rethinking the brain drain abstract when productivity is fostered by both the individual s human capital and by the average level of human capital in the economy individuals underinvest in human capital a strictly positive probability of migration to a richer country by raising both the level of human capital formed by optimizing individuals in the home country and the average level of human capital of nonmigrants in the country can enhance welfare and nudge the economy toward the social optimum under a well controlled restrictive migration policy the welfare of all workers is higher than in the absence of this policy

will business cycles in the euro area converge a critical survey of empirical research this survey of business cycle synchronization in the european monetary union focuses on two issues have business cycles become more similar and which factors drive business cycle synchronization we conclude that business cycles in the euro area have gone through periods of both convergence and divergence still there is quite some evidence that during the 1990s business cycle synchronization in the euro area has increased higher trade intensity is found to lead to more synchronization but the point estimates vary widely the evidence for other factors affecting business cycle synchronization is very mixed

output dynamics in real business cycles models the time series literature reports two stylized facts about output dynamics in the united states gnp growth is positively autocorrelated and gnp appears to have an important trend reverting component this paper investigates whether current real business cycle rbc models are consistent with these stylized facts many rbc models have weak internal propagation mechanisms and must rely on external sources of dynamics to replicate both facts models that incorporate labor adjustment costs are partially successful they endogenously generate positive autocorrelation in output growth but they need implausibly large transitory shocks to match the trend reverting component in output

inducing human capital formation migration as a substitute for subsidies abstract when productivity is fostered by an individual s own human capital as well as by the economy wide average level of human capital individuals under invest in human capital the provision of subsidies for the formation of human capital conditional on the subsidy being self financed by tax revenues can bring the economy to its socially optimal level of human capital yet a strictly positive probability of migration to a richer country by raising both the level of human capital formed by optimizing individuals in the home country and the average level of human capital of non migrants in the country can enhance welfare and nudge the economy toward the social optimum indeed under a well controlled restrictive migration policy the welfare of all workers is higher than in the absence of this policy

financial integration and business cycles in a small open economy abstract the purpose of this study is to examine a dynamic stochastic general equilibrium framework with financial and informational frictions and foreign borrowing in the case of money growth and technology shocks for a small open economy and to analyze the implications of varying degrees of financial integration for aggregate fluctuations and propagation mechanisms in the economy the existence of informational asymmetries among the agents in the model necessitates financial intermediation in the economy moreover there is uncertainty involved in the production process which leads to collateralized borrowing by firms and therefore has to be taken into account in the design of the loan contracts between firms and financial intermediaries it is shown that increasing financial integration amplifies the effect of a positive temporary monetary shock on output consumption investment labor demand and loans whereas it has barely any implication for the impact of a positive temporary technology shock on the economy

discount rates and credit markets theory and evidence from rural india three models of credit markets 1 the permanent income model 2 upward sloping credit supply to individual borrowers and 3 constrained credit due to imperfect enforcement are tested using credit market data and an experimental study of individuals discount rates in south india the permanent income model is rejected by both the discount rate and the credit market data the discount rate data are consistent with either of the other two models while the credit market data are consistent with a combination of these two models other explanations are found to be insufficient to explain the results of this study

a brain gain with a brain drain abstract we study human capital depletion and formation in an economy open to out migration as opposed to an economy which is closed under the assumption of asymmetric information the enlarged opportunities and the associated different structure of incentives can give rise to a brain gain in conjunction with a brain drain migration by high skill members of its workforce notwithstanding the home country can end up with a higher average level of human capital per worker

labour markets liquidity and monetary policy regimes dans leur etude les auteurs elaborent un modele d equilibre du mecanisme de transmission de la politique monetaire qui fait ressortir les elements de friction relatifs a l acquisition d information sur le marche de la monnaie et a la recherche d emploi

aggregate employment real business cycles and superior information abstract we test whether dynamic stochastic general equilibrium artificial economies associated with several labor market structures provide an adequate characterization of aggregate employment volatility and dynamics our test is robust to possible misspecifications about the information set used by economic agents to forecast future events accounting for agents superior information we find that the divisible labor indivisible labor labor adjustment costs and labor hoarding structures replicate employment volatility in contrast to the nominal wage contracts structure also the labor hoarding structure provides a substantially better account of employment dynamics

human capital depletion human capital formation and migration a blessing or a curse abstract we specify conditions under which a strictly positive probability of employment in a foreign country raises the level of human capital formed by optimizing workers in the home country while some workers migrate taking along more human capital than if they had migrated without factoring in the possibility of migration a form of brain drain other workers stay at home with more human capital than they would have formed in the absence of the possibility of migration a form of brain gain

valuing research leads bioprospecting and the conservation of genetic resources bioprospecting has been touted as a source of finance for biodiversity conservation recent work has suggested that the bioprospecting value of the marginal unit of genetic resources is likely to be vanishingly small creating essentially no conservation incentive this result is shown to flow specifically from a stylized description of the research process as one of brute force testing unaided by an organizing scientific framework scientific models channel research effort toward leads for which the expected productivity of discoveries is highest leads of unusual promise then command information rents associated with their role in reducing the costs of search when genetic materials are abundant information rents are virtually unaffected by increases in the profitability of product discovery and decline as technology improvements lower search costs numerical simulation results suggest that under plausible conditions the bioprospecting value of certain genetic resources could be large enough to s

non stationary hours in a dsge model the time series fit of dynamic stochastic general equilibrium dsge models often suffers from restrictions on the long run dynamics that are at odds with the data using bayesian methods we estimate a stochastic growth model in which hours worked are stationary and a modified version with permanent labor supply shocks if firms can freely adjust labor inputs the data support the latter specification once we introduce frictions in terms of labor adjustment costs the overall time series fit improves and the model specification in which labor supply shocks and hours worked are stationary is preferred

the informational structure of migration decision and migrants self selection abstract we analyze the pattern of migrants self selection in unobservables when there is uncertainty about foreign wages negative selection becomes more likely and a greater dispersion of wages at destination no longer suffices to predict that immigrants will outperform natives

brain drain and economic growth theory and evidence we focus on the impact of migration prospects on human capital formation and growth in a small open developing economy we assume that agents are heterogeneous in skills and take their educational decisions in a context of uncertainty regarding future migrations we distinguish two growth effects an ex ante brain effect migration prospects foster investments in education because of higher returns abroad and an ex post drain effect because of actual migration flows the case for a beneficial brain drain bbd emerges when the first effect dominates i e when the average level of human capital is higher in the economy opened to migrations than in the closed economy we derive the theoretical conditions required for such a possibility to be observed using cross section data for 37 developing countries we find that the possibility of a bbd could be more than a theoretical curiosity

job matching and propagation in the u s labor market the vacancy unemployment ratio and employment react sluggishly to productivity shocks we show that the job matching model in its standard form cannot reproduce these patterns due to excessively rapid vacancy responses extending the model to incorporate sunk costs for vacancy creation yields highly realistic dynamics creation costs induce entrant firms to smooth the adjustment of new openings following a shock leading the stock of vacancies to react sluggishly

implications of the mobility of skilled labor for local public funding of higher education inter jurisdictional labor mobility reduces the incentive for local public funding of education this can be rectified by dividing the financial burden between the federal and local level subsidizing local expenditures by inter jurisdictional payments based on net migration flows c 1997 elsevier science s a

real and nominal propagation of nominal shocks the role of real and nominal propagation mechanisms in generating persistent real effects of nominal shocks is analysed analytically in a fully specified intertemporal general equilibrium model while neither a real propagation mechanism capital acccumulation with one period nominal contracts nor nominal propagation staggered nominal contracts in the absence of any real propagation can generate plausible impulse responses with strong persistence it is shown that the two mechanisms interact so as to strengthen persistence possibly unit roots and generate more plausible impulse responses

labor market search endogenous disasters and the equity premium puzzle abstract the present paper investigates i the endogenous disaster mechanism in a textbook search and matching model when calibrated with a constant flow value of unemployment that is close to average labor productivity and ii its contribution to solve the equity premium puzzle i offer a simple explanation for the core of the disaster mechanism the lower bound say xkink on the annuitized costs the firm incurs from investing in a match lies sufficiently close to the body of productivity s distribution if labor productivity drops close to or even below xkink for consecutive periods the firm s annuitized share in expected future productivity of a worker can either only barely or even no longer at all break even the annuitized lower bound of the costs the firm faces vacancies become unprofitable and the economy quickly enters a downward spiral the core of the mechanism relies critically on an unreasonably high and constant flow value of unemployment disasters disappear entirely for slightly smaller or procyclical values and the effects cannot be compensated by empirically plausible adjustments of the model s remaining parameters while the model can generate a sizeable equity premium combined with a small risk free rate if the flow value of unemployment is large and constant and if the coefficient of relative risk aversion and the elasticity of intertemporal substitution are both high premia again collapse by an order of magnitude in the versions of the model without disasters

valuing biodiversity for use in pharmaceutical research biodiversity prospecting has been touted as a mechanism for both discovering new pharmaceutical products and saving endangered ecosystems it is unclear what values may arise from such activities however evidence from transactions is incomplete and existing theoretical models are flawed we calculate an upper bound on the value of the marginal species even under favorable assumptions this bound is modest slightly modified assumptions lead to drastically lower estimates we extend our findings to the value of the marginal hectare of habitat and find that the incentives for habitat conservation generated by private pharmaceutical research are also at best very modest

international migration self selection and the distribution of wages evidence from mexico and the united states we use the 1990 and 2000 mexican and u s population censuses to test borjas s negative selection hypothesis that the less skilled are those most likely to migrate from countries with high skill premia earnings inequality to countries with low skill premia earnings inequality we find that mexican immigrants in the united states are more educated than nonmigrants in mexico and were mexican immigrants to be paid according to current skill prices in mexico they would be concentrated in the middle of mexico s wage distribution these results are inconsistent with the negative selection hypothesis and instead suggest that there is intermediate selection of immigrants from mexico

can a brain drain be good for growth in the source economy this paper analyzes the interaction between income distribution human capital accumulation and migration it shows that when migration is not a certainty a brain drain may increase average productivity and equality in the source economy even though average productivity is a positive function of past average levels of human capital in an economy it is also shown how the temporary possibility of emigration may permanently increase the average level of productivity of an economy

search for a monetary propagation mechanism abstract this paper examines a monetary propagation mechanism in an economy where exchanges in goods and labor markets involve costly search it is shown that an increase in the money growth rate increases steady state employment and output when the money growth rate is low but reduces steady state employment and output when the money growth rate is already high the model produces persistent hump shaped responses in employment and output to money growth shocks even when the shocks have no persistence the model also generates desirable features in job vacancy sales inventory and the velocity of money all these features emerge here in an economy with perfectly flexible prices and wages journal of economic literatureclassification numbers e40 e30

asset pricing and the propagation of macroeconomic shocks this paper considers the implications of habit formation and financial frictions for the propagation of macroeconomic shocks in a model that is capable of matching asset pricing moments a short lived shock that destroys a small fraction of the economy s stock of pledgeable collateral generates a persistent recession a stock market crash and a flight to safety effect this novel mechanism creates a tight link between the asset pricing implications of macroeconomic models and their ability to propagate and amplify the effects of macroeconomic shocks

certification of semi forest coffee as a land sharing strategy in ethiopia abstract we analyze whether private sustainability standards can improve the economic benefits from less intensified semi forest coffee production in southwestern ethiopia we compare garden and semi forest coffee systems including non certified and rainforest alliance certified semi forest coffee and evaluate yields returns to land returns to labor and profits we use original household and plot level survey from 454 households and 758 coffee plots derived from a household survey and geographic information systems and ordinary least squares and fixed effects regression models we find that more intensified garden coffee plots bring about higher yields and returns to land than less intensified semi forest coffee plots and that rainforest alliance certification of semi forest coffee leads to higher returns to land and labor and profits than non certified semi forest and garden coffee mainly by guaranteeing farmers a better price and not by improving yields findings imply that in southwestern ethiopia coffee certification can support farmers incentives for land sharing between coffee production and semi natural forest conservation

persistency in sticky price models abstract nominal rigidities imply that nominal shocks have an impact effect which may be propagated by standard mechanisms however the nominal adjustment process may in itself be a propagation mechanism causing persistent effects of nominal shocks this may be caused by inertia in nominal wage and price adjustment arising due to input output networks or multiperiod nominal contracting as captured in models with staggered price wage decisions it has recently been contested whether staggering can account for persistency of any quantitative importance this paper reviews the theory and empirical evidence on this issue and it is concluded that staggering may be a quantitative important propagation mechanism

can selective immigration policies reduce migrants quality destination countries can adopt selective immigration policies to improve migrants quality screening potential migrants on the basis of observable characteristics also influences their self selection on unobservables we propose a model that analyzes the effects of selective immigration policies on migrants quality measured by their wages at destination we show that the prevailing pattern of selection on unobservables influences the effect of an increase in selectivity which can reduce migrants quality when migrants are positively self selected on unobservables we also demonstrate that in this case the quality maximizing share of educated migrants declines with the scale of migration

a sunspot paradox abstract this paper shows that the local stability properties of dynamic general equilibrium macroeconomic models may depend on the length of a period in the model economy this leads to the following paradoxical situation the economy may be driven by sunspots for some decision frequencies while sunspots can have no impact at other decision frequencies

refinements on macroeconomic modeling the role of non separability and heterogeneous labor supply abstract this paper proposes a dynamic stochastic general equilibrium model characterized by heterogenous labor schedules and non separability between consumption and labor in the utility function the model successfully describes output consumption investment and interest rates after a monetary expansion the proposed formulation improves on standard models by using preferences favored by the data and by requiring investment adjustment costs and habit formation parameters more in line with the micro based evidence

the spirit of capitalism and expectation driven business cycles abstract while news shocks are believed to be instrumental in explaining business cycles many existing models fail to predict a boom in consumption investment employment output and asset prices in response to good news about future productivity a model with the intrinsic desire for wealth is shown to generate the aforementioned responses a news driven boom is explained predominantly by an expansion of labor supply and is characterized by the falling real wage the simulated model not only captures well conventional business cycle statistics but also reproduces countercyclical real returns and hump shaped responses of hours and output to an unexpected technology shock

what really accounts for the fall in hours after a technology shock abstract the paper asks how state of the art dsge models that account for the conditional response of hours following a positive neutral technology shock compare in a marginal likelihood race to that end we construct and estimate several competing small scale dsge models that extend the standard real business cycle model in particular we identify from the literature six different hypotheses that generate the empirically observed decline in hours worked after a positive technology shock these models alternatively exhibit i sticky prices ii firm entry and exit with time to build iii habit in consumption and costly adjustment of investment iv persistence in the permanent technology shocks v labor market friction with procyclical hiring costs and vi leontief production function with labor saving technology shocks in terms of model posterior probabilities impulse responses and autocorrelations the model favored is the one that exhibits habit formation in consumption and investment adjustment costs a robustness test shows that the sticky price model becomes as competitive as the habit formation and costly adjustment of investment model when sticky wages are included

human capital formation and business cycle persistence abstract in this paper we examine the role of the formation of human capital in propagating shocks over the business cycle we show that a two sector equilibrium business cycle model with human capital is able to generate persistence in the growth of output and other aggregate variables comparable to that observed in the post war us data a key feature is the relatively low elasticity of substitution between skilled and unskilled labor in the production of human capital

fleshing out the monetary transmission mechanism output composition and the role of financial frictions financial frictions affect the way in which different macroeconomic series respond to a monetary policy shock we embed the financial accelerator of bernanke gertler and gilchrist 1999 into a medium scale dsge model and evaluate the relative importance of financial frictions in explaining monetary transmission specifically we apply minimum distance estimation based on impulse responses for the volcker greenspan period apart from providing estimates for structural parameters our procedure lends itself for specification tests that can be used to assess the relative fit of various restricted models financial frictions turn out to be of lesser importance for the descriptive success of our model

can payments for environmental services help reduce poverty an exploration of the issues and the evidence to date from latin america summary this paper examines the main ways in which payments for environmental services pes might affect poverty pes may reduce poverty mainly by making payments to poor natural resource managers in upper watersheds the extent of the impact depends on how many pes participants are in fact poor on the poors ability to participate and on the amounts paid although pes programs are not designed for poverty reduction there can be important synergies when program design is well thought out and local conditions are favorable possible adverse effects can occur where property rights are insecure or if pes programs encourage less labor intensive practices 2004 elsevier ltd all rights reserved

can a real business cycle model pass the watson test abstract watson 1993 measures of fit for calibrated models journal of political economy 101 6 1011 1041 proposes a procedure for evaluating the fit of a dynamic equilibrium business cycle model under watson s criterion the standard real business cycle rbc model fails dramatically in reconciling the dynamics of the model with the data this inability to account for the dynamics of us aggregate data remains a major challenge to rbc theory this paper demonstrates that reasonable modifications can bring rbc theory into closer conformity with the data the empirical results indicate that when habit formation on leisure choice and employment externality are incorporated into the analysis the striking spectral density differentials documented by watson virtually vanish at business cycle frequencies

contingent valuation controversies and evidence contingent valuation cv has become one of the most widely used non market valuation techniques cv s prominence is due to its flexibility and ability to estimate total value including passive use value its use and the inclusion of passive use value in benefit cost analyses and environ mental litigation are the subject of a contentious debate this paper discusses key areas of the debate over cv and the validity of passive use value we conclude that many of the alleged problems with cv can be resolved by careful study design and implementation we further conclude that claims that empirical cv findings are theoretically inconsistent are not generally supported by the literature the debate over cv however has clarified several key issues related to nonmarket valuation and can provide useful guidance both to cv practitioners and the users of cv results

endogenous markups intensity of competition and persistence of business cycles in order to study the propagation mechanism of business cycles in particular to investigate how the intensity of competition affects market structure and output persistence over business cycles this paper presents a real business cycle model with imperfect competition and increasing returns to scale this analysis considers the markups of price over cost to be endogenous with endogenous markups two standard forms of oligopolistic competition bertrand and cournot are considered results show that 1 the propagation mechanism in the sense of output persistence is greater under cournot 2 the propagation mechanism is unequivocally greater with imperfect competition regardless of whether markups are endogenous or not and 3 under imperfect competition the propagation mechanism is greater with endogenous markups than with exogenous markups overall these results suggest that more intense competition produces lower persistence in output growth and thus a weaker propagation mechanism in a calibration exercise these differences were also found to be quantitatively important

an estimated canadian dsge model with nominal and real rigidities this paper develops a dynamic stochastic general equilibrium dgse model for the canadian economy and evaluates the real effects of monetary policy shocks to generate high and persistent real effects the model combines nominal frictions in the form of costly price adjustment with real rigidities modelled as convex costs of adjusting capital and employment

on the dynamics of international inflation abstract we investigate the dynamic properties of inflation in 20 oecd countries with a novel approach based on the autocorrelation function we find evidence in favor of long memory and nonlinearity linear autoregressive models are shown to be misspecified

migration of skilled workers policy interaction between host and source countries abstract we examine the interaction between policies of the host and source countries in the context of a model of skilled worker migration the host country aims to provide low cost labor for its employers while also taking into consideration the fiscal burden of providing social services to immigrants it optimizes by setting a time limit on the duration of a guest worker s permit the source country maximizes its net output by optimally choosing the amount of training provided to its citizens some of whom may migrate we solve for the nash and cooperative equilibrium values of the policy instruments

real business cycle models and the forecastable movements in output hours and consumption the authors study the movements in output consumption and hours that are forecastable from a vector autoregression and analyze how they differ from those predicted by standard real business cycle models they show that actual forecastable movements in output have a variance about one hundred times larger than those predicted by the model the authors also find that forecastable changes in the three series are strongly positively correlated with each other on the other hand for parameters whose implications are plausible in other respects the model implies that output consumption and hours should not all be expected to move in the same direction copyright 1996 by american economic association

on measuring the welfare cost of business cycles lucas 1987 argues that the gain from eliminating aggregate fluctuations is trivial following lucas a number of researchers have altered assumptions on preferences and found that the gain from eliminating business cycles are potentially very large however in these exercises little discipline is placed on preference parameters this paper estimates the welfare cost of business cycles allowing for potential time non separabilities in preferences where discipline is placed on the choice of preference parameters by requiring that the preferences be consistent with observed fluctuations in a model of business cycles that is a theoretical real business cycle world is constructed and the representative agent is then placed in this world the agent responds optimally to exogenous shocks given the frictions in the economy the agent s preference parameters along with other structural parameters are estimated using a bayesian procedure involving markov chain monte carlo methods two main results emerge from the paper first the form for the time non separability estimated in this paper is very different than the forms suggested and used elsewhere in the literature second the welfare cost of business cycles is close to lucas s estimate

technology shocks and aggregate fluctuations in an estimated hybrid rbc model this paper contributes to the on going empirical debate regarding the role of the rbc model and in particular of technology shocks in explaining aggregate fluctuations to this end we estimate the model s posterior density using markov chain monte carlo mcmc methods within this framework we extend ireland s 2001 2004 hybrid estimation approach to allow for a vector autoregressive moving average varma process to describe the movements and co movements of the model s errors not explained by the basic rbc model the results of marginal likelihood ratio tests reveal that the more general model of the errors significantly improves the model s fit relative to the var and ar alternatives moreover despite setting the rbc model a more difficult task under the varma specification our analysis based on forecast error and spectral decompositions suggests that the rbc model is still capable of explaining a significant fraction of the observed variation in macroeconomic aggregates in the post war u s economy

has monetary policy become more effective we investigate the implications of changes in the structure of the u s economy for monetary policy effectiveness estimating a vector autoregression over the pre and post 1980 periods we provide evidence of a reduced effect of monetary policy shocks in the latter period we estimate a structural model that replicates well the economy s response in both periods and perform counterfactual experiments to determine the source of the change in the monetary transmission mechanism and in the economy s volatility we find that by responding more strongly to inflation expectations monetary policy has stabilized the economy more effectively in the post 1980 period

credit cycles redux theoretical studies have shown that under unorthodox assumptions on preferences and production technologies collateral constraints can act as a powerful amplification and propagation mechanism of exogenous shocks we investigate whether or not this result holds under more standard assumptions we find that collateral constraints typically generate small output amplification large amplification is obtained as a knife edge type of result

the economic effects of climate change greenhouse gas emissions are fundamental both to the world s energy system and to its food production the production of co2 the predominant gas implicated in climate change is intrinsic to fossil fuel combustion specifically thermal energy is generated by breaking the chemical bonds in the carbohydrates oil coal and natural gas and oxidizing the components to co2 and h2o one cannot have cheap energy without carbon dioxide emissions similarly methane ch4 emissions an important greenhouse gas in its own right are necessary to prevent the build up of hydrogen in anaerobic digestion and decomposition one cannot have beef mutton dairy or rice without methane emissions climate change is the mother of all externalities larger more complex and more uncertain than any other environmental problem the sources of greenhouse gas emissions are more diffuse than any other environmental problem every company every farm every household emits some greenhouse gases the effects are similarly pervasive weather affects agriculture energy use health and many aspects of nature which in turn affects everything and everyone the causes and consequences of climate change are very diverse and those in low income countries who contribute least to climate change are most vulnerable to its effects climate change is also a long term problem some greenhouse gases have an atmospheric life time measured in tens of thousands of years the quantities of emissions involved are enormous in 2000 carbon dioxide emissions alone and excluding land use change were 24 billion metric tons of carbon dioxide tco2

estimation of dsge models when the data are persistent dynamic stochastic general equilibrium dsge models are often solved and estimated under specific assumptions as to whether the exogenous variables are difference or trend stationary however even mild departures of the data generating process from these assumptions can severely bias the estimates of the model parameters this paper proposes new estimators that do not require researchers to take a stand on whether shocks have permanent or transitory effects these procedures have two key features first the same filter is applied to both the data and the model variables second the filtered variables are stationary when evaluated at the true parameter vector the estimators are approximately normally distributed not only when the shocks are mildly persistent but also when they have near or exact unit roots simulations show that these robust estimators perform well especially when the shocks are highly persistent yet stationary in such cases linear detrending and first differencing are shown to yield biased or imprecise estimates

flexible prices and the business cycle business cycles models with flexible prices face two major empirical challenges one regards observed output dynamics the positive short run autocorrelation in gnp growth and the hump shaped trend reverting output response to transitory shocks cogley and nason 1995 the other regards the alleged persistent decline in employment following a positive technology shock gali 1999 no determinate model with flexible prices has so far been able to address all of the cogley nason gali challenges we show that the standard rbc model can do so if it contains a signal extraction problem involving permanent and temporary supply shocks

selective immigration policies migrants education and welfare at origin abstract destination countries are increasingly adopting selective immigration policies these can effectively increase migrants average education even if one allows for endogenous schooling decisions and education policies at origin still more selective immigration policies can reduce social welfare at origin

let s take a break trends and cycles in us real gdp abstract trend cycle decompositions for us real gdp such as the unobserved components models the beveridge nelson decomposition the hodrick prescott filter and others yield very different cycles which bear little resemblance to the nber chronology ascribes much movements to the trend leaving little to the cycle and some imply a negative correlation between the noise to the cycle and the trend we argue that these features are artifacts created by the neglect of a change in the slope of the trend function once this is accounted for all methods yield the same cycle with a trend that is non stochastic except for a few periods around 1973 the cycle is more important in magnitude than previously reported and it accords well with the nber chronology our results are corroborated using an alternative trend cycle decomposition based on a generalized unobserved components models with errors having a mixture of normals distribution for both the slope of the trend function and the cyclical component

is the political business cycle for real abstract this paper constructs and examines a macroeconomic model which combines features from both real and political business cycle models we augment a standard real business cycle tax model by allowing for varying levels of government partisanship and competence in order to replicate two important empirical regularities first that on average the economy expands early under democratic presidents and contracts early under republican presidents second that presidents whose parties successfully retain the presidency have stronger than average growth in the second half of their terms the model generates both of these features that conform to u s post world war ii data

testing the implications of long run neutrality for monetary business cycle models this paper compares sample fluctuations of the us business cycle with those predicted by a class of equilibrium monetary business cycle models the predictions of the models are generated using the longrun neutrality restrictions implicit in the models by imposing these restrictions on sample data tests of the ability of the models to replicate the dynamics of the us business cycle are constructed although the predictions of the models for real side variables are rejected there is evidence that the nominal side predictions of the models are not rejected

heaven s swing door endogenous skills migration networks and the effectiveness of quality selective immigration policies a growing number of oecd countries are leaning toward the adoption of selective immigration policies which are expected to raise the quality or education level of migrants this view neglects two important dynamic effects the role of migration networks which could reduce the quality of migrants and the responsiveness of education decisions to the prospect of migration we propose a model of self selection into migration with endogenous education choices which predicts that migration networks and the quality of migrants can be positively associated when destination countries adopt sufficiently selective immigration policies empirical evidence presented as background motivation suggests that this is indeed the case

firm dynamics and markup variations implications for sunspot equilibria and endogenous economic fluctuations this paper analyzes how the interaction between firms entry and exit decisions and variations in competition gives rise to self fulfilling expectation driven fluctuations in aggregate economic activity and in measured total factor productivity tfp the analysis is based on a dynamic general equilibrium model in which net business formation is endogenously procyclical and leads to endogenous countercyclical variations in markups this interaction leads to indeterminacy in which economic fluctuations occur as a result of self fulfilling shifts in the beliefs of rational forward looking agents when calibrated with empirically plausible parameter values and driven solely by self fulfilling shocks to expectations the model can quantitatively account for the main empirical regularities characterizing postwar u s business cycles and for 65 of the fluctuations in measured tfp

alternative use systems for the remaining ethiopian cloud forest and the role of arabica coffee a cost benefit analysis this paper presents a cost benefit analysis of three different use systems for the remaining cloud forests in ethiopia which at present are being depleted at the rate of 8 per year these use systems are a traditional conversion to crop land b sustainable management of the forest e g by growing high quality semi forest coffee and c strict conservation we find that under business as usual conversion to cropland yields the highest net present income value for the local population taking into account watershed services sustainable forest use is in the best interests of the country for discount rates of 10 or lower taking into account the global benefits of biodiversity conservation and carbon storage sustainable forest management also yields the highest total economic value while strict conservation does not pass a cost benefit test even at a discount rate of 3 c 2012 elsevier b v all rights reserved

the fiscal impact of high skilled emigration flows of indians to the u s abstract what are the fiscal consequences of high skilled emigration for source countries this paper develops methodologies for inferring these consequences and applies them to the recent sizable emigration of high skilled workers from india to the u s this wave of emigration from india to the u s is shown to be unusually concentrated amongst the prime age work force the highly educated and high earners in order to calculate the fiscal losses associated with these emigrants estimates of their counterfactual earnings distributions are generated using two distinct methods and integrated with a model of the indian fiscal system to calculate fiscal consequences conservative estimates indicate that the annual net fiscal impact to india of high skilled emigration to the u s is one half of 1 of gross national income or 2 5 of total fiscal revenues the sensitivity of these results to the method of predicting counterfactual incomes and the implications of these estimates for other developing countries is discussed in detail

is migration a good substitute for education subsidies assuming a given educational policy the recent brain drain literature reveals that skilled migration can boost the average level of schooling in developing countries this paper introduces educational subsidies determined by governments concerned by the number of skilled workers remaining in the country the theoretical analysis shows that developing countries can benefit from skilled emigration when educational subsidies entail high fiscal distortions however when taxes are not too distortionary it is desirable to impede emigration and subsidize education the authors investigate the empirical relationship between educational subsidies and migration prospects obtaining a negative relationship for 105 countries based on this result the analysis revisits the country specific effects of skilled migration upon human capital the findings show that the endogeneity of public subsidies reduces the number of winners and increases the magnitude of the losses

sources and propagation of international output cycles common shocks or transmission abstract this paper studies the generation and transmission of international cycles in a multi country model with production and consumption interdependencies two sources of disturbance are considered and three channels of propagation are compared technology disturbances which are mildly correlated across countries are more successful than government expenditure disturbances in reproducing actual data the presence of a common component to the shocks and of production interdependencies appear to be crucial in quantitatively matching the properties of the data

long run growth uncertainty observed macroeconomic forecasts display a positive correlation between expectations of long run growth of endogenous variables e g output and cyclical activity existing business cycle models appear inconsistent with the evidence this paper presents a model of the business cycle in which households have imperfect knowledge of long run growth rate of endogenous variables and continually learn about these growth rates the model features comovement and mutual influence between households growth expectations and market outcomes it can replicate the evidence on growth forecasts and suggests that optimism and pessimism about long run growth rates is a crucial ingredient in understanding business cycle fluctuations

pigou and modern business cycle theory it is contended that a c pigou s scientific vision in industrial fluctuations 1927 has much in common with that of modern business cycle theory both stressed though to different degrees the centrality of competition and rationality however pigou gave much more emphasis than does modern theory to multiplicity of causes psychology amplitude interaction among impulses nonperfect competition labor market institutions and externalities thus his work may have some lessons for modern economists in terms of the scope and method of business cycle theory copyright 1996 by royal economic society

the is curve and the transmission of monetary policy is there a puzzle in this paper the performance of the new keynesian is curve for the g7 countries is assessed it is found that there is an is puzzle for both the purely backward looking as well as for the forward looking is curve the real interest rate does not have a significantly negative effect on the output gap based on an extended specification of the is curve also including asset prices and monetary aggregates a significantly negative interest rate effect on aggregate demand is found for all countries this finding suggests that a richer specification of the is curve in empirical work may be necessary in order to obtain an unbiased estimate of the effect of monetary policy on aggregate demand

endogenous vs exogenously driven fluctuations in vintage capital models in this paper we present a particular case of the creative destruction model of caballero and hammour quart j econ 111 1996 805 851 in which both exogenous and endogenous fluctuation sources are present we show that job creation follows a delayed differential equation with periodic coefficients the delay is equal to the optimal age of capital goods the period of the coefficients is equal to the period of an exogenous profitability cycle we mathematically show that job creation is asymptotically periodic with the same period as the profitability cycle furthermore using an explicit numerical method we find that replacement echoes generally dominate the short run dynamics finally we find that the combination of the two fluctuations sources favors the appearance of asymmetries in job creation and job destruction patterns

financing constraints and inventories abstract this paper investigates the impact of financing constraints on firms inventory and cash management in particular it examines the extent to which the presence of such constraints may account for certain empirical regularities these include e g the excess variance of production vis a vis that of sales as well as the counter cyclicality and persistence of the inventory sales ratio we model the intertemporal decision making on production cash retention and dividends of a firm that is exposed to stochastic demand shocks in every period and faces constrained access to external sources of finance it is found that the presence of financing constraints can explain the excess variance of production in a model which otherwise would not deliver this result moreover as long as demand is positively serially correlated they also contribute to the counter cyclicality and persistence of the inventory sales ratio the paper suggests that financing constraints should not be discarded as a factor driving the cyclical behaviour of inventories