micro vs macro explanations of post war us unemployment movements abstract this paper considers contributions of industry sectoral micro shocks vs aggregate macro shocks a dynamic factor model is estimated with maximum likelihood method in the frequency domain and decomposes us unemployment movements into industry sectoral and common components sectoral shocks account for around half unemployment movements

idiosyncratic and common shocks to investment decisions this paper shows how microeconomic data on investment plans can be used to study the structure of risk faced by firms revisions of investment plans form a martingale and thus reveal the underlying shocks driving investment we decompose revisions in investment plans into micro sector and aggregate shocks and exploit stock market data to distinguish between structural valuerelated shocks and measurement error in investment revisions using panel data for us firms we find that microshocks are not the dominant source of risk in investment decisions and that much of the observed microvariation is actually due to heterogeneity in firm level responses to aggregate shocks firms are able to diversify most idiosyncratic investment risk and they do not appear to be liquidity constrained

the input output approach to instrument selection this article proposes a new method of selecting demand shift instruments for disaggregated industries i use prior information from input output tables to identify industries whose output fluctuations are likely to function as approximately exogenous demand shocks for other industries after motivating this idea theoretically i implement the input output approach using data from the 1977 detailed input output study i conduct a systematic instrument search for over 450 u s manufacturing industries and find over 200 industries possessing plausible instruments i conclude with a brief application showing how input output instruments can be used to estimate the short run supply curve of the cement industry

macroeconomic implications of production bunching factor demand linkages abstract existing empirical evidence suggests that output is more variable than consumption so that production smoothing is not apparently present in this paper we investigate some macroeconomic implications of the proposition that the empirical evidence reflects the presence of some firms in the economy that produce with nonconvex technologies overall when activities are sufficiently complementary and inventory holding is sufficiently costly nonconvexities at the firm level can generate a pattern of output and sales such that the variance of output exceeds that of sales at an aggregate level in this way nonconvexities at the individual firm level may have macroeconomic consequences

nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

nonparametric estimation of sample selection models sample selection models provide an important way of accounting for economic decisions that combine discrete and continuous choices and of correcting for nonrandom sampling nonparametric estimators for these models are developed in this paper these can be used for estimating shapes and important economic quantities as in standard nonparametnc regression endogeneity of regressors of interest is allowed for series estimators for these models are developed which are useful for imposing additivity restnctions that arise from selection corrections convergence rates and asymptotic normality results are derived an application to returns to schooling among australian young females is given

risk sharing by households within and across regions and industries abstract cochrane 1991 journal of political economy 99 957 976 and mace 1991 journal of political economy 99 928 956 test if risk sharing across households is complete in the sense that household consumption moves one for one with aggregate consumption in their studies the source of income risk is idiosyncratic and agents can share risk across the entire economy using a sample of households from the panel study on income dynamics psid we explore whether households share the risk associated with their industries and regions across households in other regions and industries we find that a large fraction of risk faced by households is not shared across regions and industries

a multi sector inventory model abstract two competing paradigms for firm level inventory behavior are production smoothing and s s empirical evidence that aggregate production varies more than sales and inventory investment is positively correlated with sales appears to contradict the buffer stock production smoothing motivation work by blinder and maccini suggests that an s s model better explains these stylized facts i simulate a multi sector model with sequential interaction of heterogeneous agents representing manufacturing wholesale and retail agents who use either smoothing or s s inventory decision rules the results demonstrate that the stylized facts can be explained by a model of this type

cyclical industrial dynamics in the global it sector origins and sequencing in this article we investigate the origins and dynamics of cyclical behaviour in the it sector our lead lag analysis shows the historical cyclical patterns involved in the global semiconductor industry the computer industry and the flat panel display industry based on the granger causality tests derived from a vector autoregressive var model we find that in the global semiconductor industry changes in capacity utilization precede changes in sales which in turn leads to changes in semiconductor price

rational expectations and macroeconomics in 1984 one of the cleverest features of the rational expectations revolution was the appropriation of the term rational thereby the opponents of this approach were forced into the defensive position of either being irrational or of modeling others as irrational neither of which are comfortable positions for most economists in fact much of the rational expectations view that expectations are formed sensibly given the information that people have and are motivated to acquire has been generally accepted this viewpoint has permanently and usefully altered the way that most macroeconomists build models and carry out evaluations of shifts in governmental behavior in this sense the rational expectations revolution has triumphed decisively the phrase rational expectations macroeconomics also suggests a particular theory of business fluctuations this well known theory shows how incomplete information about the quantity of money and the general price level can lead to nonneutrality of money specifically changes in money lead to

cross sector misallocation with sector specific distortions in this paper i seek to sharpen the understanding of the economic channels through which sector specific distortions affect aggregate outcomes i pay special attention on how cross sector misallocation might arrive as a result of these distortions and clarify how models of resource misallocation across heterogeneous firms differ from models of resource misallocation across sectors i present facts that suggest the presence of such distortions in mexico a noteworthy developing country the paper highlights the importance of understanding the origin and nature of sector specific distortions for policy design

firm volatility in granular networks firm volatilities comove strongly over time and their common factor is the dispersion of the economy wide firm size distribution in the cross section smaller firms and firms with a more concentr

factor demand linkages technology shocks and the business cycle abstract this paper argues that factor demand linkages can be important for the transmission of both sectoral and aggregate shocks we show this using a panel of highly disaggregated manufacturing sectors together with sectoral structural vars when sectoral interactions are explicitly accounted for a contemporaneous technology shock to all manufacturing sectors implies a positive response in both output and hours at the aggregate level otherwise there is a negative correlation as in much of the existing literature furthermore we find that technology shocks are important drivers of the business cycle

markets and institutions in financial intermediation national characteristics as determinants abstract given the importance of financial intermediation and the rise of globalization there is little prior research on how national preferences for financial intermediation markets versus institutions are determined by cultural legal and other national characteristics using panel analysis for data on a recent 8 year period for 30 countries this paper documents that national preferences for market financing increase with political stability societal openness economic inequality and equity market concentration and decreases with regulatory quality and ambiguity aversion we confirm with robustness tests that our result for regulatory quality is independent of differences in national wealth and that our result for political stability is independent of both wealth and political legitimacy these results should be of much interest to managers scholars regulators and policy makers

sources of employment fluctuations in taiwan s industries and regions this empirical study explores the sources of employment fluctuations in taiwan s industries and regions over the period 1978 to 2004 the quarterly growth rates of employment in nine industries and four regions are modelled with a structural vector autoregression var and the employment shocks are measured by var residuals the covariance matrix of the var residuals is decomposed using system estimation method that selects the parameters to make the error model close to the covariance matrix and in turn to estimate the relative importance of national as well as industry specific and region specific shocks the empirical results show that industry specific shocks account for the major fluctuations in industries and regions on average about 83 95 of an industry s cyclical variations and 56 28 of the volatility in a region may be attributed to industry specific shocks national shocks account for little employment volatility in industries only the finance and personal service industries are highly s

the globe debate back to relevance this is a critical summary review of the debate about the global leadership and organizational behavior effectiveness globe study in jibs and other journals between november 2006 and the present issue several contributors did not realize that globe used three essential constructs taken from my publications in a sense entirely different from mine values practices and organizational culture not recognizing the ensuing confusion they had no answer for the question in my 2006 review what did globe really measure if you do not know what you are talking about you can continue arguing for ever beyond the fuzziness of what is measured the debate leaves us with an even more fundamental question what is the use of the globe dimensions

religious beliefs gambling attitudes and financial market outcomes this study investigates whether geographic variation in religion induced gambling norms affects aggregate market outcomes we conjecture that gambling propensity would be stronger in regions with higher concentrations of catholics relative to protestants consistent with our conjecture we show that in regions with higher catholic protestant ratios investors exhibit a stronger propensity to hold lottery type stocks broad based employee stock option plans are more popular the initial day return following an initial public offering is higher and the magnitude of the negative lottery stock premium is larger collectively these results indicate that religion induced gambling attitudes impact investors portfolio choices corporate decisions and stock returns

rational overoptimism and other biases rational agents with differing priors tend to be overoptimistic about their chances of success in particular an agent who tries to choose the action that is most likely to succeed is more likely to choose an action of which he overestimated rather than underestimated the likelihood of success after studying the comparative statics of this mechanism i show that it also causes agents to attribute failure to exogenous factors but success to their own choice of action to disproportionately believe that they will outperform others to overestimate the precision of their estimates and to overestimate their control over the outcome

twister employment responses to the 3 may 1999 oklahoma city tornado this research examined the impact of the 3 may 1999 tornado on the oklahoma city labour market we estimated time series models that allow for time varying variance in employment growth the models include intervention variables designed to capture the tornado s effect at initial impact as well as over the post tornado period in terms of total employment growth the oklahoma city metropolitan statistical area msa experienced an increase in employment growth and a reduction in labour market risk in the sample period following the tornado the analysis also examined the effect of the weather event on eight industrial sectors five of eight sectors experienced significant decreases in labour market risk after the tornado our evidence suggests that oklahoma city and surrounding communities that make up the metropolitan statistical area survived the disaster without suffering any extended adverse labour market effects our results indicate that at least in the aggregate the labour market improved what

asymmetric phase shifts in u s industrial production cycles abstract we identify cyclical turning points for 74 u s manufacturing industries and uncover new empirical regularities a industries tend to comove between expansion and contraction phases over the business cycle b clusters of industry turning points are highly asymmetric between peaks and troughs troughs are much more concentrated and sharper than peaks c the temporal pattern of phase shifts across industries supports the spillovers through input output linkages and d macroeconomic shocks such as unanticipated changes in monetary policy government spending oil prices and financial conditions are significant drivers of industrial phase shifts

sectoral price rigidity and aggregate dynamics abstract this paper studies the business cycle implications of sectoral heterogeneity in price rigidity using a highly disaggregated multi sector model the model is estimated by the simulated method of moments using a mix of aggregate and sectoral u s data the frequencies of price changes implied by our estimates are consistent with those reported in micro based studies we show that heterogeneity in price rigidity is the primary factor explaining the heterogeneity in the responses of sectoral output and inflation to a monetary policy shock we also find that ignoring sectoral heterogeneity in price rigidity leads to the mismeasurement of the relative importance of aggregate and sector specific shocks in aggregate and sectoral fluctuations

international effects of stock market dispersion we study the extent to which stock market dispersion is related to unemployment and output growth for 16 countries over 20 years using panel vector auto regressions and panel dynamic regressions we find increases in stock market dispersion across industries to induce future increases in unemployment and future decreases in industrial production ip growth moreover the responses of unemployment and ip growth following a positive shock to stock market dispersion are persistent and are robust to various controls sample periods and estimation methods our article provides cross country evidence in support of the hypothesis that shifts in demand across industries negatively affect employment

trade exposure export intensity and wage volatility theory and evidence this paper addresses the link between trade exposure and wage volatility first it shows in a simple model that trade exposure magnifies the impact of domestic productivity shocks on industry specific labor demand particularly for the less export intensive industries and that if labor is not perfectly mobile this implies a rise in wage volatility then it tests these predictions using industry data the empirical results confirm that wage volatility increases with an industry s degree of openness and that it declines with an increase in the industry s export intensity

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

real versus monetary business cycle theory and the statistical characteristics of output fluctuations abstract doubt has been cast on the ability of monetary models to explain output fluctuations adequately for conventional monetary models cannot account for non stationarity or the permanence of output innovations this note shows that purely monetary models can account for these characteristics once we allow technology to be endogenous so that recent statistical work does not constitute a refutation of monetary models of the business cycle

complementarities and comovements short run interindustry comovement may be due either to common shocks or to complementarities that progagate shocks across sectors this paper assesses the importance of input output linkages aggregate activity spillovers and local activity spillovers to comovement in postwar u s manufacturing i find that input output linkages and local activity spillovers are important to comovement while aggregate activity spillovers are not important i find that complementarities are important to aggregate volatility even after i remove observable aggregate shocks from the data local spillovers are particularly important explaining between 15 and 36 percent of manufacturing employment volatility the importance of local spillovers stems from the fact that industries that cluster together in space also comove through time contrary to the marshallian idea that industries with negatively correlated fluctuations should cluster together in order to stabilize local demand

sectoral shocks and business cycles a disaggregated analysis of output fluctuations in the uk in this paper we first show that it is possible to modify linear real business cycle models to allow for disaggregate industry specific factors in the generation of macroeconomic fluctuations we then try to determine the relative importance of aggregate and sectoral shocks by doing principal components analysis on the residuals from a var of output growth rates in 19 uk industrial sectors we find that a significant percentage of the innovations in sectoral output growths can be accounted for by a single unobserved component however since the model only sets an upper bound to the explanatory power of aggregate impulses the importance of using sectoral data to extract additional information to bear on the analysis of economic fluctuations is confirmed by our findings

consumer behaviour theory and empirical evidence a survey this survey is designed to emphasize the relationship between empirical a nd theoretical considerations in the analysis of consumer behavior a lthough it focuses primarily on analysis at the individual or micro l evel it tries where possible to draw implications for the estimati on of aggregate relationships the importance of micro level analysis stems from the rapid expansion in available panel and survey data se ts this development has generated its own theoretical and empirical issues many of which are raised in this survey copyright 1988 by royal economic society

employment fluctuations in u s regions and industries the roles of national region specific and industry specific shocks this study quantifies the roles of national region specific and industry specific shocks in aggregate employment fluctuations in u s regions and industries variation among the growth rates of major regions and industries is decomposed into unobserved national region and industry specific components the results reject the view that any heterogeneity in regional fluctuations is attributable to differences in industry composition after controlling for industry mix effects roughly 40 of the variance of the cyclical innovation in any region s growth rate is particular to that region in addition region specific shocks appear to propagate across regions over time

demand systems with and without errors revealed preference theory assumes that each consumer has demands that are rational meaning that they arise from the maximization of his or her own utility function in contrast econometric or statistical demand models assume that each consumer s demands equal a rational systematic component derived from a common utility function plus an individual specific additive error term this paper reconciles these differences by providing necessary and sufficient conditions for rationality of statistical demand models given individual consumer rationality

production chains and general equilibrium aggregate dynamics abstract recent empirical studies reveal that monetary shocks can cause persistent fluctuations in aggregate output in this paper we propose a mechanism to help generate such persistence our dynamic stochastic general equilibrium model features a vertical input output structure with staggered price contracts at each stage of production working through the input output relations and the timing of firms pricing decisions the model generates persistent fluctuations in aggregate output and the observed patterns of price dynamics following a monetary shock output responses are more persistent the greater the number of stages of production and the larger the share of intermediate inputs with a sufficient number of stages the persistence is arbitrarily large if the share of intermediate inputs is one at all but finitely many stages

ability location and household demand for internet bandwidth abstract this paper examines consumer preferences for internet bandwidth focusing on technical ability and urban rural location as sources of preference heterogeneity an economic model is outlined that shows that ability decreases the effective price of bandwidth as a result of this decrease part of the total effect of an increase in ability will always be an increase in the demand for bandwidth the implication is empirically investigated with an econometric approach that overcomes the limitations of the aggregated data that is currently available to describe consumer preferences results show that high ability urban consumers are willing to pay a substantive monthly premium for an improvement in bandwidth relative to rural consumers

cultural influences on home bias and international diversification by institutional investors abstract we investigate determinants of international diversification in institutionally managed portfolios from more than 60 countries survey based country specific variables on cross cultural behaviors help to explain both home bias and diversification among foreign equities in particular investment funds from countries characterized by higher uncertainty avoidance behavior display greater home bias and are less diversified in their foreign holdings portfolios from countries with higher levels of masculinity and long term orientation display lower levels of home bias and portfolios from countries with higher levels of masculinity are more diversified abroad portfolios from culturally distant countries invest less abroad and underweight culturally distant target markets the economic significance of cultural variables is high and comparable in magnitude to geographical distance a consistent influence on foreign diversification in prior studies culture impacts investor behavior directly and not merely though indirect channels such as legal and regulatory framework

lost in translation the effect of cultural values on mergers around the world we find strong evidence that three key dimensions of national culture trust hierarchy and individualism affect merger volume and synergy gains the volume of cross border mergers is lower when countries are more culturally distant in addition greater cultural distance in trust and individualism leads to lower combined announcement returns these findings are robust to year and country level fixed effects time varying country pair and deal level variables as well as instrumental variables for cultural differences based on genetic and somatic differences the results are the first large scale evidence that cultural differences have substantial impacts on multiple aspects of cross border mergers

sectoral versus aggregate shocks a structural factor analysis of industrial production using factor methods we decompose industrial production ip into components arising from aggregate and sector specific shocks an approximate factor model finds that nearly all of ip variability is associated with common factors we then use a multisector growth model to adjust for the effects of input output linkages in the factor analysis thus a structural factor analysis indicates that the great moderation was characterized by a fall in the importance of aggregate shocks while the volatility of sectoral shocks was essentially unchanged consequently the role of idiosyncratic shocks increased considerably after the mid 1980s explaining half of the quarterly variation in ip

sectoral shifts and cyclical unemployment a reconsideration sectoral shifts and cyclical unemployment a reconsideration the debate over the relative importance of sectoral and aggregate shocks in explaining fluctuations in the aggregate unemployment rate has centered on the relationship between unemployment job vacancies and the dispersion of sectoral employment growth rates which proxies for sectoral shocks this paper examines some possible theoretical relationships between these variables and after decomposing unemployment into components attributable to sectoral and aggregate shocks estimates the importance of each if finds that fluctuations in unemployment are principally caused by aggregate shocks but sectoral shifts explain a significant albeit steady amount of unemployment i introduction in a controversial paper lillien 1982 argued that much of the rise in aggregate unemployment experienced in the 1970s and 1980s was attributable to increases in the natural rate of unemployment these increases he said arose from shifts of demand between the different sectors of the national economy these demand shifts increased unemployment because labor market frictions prevented the immediate reallocation of workers from declining sectors to expanding sectors lillien used a dispersion index of sectoral employment growth rates as a proxy for the extent of sectoral shifts and found that aggregate unemployment could be explained by this dispersion with a positive distributed lag given the much discussed changing composition of output and employment in the u s this interpretation of unemployment quickly won adherents such as barro 1984 more recent work by abraham and katz 1986 challenges this view they argue that the rise in aggregate unemployment was attributable to aggregate demand disturbances they showed that if sectors had different cyclical sensitivities aggregate demand disturbances such as those resulting from monetary policy or fluctuations in animal spirits could produce counter cyclical fluctuations in the dispersion of sectoral employment growth rates the finding that unemployment was a distributed lag of this dispersion did not therefore distinguish between the two hypotheses instead abraham and katz found vacancy rates to be negatively related to dispersion with a distributed lag they interpreted this result as confirmation of the aggregate demand hypothesis since it was consistent with a movement along the beveridge curve 1 my paper further explores the relationships between sectoral shifts aggregate unemployment and aggregate vacancies the theoretical section demonstrates that sectoral shifts are also consistent with a movement along the beveridge curve and a negative relation between vacancies and the dispersion of sectoral employment growth rates this result potentially invalidates abraham and katz s claim and at the same time provides a novel explanation of the beveridge curve in the empirical section i use the implications of the two hypotheses to decompose the dispersion of sectoral employment growth rates into parts attributable to sectoral shifts and aggregate shocks respectively these new measures are then used to estimate the relative contributions of sectoral shifts and aggregate disturbances to aggregate unemployment this paper is linked to an emerging literature on the sources of macroeconomic fluctuations the seminal paper by long and plosser 1983 showed how real business cycle models could explain comovements of output across sectors on the basis of sector specific shocks in a subsequent paper long and plosser 1987 sought to identify the relative importance of aggregate versus sector specific shocks using a single factor model of output growth they found that aggregate shocks explained only a relatively small amount of the convariation of output across sectors and concluded that sectoral shocks are largely responsible for cyclical fluctuations

sources of output fluctuations in the united states during the inter war and post war years abstract this paper attempts to decompose the sources of fluctuations in industry output into 1 an aggregate national shock 2 industry group specific shocks and 3 idiosyncratic factors the empirical methodology is the engle watson dynamic mimic model the work is motivated as an attempt to compare empirically aggregate single factor theories of the cycle with real business cycle theories emphasizing technology shocks disaggregate data from the inter war and post war periods are examined conclusions on the relative importance of the various shocks seem to be dependent on the period being considered the single index theory of the cycle seems more appropriate for the inter war period

the importance of sectoral and aggregate shocks in business cycles the importance of sectoral and aggregate shocks in business cycles the theoretical literature on business cycles proposes numerous causes for their occurrence this paper attempts to measure the relative importance of aggregate whether real or nominal and sectoral factors in generating real economic fluctuations as well as to identify economic variables that are correlated with the various factors empirical results indicate that both aggregate and industry level factors are statistically significant in explaining variations in output with the aggregate factor being the most important some evidence is presented that links the aggregate factor with monetary variables i introduction prior to the keynesian revolution a great deal of theoretical and empirical research was conducted on the business cycle 1 with the acceptance of keynesian ideas the emphasis of macroeconomic research shifted from the study of business cycles to the study of macroeconomic policies required to reduce economic fluctuations this research program continued until the 1970s when oil price increases and the generally poor predictive performance of keynesian models caused many macroeconomists to question this research program as a result some economists such as robert lucas edward prescott and thomas sargent began to employ stochastic general equilibrium models to explain the main characteristics of the business cycle movements in output or real economic activity arise from the interaction of economic shocks and internal mechanisms which propagate their effects in this general framework which is based on the work of frisch 1933 and slutsky 1937 unanticipated disturbances or shocks are spread through the propagation mechanism resulting in serially correlated fluctuations in output while most theories of economic fluctuations can be fitted into this general framework there are disagreements over the form of the propagation mechanism and the source of the disturbances some models stress the role of aggregate demand shocks while other models such as the real business cycle models focus on real technological shocks such technological shocks may be sector specific and thus represent a set of disaggregate disturbances that cannot be viewed in the manner of aggregate shocks there is little agreement as to the main sources of disturbances knowledge of the relative importance of sector specific and aggregate shocks would be a significant development in theoretical work on business cycles this paper attempts to determine the relative importance of aggregate and disaggregate shocks in generating macroeconomic fluctuations it extends norrbin and schlagenhauf 1988 in a number of important ways the relative contribution of aggregate and sectoral shocks in generating real economic fluctuations is measured using disaggregated industrial production data which we believe is a better measure of real economic activity in addition we employ a more detailed disaggregation of manufacturing and mining industries covering a longer time period the robustness of the results is more carefully identified finally the methodology used to determine the relative importance of the shocks is substantially different in this paper 2 ii a time series model of disaggregate output the work of frisch 1933 and slutsky 1937 suggests that movements in output can be decomposed into an impulse effect and a propagation effect in this section we present a multivariate time series model of output for the united states this model is in the tradition of frisch s and slutsky s work and is sufficiently general to encompass most competing linear business cycle theories the model is developed at a disaggregate industry level allowing a propagation of output changes between industries in addition output fluctuations can arise from national industry group specific or idiosyncratic factors

heterogeneity and the non parametric analysis of consumer choice conditions for invertibility this paper considers structural non parametric random utility models for continuous choice variables with unobserved heterogeneity we provide sufficient conditions on random preferences to yield reduced form systems of non parametric stochastic demand functions that allow global invertibility between demands and non separable unobserved heterogeneity invertibility is essential for global identification of structural consumer demand models for the existence of well specified probability models of choice and for the non parametric analysis of revealed stochastic preference we distinguish between new classes of models in which heterogeneity is separable and non separable in the marginal rates of substitution respectively

capital allocative disturbances and economic fluctuations permanent sector specific productivity shocks alter the relative marginal products of capital and labor across sectors such that the existing factor allocations are suboptimal the subsequent factor reallocations may involve the costly movement and redeployment of capital and labor across sectors to proxy the magnitude of these disturbances this paper focuses on capital rather than labor allocative disturbances since firms can make temporary adjustments in employment levels in response to transitory sectoral shocks empirical evidence is provided that these costs reduce output from what it otherwise would have been and that this effect persists for up to three quarters copyright 1993 by mit press

culture and r2 abstract consistent with predictions from the psychology literature we find that stock prices co move more less in culturally tight loose and collectivistic individualistic countries culture influences stock price synchronicity by affecting correlations in investors trading activities and a country s information environment both market wide and firm specific variations are lower in tighter cultures individualism is mostly associated with higher firm specific variations trade and financial openness weakens the effect of domestic culture on stock price comovements these results hold for various robustness checks our study suggests that culture is an important omitted variable in the literature that investigates cross country differences in stock price comovements

are economic time series asymmetric over the business cycle it has long been argued that major cyclical variables such as the unemployment rate display an asymmetric behavior over various phases of the business cycle the paper provides a statistical test for this hypothesis using the framework of finite state markov processes i implement a test to see if the behavior of the unemployment rate is characterized by sudden jumps and slower drops it is argued that the framework provided in the paper can also be used to test other sample path properties of economic time series

the aggregate effects of sectoral reallocations abstract can a one time permanent change in the fundamentals behind the sectoral composition of the economy prompt an aggregate downturn can this downturn be non negligible even if one uses us data to determine the relative size of gross vs net job flows and the importance of job creation costs can one consider the military build down of the 1990s as a plausible cause for the 1990 1991 recession do sectoral reallocations generate responses that are qualitatively similar to productivity shocks we use a variant of the mortensen pissarides 1994 review of economic studies 61 397 415 job creation destruction model calibrate it to us labor market data and run experiments that suggest one can answer yes to all these questions

an examination of business cycle features in uk sectoral output this article examines business cycle features of uk gross domestic product gdp sectors with regard to trends cycles and growth the empirical study adopts the kalman filter to decompose these gdp sectors into trend and cycle components the general model of this study encompasses a number of alternative specifications about trend growth therefore accommodating diverse views on growth there is reasonable support in the results for a mean reverting stochastic growth model for the uk economy the characteristics in trends and cycles of uk gdp sectors are discussed focusing on their similarities and differences around business cycles

the short run relationship between sectoral shifts and u s labor market fluctuations monthly data for the aggregate u s economy are used to assess competing hypotheses concerning the relationship between sectoral employment shifts and fluctuations in the unemployment rate it is shown that sectoral shifts are caused by major work stoppages aggregate fluctuations unrelated to permanent sectoral shifts a reallocation timing effect and allocative shocks at the sectoral level larger employment shifts are associated with higher unemployment during slow growth periods and lower unemployment during above average growth periods models are presented which demonstrate that both aggregate and allocative shocks are causes of cyclical increases in unemployment

the effects of male and female labor supply on commodity demands we examine the effects of male and female labor supply on household demands and present a simple and robust test for the separability of commodity demands from labor supply using data on individual households from six years of the uk fes we estimate a demand system for seven goods which includes hours and participation dummies as conditioning variables allowance is made for the possible endogeneity of these conditioning labor supply variables we find that separability is rejected furthermore we present evidence that ignoring the effects of labor supply leads to bias in the parameter estimates

the role of international factors in the business cycle a multi country study abstract empirical research has been conducted on the various theories of the business cycle over many countries however very little research has attempted to undertake a multi country disaggregate investigation into the sources of output change this paper decomposes fluctuations in industry output in a particular country into 1 a nation specific shock 2 an industry specific shock 3 a common shock and 4 an idiosyncratic factor using a dynamic factor analysis state space approach the paper finds that the industry specific impulse explains a significant but small part of the variance of the forecast error this provides limited support for the disaggregated real business cycle paradigm

an inquiry into the sources of macroeconomic fluctuations abstract this paper attempts to decompose the sources of fluctuations in quarterly employment by industry and region into 1 an aggregate national shock 2 region specific shocks 3 industry specific shocks and 4 idiosyncratic factors the empirical analysis is motivated by a dynamic theory of the business cycle the empirical methodology is the engle watson dynamic mimic model implemented via the em algorithm the work is motivated as an attempt to compare empirically aggregate single factor theories of the cycle with real business cycle theories emphasizing industrial or regional shocks

what differentiates industrial business cycles a cross country investigation theoretical explanations appear in sharp contrast concerning the determinants of demand driven industrial business cycles aggregate factors are likely to differentiate cyclical fluctuations for a given industry across countries industry specific factors are likely to differentiate cyclical fluctuations across industries of a given economy the differences are evaluated using data for industries producing private domestic output across a group of major industrial countries aggregate factors dominate industryspecific factors in explaining industrial cyclical fluctuations in response to aggregate demand shifts consistent with the various explanations higher variability of aggregate demand moderates the response of industrial output to aggregate demand shifts across countries contrary to the implications of the new classical imperfect information model cyclical fluctuations in industrial output appear also smaller in response to higher trend price inflation across countries business cycles appear the

what did globe really measure researchers minds versus respondents minds the globe research program expanded the hofstede model of five dimensions of national cultures to 18 a re analysis based on globe s 2004 summary book produced five meta factors one was significantly correlated with gnp capita and from the hofstede dimensions primarily with power distance three more correlated significantly with hofstede s individualism uncertainty avoidance and long term orientation the fifth included the few globe questions that related to hofstede s dimension of masculinity versus femininity globe s respondents minds classified the questions in a way that the researchers minds did not account for and which closely resembles the original hofstede model

estimation of heterogeneous preferences with an application to demand for internet services this paper presents a structural econometric framework for discrete and continuous consumer choices in which unobserved intrapersonal and interpersonal preference heterogeneity is modeled explicitly it outlines a simulation assisted estimation methodology applicable in this framework this methodology is illustrated in an application to analyze data from the u c berkeley internet demand experiment

overconfidence and excess entry an experimental approach psychological studies show that most people are overconfident about their own relative abilities and unreasonably optimistic about their futures e g shelly e taylor and j d brown 1988 neil d weinstein 1980 when assessing their position in a distribution of peers on almost any positive trait like driving ability ola svenson 1981 income prospects or longevity a vast majority of people say they are above the average although of course only half can be if the trait is symmetrically distributed this paper explores whether optimistic biases could plausibly and predictably influence economic behavior in one particular setting entry into competitive games or markets many empirical studies show that most new businesses fail within a few years for example using plant level data from the u s census of manufacturers spanning 1963 1982 timothy dunne et al 1988 estimated that 61 5 percent of all entrants exited within five years and 79 6 percent exited within 10 years most of these exits are failures see also dunne et al 1989a 1989b d shapiro and r s khemani 1987

regional and sectoral evidence of the macroeconomic effects of labor reallocation a panel data analysis this paper revisits the sectoral shifts hypothesis by examining unemployment fluctuations for 48 u s states over the period 1990 01 2011 12 we develop a panel approach that incorporates dynamics parameter heterogeneity aggregate factors and cross sectional dependence our findings provide support for a positive and significant effect of the employment dispersion index on unemployment this outcome is robust under alternative specifications and measures of employment dispersion the empirical evidence corroborates the presence and relevance of cross sectional dependence and heterogeneity among states the results show that once unobserved common factors and cross state heterogeneity are taken into account labor reallocation has a significant effect on unemployment that is half the size of the estimate when cross sectional dependence is not taken into account

dynamics of sectoral business cycle comovement abstractsectoral comovement accounts for a considerable share of the variance of aggregate variables however little is known about its time varying aspects by now in this article a multivariate dcc garch framework is employed to study dynamics of sectoral comovement across manufacturing sectors both in the united states and in germany to account for possible nonlinearities asymmetric effects in conditional volatilities as well as in conditional correlations are being assessed we find that comovement across sectors is not stable but shows irregular movements particularly contractions tend to be more synchronized than expansions in manufacturing sector moreover we examine the role of various aggregate factors for the fluctuations in conditional correlations our findings reveal that both the non constant variability of common factors and the changes in the effects of these factors play role for the fluctuations in sectoral comovement

egalitarianism and international investment abstract this study identifies how country differences on a key cultural dimension egalitarianism influence international investment flows a society s cultural orientation toward egalitarianism is manifested by intolerance for abuses of market and political power and a desire for protecting less powerful actors we show egalitarianism to be based on exogenous factors including social fractionalization dominant religion circa 1900 and war experience from the 19th century we find a robust influence of egalitarianism distance on cross national flows of bond and equity issuances syndicated loans and mergers and acquisitions an informal cultural institution largely determined a century or more ago egalitarianism exercises its effect on international investment via an associated set of consistent contemporary policy choices but even after controlling for these associated policy choices egalitarianism continues to exercise a direct effect on cross border investment flows likely through its direct influence on managers daily business conduct

regional income fluctuations common trends and common cycles this paper investigates trend and cycle dynamics in per capita income for the major u s regions during the 1956 1995 period cointegration and serial correlation common features information are used in jointly decomposing the series into trend and cycle components we find considerable differences in the volatility of regional cycles controlling for differences in volatility we find a great deal of comovement in the cyclical response for all regions but the far west possible sources underlying differences in regional cycles are explored such as the share of a region s income accounted for by manufacturing defense spending as a proportion of a region s income oil price shocks and the stance of monetary policy somewhat surprisingly we find that the share of manufacturing in a region seems to account for little of the variation in regional cycles relative to national cycles but manufacturing share differentially affects trend growth for four of the seven regions studied

interpreting aggregate fluctuations looking at sectors abstract a dynamic factor model is used to investigate on the variability in labor productivity and hours across the 2 digit us manufacturing industries two kind of shocks emerge as quantitatively relevant during the postwar period they can be reasonably interpreted as technology shocks to the production of equipment and economy wide shocks the former induces a positive correlation between productivity and hours growth rates in the durable goods producing sector the latter spurs a negative correlation in the nondurable goods producing sector such evidence provides a novel interpretation of the aggregate near zero correlation between the two variables

a new look at variation in employment growth in canada the role of industry provincial national and external factors we examine fluctuations in employment growth using canadian data from 1976 to 2010 we consider a wide range of models and examine the sensitivity of our findings to modelling assumptions the results from our most preferred model which we selected using the bayesian information criteria indicate that most of the variance in employment growth that is not due to the idiosyncratic error comes from domestic sources with most of this coming from industry and provincial factors overall we find that external and national factors play a much smaller role in employment fluctuations than in earlier research we provide some possible explanations for these differences and discuss the implications of our findings for public policy and theory

culture openness and finance abstract differences in culture proxied by differences in religion and language cannot be ignored when examining why investor protection differs across countries we show that a country s principal religion predicts the cross sectional variation in creditor rights better than a country s natural openness to international trade its language its income per capita or the origin of its legal system catholic countries protect the rights of creditors less well than protestant countries a country s natural openness to international trade mitigates the influence of religion on creditor rights culture proxies are also helpful in understanding how investor rights are enforced across countries

the random utility hypothesis and inference in demand systems in this paper the authors examine the consequences of adopting the random utility hypothesis as an approach for randomizing a system of demand equations random utility models are appealing since they allow the usual assumption of deterministic utility maximizing behavior by each consumer to coexist with the apparent randomness across individuals that is exhibited by data their results show that the use of random utility models implies that the disturbances of the demand equations may not be homoskedastic but must be functions of prices and or income copyright 1989 by the econometric society

maxing out globally individualism investor attention and the cross section of expected stock returns we examine the role of cultural difference in the pricing of positive extreme returns max for 47 000 stocks from 42 countries from 1990 to 2012 we find that investors overpay for stocks with high max and that max premium the spread from long short strategy based on low and high max stocks is both statistically and economically significant worldwide the negative relation between idiosyncratic volatility and expected returns or idiosyncratic volatility puzzle exists only for stocks with high max implying that the puzzle may arise from the overpayment for stocks with high max and the subsequent return reversal consistent with the expectation that overpayment will be stronger for overconfident investors the max premium is larger in countries with high individualism index idv than it is in countries with low idv furthermore we find the max premium to be larger and the difference in the max premium between high and low idv countries to be more pronounced when vix and volatility are high our fi

understanding real business cycles he 1 960s were a time of great optimism for macroeconomists many economists viewed the business cycle as dead the keynesian model was the reigning paradigm and it provided all the necessary instructions for manipulating the levers of monetary and fiscal policy to control aggregate demand inflation occurred if aggregate demand was stimulated excessively and unemployment arose if demand was insufficient the only dilemma faced by policymakers was determining the most desirable location along this inflation unemployment tradeoff or phillips curve the remaining intellectual challenge was to establish coherent microeconomic foundations for the aggregate behavioral relations posited by the keynesian framework but this was broadly regarded as a detail that should not deter policymakers in their efforts to stabilize the economy the return of the business cycle in the 1970s after almost a decade of economic expansion and the accompanying high rates of inflation came as a rude awakening for many economists it became increasingly apparent that the basic keynesian framework was not the appropriate vehicle for understanding what happens during a business cycle nor did it seem capable of providing the empirically correct answers to questions involving changes in the economic environment or changes in monetary or fiscal policy the view that keynesian economics was an empirical success even if it lacked sound theoretical foundations could no longer be taken seriously the essential flaw in the keynesian interpretation of macroeconomic phenomenon was the absence of a consistent foundation based on the choice theoretic framework of microeconomics two important papers one by milton friedman 1968 and the other by robert lucas 1976 forcefully demonstrated examples of

disaggregate stochastic trends in industrial production abstract several industries appear cointegrated at a highly disaggregated level but the cointegration is not sufficient to reduce the system to a single common trend instead the results indicate that ten common trends are present in the industrial production aggregate

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances

world country and sector factors in international business cycles do sector specific factors common to all countries play an important role in explaining business cycle co movement we address this question by analyzing international co movements of value added va growth in a multi sector dynamic factor model the model contains a world factor country specific factors sector specific factors and idiosyncratic components we estimate the model using bayesian methods for 30 disaggregated sectors in the g7 economies for the 1974 2004 period our findings show that although there is a substantial role for sector specific factors fluctuations are dominated by country factors the world factor appears to play a minimal role because when using aggregate data the world factor captures both the factor common to all countries and industries and the factor common to the same industry across countries we then examine how these factors evolved as globalization deepened over the past two decades our results suggest that business cycles at a disaggregate level have not become more synchronized internationally this is mainly driven by a substantial fall in the volatility of world shocks during the globalization period rather than a lower sensitivity of sectoral growth to world factors our results also reveal that world factors appear to be more important for industries with a higher level of international vertical integration

do investors overpay for stocks with lottery like payoffs an examination of the returns of otc stocks abstract we study returns on over the counter stocks and find that these returns are extremely negative on average the distribution of otc stock returns is highly positively skewed while many of the stocks in our sample become worthless a few do extremely well we investigate whether this negative return premium can be rationalized by investors preference for positively skewed payoffs we show that the equilibrium model of barberis and huang 2008 provides a plausible explanation for the negative returns we also show that otc stocks that once traded on the regular exchanges perform much better than stocks that originate in the otc markets