stayers as workers and savers the classic selection effect posits that deferred wages attract stayers the results in this paper suggest an alternative explanation deferred wage contracts attract savers all else constant savers are better workers than nonsavers a firm naturally works harder to retain better workers and thus is led to pay them higher wages thereby encouraging savers to remain in the firm s employ this process creates a confluence of deferred wages high levels of compensation and low quit propensities in this explanation staying is merely the result of a selection process and not the underlying factor that drives selection

pension portability and labor mobility evidence from the survey of income and program participation abstract the evidence presented in this paper casts doubt on the proposition that pension backloading is responsible for the low job mobility rates observed for pension covered workers it corroborates earlier findings by the authors based on different data that pension covered jobs offer higher levels of compensation than workers can obtain elsewhere and it is this compensation premium rather than non portability that accounts for lower turnover among pension covered workers this evidence is further bolstered by the finding that defined contribution plans which are not backloaded and defined benefit plans bear similar negative relations to mobility

earnings and pension compensation the effect of eligibility pension compensation is shown to rise with age and tenure until the worker becomes eligible to receive benefits at this point pension compensation drops sharply if workers are paid their marginal product in each period earnings grow at a lower rate prior to eligibility but must increase when the worker reaches the age of eligibility this hypothesis is tested using data from the retirement history study and earnings are found to rise significantly after eligibility this finding supports the concept of spot market compensation and is in direct conflict with the predictions of lazear type lifetime contracts

survival of the gene intergenerational transfers and precautionary saving abstract this paper provides a model of bequest and investment in children s human capital at low incomes it posits that parents and children are linked through their common concern of grandchildren and intergenerational transfers provide a material basis for the perpetuation of the family line the model characterizes intergenerational strategic interactions in a dynamic game theoretical framework moreover it explores intergenerational uncertainty as a source of precautionary saving in contrast with the existing literature the model implies that there are qualitative differences between precautionary saving from one s own income uncertainty and precautionary bequests from children s income uncertainty

precautionary saving and endogenous labor supply with and without intertemporal expected utility we analyze precautionary saving behavior in a framework with labor and nonlabor income risks an endogenous supply of labor and a representation of preferences that disentangles attitudes towards risk attitudes towards intertemporal substitution and ordinal preferences for consumption and leisure this preference structure allows us to disentangle and to describe in an intuitive way the different forces that determine precautionary saving in the small and in the large

the usefulness of the wind up measure of pension liabilities a labor market perspective financial economists have long favored the use of a wind up measure of the firm s pension liabilities yet the pension liabilities of the firm also represent the pension wealth of its workers it is reasonable to presume that workers and shareholders have a common view of the pension contract if the wind up measure depicts the true pension liabilities of the firm then the wage concession granted by its workers must reflect the fact that the firm may choose to terminate the plan at any time data on the wageservice characteristics of the membership of a sample of final earnings plans in canada suggest contrary to the implications of the wind up measure that workers wages do not internalize accruing pension benefits on a year to year basis instead the data suggest that pension plans may be a vehicle through which a significant portion of the total compensation of individual employees is deferred until their later work years and that the wind up measure may well understate the pension liabilities of an on going firm the financial accounting standards board 4 or fasb recently proposed that net pension assets or liabilities appear on the corporate balance sheet in order to make operational the concept of the augmented balance sheet one must construct measures of both pension assets and pension liabilities the noncontroversial view at least among economists is that pension assets be valued at market the fasb endorses this view the measurement of pension liabilities on the other hand remains controversial financial economists such as sharpe 10 have traditionally advocated a market or wind up measure of the firm s pension liabilities the pensions due under the terms of the plan if it were to be immediately terminated are calculated and these pensions are then costed at current annuity rates the accrued benefit method without salary projection is the actuarial valuation method used in the calculation the wind up measure is the market value of the firm s pension liabilities since it identifies the precise amount that the firm would require to discharge its legal obligation if the plan were terminated 1 yet the fasb now rejects the use of this method of calculating the firm s

economic and environmental gains of china s fossil energy subsidies reform a rebound effect case study with eimo model abstract energy consumption and efficiency emerged as the hottest topic in the context of china s sustainable development energy subsidies and rebound effect were closely related to this topic while few combinative studies on them with a focus on china this paper employed a co thinking approach focusing on how the energy subsidies reform could mitigate the rebound effect in china and how to achieve an economic and environmental gains that reduced pecuniary spending improved the distorted energy market and reduced energy consumption simultaneously firstly with price gap approach we calculated the total energy subsidies scale of china in 2007 which amounted to582 0 billion cny then we detected and identified rebound effect of china energy consumption with the features furthermore based on china 2007 monetary input output table and energy flow analysis we compiled a hybrid physical energy input and monetary output model eimo to simulate the mitigation effect of subsidies reform results showed that removing energy subsidies would decrease ultimate demand of different economy sectors and reduce the accumulatively physical consumption of coal oil natural gas and electricity by 17 74 13 47 3 64 and 15 82 million tce respectively finally we discussed relevant policy issues on china s energy subsidies reform in depth

pension regulation and the market value of pension liabilities a contingent claims analysis using parisian options abstract we analyze the market consistent valuation of pension liabilities in a contingent claim framework whereby a knock out barrier feature is applied to capture early regulatory closure of a pension plan we investigate two cases which we call immediate closure procedure and delayed closure procedure in an immediate closure procedure when the assets value hits the regulatory boundary the pension plan is terminated immediately whereas in a delayed closure procedure a grace period is given to the pension fund for reorganization and recovery before premature closure is executed the framework is then used to construct fair pension deals furthermore we provide rules for deriving the optimal recovery period in pension regulation using utility analysis and interconnect the recovery period to the regulatory liquidation probability

an equilibrium model of wealth distribution i present an explicitly solved equilibrium model for the distribution of wealth and income in an incomplete markets economy i flrst propose a self insurance model with an inter temporally dependent preference uzawa 1968 lucas and stokey 1984 and obstfeld 1990 i then derive an analytical consumption rule which captures stochastic precautionary saving motive and generates stationary wealth accumulation finally i provide a complete characterization for the equilibrium cross sectional distribution of wealth and income in closed form by developing a recursive formulation for the moments of the distribution of wealth and income using this recursive formulation i show that income persistence and the degree of wealth mean reversion are the main determinants of wealth income correlation and relative dispersions of wealth to income such as skewness and kurtosis ratios between wealth and income

generalizing the permanent income hypothesis revisiting friedman s conjecture on consumption abstract friedman s contribution to the consumption literature goes well beyond the seminal permanent income hypothesis he conjectured that the marginal propensity to consume out of financial wealth shall be larger than out of human wealth the present discounted value of future labor income i present an explicitly solved model to deliver this widely noted consumption property by specifying that the conditional variance of changes in income increases with its level a larger realization of income not only implies a higher level of human wealth but also signals a riskier stream of future labor income inducing a higher precautionary saving and thus giving rise to friedman s conjecture appropriately adjusting human wealth for income risk i show that friedman s conjecture may be formulated as a generalized permanent income hypothesis i further show that friedman s conjecture captures the first order effect of stochastic precautionary savings finally i propose a natural decomposition of the optimal saving rule to formalize various motives for holding wealth as emphasized in friedman m 1957 a theory of the consumption function princeton university press princeton

using latent variable approach to estimate china s economy wide energy rebound effect over 1954 2010 the energy rebound effect has been a significant issue in china which is undergoing economic transition since it reflects the effectiveness of energy saving policy relying on improved energy efficiency based on the ipat equation and brookes explanation of the rebound effect this paper develops an alternative estimation model of the rebound effect by using the estimation model and latent variable approach which is achieved through a time varying coefficient state space model we estimate china s economy wide energy rebound effect over 1954 2010 the results show that the rebound effect evidently exists in china as a result of the annual average of 39 73 over 1954 2010 before and after the implementation of china s reform and opening up policy in 1978 the rebound effects are 47 24 and 37 32 with a strong fluctuation and a circuitously downward trend respectively indicating that a stable political environment and the development of market economy system facilitate the effectiveness of energy saving policy although the energy saving effect of improving energy efficiency has been partly realised there remains a large energy saving potential in china

the effect of regulation on optimal corporate pension risk abstract we study firms pension prefunding and portfolio allocation choices in a model in which firms trade off the need to compensate workers for the financial risk in their pension benefit against the cost advantage that may be gained by exploiting underpriced pension insurance in the absence of pension insurance the firm minimizes costs by rendering promised benefits free of risk to workers who are assumed to be unable to hedge firm specific risk various forms of government intervention such as benefit guarantees can alter this outcome dramatically by providing the firm with an incentive to shift risk to other parties in this case we find that the firm s decisions depend on among other influences the degree of insurance mispricing the amount of guaranteed benefits the stringency of minimum funding requirements and the costs of financial distress

financial contagion and attention allocation this paper explains financial contagion between two stock markets with uncorrelated fundamentals by fluctuations in international investors attention allocation we model the process of attention allocation that underlies portfolio investment in international markets using investors who face information processing constraints investors optimally allocate more attention to a region hit by a financial crisis to the detriment of other markets the resulting endogenous increase in uncertainty causes a reduction in the capacity to bear risks by international investors that induces them to liquidate their positions in all risky assets hence there is a collapse in stock prices around the world we show that the degree of non anticipation of a crisis is crucial for the existence of contagion using data from the east asian crisis and the number of news stories about thailand in the financial times relative to news stories about argentina brazil and chile as a proxy for the relative attention allocated to the asian stock market we find evidence consistent with two key predictions of our model first the higher the volatility of the originator market the more relative attention allocated to this market and second the more relative attention allocated to the originator market the higher the volatility of the other markets our findings support the attention reallocation channel as a transmission mechanism of financial crises between regions during the period from january 1997 to july 1998

saving behavior and wealth accumulation in a pure lifecycle model with income uncertainty several models of economic behavior currently compete for an explanation of individual wealth accumulation and savings patterns in this paper we focus in particular upon the role of income uncertainty and the role played by a retirement period during which time expected earnings are zero we nd that income uncertainty can alter savings patterns over the lifecycle signi cantly with the greatest in uence on the wealth of young individuals however its in uence on the aggregate stock of wealth is less than earlier theoretical work indicates 2001 elsevier science b v all rights reserved jel classixcation e21 e25 e60

consumption and saving with habit formation and durability abstract this paper develops a model of precautionary saving with habit formation and durability durability offsets the effects of habit formation on both consumption growth and the precautionary premium empirical tests of habit formation and durability on consumption growth might exploit their parallel effects on the precautionary premium

the effect of precautionary saving on consumption in sweden uncertainty concerning future income lowers consumption this is often called the precautionary demand for savings in this paper the existence of precautionary savings in this paper the existence of precautionary saving is investigated using swedish data for the years 1973 1992 as there are no variables for consumers uncertainty a proxy is used assuming an underlying distribution of attitudinal data a variance series is derived including the proxy in different specifications of the consumption function indication of precautionary saving can be found as a result no uncertainty would raise consumption by 4 9

income risk and farm consumption behavior abstract using panel data from illinois grain farmers a direct test of the relationship between income risk and farm consumption behavior is conducted the estimation results indicate that income risk significantly affects farm consumption and the results are robust using alternative risk measures this finding casts doubt on the relevance of the conventional life cycle permanent income hypothesis which implies that risk has no effect on consumption

the implicit pension contract developments and new directions pension economics has emerged as a separate literature over the past decade some of the early pension work was devoted to financial issues including implications of pensions for savings rates and portfolio allocation most new developments however have stemmed from research surrounding labor markets this research has led to an implicit contract theory of pensions a theory that has pensions playing a more complicated role in worker firm relation than heretofore realized the theory explains much of economic behavior in labor markets and bridges a gap between labor and financial literatures this essay describes the genesis for these ideas and traces some of the most important research results in the area an equal amount of spece is devoted to a consideration of likely directions for future research

a closed form solution for a model of precautionary saving this paper analyses life cycle consumption plans and distinguishes between temporal risk aversion and intertemporal substitution the results assume that felicity functions are quadratic and that income follows a linear model with normally distributed errors stochastic dynamic programming then yields closed loop linear decision rules certainty equivalence no longer holds but instead households play a min max strategy against nature one finds a rationale for precautionary saving and a larger sensitivity of changes in consumption to income innovations

uncertainty learning and international environmental policy coordination in this paper we construct a simple model of global warming which captures a number of key features of the global warming problem i environmental damages are related to the stock of greenhouse gases in the atmosphere ii the global commons nature of the problem means that these are strategic interactions between the emissions policies of the governments of individual nation states iii there is uncertainty about the extent of the future damages that will be incurred by each country from any given level of concentration of greenhouse gases but there is the possibility that at a future date better information about the true extent of environmental damages may become available an important aspect of the problem is the extent to which damages in different countries may be correlated in the first part of the paper we consider a simple model with two symmetric countries and show that the value of perfect information is an increasing function of the correlation between damages in the two countries in both the cooperative and non cooperative equilibria however while the value of perfect information is always non negative in the cooperative equilibrium in the non cooperative equilibrium there is a critical value of the correlation coefficient below which the value of perfect information will be negative in the second part of the paper we construct an empirical model of global warming distinguishing between oecd and non oecd countries and show that in the non cooperative equilibrium the value of perfect information for oecd countries is negative when the correlation coefficient between environmental damages for oecd and non oecd countries is negative the implications of these results for international agreements are discussed

reducing rebound effect through fossil subsidies reform a comprehensive evaluation in china abstract china has committed a sharp reduction in its carbon intensity by 2020 and proposed to take integrated policy package including energy subsidy reform to achieve this goal while energy efficiency improvement is the key influencing factor for this goal its effectiveness is significantly determined by rebound effect energy subsidy as an economic regulation policy would significantly affect rebound effect to explore how china s fossil subsidies reform would affect rebound effect this study conducts a comprehensive evaluation based on a multi sector computable general equilibrium cge model rebound effects at different technological improvement levels are investigated and the impacts of different subsidies reform scenarios on mitigating rebound effects and on the whole economy is analyzed the results provide significant policy insights firstly rebound effect does exist in china larger for electricity than for primary energies secondly by removing fossil energy subsides the rebound effect would be effectively mitigated and removing all subsides would reduce the rebound effect most however it would bring significant negative impacts on the macro economy thirdly an integrated policy with removal of fossil energy subsidies and increment of clean energy subsidies would be more effective greatly reducing rebound effect and also bring benefits for both economy and environment our findings would be critical for china s low carbon policy making in the future

an empirical study of direct rebound effect for passenger transport in urban china transport sector accounts for about 8 of total energy consumption in china and this share will likely increase in the visible future improving energy efficiency has been considered as a major way for reducing transport energy use whereas its effectiveness might be affected by the rebound effect this paper estimates the direct rebound effect for passenger transport in urban china by using the linear approximation of the almost ideal demand system model and simulation analysis our empirical results reveal the existence of direct rebound effect for passenger transport in urban china a majority of the expected reduction in transport energy consumption from efficiency improvement could be offset due to the existence of rebound effect we have further investigated the relationship between the magnitude of direct rebound effect and households expenditure it was found that the direct rebound effect for passenger transport tends to decline with the increase of per capita household consumption expenditure

stock markets and growth a brief caveat on precautionary savings abstract by allowing portfolio diversification the introduction of a stock market may reduce precautionary savings thereby tending to lower economic growth the analysis incorporates well known results from the theory of precautionary savings into an endogenous growth model of family businesses

risk sharing and growth the role of precautionary savings in the education model while the risk amelioration literature suggests that risk sharing channels savings into risky but productive technologies and hence favours growth models focused on precautionary savings reverse this conclusion we solve by means of numerical techniques a model based on human capital accumulation through education and find that the increase in precautionary savings makes labour more productive in the goods sector and draws resources from education which is the growth leading activity hence we establish a result favourable to financial integration even in a model where precautionary savings play an important role

efficient dynamic pollution taxation in an uncertain environment this paper analyzes efficient pollution taxation within a stochastic model of endogenous growth pollution is a by product of production and causes disutility furthermore the productivity which results from environmental quality is uncertain this reflects e g uncertain capital depreciation induced by natural disasters like hurricanes or floods this uncertainty is shown to raise an ambiguous impact on the optimal pollution level as well as on optimal environmental taxation market equilibrium turns out to be suboptimal since the households mis perceive their individual impact on pollution conditions for welfare maximizing pollution taxation are stated and it is shown that a direct pollution tax is not appropriate to yield pareto optimal growth instead a linear capital income tax together with a linear abatement subsidy build an efficient tax scheme if secondarily the governmental budget is balanced moreover an increase in the riskiness of environmental productivity may even lead to an increase in the optimal pollution level and to a decrease in optimal environmental taxation depending predominantly on the preference parameters

consumption and demand during the recent economic downturn anec dotal reports in the press indicate that some demands are recession resistant beer while others are very procyclical e g wine this naturally causes economists to attempt to infer something about engel curves just as macroe conomists think differently about growth and business cycles so it seems should microe conomists think differently about how con sumption responds to growth and business cycles using quarterly national income and product account nipa data figure 1 depicts consumption and food expenditure growth mean percentage growth rates for food con sumption was 2 3 in the period 1948 1977 and 1 85 in the period 1978 2009 while the standard deviation of growth rates fell from 0 37 in the earlier period to 0 27 in the later pe riod consistent with engel s law the growth rate of food consumption has fallen over time in either total or per capita forms unsur prisingly the quarterly growth rate of medical consumption not shown is higher than food with a mean growth of 5 97 in the earlier period and reduced growth of 3 4 and de clining in the later period interestingly stan dard deviation d of medical growth rate has fallen substantially from 0 51 to 0 18 the mean growth of overall consumption expendi tures was 3 9 d 4 15 in the earlier period and 3 1 d 2 62 in the later period finally housing expenditure growth rates not shown halved from 5 04 in the early period to 2 51 in the latter period with very stable rates of growth d 0 15 however negative growth rates occur during recessions 2001 is an ex ception indeed food expenditures fell almost 15 in the recent quarter from the previous quarter which was also negative growth sim ilar patterns of negative growth rates during re cessions occur for the other two categories of consumption in the period 1978 2009 and for total consumption as expected consumption and consumption growth behave very differ ently in recessions the question is are the negative growth rates just due to a fall in cur rent income or do they reflect uncertainty if uncertainty is key then one must funda mentally think about model future expecta tions in order to understand measure current demand as simple as these basic engel curve consid erations are one of the liveliest debates in eco nomics centers on consumption in response to income for decades there has been the steady accumulation of evidence for and against a keynesian type view that people consume out of current income the contrary view is most commonly called the permanent income hypothesis or pih due to modigliani and brumberg 1954 friedman 1957 and oth ers generally forward looking intertemporal models of consumption and savings might be called the life cycle hypothesis with pih as a special case yet economists have not been particularly successful at amassing convincing evidence that is consistent with the life cycle model of behavior in all of its ramifications and many find models of conventionally ra tional economic agents wanting e g laibson 1998 the pih is that individuals consume out of an annuity derived from expected lifetime wealth this is particularly relevant when dis cussing the effects of countercyclical fiscal pol icy john taylor 2008 recently sided with the pih against the keynesian or neo keynesian view a second major issue is whether liquid ity constraints mitigate the forward looking life cycle predictions a third issue is how un certainty affects consumption and saving pre cautionary behavior much research has focused on the demand response to changes in total expenditure or even food expenditure allocations to particu lar foods engel curve notions of this research could be stated as dqt dc 1 n where c is real total consumption expenditures c j2 i piqi where qt and pt are the th quantity and real price respectively macroeconomics fellows address rulon d pope is professor of economics at brigham young university the author would like to thank daniel sullivan for assistance fellows address was presented at the 2008 aaea annual meet ing in milwaukee wi august 2009 invited addresses are not sub jected to the journal s standard refereeing process

pension benefits and male female wage differentials female members of defined benefit pension plans will receive greater pension benefits than males with identical work and earnings histories since females have greater longevity yet females have higher turnover rates and lower earnings both of which serve to reduce pension benefits relative to those received by males we illustrate the net effect on pension benefits in defined benefit plans of gender differences in longevity turnover and wages we conclude that females tend to receive lower pension benefits and therefore that pension benefits are more likely to exacerbate than to reduce the male female wage gap

equilibrium consumption and precautionary savings in a stochastically growing economy abstract the derivation of a closed form solution for consumption based on the constant elasticity utility function in the presence of stochastic labor income has proved to be intractable this paper derives a closed form equilibrium relationship between consumption and wealth one that holds along a balanced growth path in a stochastic romer endogenous growth model by employing more general recursive preferences we can disentangle the coefficient of relative risk aversion from the intertemporal elasticity of substitution the effects of key structural parameters on equilibrium consumption and its tradeoff with leisure are analyzed a significant aspect of our analysis concerns the extent to which current risk in the economy is shared between labor and capital this plays an important role in determining the impact of risk on the economy in general and on consumption in particular formal analysis is supplemented with extensive numerical simulations

linking benefits to investment performance in us public pension systems abstract this paper calculates the effect that introducing risk sharing during either retirement or the working life would have on public sector pension liabilities we begin by considering the introduction of a variable annuity for the retirement phase in which positive benefit adjustments are granted each year only if asset returns surpass 5 this change would reduce unfunded accrued liabilities by over half and would lower the annual contribution increases required to target full funding in 30 years by 44 alternative measures that have similar effects on costs include increasing employee contributions by 10 3 of pay while keeping benefits unchanged or giving employees a collective dc plan with an employer contribution of 10 of pay for future service if there is a minimum guarantee that benefits cannot fall below their initial levels the impact of introducing variable annuities is substantially smaller we discuss these results in the context of models of lifecycle portfolio choice and analyze the conditions under which lifecycle agents might receive utility gains from the implementation of variable annuities

empirical estimates of the direct rebound effect a review beginning with william stanley jevons in 1865 a number of authors have claimed that economically justified energy efficiency improvements will increase rather than reduce energy consumption jevons paradox is extremely difficult to test empirically but could have profound implications for energy and climate policy this paper summarises and critiques the arguments and evidence that have been cited in support of jevons paradox focusing in particular on the work of len brookes and harry saunders it identifies some empirical and theoretical weaknesses in these arguments highlights the questions they raise for economic orthodoxy and points to some interesting parallels between these arguments and those used by the biophysical school of ecological economics while the evidence in favour of jevons paradox is far from conclusive it does suggest that economy wide rebound effects are larger than is conventionally assumed and that energy plays a more important role in driving productivity improvements and economic growth than is conventionally assumed 2008 elsevier ltd all rights reserved

health insurance and savings over the life cycle a semiparametric smooth coefficient estimation individuals save for future uncertain health care expenses this is less efficient than pooling health risk through insurance the provision of comprehensive health insurance may raise welfare by providing the missing market to smooth out consumption through the life cycle we employ a semiparametric smooth coefficient model to examine the effects of the introduction of the national health insurance in taiwan in 1995 on savings and consumption over the life cycle the idea is to estimate the coefficients of health insurance which vary with age our results suggest that younger households are more sensitive to the risk reductions and that they demonstrate a greater response in the reduction of their precautionary saving copyright 2004 john wiley sons ltd

spinoff terminations and the value of pension insurance this paper derives the value of pension benefit guarantee corporation pbgc pension insurance under two scenarios of interest the first allows for voluntary plan termination which appears to be legal under current statutes in the second scenario termination is prohibited unless the firm is bankrupt empirical estimates of pbgc liabilities are calculated these show that prospective pbgc liabilities greatly exceed current reserves for plan terminations that even under a bankruptcy only termination rule pbgc liabilities still would be quite sensitive to discretionary funding policy and that the increasingly common practice of pension spinoff terminations substantially increases the present value of the pbgc s contingent liabilities the pension benefit guarantee corporation pbgc was established by the employee retirement income security act of 1974 erisa to guarantee the benefits of workers who belong to defined benefit pension plans if a pension plan is terminated with insufficient assets to pay guaranteed benefits the pbgc assumes responsibility for those benefits the pbgc can take some comfort from the fact that most large pension plans are currently overfunded surplus plan assets provide a cushion for adverse investment experience that reduces the value of pbgc contingent liabilities recently however terminations of overfunded plans have become more common 7 these spinoff terminations typically allow firms to split their pension plans into two parts one for active employees and one for retirees to place all surplus assets into the retiree plan and then to terminate that plan thereby recapturing the entire surplus the pbgc is left insuring a continuing plan that has been stripped of surplus assets the current value of pbgc contingent liabilities obviously increases under spinoff terminations one approach to valuing pbgc liabilities is provided by the options pricing framework several authors 3 4 5 6 9 11 12 17 and 19 already have used option pricing methodology to study the valuation of pbgc insurance the provisions of erisa allow firms to transfer their pension liabilities to the pbgc in return for pension fund assets plus 30 percent of the market value of the firm s net worth thus viewing pbgc insurance as a put option the pension liabilities play the role of the exercise price while the fund assets plus 30 percent of net worth play the role of the underlying asset or stock price however while the analogy between put options and the option to terminate a pension plan appears straightforward the correspondence between the two is not at all clear with respect to the effective time to maturity of the pension put

what are corporate pension liabilities analyses of corporate pension plans often make unstated assumptions about an implicit labor contract an example of the effect of such an assumption is that many mistakenly believe that if a worker s benefits are tied to final salary he is protected against inflation until retirement also the value of a worker s claims is often considered to be independent of the status of the firm s pension fund these implicit contract assumptions are examined and questioned the implications of analyzed pension liabilities in a manner consistent with the analysis of other corporate liabilities are explored

how should public pension plans invest how public pension plan assets should be invested is an important but unsettled question alicia h munnell and mauricio soto 2007 find that the share of state and local s l plan assets held in equities has grown over time largely in parallel with private sector practices from an average of about 40 percent in the late 1980s to about 70 percent in 2007 this exposure led to a loss of an estimated 1 trillion dollars following the decline of the stock market from october 2007 to october 2008 munnell kelly haverstick and jean pierre aubry 2008 nevertheless some observers endorse the standard practice of investing heavily in higher yielding but riskier equities reasoning that the higher average returns will reduce future required tax receipts and also help to reduce underfunding over time others advocate a more conservative approach that reduces the volatility of funding levels and the likelihood of severe shortfalls during economic downturns when government resources are already constrained e g lawrence n bader and jeremy gold 2007 the accounting rules for public pensions create a perverse incentive to invest in stocks since projected liabilities are discounted at the expected return on assets rather than at a rate that reflects the generally lower risk of liabilities investing the assets in the stock market leads to

precautionary saving and consumption smoothing across time and possibilities this paper examines how aversion to risk and aversion to intertemporal substitution determine the strength of the precautionary saving motive in a two period model with selden kreps porteus preferences for small risks we derive a measure of the strength of the precautionary saving motive which generalizes the concept of prudence introduced by kimball 1990b for large risks we show that decreasing absolute risk aversion guarantees that the precautionary saving motive is stronger than risk aversion regardless of the elasticity of intertemporal substitution holding risk preferences fixed the extent to which the precautionary saving motive is stronger than risk aversion increases with the elasticity of intertemporal substitution we derive sufficient conditions for a change in risk preferences alone to increase the strength of the precautionary saving motive and for the strength of the precautionary saving motive to decline with wealth within the class of constant elasticity of intertemporal substitution constant relative risk aversion utility functions these conditions are also necessary

opportunistic behavior by firms in implicit pension contracts several studies have established that under the most common form of pension coverage benefits accrue disproportionately near the end of a worker s career such backloading establishes a penalty for early quitting but may also create an incentive for opportunistic firm behavior because benefits generally are a function of highest earnings when nominal earnings are expected to rise an employer can reduce pension liabilities by discharging workers prior to retirement this paper uses the national longitudinal survey of mature men to test whether such actions by employers are systematic we estimate that pension covered workers with mean losses are less likely to be discharged unexpected increases in pension losses due to increases in inflation however raise the risk of discharge we find no evidence that the minimum vesting standards of the employees retirement income security act reduces the likelihood of discharge for older workers who previously were not vested these results are consistent with an implicit pension contract under which employer compliance is enforced by reputation

risk pooling precautionary saving and consumption growth in this paper we model the evolution of income risk and consumption growth we decompose the time series innovation of the income process into its common and cohort specific components from these we compute conditional variances which are used as separate risk terms in a consumption growth equation using a long series of british household data we exploit the time series variation to identify precautionary saving effects and find strong evidence of their importance specifically after allowing for demographic and labour market status there is an independent role for income risk in explaining consumption growth rather than the component that is common across cohorts however it is the cohort specific element that is important in determining changes in consumption growth this result points to a failure of between cohort insurance mechanisms

estimating the rebound effect in us manufacturing energy consumption abstract the energy price shocks of the 1970s are usually assumed to have increased the search for new energy saving technologies where eventual gains in energy efficiencies will reduce the real per unit price of energy services and hence the consumption of energy will rise and partially offset the initial reduction in the usage of energy sources this is the rebound effect which is estimated for the us manufacturing sector using time series data applying the dynamic ols method dols when allowing for asymmetric price effects the rebound effect is found to be approximately 24 for the us manufacturing sector

portfolio and welfare consequences of debt market dominance the ability to issue debt that pays in units of the domestic good leads a country to accumulate a large and negative net foreign asset position while maintaining a positive position in equity this debt market advantage also helps to explain the weak relationship between the real exchange rate and relative consumption our stylized model matches the key facts about the u s international portfolio the u s real exchange rate and explains nearly 50 of the observed variation in the valuation effects we find that taxing bond market transactions increases the volatility of the exchange rate capital flows and allocations in contrast taxing equity positions stabilizes the exchange rate and capital flows while having little impact on the allocation lastly the paper describes a global solution method for portfolio problems under incomplete markets

the role of pensions in the labor market a survey of the literature because employer sponsored group pension plans entail agreements between workers and their employers explicitly linking future payment and employment they offer an unusual window into long term employment relationships this review of recent research on pensions explores how pensions influence employee compensation retirement turnover and other matters central to the determination of labor s price and quantity over time the authors also outline some unanswered questions and difficult to reconcile findings because the pension promise involves an explicit and relatively well documented set of statements regarding future contingent payment and employment an examination of the design and operation of employersponsored group pension plans can yield important insights into the long term employment relationship specifically pension research illuminates some important labor market questions in two ways it offers insight into an important element of compensation in its own right and it furthers our understanding of labor markets in which long term

a measure of the sensitivity of saving to interest rate uncertainty with non expected preferences abstract we propose a local measure of the precautionary premium when the consumer faces interest rate uncertainty and has selden type preferences it appears to be useful in order to generalize and to rationalize different results obtained in comparative statics

reversions of excess pension assets after takeovers this article evaluates pension asset reversions as a source of takeover gains in our sample of 413 takeovers pension funds were reverted by 15 1 of acquirers in the two years following hostile takeovers compared to 8 4 in the two years following friendly takeovers reversions following takeovers tend to occur in unit benefit plans where the potential for wealth transfer is the greatest these results are consistent with the view that hostile takeovers breach implicit contracts between firms and employees we estimate that the reversions can on average explain approximately 11 of the takeover premium in cases where they actually occur reversions are too small to be the sole or even dominant source of takeover gains

precautionary saving a review of the empirical literature standard macroeconomic models show that uncertainty plays a significant role in consumption and saving decisions under rather mild conditions namely the convexity of the marginal utility of consumption increased uncertainty generates a positive extra saving the so called precautionary saving although this hypothesis has been tested by a large number of authors both at macro and micro level the empirical results are not conclusive and the main conclusion than can be drawn is that there is neither consensus on the intensity of that motive for saving nor on the most appropriate measure of uncertainty this paper provides a comprehensive review of the empirical literature discussing the main controversial issues and the different approaches followed by the studies addressing empirically the test of precautionary saving

optimal consumption and portfolio policies when asset prices follow a diffusion process abstract we consider a consumption portfolio problem in continuous time under uncertainty a martingale technique is employed to characterize optimal consumption portfolio policies when there exist nonnegativity constraints on consumption and on final wealth we also provide a way to compute and verify optimal policies our verification theorem for optimal policies involves a linear partial differential equation unlike the nonlinear partial differential equation of dynamic programming the relationship between our approach and dynamic programming is discussed we demonstrate our technique by explicitly computing optimal policies in a series of examples in particular we solve the optimal consumption portfolio problem for hyperbolic absolute risk aversion utility functions when the asset prices follow a geometric brownian motion the optimal policies in this case are no longer linear when nonnegativity constraints on consumption and on final wealth are included by these examples one can see that our approach is much easier than the dynamic programming approach

guaranteed trouble the economic effects of the pension benefit guaranty corporation how did the pension benefit guaranty corporation a government corporation created to insure the pensions of workers and retirees in bankrupt firms end up facing financial distress of its own how did an organization designed to strengthen retirement security come to be seen as contributing to retirement insecurity the superficial answer is that the pbgc s current funding problem arises from the decline in stock market prices in 2000 which reduced pension assets and the fall in interest rates at about the same time which boosted the present value of pension liabilities but more fundamentally much of the blame for the poor financial state of the pbgc as well as the defined benefit system more generally lies in some major design flaws of the pbgc pension insurance program specifically the pbgc has 1 failed to properly price insurance and thus encouraged excessive risk taking by plan sponsors 2 failed to promote adequate funding of pension obligations and 3 failed to promote sufficient information disclosure to market participants together these three flaws produced a system in which many firms fail to adequately fund their pension obligations knowing that in financial distress they can dump their pension liabilities onto the pbgc though the pension protection act of 2006 made some progress in improving the pbgc program it failed to correct these three major problems fully absent further reform substantial problems will continue to plague the private defined benefit pension system in decades to come to prevent this deterioration this paper concludes that congress should transfer much of the responsibility for defined benefit pension insurance to compulsory private markets

empirical evidence of direct rebound effect in catalonia this paper reviews the empirical literature concerning the direct rebound effect in households it briefly analyzes the main theoretical and methodological aspects and finally estimates the magnitude of direct rebound effect for all energy services using electricity in households of catalonia spain using econometric techniques the main results show an estimated direct rebound effect of 35 in the short term and 49 in the long term the existence of a rebound effect reduces the effectiveness of energy efficiency policies

the rebound effect an evolutionary perspective the rebound effect presents a major flaw in to energy conservation policies that aim to reduce energy consumption through energy efficiency development economics and energy related disciplines have thus far developed tools to measure such a phenomenon this paper attempts to explain this seeming paradox using a thermodynamic evolutionary theoretical framework in addition to the traditional economic approach we here propose that evolutionary systems such as biological or even economic systems may rearrange themselves in a more complex fashion under the pressure of an increasing flux of energy driven by the higher conversion rate of greater efficiency higher complexity due to a greater energy density rate counteracts the positive effects of energy efficiency we investigated this hypothesis in the context of the road freight transport system and the productive structure the qualitative analysis in this paper further substantiated by figures provides a link between the dynamics of production patterns and the effect of efficiency in the light of the macro economic effects of increased energy demand the analysis departs from a rigorous investigation of the actual energy efficiency evolution in the road freight transport system to develop through a survey of the subsequent worldwide economic revolution in the production system it is then shown how outsourcing the key feature of globalization can be identified as the main source of traffic density growth finally four paradigms are used to stress how the shift in the production system must be considered a leap in structural complexity that consequently serves to increase the frequency of components interactions

precautionary savings and the permanent income hypothesis this paper derives the explicit solution of a dynamic stochastic optimal consumption problem for infinitely lived agents whose preferences exhibit in the presence of non diversifiable labour income uncertainty a constant elasticity of intertemporal substitution and constant absolute risk aversion the constancy of the elasticity of intertemporal substitution which implies that marginal utility at zero consumption is infinite guarantees that the non negativity constraint on consumption is never binding along the optimal path the assumption of constant absolute risk aversion allows an explicit computation of human wealth and provides a simple representation of the precautionary savings motive

discontinuities in pension benefit formulas and the spot model of the labor market implications for financial economists in their analysis of corporate pension plans financial economists typically invoke the simplest and the most tractable model of the labor market this is the spot model where the worker s cash wage plus accruing pension benefit equals the value of his marginal product in each and every period this paper provides evidence against the empirical validity of the spot model and uses provisions common to most pension plans to do so these findings are relevant to the appropriate measurement of pension liabilities and thus to the present controversy surrounding the termination of overfunded plans and the recapture of surplus assets by the employer the existence of incentive effects ruled out by the spot model may help to unravel certain well known puzzles such as the failure of employers to fully fund their plans in spite of the tax advantages of doing so

the effect of interest rates on consumption in an income fluctuation problem abstract we examine the effect of a change in interest rates on an agent s consumption and savings decisions when her income is fluctuating in each period a long lived agent decides how much to save i e invest in a risky bond and how much to consume while her income and the rate of return on her savings are uncertain and depend on the state of the economy we show that under the concavity of the consumption function a condition that ensures that the substitution effect dominates the income effect lower interest rates encourage the agent s consumption across all states

national health insurance and precautionary saving evidence from taiwan abstract by reducing uncertainty about future medical expenses comprehensive health insurance can reduce households precautionary saving we examine this effect using taiwan micro data spanning the 1995 introduction of national health insurance the effects of national health insurance are identified using employment based variation in prior insurance coverage replacement of the households prior insurance coverage with national health insurance is exogenous to the household so our estimates are not subject to selection bias compared with the preceding government insurance programs national health insurance reduced saving by an average of 8 6 13 7 with the largest effects for households with the smallest saving

earnings uncertainty and precautionary saving abstract we test for the presence of precautionary saving using a self reported measure of earnings uncertainty drawn from the 1989 italian survey of household income and wealth the effect of uncertainty on wealth accumulation is consistent with the theory of precautionary saving and with decreasing prudence but explains only a small fraction of saving the results cast doubts on the empirical relevance of precautionary saving in response to earnings uncertainty but are not in contrast with the importance of the precautionary motive per se beside earnings uncertainty other risks such as health and mortality may be important determinants of wealth accumulation

carbon lock in rebound effects and china at the limits of statism abstract from the beginning the statist frame of the kyoto protocol has invited a focus on national carbon budgets and piecemeal mitigation within rich countries despite the clean development mechanism and other efforts to diffuse low carbon technologies to developing countries china has over the last decades continued to construct hundreds of new thermal coal power plants leading not only to skyrocketing emissions in the present but also to long term carbon lock in in light of this china is likely to continue to put strong upward pressure on global emissions for many decades to come ignoring the seriousness of this situation many rich countries have persisted to seek marginal improvements to intermittent low energy sources such as wind power rather than taking the lead in developing breakthrough baseload technologies such as nuclear fusion this paper argues that only such high energy technologies if made significantly cheaper than any fossil alternatives will be capable of breaking the current carbon lock in process in china and other developing countries

the labor contract and true economic pension liabilities most pension covered workers in the united states are covered solely or primarily by defined benefit plans in these plans workers are typically promised a pension that is proportional to their years of service in the firm and their final wage depending upon how workers pay for it the existence of a pension in the labor contract may play either an important role or no role at all in the worker firm relationship this paper addresses the issue how workers pay for the cumulating pension benefit over their tenure cycle in the firm and derives several economic implications for the worker firm contract while the theory itself has ambiguous implications the data confirm the longstanding presumption that pensions offer strong incentives for the worker to complete the normal tenure cycle in the firm not to quit early but if this intuitive notion is accepted it is shown that a perhaps less intuitive notion is also true firms make workers longterm bondholders in the firm the same flow of worker pension savings that tie workers to the firm are not accounted for in the pension trust fund pension plans are significantly underfunded in a true economic sense this is a peculiar characteristic of the labor contract which raises several unanswered questions the paper also shows that the nature of the pension contract can play an important role in determining the wage service profile and the capitalized value of the firm recent contributions to the literature pose an interesting and unconventional view of pensions one which leads to the conclusion that pensions play a relatively minor role in the worker firm contract the argument has been implicitly made by burt barnow and ronald ehrenberg 1979 and william sharpe 1976 but has recently been stated more directly by jeremy bulow 1982 2 in essence their views rest on a legal interpretation of pension liabilities namely since the firm can legally terminate its pension plan anytime the firm s pension liabilities cannot exceed the present value of the nominal pension promises it would owe workers if the firm terminated the plan immediately if workers believe the firm will exercise its legal right it is intuitively apparent and easy to show that workers will deposit only that amount of compensation into the pension plan that they expect to receive upon immediate termination using this interpretation of pension plan liabilities pensions have no influence on whether the worker leaves or remains in the firm moreover it will be shown that if the pension contract is written in nominal terms reflecting the legal view workers are not bondholders in the firm pension plans are excessively overfunded an alternative view is that the pension plan is an implicit contract between the worker and the firm see for example jack treynor 1977 an implicit contract theory implies that workers anticipating careers with a firm will consider the package of wage and pension benefits they expect to collect over their life cycle it is shown that these expectations lead quite directly to several implications that the pension contract is written in real terms that firms intend to meet their pension promises and that the firm will re u s department of labor s 4521 washington d c 20210 the views expressed in this paper are my own and do not necessarily represent the views of the department of labor the paper has substantially benefited from the comments of pauline ippolito and discussions with jeremy bulow i am also indebted to robert clark gary fields alan gustman olivia mitchell james pesando john turner michael ward and participants at the labor relations workshop at cornell university and the law and economics workshop at the university of chicago for comments see my 1985a book 2 the argument is also implicit in other related papers see for example martin feldstein and randall morck 1982

consumption puzzles and precautionary savings abstract when marginal utility is convex agents accumulate savings as a precautionary measure against labor income eventualities this paper shows that precautionary savings can go a long way in making the excess growth excess smoothness and excess sensitivity features of consumption consistent with the stochastic processes of labor income observed in the u s at the microeconomic level

temporal risk aversion intertemporal substitution and keynesian propensities to consume abstract a two period life cycle model of precautionary saving is constructed in which the link between the coefficient of relative risk aversion and the inverse of the elasticity of intertemporal substitution is broken there is excess sensitivity of consumption to unanticipated changes in future income if there is temporal risk aversion consumers with ricardian rationality display keynesian propensities to consume out of a tax cut however if there is temporal love for risk rational consumers save less and consume more in response to a postponement of taxation

a critical review of china s rapidly developing renewable energy and energy efficiency policies renewable energy and energy efficiency reee policies have far reaching implications for energy security climate change economic competitiveness pollution and human livelihood for these reasons reee has become a national priority for the chinese government particularly since 2005 this paper aims to critically review china s reee policies in six sectors electricity industry transportation buildings and local government in addition to examining the progress china has made in the development and implementation of reee policies this review also identifies limitations and room for improvement finally five policy recommendations are presented

reform of refined oil product pricing mechanism and energy rebound effect for passenger transportation in china new huadu business school research fund china sustainable energy program of the energy foundation g 1203 15828 national social science foundation of china 12zd059 ministry of education 10gbj013

how does financial development alter the impact of uncertainty abstract how does the impact of uncertainty on output vary with financial development levels we investigate this question empirically using a quarterly panel data set of 50 countries between 1971 and 2009 and an instrumental variables model the results support the conjecture that financial development mitigates the negative impact of uncertainty on output at the lower end of the distribution of the financial development levels one standard deviation increase in uncertainty decreases output by more than two standard deviations at the higher end of financial development the impact on output is statistically insignificant these results suggest that strengthening the financial system and increasing liquidity and credit availability improce the robustness of growth performance during periods of uncertainty

rebound and disinvestment effects in refined oil consumption and supply resulting from an increase in energy efficiency in the scottish commercial transport sector in this paper we use an energy economy environment computable general equilibrium cge model of the scottish economy to examine the impacts of an exogenous increase in energy augmenting technological progress in the domestic commercial transport sector on the supply and use of energy we focus our analysis on scottish refined oil as the main type of energy input used in commercial transport activity we find that a 5 increase in energy efficiency in the commercial transport sector leads to rebound effects in the use of oil based energy commodities in all time periods in the target sector and at the economy wide level however our results also suggest that such an efficiency improvement may cause a contraction in capacity in the scottish refined oil supply sector this disinvestment effect acts as a constraint on the size of rebound effects however the magnitude of rebound effects and presence of the disinvestment effect in the simulations conducted here are sensitive to the specification of key elasticities of substitution in the nested production function for the target sector particularly the substitutability of energy for non energy intermediate inputs to production

the rebound effect some empirical evidence from india abstract the present paper looks at the effect of technical efficiency gains on energy use in three sectors in india at varying levels of aggregation high positive rebound implies that efficient technology unless supplemented by appropriate pricing policy will not be successful in containing demand however the main purpose of the paper is to focus on the unique mechanism of rebound that may occur in developing countries with unmet demand

precautionary wealth accumulation this paper provides theoretical foundations for when individual and aggregate wealth accumulation increase as earnings risk increases stated in terms of a simple picture the problem addressed in this paper is to find sufficient conditions such that the pattern in figure 1 holds figure 1 describes a situation in which an individual s expected wealth accumulation profile is weakly greater at each age over the life cycle whenever the individual faces one earnings process that is riskier than another earnings process other things equal two important open questions can be answered by finding sufficient conditions for the pattern in figure 1 to occur first there is the question of when theory predicts that households that face more earnings risk have more expected wealth accumulation at any point in the life cycle than households that face less earnings risk the development of such a theory would be helpful as there is a sizeable empirical literature related to this question which is surveyed by browning and lusardi 1996 second there is the question of when theory predicts that aggregate wealth accumulation increases as earnings risk increases much of the interest in the precautionary savings literature is based on the possibility that an important part of aggregate wealth is due to uninsured earnings risk this question can also be answered with figure 1 the idea is to treat the expected wealth profile of one individual as the realized average wealth profile of a large number of similarly situated individuals the law of large numbers justifies this when shocks are independent across individuals and thus earnings risk is idiosyncratic since aggregate wealth holding is a weighted sum of the average wealth holdings of individuals at different ages an upward shift of the expected wealth profile of all agents then implies that aggregate wealth holding increases with increases in earnings risk other things equal this paper provides the first general answer to when the pattern in figure 1 occurs in the context of a multi period model with independent earnings shocks the answer is given at two levels in terms of properties of the decision rule for savings i e the savings function and in terms of preferences a savings function maps an individual s current state e g current wealth and earnings and age into savings or wealth carried into the next model period given a specific earnings process since economists are familiar with the merits of sufficient conditions stated in terms of preferences i will try to motivate why sufficient conditions stated in terms of the savings function are interesting first they are widely applicable they apply to theories where savings decisions maximize a utility function or are given by a rule of thumb they also apply to models where there is wage risk and there are both consumption saving and labour leisure decisions second in so far as the savings function can be estimated it is useful for an empirical

pension reversions and worker stockholder wealth transfers this paper examines the relative importance of transfers from workers to shareholders in the firm s decision to terminate their overfunded defined benefit pension plans in contrast to earlier studies i find evidence that firms terminate their pension plans to relieve themselves of implicit promises to workers of future compensation in addition financing and tax considerations influence the reversion decision the results suggest that the 1986 excise tax on asset reversions reduced termination for reversion by 36 percent in 1986

the impact of increased efficiency in the industrial use of energy a computable general equilibrium analysis for the united kingdom the conventional wisdom is that improving energy efficiency will lower energy use however there is an extensive debate in the energy economics policy literature concerning rebound effects these occur because an improvement in energy efficiency produces a fall in the effective price of energy services the response of the economic system to this price fall at least partially offsets the expected beneficial impact of the energy efficiency gain in this paper we use an economy energy environment computable general equilibrium cge model for the uk to measure the impact of a 5 across the board improvement in the efficiency of energy use in all production sectors we identify rebound effects of the order of 30 50 but no backfire no increase in energy use however these results are sensitive to the assumed structure of the labour market key production elasticities the time period under consideration and the mechanism through which increased government revenues are recycled back to the economy

robust permanent income and pricing i suppose there exists an extremely powerful and if i may so speak malignant being whose whole endeavours are directed toward deceiving me rene descartes meditations ii 1

pensions bonding and lifetime jobs a well known if underappreciated finding in the mobility literature is that turnover is much lower in jobs covered by pensions than in other jobs this could result from capital losses for job changes created by most benefit formulas the tendency of turnover prone individuals to avoid jobs covered by pensions or higher overall compensation levels in such jobs a switching bivariate probit model of pension coverage and turnover is developed to estimate the effect of each of these factors the results show that capital losses are the main factor responsible for lower turnover in jobs covered by pensions but self selection and compensation levels also play an important role this is the first direct evidence that bonding is important for understanding long term employment relationships

how forward looking are consumers further evidence for the united states this paper extends a standard model of consumption to test for the existence of myopic consumers the extended model includes rule of thumb consumers as well as consumers who are assumed to solve a dynamic programming problem the model allows this second set of consumers however to be boundedly rational for a variety of reasons they may be unable to fully account for their future uncertain labor income the model predicts that this inability to correctly value future resources leads to the breakdown of the simple permanent income hypothesis and that consumption responds to predictable changes in income using data for the united states for the period 1951 1990 the paper finds evidence of such myopic behavior

price uncertainty and consumer welfare in an intertemporal setting abstract in this paper we examine how increases in intertemporal price uncertainty affect the welfare of a consumer in the preference structure of the consumer the coefficient of relative risk aversion and the elasticity of intertemporal substitution eis are parametrically independent we find that under some circumstances including configurations where parameter values are consistent with much of the empirical literature for each given degree of risk aversion an increase in price uncertainty reduces consumer welfare if the eis is lower than a corresponding threshold value we also find that when saving rates are sensitive to the eis then there are important counterexamples to this intuitive case

firm characteristics unanticipated inflation and stock returns this paper re examines the effects of nominal contracts on the relationship between unanticipated inflation and an individual stock s rate of return this study differs in three main ways from previous research first announced inflation data are used to examine the effects of unanticipated inflation second a different specification is used to obtain more efficient estimates third additional nominal contracts are considered the empirical results indicate that time varying firm characteristics related to inflation predominately determine the effect of unanticipated inflation on a stock s rate of return a firm s debt equity ratio appears to be particularly important in determining the response

risk and savings a taxonomy abstract the effect of risk on savings depends not just on preferences but also on the type of risk this helps to explain why the empirical literature reports positive effects for developed countries but negative effects for developing countries

what are occupational pension plan entitlements worth in britain the acquisition of rights by workers in private pension plans underpins retirement behaviour recruitment policy and wage structure but there is controversy as to how these individual pension rights should be valued the paper combines four data sets to calculate pension entitlements for a sample of 3000 british workers in 1987 expected scheme tenure is a key variable in valuation younger workers and women face greater initial uncertainty as to their pension outcomes which is resolved as job tenure lengthens given the distribution of tenure durations many employees would obtain higher returns in defined contribution schemes than in a typical final salary defined benefit plan

aggressive oil extraction and precautionary saving coping with volatility the effects of stochastic oil demand on optimal oil extraction paths and tax spending and government debt policies are analyzed when the oil demand schedule is linear and preferences quadratic without prudence optimal oil extraction is governed by the hotelling rule and optimal budgetary policies by the tax and consumption smoothing principle volatile oil demand brings forward oil extraction and induces a bigger government surplus with prudence the government depletes oil reserves even more aggressively and engages in additional precautionary saving financed by postponing spending and bringing taxes forward especially if it has substantial monopoly power on the oil market gives high priority to the public spending target is very prudent and future oil demand has high variance uncertain economic prospects induce even higher precautionary saving and if non oil revenue shocks and oil revenue shocks are positively correlated even more aggressive oil extraction in contrast prudent governments deliberately underestimate oil reserves which induce less aggressive oil depletion and less government saving but less so if uncertainty about reserves and oil demand are positively correlated

the effects of pension funds on markets performance a review the worldwide reforming process of pension systems triggered by the demographic transition and globalization has led several countries to implement multi pillar pension systems and enhance pension funds for this reason the studies on the effects that pension funds exert on markets performance have been flourishing in the last decades in this paper we provide an updated review of the empirical advances in this field of study with particular focus on the effects that pension funds produce on labour markets financial markets and economic growth

the rebound effect for space heating empirical evidence from austria abstract the major focus of this paper is to investigate the magnitude of the rebound effect for space heating in austria different approaches are applied and compared the most important result of this investigation is that despite the fact that all approaches applied have their weaknesses and some results were not highly significant the final outcomes of the different approaches show quite good coincidence they provide evidence of a rebound effect between 20 and 30 the most important conclusions for energy policy makers are i standards with respect to building codes are very important tools to increase the thermal quality of new buildings ii due to prevailing low energy prices a triggering tool which may be rebates or loans has to be implemented to increase the efficiency of the building stock

precautionary wealth accumulation a positive third derivative is not enough abstract it is commonly conjectured that expected wealth accumulation increases when earnings risk increases as long as the utility function in each period is increasing concave and has a positive third derivative we present a counter example which highlights the importance of the convexity of the savings function