comparative estimates of a macroeconomic disequilibrium model france germany the u k and the u s a the paper gives comparative estimates of a macroeconomic disequilibrium model for four countries first a theoretical mini disequilibrium model close to the barro grossman formulation is presented the productivity cycle is linked with the changes in regimes a new technique allows to compute comparative estimates of the model for france germany the u k and the u s a on the sample period 65 iv to 85 iv the results are used to assess the wage gap doctrine according to which the difference in the unemployment rates of europe and the u s a can be explained by a larger discrepancy between the real wage and the marginal productivity of labor on the eastern side of the atlantic

accuracy of response in labor market surveys evidence and implications this paper examines the extent of response errors in labor market survey data and explores the implications of such errors for economic analysis explicitly examined are responses to questions on industry occupation union status hours worked and wages analyses are based on two sources 1 a special supplement to the january 1977 current population survey that obtained data from workers and their employers and 2 an exact match of workers and their employers interviewed in the employment opportunity pilot project survey the dual nature of these surveys provides a basis for analyzing the effect of response error on a variety of economic analyses including the trade off between wages and risk the wage impact of unionism and the sensitivity of wage determination models to alternative responses to earnings questions

the practice of delta gamma var implementing the quadratic portfolio model abstract this paper intends to critically evaluate state of the art methodologies for calculating the value at risk var of non linear portfolios from the point of view of computational accuracy and efficiency we focus on the quadratic portfolio model also known as delta gamma and as a working assumption we model risk factor returns as multi normal random variables we present the main approaches to delta gamma var weighing their merits and accuracy from an implementation oriented standpoint one of our main conclusions is that the delta gamma normal var may be less accurate than even delta var on the other hand we show that methods that essentially take into account the non linearity hence gammas and third or higher moments of the portfolio values may present significant advantages over full monte carlo revaluations the role of non diagonal terms in the gamma matrix as well as the sensitivity to correlation is considered both for accuracy and computational effort we also qualitatively examine the robustness of delta gamma methodologies by considering a highly non quadratic portfolio value function

testing rent sharing using individualized measures of rent evidence from domestic helpers wing suen the market for resident domestic helpers offers a rare opportunity where the surplus from employment relationship can be quantitatively measured for each individual employee using the difference between employer s cost of time and employee s wage as a measure of rent it is found that wages for domestic helpers are positively related to rent however the apparent sharing of rent is better explained by matching than by efficiency wage models rent sharing is observed even in households where monitoring or turnover costs are low rent sharing is not observed among newly arrived foreign domestic helpers whose ability remains to be revealed jel j41 i introduction this article studies the pattern of wages for resident domestic helpers in hong kong no one would lure economists into paying attention to this arcane labor market were it not for one feature of the market for housework a measure of employment rent can be plausibly assigned to each individual employee having an individualized measure of rent at the worker level instead of a general measure at the firm level will shed considerable light on the large and growing literature of rent sharing in wage determination since 1975 the hong kong government has allowed the importation of foreign domestic helpers into the territory because of large wage differences between hong kong and some of its asian neighbors the program is highly popular the census and statistics department 1995 estimates that 92 700 households or 5 6 of all domestic households in hong kong employed domestic helpers in 1993 the figure is even more dramatic for high income households 44 of households with monthly income of over hk 50 000 had one or more domestic helpers 1 one consequence of the availability of market procured housework is that women who employ helpers have more time for market work in suen 1994 i estimate that the probability of labor force participation among married women who had domestic helpers is 22 percentage points higher than that for women without domestic help other things equal if hiring a helper enables a married woman to engage in market work then a plausible measure for the rent or surplus from this employment relationship is the difference between the woman s wage and her helper s wage if a woman with a domestic helper decides to stay home nonetheless the size of the surplus can be measured by the difference between the shadow value of leisure and the helper s wage wage information is readily available from census data and shadow wages can be estimated using standard techniques this article utilizes this rare opportunity to impute a measure of rent for each employer employee pair studying how the wages of domestic helpers vary wi th the magnitude of rent will provide direct evidence for rent sharing in the labor market there is a large literature which documents the fact that the characteristics of the employer such as industry affiliation and firm size are significantly correlated with the employees wages krueger and summers 19881 brown and medoff 1989 groshen 1991 helwege 1992 and many others offer convincing evidence that inter industry wage differentials and employer wage effects exist rent sharing is often invoked to account for such wage patterns however few studies in the literature offer a plausible account for the existence of or a measure for the size of the rent that is supposedly shared 2 at the industry level dickens and katz 1987 use variables such as concentration ratio capital labor ratio research and development expenditures and average rate of return on capital as covariates in wage equations these variables provide at best an indirect and error prone measure of employment rent campbell 1993 makes use of firm level characteristics instead of industry characteristics but t here is no information on profits in his firm level data

export diversification through resource based industrialization the case of natural gas for small resource rich developing economies specialization in raw exports is usually considered to be detrimental to growth and resource based industrialization rbi is often advocated to promote export diversification this paper develops a new methodology to assess the performance of these rbi policies we first formulate an adapted mean variance portfolio model that explicitly takes into consideration i a technology based representation of the set of feasible export combinations and ii the cost structure of the resource processing industries second we provide a computationally tractable reformulation of the resulting mixed integer nonlinear optimization problem finally we present an application to the case of natural gas comparing current and efficient export oriented industrialization strategies of nine gas rich developing countries

a disequilibrium model with smooth regime transitions and a keynesian spillover for switzerland s labor market abstract this paper presents a disequilibrium labor market model in which aggregation over a continuum of micro markets with different demand supply ratios produces smooth macro relationships mapping aggregate demand and supply onto actual employment and regime proportions aggregate labor demand consists of a classical part derived on a putty clay assumption and a keynesian spillover from the goods market the specification of labor supply incorporates intertemporal substitution the degree of aggregate imbalances on labor and goods markets is measured by business survey data the estimated model indicates a growing mismatch between the micro structures of demand and supply of labor the short run fluctuations of employment are primarily traced back to the keynesian spillover classical determinants of labor demand are relevant as well but only in the medium term labor supply is rather inert and thus absorbs the swings of labor demand only partly

complex business cycles and recurrent unemployment in a non walrasian macroeconomic model abstract in a dynamic non t tonnement macroeconomic model trades take place in each period even when prices are not walrasian prices are adjusted between trading periods according to the intensity of disequilibrium a reliable measure of which is obtained by means of stochastic rationing the degree of downward nominal wage stickiness as well as government policy parameters are decisive for the dynamics that emerge in particular it is possible for the economy to converge to quasi stationary states involving permanent unemployment and decreasing nominal wages or to produce complex business cycles with structural features recurrent over time but varying and unpredictable shape and size

remaining puzzles and neglected issues in macroeconomics this paper analyses the chain of transmission mechanisms of economic policy actions to financial markets output and employment and finally unemployment in an attempt to identify remaining puzzles and neglected issues in macroeconomics the paper emphasizes the consequences of fiscal and monetary policy actions on real variables including real interest rates and real exchange rates an attempt is made to explain why product demand shocks often tend to have faster effects on output and employment than on prices the paper also discusses why demand induced increases in output and employment are not systematically connected with a reduction in the product wage rate the paper ends with a discussion of various supply side considerations in macroeconomics

cyclical variation in the interindustry wage structure this paper presents an analysis of cyclical variation in the interindustry wage structure the study is therefore concerned with changes in relative wages among industries and not directly with the determination of the absolute wage level or changes in the absolute wage level the theory of the wage structure presented here is based on two hypotheses tihe first introduced initially as a maintained hypothesis is that differences among industries in the competitive structure of their product and labor markets result in wage inequalities for given skill levels the second hypothesis and the major finding of the paper is that the size of the wage differentials is a function not only of the extent and nature of the noncompetitive elements but also of the excess demand conditions in the labor market this result is derived from the proposition that under competitive supply conditions labor allocation is based on relative wages to support the theory a wage structure equation is estimated with the coefficient of variation of straight time average hourly earnings in the two digit manufacturing industries as the dependent variable the implications of the study for aggregate and industry wage equations are then discussed

structural unemployment and disequilibrium abstract in this paper we present a disequilibrium model of the labor market which allows us to distinguish cyclical unemployment due to wage rigidity from structural unemployment this is done through the insertion in the exchange condition of an aggregate disequilibrium model of variables measuring mismatch between disaggregated labor supplies and labor demands such a model also allows unemployment and job vacancies to coexist the model is estimated using canadian quarterly data from 1966 to 1983 our results imply that structural unemployment due to inter industrial shocks while significant is fairly small

nonlinear portfolio selection using approximate parametric value at risk abstract as the skewed return distribution is a prominent feature in nonlinear portfolio selection problems which involve derivative assets with nonlinear payoff structures value at risk var is particularly suitable to serve as a risk measure in nonlinear portfolio selection unfortunately the nonlinear portfolio selection formulation using var risk measure is in general a computationally intractable optimization problem we investigate in this paper nonlinear portfolio selection models using approximate parametric value at risk more specifically we use first order and second order approximations of var for constructing portfolio selection models and show that the portfolio selection models based on delta only delta gamma normal and worst case delta gamma var approximations can be reformulated as second order cone programs which are polynomially solvable using interior point methods our simulation and empirical results suggest that the model using delta gamma normal var approximation performs the best in terms of a balance between approximation accuracy and computational efficiency

effective demand in a sequence of markets a consumer s effective demand is defined in a model where prices are fixed at nonclearing levels where markets are visited sequentially and where there is stochastic rationing this concept of effective demand is compared to that proposed by lower grossman and benassy and that proposed by dreze the influence of transaction costs on effective demand and the choice of an optimal order of visits to the markets are also dealt with

regional disparities and national similarities in spanish unemployment a case of seasonal cointegration short run fluctuations in unemployment could be interpreted as transitory movements away from a hypothetical equilibrium the problem apart from the existence of such equilibrium is the existence of an adjustment mechanism that ensures the convergence of the short towards the long run with quarterly data from the spanish labour market since 1975 we have estimated a vectorial error correction model that allows for precisely this convergence the objective was to investigate the variables that explain the two distinctive features of spanish unemployment its size and its persistence we have found that there is a cointegration relationship between unemployment and production proxied by several variables for this reason rather than hysteresis we have found a high persistence in spanish unemployment this persistence could be explained by regional mismatch that is lack of adjustment between demand and supply of labour in some spanish regions we have used regional data to find those common trends i

heterogeneous beliefs regret and uncertainty the role of speculation in energy price dynamics abstract this paper proposes to investigate the impact of financialization on energy markets oil gas coal and electricity european forward prices during both normal times and periods of extreme fluctuation by using an original behavioral and emotional approach with this aim we propose a new theoretical and empirical framework based on a heterogeneous agents model in which fundamentalists and chartists co exist and are subject to regret and uncertainty we find significant evidence that energy markets are composed of heterogeneous traders who behave differently depending on the intensity of the price fluctuations and the uncertainty context in particular energy prices are governed primarily by fundamental and chartist agents that are neutral to uncertainty during normal times whereas these prices face irrational chartist investors averse to uncertainty during periods of extreme fluctuations in this context the recent surge in energy prices can be viewed as the consequence of irrational exuberance our new theoretical model is suitable for modeling energy price dynamics and outperforms both the random walk and the arma model in out of sample predictive ability

labor utilization and nonwage labor costs in a disequilibrium macro framework the literature on labor utilization and nonwage labor costs is extended to incorporate recent approaches to macroeconomic disequilibrium modeling based on the smoothing by aggregation principle this leads to a reformulation of the basic sneessens dreze type model by treating employment and working hours as separate inputs the inclusion of nonwage labor costs serves a double purpose first they represent a restriction in the profit maximizing process and second they serve as a proxy for the fixity of labor the results differ substantially from simulation studies that disregard the utilization of labor and the nonlinear structure of labor costs

an empirical two market disequilibrium model for dutch manufacturing abstract we develop an empirical version of the aggregate two market fixprice model due to barro and grossman maximum likelihood estimation of the model appears to be difficult as a large number of local maxima occurs the number of local maxima is considerably reduced by the introduction of prior information on some of the standard deviations of the disturbance terms in the model satisfactory estimation results are obtained this way the model closely reproduces the post war dutch trade cycle although some problems remain especially with the seventies

the phillips curve as a long run phenomenon in a macroeconomic model with complex dynamics abstract in this paper we derive a phillips curve as the image of a chaotic attractor of the state variables of a non linear dynamical system describing the evolution of an economy this has two important consequences the phillips curve in our model is a true long run phenomenon but to exploit the apparent unemployment inflation trade off may require unrealistically complex policy measures the model is based on an overlapping generations non t tonnement approach involving temporary equilibria with stochastic rationing in each period and price adjustment between successive periods in this way we are able to obtain complex sequences of consistent allocations allowing for recurrent unemployment and inflation

the real debt resistance hypothesis and persistence of unemployment in the oecd countries according to friedman 1968 p 10 unemployment above the natural rate should sooner or later lead to deflation and an accelerating deflation at that as table 1 shows until the mid 1980s the course of movement of the rate of unemployment and inflation in the oecd countries is in conformity with this hypothesis however since the mid 1980s and in spite of continuing high unemployment the rate of inflation remained at a significantly positive level there is certainly not evidence of accelerated deflation as predicted by friedman the most popular explanation offered is the possibility of presence of the hysteretic tendencies in the nairu three famous models in this respect are the insider outsider hypothesis of blanchard and summers 1986 the capacity constraint hypothesis of sneessens and dreze 1986 and the declining search effectiveness long term unemployment hypothesis of layard nickell and jackman 1991 all these explanations rely on the real wage rigidity as table 1 shows however the rigidity of real wages seems to be more due to the downward rigidity of the rate of growth of nominal wages and prices for example the average weekly earnings of the production workers in the us manufacturing sector has steadily increased since 1946 1 thus contrary to the dominant view in the new keynesian school see gordon 1990 what needs to be explained is the long term downward rigidity of nominal wages

a discussion of belgian unemployment combining traditional concepts and disequilibrium econometrics with a gdp of less than 100 billion and exports of more than 60 billion belgium comes perhaps closer than any other country to being a small open economy consequently trends in world trade and export performance have a major impact on domestic activity whereas the impact of domestic fiscal policy is damped by import leakages table 1 presents a few figures confirming these observations

complex dynamics in a simple macro disequilibrium model abstract this study analyzes disequilibrium dynamics in a simple macro economic model constructed with micro foundation in which the behavior of individual economic agents concerning consumption labor supply employment output supply and the formation of expectation can be described by very simple and conventional monotonic functions it is demonstrated that despite that simplicity complex nonlinear dynamics may appear through the interaction of those individual behavior in different markets

on macroeconomic equilibrium with stochastic rationing the purpose of this paper is to apply the ideas of stochastic rationing mechanisms to a simple disequilibrium macroeconomic model it has been shown that effective demands with stochastic rationing as opposed to those derived from deterministic constraints the clower benassy or dreze effective demand are consistent with the maximization of expected utility and are also capable of producing unsatisfied demand and supply in a quantity constrained equilibrium the well known regime classification of quantity constrained equilibria i e keynesian unemployment classical unemployment repressed inflation and underconsumption is shown to be relevant in a macroeconomic framework with stochastic rationing comparative statics of quantity constrained equilibria are worked out for different regimes

accounting for unemployment a labour market perspective i examine whether prolonged high unemployment in canada can be attributed to various structural causes rather than to demand deficiency as found by macro econometric models the answer is largely negative neither the dispersion of sectoral growth rates nor excessive and rigid real wages can convincingly account for most unemployment contentions to the contrary are based upon inappropriately partial analyses enduring shifts in industrial structure have if anything been declining labour mobility is high much unemployment lasts too long to be frictional fuller quantitative understanding of the nature of unemployment can be achieved only in a more general framework

updated notes on the interindustry wage structure 1890 1990 the author documents and analyzes changes in wage structure across manufacturing industries over the years 1890 1990 interindustry differentials in wages were highly stable over that period for production workers but much less stable for nonproduction workers interindustry wage patterns were very similar for production and nonproduction workers in 1990 though this similarity dates back only to 1958 although dispersion of wages across industries followed varying trends over the period it was higher in 1990 than at any previous time in this century the variables that have been most strongly correlated with wage growth are productivity growth rising union density rising capital intensity and profit growth

on the alternative explanations of persistence of unemployment in the oecd countries this paper begins with a summary statement of a few relevant facts about the worsening state of unemployment since the mid 1970s in the oecd countries a joint statistical test of the hypotheses of the natural rate hysteresis and the persistence is conducted by pooling annual data 1963 93 from up to 16 oecd countries the results provide strong evidence in support of the persistence hypothesis and the non linearity of the phillips curve while concurrently rejecting the other two alternative explanations

armod a small numerical macroeconomic world model with non clearing markets the purpose of this paper is to demonstrate the usefulness of a non walrasian numerical modeling approach to current macroeconomic problems of excessive unemployment and trade imbalances in the oecd area the model which consists of five world regions generates a sequence of short run equilibria the model captures international transmission mechanisms of business cycle impulses and of the effects of monetary and fiscal policy assuming flexible interest and exchange rates full capital mobility and adaptive expectations a scenario with successful international policy coordin ation illustrates how the model works copyright 1987 by the editors of the scandinavian journal of economics

efficiency wage models of unemployment keynesian economists hold it to be self evident that business cycles are characterized by involuntary unemployment but construction of a model of the cycle with involuntary unemployment faces the obvious difficulty of explaining why the labor market does not clear involuntarily unemployed people by definition want to work at less than the going wage rate why don t firms cut wages thereby increasing profits

capital accumulation and unemployment a tale of two continents in contrast to much recent work regarding the causes of european unemployment in this paper we emphasize the importance of capital accumulation but unlike the few previous studies which have examined the relationship between capital accumulation and unemployment we argue that what matters for the evolution of employment and the unemployment rate is not the absolute growth rate of a country s capital stock but its evolution relative to other countries capital stock the empirical validity of the above statement is demonstrated for almost all oecd countries using quarterly time series data for the period 1961 1995 more detailed evidence is also presented for germany japan and the united kingdom

catastrophic walrasian equilibrium from the non walrasian viewpoint a three good macroeconomic example a walrasian equilibrium is catastrophic from the non walrasian viewpoint if some small deviation from the walrasian prices produces only non walrasian equilibrium allocations a long way from the walrasian allocation a precise account of this phenomenon is given for a class of three good single household private ownership production economies

the causes of increasing interindustry wage dispersion in the united states using establishment level data from a variety of sources this study documents and analyzes the consistent rise in interindustry wage dispersion in the united states between 1970 and 1987 the authors attribute about 60 of the rise in this measure of wage dispersion to competitive market factors such as changes in the demographic and occupational mix of industrial sectors they find however that noncompetitive factors also play an important part in this trend the most important noncompetitive factor is a strong link between the long term trends in industry wages and productivity growth which appears to stem largely from rent sharing behavior among industries

endogenous trading uncertainty and macroeconomic equilibrium this paper explores the analogy between equilibrium under flexible prices and equilibrium under fixed prices in a large decentralised economy characterised by trading uncertainty to price dispersion in the former there corressponds quantity dispersion in the latter specifically we show that if fixed prices are posited and proposed trades are rationed according to a stochastic rationing mechanism different disequilibrium regimes can coexist in different parts of the system such a coexistence has equilibrium properties in the sense that agents consumers and firms are indifferent between facing different stylised disequilibrium regimes the plan of the paper is as follows section i discusses the concept of stochastic rationing we employ in conjunction with fixed price equilibrium theory section ii introduces the model and indicates how it may be applied to study price dispersion in flexible price equilibrium section iii presents the main result about the coexistence of the stochastic keynesian regime and the stochastic suppressed inflation regime and discusses its implications for macroeconomic policy

estimation of a quarterly macroeconomic model with quantity rationing we specify and estimate a small fix price model with quantity rationing on both the goods and labor markets the side of the market which is rationed is random the model is able to generate a productivity cycle and the degree of capacity utilization is endogenous the rationing scheme allocating supply between the various components of demand is estimated the probabilities of being in the various regimes the intensity of the dispquilibrium on the markets and the results of policy exercises are discussed

european unemployment lessons from a multi country econometric study the paper summarizes the principal empirical findings of the european unemployment program it draws on 10 country studies which utilize the macroeconomic framework set out by sneessens and dreze 1986 the main conclusions are as follows i a major problem in europe is that productivity gains are quickly absorbed into wages and the effect of unemployment on wage settlements is generally weak ii a wage price productivity spiral means the european economies are inflation prone iii demand pressures spill over into the balance of payments rather than leading to price increases iv the major proximate determinant of employment in the 1 980s is the level of effective demand

a macroeconomic rationing model of the belgian economy despite a wide recognition of the possible theoretical fruitfulness of the quantity rationing approach there prevails an equally wide suspicion as to the possibility of getting sensible econometric results out of this type of specification our aim in the following will be to show that sensible results can indeed be obtained we shall consider for that purpose the belgian goods and labor markets over the years 1953 1978 and specify the econometric model along the lines suggested in the previous chapter

stationary keynesian equilibria equilibria with keynesian unemployment are studied in the framework of a simple macroeconomic model assuming that they result from a non t tonnement at fixed prices and wages

on valuing and hedging european options when volatility is estimated directly abstract we quantify the effects on contingent claim valuation of using an estimator for the unknown volatility of a geometric brownian motion gbm process the theme of the paper is to show what difficulties can arise when failing to account for estimation risk our narrative uses a direct estimator of volatility based on the sample standard deviation of increments of the underlying brownian motion after replacing the direct estimator into the gbm we derive the resulting distribution function of the approximated gbm for any time point this allows us to present post estimation distributions and valuation formulae for an assortment of european contingent claims that are in accord with many of the basic properties of the underlying risk neutral process and yet better reflect the additional uncertainties and risks that exist in the black scholes merton paradigm

effective demand and spillovers when individuals face rationing on a particular market they will seek to amend their trade offer on this and other markets to account for the extra constraint on their behaviour empirical researchers must attempt to mimic this behaviour by specifying effective demand functions there is no consensus however about how this should be done the development of applied multi market disequilibrium modelling has given this problem an immediate practical relevance moreover aggregation and computational considerations further complicate the problem of specifying theoretically consistent yet tractable effective demands this paper explores theoretical aspects of empirical effective demand functions and in this light reviews the existing empirical literature we stress the practical nature of the problems encountered in applied work and the limited guidance that theory provides the initial systematic discussion of the problems involved in specifying empirical effective demand functions in portes 1977 has been supplemented by gourieroux laffont and monfort 1980 ito 1980 sneessens 1981 and lee 1986 our paper is partly an update of this work there are three main candidates differing according to both the measurement of excess demand on other markets and how individuals are assumed to respond to this using linear forms for the effective demands portes showed how the three candidates are observationally equivalent in that they all imply the same level of trade perhaps because of this we find a wide range of effective demand concepts used in existing empirical applications we then consider the implications for empirical effective demand functions of allowing rationing to operate at a disaggregated level these smoothing by aggregation models have been the most significant

a macroeconometric disequilibrium model of product market and labour market for the netherlands 1985 a macroeconometric disequilibrium model of product market and labour market for the netherlands applied economics vol 17 no 4 pp 633 646