immigration for high skill workers is optimal however there might be no high skill immigration when heavy taxes are levied on all high skill workers both natives and immigrants

convergence to the law of one price without trade barriers or currency fluctuations using a panel of 51 prices from 48 cities in the united states we provide an upper bound estimate of the rate of convergence to purchasing power parity we find convergence rates substantially higher than typically found in cross country data we investigate some potentially serious biases induced by i i d measurement errors in the data and find our estimates to be robust to these potential biases we also present evidence that convergence occurs faster for larger price differences finally we find that rates of convergence are slower for cities farther apart however our estimates suggest that distance alone can only account for a small portion of the much slower convergence rates across national borders

the canadian border and the us dollar the impact of exchange rate changes on us retailers this paper provides a micro level investigation into the impact of changes in the uscanada nominal exchange rate on retailers in us regions lying close to the uscanada border using a large data set on product level retail prices and sales in the united states over a nine year period we explore the links between changes in exchange rates cross border travel and the price and quantity responses of us retailers this allows us to assess the importance of geography and distance in affecting the pass through of exchange rate changes into prices and quantities at the level of the consumer we develop a two stage theoretical model of cross border travel and industry equilibrium for retail sales at the border our empirical results accord well with the implications of the model

aggregate investment in a business cycle model with adjustment costs abstract this paper explains the observed cyclical variability of aggregate investment and the counter movements with respect to its relative price in the us data using a stochastic growth model with adjustment costs the exogenous disturbances of the model represent preference shocks productivity innovations and changes on the relative price between consumption and investment goods simulations of the model imply that the volatility of those relative price innovations need to be three to four times larger than the standard solow residual innovations in order to match the model with the data

measuring human capital in the labor market the supply of experience in 8 oecd countries abstract to investigate the evolution of the supply side of the labor market i derive a methodology to measure an important component of the human capital level of the workforce the experience of the labor market based on the perpetual inventory method a stock of experience is estimated for eight oecd countries it appears that during the last three decades the oecd labor markets have faced a decline in the supply of experience by the labor market participants with a minimum in the early 1980s for most countries and a recovery in the 1990s some implications regarding relative wages relative unemployment and schooling are discussed

the impact of climate on the law of one price a test using north american food prices from the 1920s using grocery price data for over 100 urban locations across the us and canada from the 1920s we show that deviations from the law of one price lop were strongly related to climate differences the effect of climate has a large impact on the elasticity of deviations from lop with respect to distance while having no impact on the border effect we then test a counterfactual to show that the relationship between deviations from lop and temperature does not hold when historical temperature data are replaced with contemporary this is evidence that climate impacts production l impact du climat sur la loi du prix unique un test utilisant les prix de la nourriture en amerique du nord dans les annees 1920 a l aide de donnees sur les prix de la nourriture dans les epiceries dans plus d une centaine de villes aux etats unis et au canada dans les annees 1920 on montre que les deviations par rapport a la loi du prix unique lpu sont fortement reliees aux differences dans le climat l effet du climat a un grand impact sur l elasticite des deviations par rapport a la lpu par rapport a la distance mais aucun impact sur l effet de frontiere on utilise alors un test contrefactuel pour montrer que la relation entre les deviations par rapport a la lpu et la temperature ne tient pas quand on remplace les temperatures historiques par les temperatures contemporaines ceci montre que le climat a un impact sur la production

selection investment and women s relative wages over time in theory growing wage inequality within gender should cause women to invest more in their market productivity and should differentially pull able women into the workforce our paper uses heckman s two step estimator and identification at infinity on repeated current population survey cross sections to calculate relative wage series for women since 1970 that hold constant the composition of skills we find that selection into the female full time full year workforce shifted from negative in the 1970s to positive in the 1990s and that the majority of the apparent narrowing of the gender wage gap reflects changes in female workforce composition we find the same types of composition changes by measuring husbands wages and national longitudinal survey iq data as proxies for unobserved skills our findings help to explain why growing wage equality between genders coincided with growing inequality within gender

price gaps at the border evidence from multi country household scanner data abstract studies employing micro price data to examine the extent of international goods market integration tend to find that borders imply arbitrage impeding transaction costs inducing market segmentation within monetary unions these effects are found to be very minor though at least when online prices are considered however analyzing household scanner price data from three euro area member states belgium germany and the netherlands we document that households face and pay significantly different prices for identical goods across these countries in the vast majority around 75 of cases considered for regions within countries as a counterfactual however no evidence for such effects exists employing cross border shopping information we are able to draw direct conclusions about the question of integration of markets for a substantial number of goods in addition we can also derive a measure of border costs for most of them for goods for which no cross border shopping take place we provide a lower bound for border costs in the majority of cases in line with existing evidence our findings suggest considerable heterogeneities in border costs median values generally range between 15 and 20 of the price of a good for exact border cost estimates and between 18 and 20 for the derived lower bounds considering the distribution of values obtained suggests that most values lie in a range of 40 since our data set comprises purchase information from all major retailers present in a given market we are also able to examine the role of retailer heterogeneity for cross border price gap estimates differences in retailer composition turn out to be fairly small however grouping goods by various characteristics reveals that goods purchased more often tend to exhibit somewhat bigger border estimates considering the price or the goods category however does not yield any conclusive insights

revisiting the importance of non tradable goods prices in cyclical real exchange rate fluctuations abstract in an influential paper engel 1999 argues that essentially all the fluctuations in the real exchange rate can be attributed to fluctuations in the relative price of traded goods and that only a small part of the fluctuations can be attributed to changes in the relative price of non tradables we revisit this important issue and our main finding suggests that the relative distribution wedge i e the relationship between traded goods prices at the dock and the retail prices of those goods is key to understanding real exchange rate fluctuations importantly our results suggest that variations in the relative wedge are driven by fluctuations in mark ups and not in distribution costs

equilibrium and migration in dynamic models of housing markets abstract this paper presents a model of a regional housing market where households choose among competing employment opportunities offered by cities within a given system the equilibrium requirement imposed in the model requires that households be indifferent among all locations both within their current city and other cities within the region rather than in terms of exogenously determined utility or populations this construction allows the characterization of equilibrium in terms of potentially observable variables related to household income given that equilibrium can be defined in this more general manner it is natural to identify ways in which the predictions will differ from those generated by existing models capozza and helsley s j urban econ 28 1990 180 203 model of land conversion is evaluated in this context in this setting the option value associated with the ability to delay development depends directly on the degree to which the income processes are correlated across cities also increased idiosyncratic income risk does not necessarily lead to larger option values

changes in returns to education in latin america the role of demand and supply of skills using micro data for the urban areas of argentina brazil chile colombia and mexico the authors document trends in men s returns to education during the 1980s and the 1990s and estimate the role of supply and demand factors in explaining the changes in skill premia they propose a model of demand for skills with three production inputs corresponding to workers with primary secondary and university level education further the authors demonstrate that an unprecedented rise in the supply of workers having completed secondary level education depressed their wages relative to workers with primary level education throughout latin america this supply shift was compounded by a generalized shift in the demand for workers with tertiary education

an adjustment cost model of asset pricing an intertemporal asset pricing model is constructed incorporating an explicit adjustment cost technology the capital stock can be altered by investment but there are adjustment costs whi ch lower the marginal return of investment in a model involving an i nfinitely lived representative agent it is shown how changes in adju stment costs influence asset prices the term structure of real inter est rates and risk premia the results suggest that adjustment cost by causing an intertemporal consumption substitution raises the pri ces of risky stocks and risk premia and reduces long term real intere st rates copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

changes in male labor supply and wages in the 1980s both wages and labor supply of poorly educated men fell substantially relative to those of educated men some observers have interpreted this positive association between changes in w

price dispersion and the border effect abstract cross country price differences could reflect regional market segmentation within countries or national segmentation at the border in a search based model of price setting identifying national versus regional segmentation requires data on regional trade flows a calibration to u s and canadian data implies predominantly regional frictions u s producers are three times more likely to sell in their home region than another u s region and canadian producers are seven times more likely to sell in their home region than another canadian region frictions vis a vis foreign regions are only slightly higher models that ignore regional segmentation can misstate the severity of frictions at the border

optimal anti inflation programs in semi industrialized economies orthodox versus heterodox policies abstract the paper characterizes the optimal time consistent anti inflation program in a small open semi industrialized economy when policy makers choose the rate of exchange rate crawl the rate of change of fiscal spending and a wage and price control parameter to minimize deviations of output and inflation the optimal program involves a rapidly decelerating rate of crawl a sharp reduction in spending and a short initial period of wage and price controls the paper also assesses the importance of controls in helping to reduce the output loss associated with fighting inflation

segmentation of consumer markets in the us what do intercity price differences tell us we quantify the magnitude of market segmentation in us consumer market and explore the underlying factors behind this segmentation using a quarterly panel of retail prices for 45 products in 48 us cities from 1985 to 2009 the extent of market segmentation is estimated using city pair price differences within the framework of both linear autoregressive ar and nonlinear threshold autoregressive tar models we find that the magnitude of market segmentation varies from one product to another but even more across city pairs in each product contrary to a widespread perception market segmentation within the us is not necessarily larger for non tradable services compared to tradable goods we identify potential drivers of market segmentation by relating the cross city and cross product variations of market segmentation to location specific and product specific characteristics distance relative city sizes differences in wage and rent type of product and proximity to marketplace distance which captures more than transport costs turns out to be the most salient factor even after controlling for a range of other potential factors the effect of distance however varies substantially across products with perishable products and locally produced products showing larger distance effect on market segmentation we find that the magnitude of market segmentation has been somewhat stable during the sample period but intercity price differences have become more sensitive to distance over time in many products under study

migration theories and evidence an assessment abstract this paper presents a critical survey of theories of migration their welfare and policy implications and their empirical relevance we also develop some extensions to the theory beginning with the harris and todaro ht model in particular the ht model is extended to examine risk averse behaviour within families where the migration of members of families serves to diversify risk the welfare implications of the individual migration decision and government intervention in the form of employment subsidies are examined recent evidence on international migration is presented it is shown that migration does not flow automatically in response to wage differentials characteristics of migrants and the process of self selection are found to be important determinants of the rate of migration

three questions about sunspot equilibria as an explanation of economic fluctuations it is by now well known that the sort of difference equations that characterize the equilibrium conditions of an infinite horizon competitive economy may have solutions in which the endogenous variables fluctuate in response to sunspot variables that is to random events that in fact have nothing to do with economic fundamentals and so do not directly affect the equilibrium conditions it is possible to view such sunspot equilibria as a representation of an actual phenomenon economic fluctuations not caused by exogenous shocks to fundamentals but rather by revisions of agents expectations in response to some event which revised expectations become self fulfilling early discussions of such solutions sometimes suggested that a more rigorous derivation of the requirements for equilibrium might yield additional restrictions that would eliminate the sunspot solutions from the set of true equilibria the demonstration by karl shell 1977 david cass 1981 and costas azariadis 1981 that sunspot equilibria can exist in a rigorously formulated intertemporal equilibrium model namely the overlapping generations model of samuelson has shown that this is not always the case nevertheless many economists remain skeptical about the reasonableness of the sunspot hypothesis as a possible explanation of actual economic fluctuations and for quite general reasons independent of judgments about the empirical plausibility of any particular models i discuss here three such general reasons for skepticism

against the wind bargaining recentralisation and wage inequality in norway 1987 91 in the late 1980s norway s labour market experienced similar supply and demand shifts for skills to other countries but unlike other oecd nations norway s wage setting system became more centralised the pay distribution in norway became more compressed at the bottom from 1987 to 1991 while low wage workers in other countries lost ground relatively using norwegian microdata for 1987 and 1991 i found that changing labour market prices helped cause this wage compression further the less educated had declining relative overall employment but increasing relative public sector employment both possible labour market responses to the wage compression

technology and the us labor market evidence from the sectoral and regional decomposition of the change in the us workforce skill mix abstract researchers have found indirect evidence supporting the role of technology in changing the workforce skill mix in the us by decomposing the change in the skill mix into within between industry components this paper provides additional support for the role of technology by extending the decomposition analysis into both the sectoral and the regional dimensions

international prices costs and markup differences relative cross border retail prices in a common currency comove closely with the nominal exchange rate using product level prices and wholesale costs from a grocery chain operating in the united states and canada we decompose this variation into relative costs and markup components the high correlation of nominal and real exchange rates is driven mainly by changes in relative costs national borders segment markets retail prices respond to changes in costs in neighboring stores within the same country but not across the border prices have a median discontinuous change of 24 percent at the border and 0 percent at state boundaries jel f31 l11 l81

functional equivalence between intertemporal and multisectoral investment adjustment costs abstract two types of adjustment cost specifications coexist in macroeconomic models with investment intertemporal adjustment costs which involve a nonlinear substitution between capital and investment in capital accumulation and multisectoral costs which are captured by a nonlinear transformation between consumption and investment this paper demonstrates a functional equivalence between these two specifications one surprising result is that an increase in multisectoral adjustment costs can be equivalent to a decrease in intertemporal adjustment costs depending upon the size of the intertemporal costs we then observe that the functional equivalence implies a problem in identifying the two types of adjustment costs and show ways to solve the problem

regional labor markets and the determinants of wage inequality from 1972 to 1990 the united states experienced the largest increase in wage inequality of any developed country the spread in log wages between the 90th and 10th percentiles of the male wage distribution increased by about 60 points and inequality increased within virtually every demographic or skill category of the labor force see chinhui juhn et al 1993 various explanations have been offered including changes in the relative demand for skill intensive goods international trade immigration of less skilled workers and increased labor force participation of women yet attempts to quantify the relative importance of these factors have not met with much success this leaves skill biased technical change as the residual claimant that rationalizes the data this paper uses regional differences in the evolution of wage inequality to provide new evidence on the determinants of relative wages using a model of factor demand in geographic markets i isolate contributions of i changing skill ratios in the labor force ii increased participation of women iii technical change and iv changes in the industrial composition of labor demand the data indicate that changing skill ratios and women s labor supply have affected the wages of low skilled men in the west the data indicate that increased immigration of less skilled hispanic and asian workers has adversely affected the wages of natives causing a greater increase in inequality there than in any other region of the country i modeling wage inequality in regional markets

immigrants minorities and labor market competition this paper investigates the extent of labor market competition among immigrants minorities and the native population an analysis of 1980 u s census data reveals that immigrants tend to be substitutes for some labor market groups and complements for others the effects of shifts in immigrant supply on the earnings of native born men are however very small on the other hand increases in the supply of immigrants do have a sizable impact on the earnings of immigrants themselves an increase of 10 percent in the supply of immigrants for example reduces the immigrant wage by about 10 percent

borders and big macs i measure the extent of international market segmentation using local national and international big mac prices i show that the bulk of time series price volatility observed across the united states arises between neighboring locations using these data i provide new estimates of border frictions for 14 countries i find that borders generally introduce only small price wedges far smaller than those observed across neighboring locations when expressing these wedges in terms of distance equivalents i find that border widths are small in relation to price variations observed across the united states this suggests that international markets are well integrated

internal borders ethnic based market segmentation in malawi summary ethnic diversity is associated with poorer economic development but why i argue that market segmentation is one mechanism linking diversity to economic underdevelopment when ethnic groups are geographically segregated and trust is concentrated within groups markets will be tend to be segmented along ethnic lines i evaluate this argument using maize price data from seventy malawian markets over 14 years and combine it with census data on the spatial distribution of ethnic groups i find that maize price differences a key indicator of market segmentation are indeed larger for ethnically dissimilar markets even after taking sub national administrative borders geographic barriers and climatic differences into account these statistical findings are complemented by interview data from farmers and traders in three markets across malawi which highlight the centrality of trust in small scale maize trading as well as a preference for coethnic trading partners together these findings suggest that ethnic diversity and ethnoregional segregation in particular can have a negative impact on market integration an important driver of food security and long term economic development

retailers strategies and food price dynamics evidence from dairy scanner data abstract we investigate the relationship between retailers strategies and dairy price dynamics using high frequency italian scanner data for different dairy products we compute a weekly drift free price index specific for product category chain and type of store exploiting the unbalanced panel data structure to control for unobservable strategies by chain time and type of store we test if unobservables are statistically significant in influencing the price dynamics of each of the products covered by our analysis in general chain and type of store specific unobservables play a significant role moreover we identify the role of some observable strategic variables in controlling or in stimulating price inflation rates we obtain mixed results on the relationship between private label pl market shares and price trend while we find price promotions to be more effective if applied to national brands nbs rather than pls we conclude with some implications for the potential role of public policies in controlling food inflation

when can changes in expectations cause business cycle fluctuations in neo classical settings abstract it is often argued that changes in expectation are an important driving force of the business cycle however it is well known that changes in expectations cannot generate positive co movement between consumption investment and employment in the most standard neo classical business cycle models this gives rise to the question of whether changes in expectation can cause business cycle fluctuations in any neo classical setting or whether such a phenomenon is inherently related to market imperfections this paper offers a systematic exploration of this issue our finding is that expectation driven business cycle fluctuations can arise in neo classical models when one allows for a sufficiently rich description of the production technology however such a structure is rarely allowed or explored in macro models in particular we identify a multi sector setting and a setting with a costly distribution system in which expectation driven business cycles can arise

explaining time variation in geographic price dispersion the pattern of price dispersion significantly varies over time and across locations using a detailed dataset with product level retail prices we examine the role of time varying factors in shapin

the economics of cross border travel abstract we model the decision to travel across an international border as a trade off between benefits derived from buying a range of products at lower prices and the costs of travel we estimate the model using microdata on canada united states travel price differences motivate cross border travel a 10 home appreciation raises the propensity to cross by 8 to 26 the larger elasticity arises when the home currency is strong a result predicted by the model distance to the border strongly inhibits crossings with an implied cost of 87 cents per mile geographic differences can partially explain why american travel is less exchange rate responsive

the law of one price in scandinavian duty free stores many empirical studies have rejected the law of one price that prices of a good differ across locations has been explained by differences in product attributes and costs of local inputs transport costs trade barriers and that buyers have imperfect information about prices in different locations see penelopi k goldberg and michael m knetter 1997 for a survey we examine the law of one price in situations where none of the mentioned reasons for its failure can be invoked it has also been suggested that deviations from the law of one price are a consequence of rigid nominal prices and that different countries typically have different currencies we explore whether this can contribute to our understanding of deviations from the law of one price our data are taken from three scandinavian duty free outlets where each product at the same location has price tags in at least two currencies hence a consumer has the option to choose between several prices for the same identical good in such a setting there is a strong prior that the law of one price lop hereafter holds well however the potential for arbitrage will arise because nominal prices are not continuously adjusted while exchange rates fluctuate daily based on standard tests we reject lop at all duty free outlets given that lop does not hold here it is less surprising that many previous studies have found that prices of similar products at different locations differ significantly nevertheless the main conclusion of the paper is that in this natural experiment lop remains a useful guide to the behavior of relative prices as deviations become large nominal prices are adjusted to reduce the deviations from lop thereby limiting arbitrage opportunities the patterns at the duty free outlets suggest that there is a band of inaction so that small deviations from lop may persist for almost a decade in one case but that large deviations quickly lead firms to adjust relative prices the findings are consistent with costly arbitrage and fixed costs of adjusting nominal prices

optimal feedback rules in an open economy macromodel with rational expectations this paper outlines procedures for deriving optimal time invariant linear feedback rules in continuous time linear stochastic models under rational expectations it also examines the derivation of optimal simple rules of a similar type these procedures are applied to an open economy model under rational expectations and the consequences of uncertainty about stochastic disturbance structures for policy design are considered the results indicate some preference for price level or nominal income rules rather than a monetary rule for the open economy

the analytics of technology news shocks abstract this paper constructs several models in which unlike the standard neoclassical growth model positive news about future technology generates an increase in current consumption hours and investment these models are said to exhibit procyclical news shocks we find that all models that exhibit procyclical news shocks in our paper have two commonalities there are mechanisms to ensure that i consumption does not crowd out investment or vice versa ii the benefit of forgoing leisure in response to news shocks outweighs the cost among the models we consider we believe one model holds the greatest potential for explaining procyclical news shocks its critical assumption is that news of the future technology also illuminates the nature of this technology this illumination in turn permits economic actors to invest in capital that is forward compatible i e adapted to the new technology on the technical side our paper reintroduces the laplace transform as a tool for studying dynamic economies analytically using laplace transforms we are able to study and prove results about the full dynamics of the model in response to news shocks

dynamic games and the time inconsistency of optimal policy in open economies it has been argued that the bretton woods system of pegged but adjustable exchange rates set up after world war ii was designed specifically to prevent the manipulation of exchange rates in pursuit of national macroeconomic objectives see r cooper so it is perhaps no coincidence that the ending of pegged rates has led to the re emergence of theories and policies involving such manipulation before the war when inflation was low and unemployment high in the major industrialised nations this involved competitive depreciation as countries tried to gain employment in the late 1970 s and early 1980 s however countries like the uk and the us have embarked on policies of competitive appreciation in order to cut inflation regarded as the first priority sharp movements in exchange rates however constitute a threat to orderly trade and stimulate protectionism as bergsten 1981 argues this abstract was borrowed from another version of this item

price level convergence new evidence from u s cities abstract this paper tests the bilateral price level convergence among 52 u s cities at the good level by using a new econometric approach the estimated median half lives are far below the half lives found in the corresponding studies for the u s

the hidden winners of renewable energy promotion insights into sector specific wage differentials abstract in light of germany s energy system transformation this paper examines differences in employment structures and wage differentials between renewable energy establishments and their sector peers to do so we have developed a novel data set by linking company level information from the german renewable energy federation with administrative establishment level data from the institute for employment research descriptive evidence shows significant differences in wages and several other characteristics between renewable energy establishments and their sector peers our estimates give evidence that human capital and other establishment level characteristics mostly explain the wage differential among manufacturers and energy providers however we find a persistent renewable energy wage premium of more than ten percent in construction installation activities and architectural engineering services we interpret this premium as a positive indirect effect of the promotion of renewable energies for the benefit of employees in renewable energy establishments within these two sectors

pass through vertical contracts and bargains abstract this paper analyzes the determinants of pass through that are specific to vertical relationships between wholesalers and retailers the type of vertical agreement firms contract upon as well as their relative bargaining power are identified as major determinants of pass through rates

border prices and retail prices abstract we analyze retail prices and at the dock import prices of specific items in the bureau of labor statistics bls cpi and ipp databases using both databases simultaneously to identify items that are identical in description at the dock and when sold at retail this identification allows us to measure the distribution wedge associated with bringing traded goods from the point of entry into the united states to their retail outlet we find that overall u s distribution wedges are 50 70 around 10 to 20 percentage points higher than that reported in the literature we discuss the implications of this for measuring the size of the pure tradeables sector exchange rate pass through and real exchange rate determination we find that distribution wedges are very stable over time but there is considerable variation across items there is some variation across the country of origin for the imported item for our major trading partners but not as much as the cross item variation we also investigate the determinants of distribution wedges finding that wedges do not vary systematically with exchange rates but are related to other features of the micro data

the evolution of price dispersion in the european car market car prices in europe are characterized by large and persistent differences across countries the purpose of this paper is to document and explain this price dispersion using a panel data set extending from 1980 to 1993 we first demonstrate two main facts concerning car prices in europe i the existence of significant differences in quality adjusted prices across countries with italy and the u k systematically representing the most expensive markets 2 substantial year to year volatility that is to a large extent accounted for by exchange rate fluctuations and the incomplete response of local currency prices to these fluctuations these facts are analysed within the framework of a multiproduct oligopoly model with product differentiation the model identifies three potential sources for the international price differences price elasticities generating differences in markups costs and import quota constraints local currency price stability can be attributed either to the presence of a local component in marginal costs or to markup adjustment that is correlated with exchange rate volatility the latter requires that the perceived elasticity of demand is increasing in price we find that the primary reason for the higher prices in italy is the existence of a strong bias for domestic brancs that generates high markups for the domestic firm fiat in the u k higher prices are mainly attributed to better equipped cars and or differences in the dealer discount practices the import quota constraints are found to have a significant impact on japanese car prices in italy france and the u k with respect to local currency price stability a large percentage of the documented price inertia can be attributed to local costs and a smaller fraction to markup adjustment that is indicative of price discrimination based on these results we conjecture that the emu will substantially reduce the year to year volatility observed in the car price data but without further measures to increase european integration it will not completely eliminate existing cross country price differences

pass through in a concentrated industry empirical evidence and regulatory implications we estimate pass through with thirty years of data from a concentrated industry the empirical model accounts for oligopoly interactions yet facilitates estimation with aggregate price data robust statistical evidence supports that industry wide cost changes are more than completely transmitted downstream and that this industry pass through is largely unaected by competitive conditions the industry in question portland cement is a major focus of environmental and antitrust regulators we use our pass through estimates to i evaluate the welfare consequences of marketbased co2 regulation ii predict the magnitude and location of price eects due to a merger under review by antitrust authorities and iii corroborate the simulation based analysis of the epa regarding its impending regulation of local pollutants

on the political economy of immigration and income redistribution in this article we analyze an economy in which agents vote over immigration policy and redistributive tax policy we show that natives preferences over immigration are influenced by the prospect that immigrants will be voting over future tax policy we also show that changes in the degree of international capital mobility the distribution of initial capital among natives the wealth or poverty of the immigrant pool and the future voting rights and entitlements of immigrants can have dramatic effects on equilibrium immigration and tax policies finally we provide some empirical support for the model s predictions

the effect of income taxes on household income research on the distribution of income during the 1980s has identified a trend towards increasing inequality which may be the continuation and acceleration of trends spanning several decades this paper explores to what extent behavioral responses to the tax changes during the 1980s may also explain the rising inequality the 1986 tax reform act is used as a natural experiment to explore the roles played by both taxes and a variety of nontax factors our principal finding is that both tax rates and nontax factors appear to have had significant effects on relative income growth during the late 1980s

a comparison of international income inequality an ordered probit model analysis in this study the ordered probit model with marginal effect was applied to examine the key elements that influence changes in the gini levels the empirical results indicated that export incentives and poverty have a positive impact on the gini levels moreover the marginal effect revealed that export incentives increase income inequality for countries with higher inequality and reduce inequality for those countries with a relatively even income distribution likewise the study found that the asian pacific economic cooperation apec and the eu countries move from inequality to equality more efficiently than countries in the latin american integration association laia

gender and the new inequality explaining the college non college wage gap the new inequality is often characterized by the increasing wage gap between workers with a college education and those without yet although the gap in hourly wages between college educated and non college educated women is high and rising the topic has been overshadowed by research on gender inequality and wage inequality among men using the 1990 5 percent public use microdata samples independent sources of macro data and controls for individual human capital characteristics i examine the association between the college non college wage gap and key aspects of local economic conditions for women and men while the college non college wage gap among women is comparable in size to the gap among men significant gender differences emerge in the underlying sources of high wage gaps in over 500 labor markets across the united states compared with men flexible and insecure employment conditions e g joblessness casualization and immigration are more important in fostering high wage gaps among women than are technology trade and industrial composition the prevailing explanations of rising wage inequality over time based on these gender differences i reconsider the debate on labor market restructuring and inequality and discuss a new analytical focus on differences in within gender inequality

labor hoarding and the business cycle this paper investigates the sensitivity of solow residual based measures of technology shocks to labor hoarding behavior using a structural model of labor hoarding and the identifying restriction that innovations to technology shocks are orthogonal to innovations in government consumption we estimate the fraction of the variability of the solow residual that is due to technology shocks our results support the view that a significant proportion of movements in the solow residual are artifacts of labor hoarding behavior specifically we estimate that the variance of innovations to technology is roughly 50 percent less than that implied by standard real business cycle models in addition our results suggest that existing real business cycle studies substantially overstate the extent to which technology shocks account for the variability of postwar aggregate u s output

real exchange rate fluctuations and the dynamics of retail trade industries on the u s canada border consumers living near the u s canada border can shift their expenditures between the two countries so real exchange rate fluctuations can act as demand shocks to border areas retail trade industries using annual county level data we estimate the effects of real exchange rates on the number of establishments and their average payroll in border counties for four retail industries in three of the four industries we consider the number of operating establishments responds either contemporaneously or with a lag of one year to real exchange rate movements for these industries the response of retailers average size is less pronounced the rapid response of net entry is inconsistent with any model of persistent deviations from purchasing power parity that depends on retailers costs of changing nominal prices

price setting in online markets basic facts international comparisons and cross border integration we document basic facts about prices in online markets in the united states and canada which is a rapidly growing segment of the retail sector relative to prices in regular stores prices in online markets are more flexible and exhibit stronger pass through 60 75 percent and faster convergence half life less than two months in response to movements of the nominal exchange rate multiple margins of adjustment are active in the process of responding to nominal exchange rate shocks properties of goods sellers and markets are systematically related to pass through and the speed of price adjustment for international price differentials

the decline of welfare benefits in the u s the role of wage inequality welfare benefits in the u s have experienced a much studied secular decline since the mid 1970s we explore a new hypothesis for this decline related to the increase in wage inequality in the labor market and the decline of real wages at the bottom of the distribution we posit that voters prefer benefits which are tied to low skilled wages we test the hypothesis using a 1969 1992 panel of state level data an additional contribution of our analysis is the use of general social survey data on voter preferences for welfare which we combine with current population survey data to determine the voter in each state who has the median preferred welfare benefit level our analysis reveals considerable evidence in support of a role for declining real wages in the decline of welfare benefits

trade liberalization and the inter industry wage premia the missingf role of productivity the literature concerning the effect of tariffs on the inter industry wage premium has not addressed the role of total factor productivity tfp in determining both the wage premium and tariffs this omission not only overlooks an important determinant of wage premium but also invalidates the use of the pre reform tariff level as an instrument for the change in tariffs based on an analysis of colombian data i find that including tfp in the estimated model of the effects of tariffs on the wage premium leads to a 41 decrease in the effect of tariffs on the inter industry wage premium relative to the model that omits tfp more specifically a 10 percentage point decrease in tariffs reduces the wage premium by 1 01 whereas a 10 increase in tfp raise wage premium by 1 6 this finding suggests the importance of using policies that boost productivity to offset the effect of tariffs on the wage premium

the economics of immigration this literature review concerns the impact of immigration on the economy of the host country focusing on the experience of the united states the emphasis is on the period from the 1970s to the 1990s the author shows that research earlier in this period generally concluded that the economic effects of immigration were positive but that more recent research on later migrations have generally concluded that immigration may be having an adverse effect on the earnings of native unskilled workers and be placing an increased burden on welfare programs the importance of such economic analysis for the formulation of appropriate migration policies is stressed

how robustness can lower the cost of discretion model uncertainty has the potential to change importantly how monetary policy is conducted making it an issue that central banks cannot ignore using a standard new keynesian business cycle model this paper analyzes the behavior of a central bank that conducts policy under discretion while fearing that its model is misspecified the main results are as follows first policy performance can be improved if the discretionary central bank implements a robust policy this important result is obtained because the central bank s desire for robustness directs it to assertively stabilize inflation thereby mitigating the stabilization bias associated with discretionary policymaking second the central bank s fear of model misspecification leads it to forecast future outcomes under the belief that inflation in particular will be persistent and have large unconditional variance raising the probability of extreme outcomes private agents however anticipating the policy response make decisions under the belief that inflation will be more closely stabilized that is more tightly distributed than under rational expectations finally as a technical contribution the paper shows how to solve with robustness an important class of linear quadratic decision problems

the international transmission of policy announcement effects abstract this paper extends recent work on the effects of fiscal and monetary policy in two country models by considering an additional channel through which the effects of policy announcements may be transmitted the term structure of interest rates previous work suggests that policy announcements have no impact on worldwide aggregates and merely cause a redistribution of demand and output between the domestic and important impact effects on worlwide aggregates which necessarily introduces ambiguities concerning the effects of policy announcements on foreign output and employment

aggregation bias in elasticities of substitution and the minimum wage paradox while the employment effects of minimum wages are usually reported to be small suggesting low substitutability between skill types direct estimates suggest a much larger degree of substitutability this article argues that this paradox is largely due to a bias induced by the aggregation of skill types into broad categories an assignment model is applied where skilled workers have a comparative advantage in complex jobs the implied pattern of substitutability reveals the sources of the bias estimation results for the united states show elasticities of complementarity to be underestimated by up to a factor 2 5 the methods laid out likewise can be applied to other markets where different quality types are close substitutes such as the housing market

the role of prices in measuring the poor s living standards in this paper we revisit two pieces of conventional wisdom in the current debate about poverty paying close attention to the price data underlying these findings that the poor pay more than households of higher income for the goods and services they purchase and that poverty rates at least as measured by the u s census have remained essentially flat since the late 1960s raising questions about the success of the policies implemented to reduce poverty by examining scanner data on thousands of household purchases we find that the poor pay less not more for the goods they purchase and by extending the advances on price measurement in the recent decade back to the 1970s we find that current poverty rates are less than half of the official numbers

are college graduates more responsive to distant labor market opportunities abstract are highly educated workers better at locating in areas with high labor demand to answer this question i use three decades of u s census data to estimate a mcfadden style model of residential location choice i test for education differentials in the likelihood that young workers reside in states experiencing positive labor demand shocks at the time these workers entered the labor market i find effects of changes in state labor demand on college graduate location choice that are several times greater than for high school graduates nevertheless medium run wage effects of entry labor market conditions for college graduates equal or exceed those of less educated workers

accounting for incomplete pass through recent theoretical work has suggested a number of potentially important factors in causing incomplete pass through of exchange rates to prices including markup adjustment local costs and barriers to price adjustment we empirically analyze the determinants of incomplete passthrough in the coee industry the observed pass through in this industry replicates key features of pass through documented in aggregate data prices respond sluggishly and incompletely to changes in costs we use microdata on sales and prices to uncover the role of markup adjustment local costs and barriers to price adjustment in determining incomplete pass through using a structural oligopoly model that nests all three potential factors the implied pricing model explains the main dynamic features of short and long run pass through local costs reduce long run pass through by a factor of 59 relative to a ces benchmark markup adjustment reduces pass through by an additional factor of 33 where the extent of markup adjustment depends on the estimated super elasticity of demand the estimated menu costs are small 0 23 of revenue and have a negligible eect on long run pass through but are quantitatively successful in explaining the delayed response of prices to costs we nd that delayed passthrough in the coee industry occurs almost entirely at the wholesale rather than the retail level

uniform pricing in us retail chains we show that most u s food drugstore and mass merchandise chains charge nearly uniform prices across stores despite wide variation in consumer demographics and competition demand estimates reveal substantial within chain variation in price elasticities and suggest that the median chain sacrifices 16 million of annual profit relative to a benchmark of optimal prices in contrast differences in average prices between chains are broadly consistent with the optimal benchmark we discuss a range of explanations for nearly uniform pricing highlighting managerial inertia and brand image concerns as mechanisms frequently mentioned by industry participants relative to our optimal benchmark uniform pricing may significantly increase the prices paid by poorer households relative to the rich dampen the response of prices to local economic shocks alter the analysis of mergers in antitrust and shift the incidence of intranational trade costs

what drives local food prices evidence from the tanzanian maize market this study quantifies the relationship between tanzanian and external maize markets while also accounting for domestic influences it concludes that external influences on domestic prices originate from regional rather than global markets it also shows that compared to external factors domestic factors exert a greater influence on tanzanian maize markets further the mechanisms through which trade policies influence maize markets involve interactions with both external market shocks and domestic weather shocks overall it provides evidence that the intermittent imposition of export bans in tanzania has had adverse impacts on its maize markets and consequently on the development of its agrarian economy

differences in metropolitan and nonmetropolitan u s family income inequality a cross county comparison abstract u s family income inequality is examined using 1990 cenus of population data for the 3109 counties and independent cities in the 48 contiguous states use of counties as the unit of analysis extends previous research on u s income inequality that relied on national state or metropolitan level data in addition including both metropolitan and nonmetropolitan counties allows us to determine whether income inequality differs between them after controlling for a variety of labor market demographic and regional characteristics as another innovation we also consider whether counties that experienced recent structural changes in industry composition have higher income inequality

noisy information distance and law of one price dynamics across us cities abstract us micro price data at the city level suggests that both the volatility and the persistence of law of one price deviations are rising in the distance between us cities a standard two city equilibrium model with trade costs can predict the relationship between volatility and distance but not between persistence and distance we show that if there is imperfect information about the state of nominal aggregate demand with noisy signals that are asymmetric across cities then distance and persistence will be positively correlated our main results are shown to be robust to the introduction of sticky prices and multiple cities

labor market institutions and wage inequality the authors investigate how labor market institutions such as unemployment insurance unions firing regulations and minimum wages have affected the evolution of wage inequality among male workers results of estimations using data on institutions in eleven oecd countries indicate that changes in labor market institutions can account for much of the change in wage inequality between 1973 and 1998 factors found to have been negatively associated with male wage inequality are union density the strictness of employment protection law unemployment benefit duration unemployment benefit generosity and the size of the minimum wage over the 26 year period institutional changes were associated with a 23 reduction in male wage inequality in france where minimum wages increased and employment protection became stricter but with an increase of up to 11 in the united states and united kingdom where unions became less powerful and in the united states minimum wages fell

the effect of male wage inequality on female age at first marriage a model in which women search for husbands characterized by their wages predicts increasing within group male wage inequality raises the expected value of continued marital search and so lowers female marriage propensities using 1970 1980 and 1990 census data i test this hypothesis within geographically racially and educationally defined marriage markets the estimates suggest rising male wage inequality accounted for 7 to 18 of the decline in the propensity to marry between 1970 and 1990 for white women and more educated black women growing wage inequality appears to have had little effect on the marriage behavior of less educated black women

factor proportions and relative wages the supply side determinants of wage inequality supply side factors may contribute to rising wage inequality first certain changes in the supply of skills allegedly exacerbate wage inequality women s increased labor force participation and increased immigration are the leading candidates both allegedly reduce the wages of less skilled men however immigration s impact on wage inequality has been minor and the effects of women s participation is inconclusive second in evaluating the likelihood that human capital investment will mitigate future inequality evidence suggests that rising returns to education have increased the proportion of young people attending college limiting the growth of inequality among high wage workers

who benefits from local oil and gas employment labor market composition in the oil and gas industry in texas and the rest of the united states abstract this paper examines local labor market outcomes from an oil and gas boom we examine two main outcomes the probability of employment and the log wages of workers employed outside the oil and gas industry for texas and the rest of the united states across gender race and ethnicity we find that men and women gain employment in the oil and gas industry during booms but such gains are much larger for men and are largest for black and hispanic men we also find positive income spillovers for workers in other industries that are similar in magnitude across demographic groups

labor earnings in one company towns theory and evidence from kazakhstan one company towns characterized by the presence of a large employer in a local labor market are a frequent legacy of state led development strategies how will downsizing or closing unprofitable state owned enterprises affect these towns this article develops a simple model combining monopsony power in the labor market with a keynesian closure of the product market and uses it to interpret the findings of previous studies the article evaluates the impact of the company s employment level on the town s labor earnings in kazakhstan where one company towns are still prevalent the evaluation is based on data from the 1996 living standards measurement survey the results show that labor earnings in the town decrease roughly 1 5 percent when the share of its population working for the company decreases 1 percent the results are robust to changes in the definition of labor earnings and to the inclusion of a variety of other community characteristics in the analysis these results and the theoretical model are combined to evaluate the welfare impact of company downsizing and consequently to derive the optimal extent of labor retrenchment

hysteresis price acceptance and reference prices the existence of price thresholds in grocery retailing is well documented most authors explain the existence of price thresholds using assimilation contrast theory adaptation level theory or prospect theory however each of these theories is untenable if consumers are believed to behave rationally we offer a theoretical explanation grounded in real options theory rot and economic hysteresis we test the rot hypothesis against three plausible alternatives using a maximum likelihood friction model that we augment for unobserved heterogeneity our findings support the rot hypothesis and suggest that the existence of price thresholds in aggregate data are driven by a common recognition of real option values which do not disappear with the inclusion of consumer heterogeneity

does distance reflect more than transport costs we decompose the effect of distance on intercity retail price dispersion in us into transport and non transport cost components we find that distance contains more information than transport costs care should be taken in interpreting distance effect as transport costs only

on the importance of sectoral and regional shocks for price setting summary we use novel disaggregate sectoral regional euro area data to investigate the sources of price changes introducing a new method to extract factors from overlapping data blocks that allows for estimation of aggregate sectoral country specific and regional components of price changes our sectoral component explains much less variation in disaggregate inflation rates and exhibits much less volatility and more persistence than previous findings for the us indicate country and region specific factors play an important role emphasizing heterogeneity of inflation dynamics along both sectoral and geographical dimensions our results are incompatible with basic sticky information or calvo type price setting models but require multi sector multi country models copyright 2015 john wiley sons ltd

the role of two frictions in geographic price dispersion when market friction meets nominal rigidity this paper empirically investigates and theoretically derives the implications of two frictions market friction and nominal rigidity on the dynamic properties of intra national relative prices with an emphasis on the interaction of the two frictions by analyzing a panel of retail prices of 45 products for 48 u s cities over the period 1985 2009 we make two major arguments first the effect of each type of friction on the dynamics of intercity price gaps is quite different while market frictions arising from physical distance and transportation costs have a positive impact on volatility and persistence of intercity price dispersion nominal rigidities have a positive impact on persistence but a negative impact on volatility this empirical evidence is different from what is predicted by standard theoretical cross country models based on price stickiness second complementarities exist between market frictions and nominal rigidities such that the marginal effect of a market friction dwindles as nominal rigidities increase we provide an alternative theoretical explanation for this finding by extending the state dependent pricing sdp model of dotsey et al 1999 and show that our two city model with nominal rigidity and market frictions can successfully explain the salient features of the dynamic behavior of intercity price differences that have not been captured in previous analysis

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association