price dispersion and price indexes the traditional theory of price index numbers is based on the law of one price but in the real world we frequently observe the existence of an equilibrium price dispersion instead of one price of equilibrium this article discusses the effects of price dispersion on two price indexes the cost of living index and the consumer price index with price dispersion and consumer searching for the lowest price these indexes cannot be interpreted as deterministic indicators but as stochastic indicators and they can be biased if price dispersion is not taken into account a measure for the bias of the consumer price index is proposed and the article ends with an estimation of the bias based on data obtained from the consumer price index calculated for the city of sao paulo brazil from january 1988 through december 2004 the period analysed is very interesting because it exhibits different inflationary environments high levels and high volatility of the rates of inflation with great price dispersion until

land consumption and income in italy a case of inverted ekc abstract the ekc hypothesis postulates that the relationship between economic growth and environmental deterioration is represented by an inverted u shaped function its validity has been questioned from several perspectives and a need for public policies has been expressed this paper uses a heuristic approach to analyze the relationship between per capita income and land consumption as proxied by the number of building permits issued by public authorities using data from the italian regions we run a panel data regression model to test whether the ekc hypothesis holds results confute it evidencing a u shaped relationship in the authors opinion the combined effect of market conditions lifestyle evolution and institutional and political factors have produced an adverse effect on environment on this basis the paper claims that when social and intergenerational aspects are involved a balanced mix of market policies and institutional architecture is needed

preschool for all enrollment and maternal labour supply implications of a bilingual preschool policy abstractprevious research supports the effectiveness of preschool in various contexts yet there is limited evidence whether universal type preschool policies induce changes in enrollment while ce

empirical measures of inflation uncertainty a cautionary note a direct ex ante measure of inflation uncertainty in the us is compared with a number of proxies used in empirical studies the direct estimate is the root mean subjective variance of the probability distributions for inflation reported by respondents to the asa nber survey the proxies include forecast standard deviations from arima arch and structural models of inflation these proxies are not significantly correlated with the direct measure nor with one another use of the proxies leads to incorrect inferences about the correlation between inflation and inflation uncertainty and between inflation uncertainty and the real interest rate

new evidence on labor supply employment versus hours elasticities by sex and marital status using the tri annual micro panel data of the survey of income and program participation we estimate fixed effects labor supply models separating the extensive and intensive margins the employment elasticity is 0 6 for single men versus 1 1 for married men the employment elasticity is 2 4 for single women versus 1 8 for married women the compensated hours worked elasticity is 0 4 for employed single and married men and 0 7 for employed single and married women the implied aggregate employment elasticity of 1 5 and hours per employee elasticity of 0 5 indicate employment fluctuations account for three fourths of wage induced variation in labor hours

inflation inflation uncertainty and relative price dispersion evidence from bivariate garch m models abstract one potential real effect of inflation is its influence on the dispersion of relative prices in the economy menu cost models generally imply that higher trend inflation will increase price dispersion in contrast signal extraction models predict that increased inflation uncertainty will raise relative price dispersion existing empirical studies do not distinguish between these separate hypotheses we constuct a bivariate garch m model of inflation and relative price dispersion to test these differing explanations in a single model and find that inflation uncertainty dominates trend inflation as a predictor of relative price dispersion

longer term effects of head start specially collected data on adults in the panel study of income dynamics are used to provide evidence on the longer term effects of head start an early intervention program for poor preschool age children whites who attended head start are relative to their siblings who did not significantly more likely to complete high school attend college and possibly have higher earnings in their early twenties african americans who participated in head start are less likely to have been booked or charged with a crime there is some evidence of positive spillovers from older head start children to their younger siblings language en

the relationship between the level and variability of inflation theory and evidence summary this paper emphasizes the role played by asymmetric stabilization policies in producing the widely reported positive association between the level and variability of inflation a simple theoretical model is constructed which shows how asymmetric policies give rise to this association the empirical findings presented provide support to the proposition that variations in inflation uncertainty are policy induced

housing bubbles and busts the role of supply elasticity existing studies of the relationship between housing price dynamics and housing supply which have relied upon questionable proxies for supply elasticity have yielded highly mixed results in this paper we provide new evidence on this relationship based on actual estimates of the price elasticity of supply for local markets in florida intermarket differences in housing supply elasticity are found to explain much of the variation in housing price movements and new construction during the most recent boom bust cycle additionally we find that variance in the elasticity of housing supply can be attributed to differences in land availability and the local fiscal and regulatory environment jel r14

the relationship between relative prices and the general price level it is very nearly a truismi amaong neoclassical economists that the public is wont to confuse changes in the general price level with relative price changes correspondingl y one might speak of the independence between the two as one of the central postulates of the neoclassical tradition william stanley jevons was aml ong the first to identify this basic dichotomin economic life as well as to attempt to explain the ordinary citizen s seenming incapacity to understand it

land use planning and the housing market a comparative review of the uk and the usa this paper provides a review of some of the key articles and research examining the relationship between planning regulation and its impact on the housing market in the uk and the us in both count

a note on the variability of inflation and the dispersion of relative price changes abstract the relationship between the variance of inflation and the variability of relative price changes is analyzed empirically a strong positive association is found for 1948 1969 and 1948 1975 application of chow s test indicates structural instability and granger s test suggests a feedback effect between these variables

an empirical analysis of expected stock price movements the livingston survey of economists forecasts of key economic variables has served as the data source for a number of studies investigating the forrnation and effects of expectations much of this work has utilized the price level predictions from the survey to proxy anticipated inflation l this measure of expected inflation has also been analyzed by several researchers to see if it conforrns to the notion of rational expectations with differing conclusions 2 this paper extends the analysis of the livingston data by examining the forecasts of common stock prices made by the individual survey participants since predicted movements in stock prices may play an important role in portfolio decisions and according to tobin s q model real investment decisions it seems useful to explore the characteristics of these forecasts the paper addresses two main issues first are the stock price predictions in accord with rational expectation forrnation second how are the respondents expectations of stock price movements related to their forecasts of inflation and real

pollution shadow economy and corruption theory and evidence abstract we study how the shadow economy affects pollution and how this effect depends on corruption levels in public administration production in the shadow economy allows firms to avoid environmental regulation policies a large informal sector may be accompanied by higher pollution levels our theoretical model predicts that controlling the levels of corruption can limit the effect of the shadow economy on pollution we use panel data covering the period from 1999 to 2005 in more than 100 countries to test this theoretical prediction our estimates confirm that the relationship between the shadow economy and the levels of pollution are dependent on the levels of corruption our results hold when we control for the effects of other determinants of pollution time varying common shocks country fixed effects and various additional covariates

the effect of child care costs on married women s labor force participation the effect of child care costs on the probability that married women with children will participate in the labor market is examined child care costs are estimated using a generalized tobit specification corrected for selection estimates of a structural probit model of labor force participation provide evidence to support the prediction that increased child care costs lower the probability of participation it is also shown that the lower rate of labor force participation among mothers of preschoolers is entirely the result of the higher child care costs faced by these women and endogeneity of the number of young children in the participation equation copyright 1992 by mit press

inflation and the distribution of price changes across markets a causal analysis recent advances in time series methodology are applied to the investigation of causal relationships between monthly changes in the consumer price index and changes in its dispersion across different consumption categories this dispersion is associated with the degree to which relative prices are changing past inflation rates seem useful in forecasting changes in relative prices but not vice versa there is also a significant contemporaneous correlation between these series hence it is concluded that fluctuations in the inflation rate help cause fluctuations in relative prices but not vice versa unless the entire effect occurs within a month the analysis also serves to illustrate a new way to implement the granger causality concept

conglomerate mergers as defense against the risk of relative price variability this paper studies the effects of the risk of relative price variability on the optimal structure of a firm s cash flows with an application of portfolio theory it is suggested that when relative price risk is greater it is optimal for the management to diversify at the margin and emphasize economies of scale or scope when the risk is smaller conglomerate mergers should therefore be positively associated with relative price risk given the variables affecting mergers as a whole empirical evidence is found to lend support to the theory the inflation rate explains conglomerate mergers even better which suggests that relative price risk may constitute another real resource cost of inflation

privatization and changes in welfare costs of inflation the case of entel argentina abstract in a country with permanent deficit driven inflation problems the proceeds from privatization may translate into potential reductions of the seigniorage needed to finance a given a level of government expenditure the changes in welfare costs of inflation brought about by divestiture are quantified in a monetary model in an argentine case study these changes were found to be small both in terms of gdp and as a percentage of seigniorage revenue within the model this is mainly explained by the low values encountered for the elasticities of money demand with respect to expected inflation and by the exclusion of considerations about unanticipated inflation

on inflation and real price variability this paper studies the consequences of costly price adjustments for the variability of real prices accompanying inflation for constant elasticity demand and cost of production it is shown that a higher demand a lower cost of production or a lower cost of price adjustment leads to less intertemporal variability of real prices if the marginal cost of production does not increase too fast then the average real price is less than the real price that would prevail in the absence of inflation additionally a higher demand a lower cost of production or a lower cost of price adjustment leads to a higher level of real prices

inflation and relative price variability in yugoslavia abstract granger causality tests show that inflation granger causes relative price variability but the feedback relationship cannot be excluded

corruption and the environmental kuznets curve empirical evidence for sulfur abstract we investigate how corruption influences the income level at the turning point of the relationship between sulfur emissions and income using a wide cross national panel of countries at different levels of development and with different degrees of corruption our results support the environmental kuznets curve hypothesis for sulfur we find evidence that the higher the country s degree of corruption the higher the per capita income at the turning point suggesting different income pollution paths across countries due to corruption we build upon a new specification for the ekc developed by bradford et al 2005 that avoids using nonlinear transformations of potentially nonstationary regressors in panel estimation also we account for the indirect impact of corruption on emissions through its impact on per capita income our main findings remain unchanged when we investigate additional heterogeneity allowing for different income slopes across richer and poorer countries

local taxation and urban development testing for the side effects of the italian property tax land is an essential yet limited natural resource its current unsustainable use asks for a better understanding of the main determinants of urban expansion a heuristic approach is used to analyze urban development in italy in particular the paper estimates an econometric model to test the impact of the italian property tax ici on the local authorities behavior and in particular on urban planning and development it tests whether its introduction has fostered rather than dampened construction activity the hypothesis put forward is that because of the concurrent market conditions the introduction of the tax has facilitated urban development the structure of the tax and the devolution process that began in the 90s induced local municipalities to adopt less tight accommodative urban policies to offset budgetary needs a more elastic urban policy reduces price volatility however its overall welfare effect is not clearly determined indeed ceteris paribus geographical areas with more elastic housing supply witness larger land consumption the land use changes we witnessed in the last decades could be the combined effect of financial and fiscal aspects if this is so careful attention should be given to the issue of whether leaving urban planning and the power to levy property taxes under the same jurisdiction

corruption income and the environment an empirical analysis abstract in response to the recent growth of a largely theoretical body of literature analysing the linkages between corruption and pollution this paper subjects the corruption pollution relationship to a detailed empirical examination a distinction is drawn between the direct impact of corruption on pollution and the indirect impact which operates through corruption s impact on per capita income and the resultant impact of income on pollution using data for 94 countries covering the period 1987 2000 both direct and indirect impacts of corruption on air pollution emissions are estimated for both sulfur dioxide and carbon dioxide corruption is estimated to have a positive direct impact on per capita emissions indirect effects are found to be negative and larger in absolute value than direct effects for the majority of the sample income range as a result the total effect of corruption on emissions is negative for all but the highest income countries in the sample

property rights corruption and the allocation of talent a general equilibrium approach we consider an economy where contracts are necessary to encourage investments contract enforcement requires that a fraction of the agents work in the public sector and do not accept bribes we find that 1 it may be optimal to allow some corruption and not enforce property rights fully 2 less developed economies may choose lower levels of property right enforcement and more corruption 3 there may exist a free lunch such that over a certain range it is possible simultaneously to reduce corruption increase investment and achieve a better allocation of talent bureaucratic corruption is widespread in many societies casual empiricism and case studies suggest that corruption distorts the allocation of resources and discourages investment and the creation of new firms e g mydral 1968 desoto 1989 cross country studies also find that countries with high corruption or long bureaucratic delays suffer lower growth e g mauro 1996 sartre 1997 it is therefore tempting to conclude that government policies and bureaucratic corruption are at least partly responsible for the lack of development or slow growth of many economies e g shleifer and vishny 1993 nevertheless governments and bureaucracies do not exist only to seek rents they perform a number of useful functions including provision of public goods correction of market failures and redistribution without understanding why the state exists it is difficult to assess why corruption arises what its consequences are and whether and how it should be prevented in this paper we analyse how the employees of the state bureaucrats can misuse their power to enforce property rights the protection of property rights is commonly viewed as one of the most important roles of the state by political philosophers as diverse as david hume karl marx and robert nozick while a number of social scientists including north and thomas 1973 and rosenberg and bridzell 1989 emphasise the importance of secure property rights in the development of western societies for the state to have a role in enforcing property rights some contractual problems must exist between private parties in our economy these contractual problems are between entrepreneurs in particular production requires two agents and one of the entrepreneurs needs to undertake an investment but the returns accrue to the other one this can be thought as a partnership with the first agent as an upstream supplier providing an input of variable

dispersed communication by central bank committees and the predictability of monetary policy decisions the paper asks whether members of central bank decision making committees should communicate with the public in a collegial manner by conveying the consensus or majority view of the committee or in an individualistic way by providing the diversity of views among the committee members it finds that more active as well as more consistent communication by committee members improves the predictability of monetary policy decisions significantly this effect is sizeable as communication dispersion across committee members accounts on average for one third to one half of the market s prediction errors of fomc policy decisions moreover more active and more consistent communication are found to also reduce the degree of uncertainty about the future path of interest rates these findings suggest that a collegial communication which stresses the consensus view on policy inclinations can enhance the effectiveness of central bank communication

indexation and the effect of inflation uncertainty on real gnp this article examines the combined effects of inflation uncertainty and indexation on the growth rate of real gross national product gn p the evidence suggests that greater indexation partially reduces t he adverse effect of inflation uncertainty on real gnp growth over time it also indicates that in contrast to earlier findings regarding th e effect of inflation uncertainty on employment the overall effect of inflation uncertainty on real gnp growth may be permanent a preliminary assessment of whether the discrepancy is the result of in flation uncertainty permanently affecting the growth rate of the capi tal stock is inconclusive copyright 1988 by the university of chicago

the incredible shrinking elasticities married female labor supply 1978 2002 this paper demonstrates the extent to which married women s labor supply elasticities have changed over the past quarter century estimates from march current population survey data suggest that these elasticities have decreased substantially by 60 percent for the hours wage elasticity from 0 36 to 0 14 70 percent for the hours income elasticity from 0 053 to 0 015 95 percent for the participation wage elasticity from 0 66 to 0 03 and 60 percent for the participation income elasticity from 0 13 to 0 05 changing demographic characteristics explain little of the drop in these elasticities suggesting that preferences toward work have changed across birth cohorts

wage indexation openness and inflation uncertainty the case of italy this article uses annual data of the italian economy to test the validity of the hypotheses of friedman 1977 and aizenman 1985 that the level of inflation uncertainty and the degree of openness of an economy have positive effects on the level of wage indexation it was found that the estimated wage indexation equation supports the validity of the aizenman hypothesis that the degree of openness of an economy has positive effects on the level of wage indexation on the other hand the regression of the wage indexation equation does not generally support the validity of the friedman hypothesis that the level of inflation uncertainty has positive effects on the level of wage indexation

an empirical study of the impact of corruption on environmental performance evidence from panel data this paper extends the empirical debate on the effects of corruption on environmental degradation by considering a recently available measure of environmental quality the environmental performance index this indicator is more comprehensive than the measures of air pollutant emissions commonly used in the literature and in particular can also capture the impact of pollution on human health this allows for a better understanding of the actual effects of a wide range of human activities on the ecosystem from a panel data analysis two regularities emerge first corruption deteriorates the overall environmental quality this effect is robust and persistent second our findings highlight the improvement of environmental quality as income rises even at an initial level of development this is not in contradiction with the ekc hypothesis because an increase in income levels provides positive externalities on the whole environmental quality by compensating the mere negative effects induced by industrialization on the emission levels as a consequence in emerging economies policies fighting corruption and enhancing development are very likely to improve the environmental performances

preschoolers enrolled and mothers at work the effects of universal prekindergarten three states recently introduced universal prekindergarten programs offering free preschool to all age eligible children policy makers in many other states are promoting similar programs using restricted access data from the census together with birthday based eligibility cutoffs i employ a regression discontinuity framework to estimate the effects of universal pre k availability on overall preschool enrollment and maternal labor supply universal pre k availability increases statewide preschool enrollment by about 14 but has little effect on the labor supply of most women

corruption pollution and the kuznets environment curve abstract this paper examines the implications of corruption and rent seeking behavior by the government for the relationship between pollution and growth cases of both cooperative and non cooperative interaction between the government and the private firm are studied it is shown that corruption is not likely to preclude the existence of an inverted u shaped kuznets environmental curve under both these cases however for any level of per capita income the pollution levels corresponding to corrupt behavior are always above the socially optimal level further the turning point of the kuznets curve takes place at income and pollution levels above those corresponding to the social optimum

inflation uncertainty inflationary shocks and the credibility of counterinflation policy abstract this paper assesses the contributions of price shocks general price variability and the credibility of counterinflation policy to changes in inflation uncertainty in the u k uncertainty is measured by the root mean square error of consumer inflation forecasts in contrast to the assumptions of much theory uncertainty is not significantly affected by noise in individual or aggregate inflation rates factors which determine policy credibility are more important the political party in government the proximity of elections and under fixed exchange rates the rate of inflation itself however government initiatives to increase credibility through incomes policies and monetary targets have failed to reduce uncertainty

inflation expectations revisited this paper describes the construction and main features of a new monthly time series for the mean and standard deviation of consumer inflation expectations in the united kingdom in the years 1961 85 based on a number of consumer surveys this involves generalizing to four and five category tendency survey data the method used by j a carlson and m parkin 1975 to quantify the results of a three category tendency survey of inflation expectations the new series exhibit very different time series properties from the original carlson parkin data copyright 1988 by the london school of economics and political science

the choice of exchange rate regime and speculative attacks we develop a framework for studying the choice of exchange rate regime in an open economy where the local currency is vulnerable to speculative attacks the optimal regime is determined by a policymaker who trades off the loss from nominal exchange rate uncertainty against the cost of maintaining a given regime this cost is affected in turn by the likelihood of a speculative attack searching for the optimal regime within the class of exchange rate bands we show that the optimal regime is either a peg a zero width band a free float an infinite width band or a non degenerate finite width band the paper shows that lower costs of moving across currencies induce policymakers to set more flexible exchange rate systems this lowers ceteris paribus the likelihood of financial crises one implication is that a tobin tax does not necessarily reduce the likelihood of currency crises the paper also investigates the effects of country size openess variability in fundamentals and reputation on the choice of exchange rate regime the role of abrupt changes in reputation in triggerering crises even with unchanged fundamentals as an alternative to sunspots is discussed and illustrated

public schooling for young children and maternal labor supply as policy makers have sought to reduce the welfare rolls by increasing labor supply among single mothers much attention has been given to the possible role of expanded child care subsidies including direct provision of public preschool at the same time public interest in child care subsidies for two parent households is high for example former vice president gore not long ago proposed to make high quality pre school fully available to every family for every child in every community in america albert gore 1999 in this paper i use 1980 census data to estimate the effect of public school enrollment for a woman s five year old on measures of labor supply and public assistance receipt this approach has two advantages first i am able to estimate the effect of a large implicit child care subsidy 1 second because public kindergarten is universally available to all age eligible children where it is provided selection problems related to means testing do not arise a difficulty with public school enrollment arises because parents may choose to hold their children back a year or enroll them in private school i deal with this issue by using five yearold s quarter of birth qob variables as instruments for public school enrollment status this strategy works because parents ability to enroll a child in public kindergarten in the academic year when the child turns five typically depends on the calendar date of the child s birth 2 in most states children born in the second quarter april 1 june 30 of 1974 will have been eligible to start kindergarten in the fall of 1979 while children born in the first quarter january 1march 31 of 1975 generally will not eligibility for children born between july 1 and december 31 1974 depends on the rules where they live 3

bureaucratic corruption and endogenous economic growth there appears to be significant diversity in the incidence of bureaucratic corruption across countries at different stages of economic development and under different political and economic regimes little theoretical or empirical analysis has been offered however on the link between corruption government and growth the paper attempts to fill the void through equilibrium models of endogenous growth balanced growth is derived as a balancing act between accumulating human capital which engenders growth and accumulating political capital which mainly assures bureaucratic power the analysis focuses on the interplay between investment in these two types of capital and its implications for long term growth under alternative political regimes some propositions are tested and confirmed empirically

the effect of growth and corruption on soil sealing in italy a regional environmental kuznets curve analysis this paper analyses and looks more closely at the empirical debate regarding the income elasticity hypothesis postulated in relation to the environmental kuznets curve and the impact of corruption on the relationship between growth and environmental impact measured in terms of soil sealing as proxied by the number of building permits issued by public authorities it postulates that when current private rent is high compared to perceived social costs and a large enough minority benefits from the rules the ekc does not emerge and public intervention fails to perceive social optimality to validate this hypothesis we run a panel data regression model based on data from all italian regions results confirmed the hypothesis evidencing a u shaped relationship i e a detrimental relationship between income and environmental impact quality it also demonstrated that this is contingent on the level of corruption the latter affects the position and the shape of the inverted ekc speeding up the exploitation process it shows that the higher the income the higher the effect of corruption on the environment therefore it advocates caution against any simplistic inference from ekc