tariff effects on mnc decisions to engage in intra firm and arm s length trade using confidential firm level data from the bureau of economic analysis bea on activities of u s multinational corporations mncs and their canadian affiliates we study the dramatic growth of intra firm and arm s length u s canada trade over the 1984 95 period we find that decisions to engage in intra firm and arm s length trade are essentially unrelated to tariff and transport cost reductions over this sample period thus we find that the increase in trade occurred almost entirely on the intensive rather than the extensive margin this is consistent with case study evidence in keane and feinberg 2006 where mnc executives consistently indicate that the modest tariff reductions of the 1984 95 period were not sufficient to justify fixed costs of overhauling international supply chains our results have important implications for recent influential models of international trade that rely on sensitivity of intra firm trade to tariffs at the extensive margin to explain how small tariff declines could have led to the explosion of intra firm trade since the 1980s we also find that initial conditions i e 1983 tariffs are uncorrelated with whether firms engaged in intra firm or arm s length trade activity at the start of the sample period this result is surprising as it implies that firms industries with a greater propensity to engage in trade were not in general successful at lobbying for more favourable tariff treatment a l aide de donnees confidentielles au niveau de la firme du bureau of economic analysis bea a propos des activites des firmes plurinationales fpn americaines et de leurs succursales canadiennes on etudie la croissance dramatique du commerce usa canada tant intra firme qu a bout de bras pour la periode 1984 95 il appert que les decisions de s engager dans l un et l autre commerce sont fondamentalement non reliees aux reductions des couts de transport et des tarifs au cours de cette periode on decouvre que l accroissement du commerce s est produit presqu entierement a la marge intensive plutot qu a la marge extensive c est en ligne avec les resultats de l etude de cas de keane et feinberg 2006 ou les cadres des fpn ont systematiquement indique que les modestes reductions de tarifs entre 1984 et 1995 n etaient pas suffisantes pour justifier les couts fixes impliques par la modification de leurs chaines de production internationales ces resultats ont des implications importantes pour certains modeles influents de commerce international qui sont ancres dans une sensibilite du commerce intra firme aux tarifs a la marge extensive pour expliquer comment de faibles chutes de tarifs ont pu engendrer une explosion du commerce intra firme depuis les annees 80 on montre aussi que les conditions initiales e g les tarifs de 1983 ne sont pas co reliees avec le fait que la firme est engagee ou non dans l un ou l autre commerce en debut de periode le resultat est surprenant parce qu il implique que firmes et industries ayant une plus grande propension a commercer n ont pas eu de succes dans leur lobby pour obtenir un traitement tarifaire plus favorable

optimal monetary policy in an economy with inflation persistence abstract this paper studies optimal monetary policy in a model where inflation is persistent two types of price setters are assumed to exist one acts rationally given calvo type constraints on price setting the other type sets prices according to a rule of thumb this results in a phillips curve with both a forward looking term and a backward looking term the phillips curve nests a standard purely forward looking phillips curve as well as a standard purely backward looking phillips curve as special cases a cost push supply shock is derived from microfoundations by adding a time varying income tax and by making the elasticity of substitution between goods stochastic a central bank loss function for this model is derived from a second order taylor approximation of the household s welfare function optimal monetary policy for different relative values of the forward and backward looking terms is then analyzed for both the commitment case and the case of discretion

the generalized multinomial logit model accounting for scale and coefficient heterogeneity the mixed or heterogeneous multinomial logit mixl model has become popular in a number of fields especially marketing health economics and industrial organization in most applications of the model the vector of consumer utility weights on product attributes is assumed to have a multivariate normal mvn distribution in the population thus some consumers care more about some attributes than others and the iia property of multinomial logit mnl is avoided i e segments of consumers will tend to switch among the subset of brands that possess their most valued attributes the mixl model is also appealing because it is relatively easy to estimate recently however some researchers have argued that the mvn is a poor choice for modelling taste heterogeneity they argue that much of the heterogeneity in attribute weights is accounted for by a pure scale effect i e across consumers all attribute weights are scaled up or down in tandem this implies that choice behaviour is simply more random for some consumers than others i e holding attribute coefficients fixed the scale of their error term is greater this leads to a scale heterogeneity mnl model s mnl here we develop a generalized multinomial logit model g mnl that nests s mnl and mixl by estimating the s mnl mixl and g mnl models on 10 data sets we provide evidence on their relative performance we find that models that account for scale heterogeneity i e g mnl or s mnl are preferred to mixl by the bayes and consistent akaike information criteria in all 10 data sets accounting for scale heterogeneity enables one to account for extreme consumers who exhibit nearly lexicographic preferences as well as consumers who exhibit very random behaviour in a sense we formalize below

the quantitative analytics of the basic neomonetarist model this paper constructs a dynamic macroeconomic model with less than perfect price flexibility which has a classical side consistent with real business cycle theory augmented by investment adjustment costs increasing returns to scale and a new flexible formalization of imperfect competition something akin to the classical dichotomy is justified by a mode of approximation appropriate for a model in which one state variable adjusts quickly while another state variable adjusts slowly even with investment adjustment costs monetary expansions are found to raise the real interest rate the determinants of real rigidity and the macroeconomic rate of price adjustment are investigated copyright 1995 by ohio state university press

the economics of smallholder organic contract farming in tropical africa summary the paper examines the revenue effects of certified organic contract farming for smallholders and of adoption of organic agricultural farming methods in a tropical african context the comparison in both cases is with farming systems that are organic by default survey data from a large organic coffee contract farming scheme in uganda are reported and analyzed using a standard ols regression and a full information maximum likelihood fiml estimate of the heckman selection model the analysis finds that controlling for a range of factors there are positive revenue effects both from participation in the scheme and more modestly from applying organic farming techniques

the ir relevance of real wage rigidity in the new keynesian model with search frictions we explore the role of real wage dynamics in a new keynesian business cycle model with search and matching frictions in the labor market both job creation and destruction are endogenous we show that the model generates counterfactual inflation and labor market dynamics in particular it fails to generate a beveridge curve vacancies and unemployment are positively correlated introducing real wage rigidity leads to a negative correlation and increases the magnitude of labor market flows to more realistic values however inflation dynamics are only weakly affected by real wage rigidity this is because of the presence of labor market frictions which generate long run employment relationships the measure of real marginal cost that is relevant for inflation dynamics via the phillips curve contains a dynamic component that does not necessarily move with real wages

taxes tariffs and transfer pricing in multinational corporate decision making three interrelated aspects of u s multinational corporation activity are analyzed here the ability to shift profits from high tax countries to low tax countries the impact of host country taxes and tariffs on the distribution of real capital and the influence of these policies on international trade patterns of the united states and host countries the cross sectional empirical analysis indicates that the observed pattern of reported profits in high and low tax countries is consistent with income shifting behavior and that real investment responds to host country effective tax rates and tariffs the united states appears both to import more from and export more to low tax countries where mnc investment is greater but this bilateral focus must be amplified to consider multilateral effects if trade benefits are to be projected copyright 1991 by mit press

efficiency wages and the business cycle puzzle abstract the main thrust of this work is to open the real business cycle rbc methodology to non walrasian considerations and reciprocally to submit some non walrasian models to the discipline of the rbc approach in doing so we provide a first rbc model with involuntary unemployment and a suboptimal equilibrium path we also demonstrate the promise and difficulty of resolving the business cycle puzzle by appealing to quantity rationing in the labor market

trade liberalization and delocalization new evidence from firm level panel data the authors examine how u s multinational corporations mncs and their canadian affiliates responded to the substantial bilateral tariff reductions that occurred over the 1983 92 period using confidential firm level data from the bureau of economic analysis they focus on the mncs allocation of employment and capital across canada and the united states the authors find that canadian affiliate employment and assets were negatively correlated with canadian tariff rates a pattern that contradicts the notion that canadian tariff reductions would lead to a hollowing out of canadian manufacturing they also find evidence of substantial heterogeneity in mncs responses to tariff changes even within narrowly defined industries

the influence of wages and industrial relations environments on the production location decisions of u s multinational corporations using the benchmark and annual surveys of u s direct investment abroad collected by the bureau of economic analysis the authors examine the operations of u s multinational corporations mncs in seven manufacturing industries and twenty two countries over the years 1982 91 they analyze how tariffs wages and industrial relations environments influenced u s mncs decisions about where to locate assets and employment the results imply that wages and the industrial relations environment were statistically significant determinants of the extent to which mncs located operations in a particular host country however while these factors were important their impact was much smaller than that of host country market size which was by far the main determinant of mnc location decisions furthermore the authors find no evidence that tariff reductions increased the share of u s mnc activities located abroad thus concerns that tariff reductions may lead to loss of american jobs appear to be exaggerated

a monetary business cycle model with unemployment abstract to reproduce key features of the post war u s data most monetary business cycle models must assume there are high price markups and that agents have high labour supply elasticities despite the existence of contradictory microeconomic evidence this paper eliminates the need for these assumptions by introducing imperfectly observed effort into a limited participation model the estimated model is better able to capture the sluggish price response to a monetary policy shock than the standard model and is consistent with evidence regarding the qualitative responses of the u s economy to technology shocks fiscal policy shocks and monetary policy shocks

small farmers and big retail trade offs of supplying supermarkets in nicaragua summary in nicaragua and elsewhere in central america small scale farmers are weighing the risks of entering into contracts with supermarket chains we use unique data from cooperatives supplying supermarkets to study the effect of supply agreements on producers mean output prices and price stability we find that prices paid by the domestic retail chain approximate the traditional market in mean and variance while mean prices paid by walmart are significantly lower than the traditional market however the walmart contract is found to systematically reduce price volatility we find some evidence however that farmers may be paying too much for this contractual insurance against price variation

an analysis of contract farming in east java bali and lombok indonesia this article examines the emergence and benefits of contract farming in east java bali and lombok indonesia after a general review of contract farming in these regions three contracts for seed corn in east java seed rice in bali and broilers in lombok are described and analyzed using key informant interviews and household survey data a review of the contracts suggest that there is a wide array of contract types and this is related to the technical requirements of production and the associated costs probit analysis is used to identify factors contributing to smallholder participation in farm contracts and a two stage estimation process used to measure the effects of farm contracts on gross margins and labor use results indicate participation in contracts is influenced by farm size and other factors such as smallholder s age education and participation in farm groups contracts increased returns to capital for the seed corn and broiler contracts but not for the seed rice contract all three contracts influenced the types of labor used however none of them influenced total farm employment

the transition to modern agriculture contract farming in developing economies recent years have seen considerable interest in the impact of contract farming on farmers in developing countries motivated out of belief that contract farming spurs transition to modern agriculture in this article we provide a thorough review of the empirical literature on contract farming in bo

a method for taking models to the data abstract this paper develops a method for combining the power of a dynamic stochastic general equilibrium model with the flexibility of a vector autoregressive time series model to obtain a hybrid that can be taken directly to the data it estimates this hybrid model via maximum likelihood and uses the results to address a number of issues concerning the ability of a prototypical real business cycle model to explain movements in aggregate output and employment in the postwar us economy the stability of the real business cycle model s structural parameters and the performance of the hybrid model s out of sample forecasts

comparing new keynesian models of the business cycle a bayesian approach abstract the baseline new keynesian model cannot replicate the observed persistence in inflation output and real wages for sensible parameter values as a result several extensions have been suggested to improve its fit to the data we use a bayesian approach to estimate and compare the baseline sticky price model of calvo s 1983 staggered prices in a utility maximizing framework journal of monetary economics 12 383 398 and three extensions our empirical results are as follows first we find that adding price indexation improves the fit of calvo s 1983 staggered prices in a utility maximizing framework journal of monetary economics 12 383 398 model second models with both staggered price and wage setting dominate models with only price rigidities third introducing wage indexation does not significantly improve the fit fourth all model estimates suggest a high degree of price stickiness fifth the estimates of labor supply elasticity are higher in models with both staggered price and wage contracts finally the estimated inflation parameters of the taylor rule are stable across models

current real business cycle theories and aggregate labor market fluctuations hours worked and the return to working are weakly correlated traditionally the ability to account for this fact has been a litmus test for macroeconomic models existing real business cycle models fail this test dramatically we modify prototypical real business cycle models by allowing government consumption shocks to influence labor market dynamics this modification can in principle bring the models into closer conformity with the data our empirical results indicate that it does

contract farming configuration smallholders preferences for contract design attributes while contract farming cf can enhance smallholders income in developing countries empirical research on the motivation of smallholders to participate in cf is scarce this paper explores farmer preferences for particular contract design attributes we combined analytical hierarchy process and discrete choice experiments to investigate the importance of contract design attributes on the basis of data collected among potato farmers in ethiopia we found that input market uncertainty is more important than output market uncertainty in smallholders decision to participate farmers tend to minimize their risk by opting for the buyer firm above the state and ngos as providers of seed inputs and technical assistance the results imply that the success of a cf scheme depends on the willingness of the firm to incorporate the preferred contract design attributes institutional intervention in the input market could induce agribusiness firms to offer attractive contracts for smallholders

distributional effects of agricultural cooperatives in china exclusion of smallholders and potential gains on participation abstract this paper examines the treatment effects of the agricultural cooperative and publicly funded extension services on individual household economy using data collected by the author from watermelon producing farm households in rural nanjing the cooperative addressed in this study restricts the participation of small scale farmers implying that selection into the program must be taken into consideration for an accurate assessment of the treatment effect the econometric analysis revealed that government extension services have a modest effect on farm income in contrast the treatment effect of the agricultural cooperative is robust and substantially large accounting for nearly 70 of the pre matching difference this suggests that the agricultural cooperative system is an important avenue for farmers to improve their economic status the treatment effect of the agricultural cooperative is highly heterogeneous the economic benefits arising from the cooperative are significant only for small scale farms we can argue that a coexistence of smallholder exclusion and the treatment effect in favor of small scale farms poses serious challenges to pro poor agricultural growth in china

shirking unemployment and aggregate fluctuations empirically real wages exhibit relatively little cyclical variation and a weak cyclical pattern early real business cycle rbc models predict to the contrary large procyclical real wage movements incorporating efficiency wages into a rbc environment would seem promising since one prediction from the efficiency wage literature is real wage rigidity this paper evaluates a common microfoundation for efficiency wages the shirking model with respect to its predictions for real wages within a rbc style model simulations of the model reveal that it can generate dampened but still strongly procyclical real wage behavior

habit formation in consumption and its implications for monetary policy models this paper explores a monetary policy model with habit formation for consumers in which consumers utility depends in part on current consumption relative to past consumption the empirical tests developed in the paper show that one can reject the hypothesis of no habit formation with tremendous condence largely because the habit formation model captures the gradual hump shaped response of real spending to various shocks the paper then embeds the habit consumption specication in a monetary policy model and nds that the responses of both spending and inflation to monetary policy actions are signicantly improved by this modication jel d12 e52 e43

impact of contract farming on income linking small farmers packers and supermarkets in china summary this study compares contract and non contract growers of apples and green onions in shandong province china in order to explore the constraints on participation and the impact of contract farming on income we find little evidence that firms prefer to work with larger farms though all farms in the area are quite small using a heckman selection correction model we find that contract farming raises income even after controlling for observable and unobservable household characteristics these results suggest that contract farming can help raise small farm income though questions remain regarding the number of farmers that can be brought into such schemes 2009 elsevier ltd all rights reserved

technology shocks in the new keynesian model in the new keynesian model preference cost push and monetary shocks all compete with the real business cycle model s technology shock in driving aggregate fluctuations a version of this model estimated via maximum likelihood points to these other shocks as being more important for explaining the behavior of output inflation and interest rates in the postwar u s data these results weaken the links between the current generation of new keynesian models and the real business cycle models from which they were originally derived they also suggest that federal reserve officials have often faced difficult trade offs in conducting monetary policy

oil palm boom contract farming and rural economic development village level evidence from indonesia summary contracts between companies and local communities have been used in indonesia for over 20 years to involve smallholder farmers in the emerging palm oil industry impacts of these contracts have not been analyzed systematically here data from a village survey spanning a time period from 1992 to 2012 are used to evaluate effects on rural economic development panel regression models with village fixed effects show that contracts have significantly contributed to wealth accumulation contracts signed before 1999 were more beneficial than contracts signed afterward which is due to more public sector support and infrastructure investments during the earlier period contracts have contributed to decreasing inter village inequality not only because poorer villages were more likely to adopt a contract but also because they benefited more from contract adoption than richer ones the results suggest that well designed contracts can be important for smallholder farmers to benefit from the oil palm boom the village level approach has clear advantages to evaluate direct and indirect economic effects but it also has drawbacks in terms of analyzing environmental effects and issues of intra village inequality more research with various approaches is needed to better understand the multifaceted implications of oil palm contracts for sustainable rural development

constructing and estimating a realistic optimizing model of monetary policy abstract a dynamic stochastic general equilibrium dsge model with real and nominal both price and wage rigidities succeeds in capturing some key nominal features of u s business cycles additive technology shocks as well as multiplicative shocks are introduced and shown to be crucial monetary policy is specified as an interest rate targeting rule following developments in the structural vector autoregression var literature the interaction between real and nominal rigidities is essential to reproduce the liquidity effect of monetary policy the model is estimated by maximum likelihood on u s data and its fit is comparable to that of an unrestricted first order var besides producing reasonable impulse responses and second moments this model replicates a feature of u s business cycles never captured by previous research with dsge models that an increase in interest rates predicts a decrease in output two to six quarters in the future

estimating the frequency of price re optimization in calvo style models abstract this paper assesses the empirical performance calvo style models of price re optimization we first show that versions of these models in which firms update non re optimized prices to lagged inflation account well for the statistical behavior of post war u s inflation rates we then investigate whether these models imply plausible degrees of inertia in price setting behavior by firms they do but only if we depart from two standard auxiliary assumptions monopolistically competitive firms face a constant elasticity of demand and capital is homogeneous and can be instantaneously reallocated after a shock we develop a version of the model in which these assumptions are relaxed and show that it is consistent with the view that firms re optimize prices on average once every two quarters

small farmers in high value chains binding or relaxing constraints to inclusive growth summary considerable empirical work relates participation in contract farming with farm profitability however causation is far from settled as few studies control for endogeneity of participation moreover the link between contract farming and equity is ambiguous as the association between contract farming and farmer endowments is mixed this case study of smallholders in the tobacco industry addresses these issues and seems to be the first such econometric application in the philippines based on a treatment effects regression contract farming increases profitability with participation biased toward smaller farm sizes supporting the positive role of contract farming toward inclusive growth in rural areas

the macroeconomic effects of distortionary taxation abstract prescott 1986 estimates that technology shocks account for 75 of the fluctuations in the postwar u s economy this paper reestimates the contribution of technological change for a standard business cycle model that includes a public sector and fiscal disturbances i find that a significant fraction of the variance of aggregate consumption investment output capital stock and hours of work can be explained by disturbances in labor and capital tax rates and government consumption i also use the model to quantify the welfare costs of capital and labor taxation for both the time series and welfare calculations maximum likelihood estimates of taste technology and policy parameters are used

changes in the federal reserve s inflation target causes and consequences this paper estimates a new keynesian model to draw inferences about the behavior of the federal reserve s unobserved inflation target the results indicate that the target rose from 1 1 4 percent in 1959 to over 8 percent in the mid to late 1970s before falling back below 2 1 2 percent in 2004 the results also provide some support for the hypothesis that over the entire postwar period federal reserve policy has systematically translated short run price pressures set off by supply side shocks into more persistent movements in inflation itself although considerable uncertainty remains about the true source of shifts in the inflation target jel e31 e32 e52

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

investment shocks and business cycles abstract the origins of business cycles are still controversial among macroeconomists this paper contributes to this debate by studying the driving forces of fluctuations in an estimated new neoclassical synthesis model of the u s economy in this model most of the variability of output and hours at business cycle frequencies is due to shocks to the marginal efficiency of investment imperfect competition and to a lesser extent technological frictions are the key to their transmission although labor supply shocks explain a large fraction of the fluctuations in hours at very low frequencies they are irrelevant over the business cycle this finding is important because the microfoundations of these disturbances are widely regarded as unappealing

small farmers ngos and a walmart world welfare effects of supermarkets operating in nicaragua despite more than a decade of ngo and government activities promoting developing world farmer participation in high value agricultural markets evidence regarding the household welfare effects of such initiatives is limited this paper analyzes the geographic placement of supermarket supply chains in nicaragua between 2000 and 2008 and uses a difference in difference specification on measures of supplier and non supplier assets to estimate the welfare effects of small farmer participation though results indicate that selling to supermarkets increases household productive asset holdings they also suggest that only farmers with advantageous endowments of geography and water are likely to participate

overtime effort and the propagation of business cycle shocks abstract this paper presents and estimates a variant of hansen and sargent s 1988 real business cycle model with straight time and overtime the model presented has only one latent variable the state of technology yet it does a better job propagating and magnifying shocks than the labor hoarding models which incorporate unobserved effort this model as well as a version of burnside eichenbaum and rebelo s 1993 labor hoarding model is estimated using maximum likelihood the maximum likelihood parameter estimates are compared to those using gmm

money prices interest rates and the business cycle the mechanisms governing the relationship of money prices and interest rates to the business cycle are the most studied and most disputed topics in macroeconomics in this paper we first document key empirical aspects of this relationship we then ask how well three benchmark rational expectations macroeconomic models a real business cycle model a sticky price model and a liquidity effect model account for these central facts while the models have diverse successses and failures none can account for the fact that real and nom inal interest rates are inverted leading indicators of real economic activity that is none of the models captures the post war u s business cycle fact that a high real or nominal interest rate in the current quarter predicts a low level of real economic activity two to four quarters in the future i introduction the positive correlation of monetary aggregates and real economic activity over the course of many business cycles is a key empirical fact about the u s economy indeed the dynamic dimension of this covariation is so strong and stable that a monetary variable has long been included in the commerce department s index of leading economic indica tors while this pattern of cyclical comovement is widely agreed upon its interpretation is not some macroeconomists view money as purely passive with a positive response to varying levels of economic activity producing the positive correlation others view changes in the quantity of money as an important perhaps dominant source of economic fluctua tions frequently the real effects of monetary changes are suggested to arise from frictions in commodity labor or financial markets in economic theories that describe the influence of these frictions the transmission mechanism from monetary changes to real activity is typically viewed as involving interest rates and the price level the primary goal of this paper is to evaluate three models that explain the link between money prices interest rates and the business cycle we do this in three steps first we docu ment the cyclical behavior of these variables in the united states over the postwar period second we construct three quantitative rational expectations models of macroeconomic activity i a real business cycle model with endogenous money ii a model of commodity market frictions with mon etary non neutralities arising from gradual adjustment of goods prices and iii a model of financial market frictions with monetary non neutralities arising from gradual adjust ments of portfolios finally we compare the models predic tion for the business cycle behavior of money prices and interest rates with the data in exploring the predictions of these models we take the stock of money to be one of several exogenous variables in the system all of our models are capable of generating a forecasting role for money relative to real economic activity similar to that found in the u s data in the real business model monetary changes can forecast real activity because productivity is related to many underlying sources of shocks and because these real shocks also affect the money stock in the models with sticky prices and liquidity effects short hand names for the models with frictions in the com modity and financial markets monetary changes have an additional direct positive effect on aggregate output the outline of the paper is as follows section ii describes the data and documents its business cycle characteristics section iii outlines the three macroeconomic models and develops the particular quantitative versions of the models used in our analysis our main empirical results are pre sented in section iv and section v summarizes our results and concludes

profits from participation in high value agriculture evidence of heterogeneous benefits in contract farming schemes in southern india abstract this paper assesses the variable impact of participation in high value agriculture through contract farming arrangements in southern india using survey data for 474 farmers in four commodity sectors gherkins papaya marigold and broiler an endogenous switching model is used to estimate net profits from participation findings suggest that average treatments effect vary widely across contract commodities papaya and broiler contracting offer clear net gains for participants whereas marigold contracting leaves participants worse off for gherkins while contracting holds net gains for participating farmers overall this is true of contracts with some firms but not others the standard deviations of point estimates of treatment effects are quite large indicating variability in profit gains even within the same commodity sectors thus notwithstanding the sign of average treatment effects contract farming arrangements have diverse impacts on income for individual farmers and these could have implications for sustained participation of farmers in high value agriculture

unemployment and the business cycle abstract this paper presents a dynamic general equilibrium model where labor effort is imperfectly observable and there is unemployment in equilibrium in contrast to shirking models in the efficiency wage literature detected shirkers are not dismissed instead they face a monetary punishment because they forgo an increase in their compensation estimated versions of the model can generate the high variation in employment and low variation of real wages observed over the business cycle and are consistent with existing qualitative evidence about the responses of the economy to fiscal policy shocks

consumption habits in a new keynesian business cycle model consumption habits have become an integral component in new keynesian models however consumption habits can be modeled in a host of different ways and this diversity is reflected in the literature i examine whether different approaches to modeling consumption habits have important implications for business cycle behavior using a standard new keynesian business cycle model i show that to a first order log approximation the consumption euler equation associated with the additive functional form for habit formation encompasses the multiplicative function form empirically i show that whether consumption habits are internal or external has little effect on the model s business cycle characteristics

an optimizing is lm specification for monetary policy and business cycle analysis we ask whether relations of the is lm type can sensibly be used for the aggregate demand portion of a dynamic optimizing general equilibrium model intended for analysis of issues regarding monetary policy and cyclical fluctuations the main result is that only one change the addition of a term regarding expected future income is needed to make the is function match a fully optimizing model whereas no changes are needed for the lm function this modification leads to a dynamic forward looking model of aggregate demand that is tractable and usable with a wide variety of aggregate supply specifications theoretical applications concerning price level determinacy and gradual price adjustment are included

shirking in a monetary business cycle model this paper investigates whether a limited participation model with imperfectly observed effort can reproduce the economy s responses to a monetary policy shock without appealing to high labour supply elasticities or high markups the results demonstrate that the presence of imperfectly observed effort in combination with the limited participation assumption allows the model to account for the presence of involuntary unemployment nominal wage rigidity and the observed responses to monetary policy shocks jel clas sification e3 j41

economic impact of direct marketing and contracts the case of safe vegetable chains in northern vietnam abstract the paper investigates the respective impacts on incomes of contractual arrangements direct sales and spot marketing for safe vegetable farmers in northern vietnam it is based on a survey of 137 peri urban vegetable farmers that was analyzed using different econometric methods to correct selection biases direct sales and contractual arrangements have a significant positive impact on income compared to spot marketing contracts have less impact on income compared to direct sales it is recommended that policies be formulated to stimulate direct dealings between farmers and consumers which enhance consumer confidence in terms of quality and translate into higher farmer income than anonymous exchanges or contracts

unemployment insurance in a sticky price model with worker moral hazard abstract this paper studies the role of unemployment insurance in a sticky price model that features an efficiency wage view of the labor market based on unobservable effort the risk sharing mechanism central to the model permits but does not force agents to be fully insured structural parameters are estimated using a maximum likelihood procedure on us data formal hypothesis tests reveal that the data favor a model in which agents only partially insure each other against employment risk the results also show that limited risk sharing helps the model capture many salient properties of the business cycle that a restricted version with full insurance fails to explain

estimation and control of an optimization based model with sticky prices and wages abstract this paper provides estimates of an optimization based equilibrium model with sticky prices and wages the estimated model is used to analyse the welfare properties of various interest rate rules for conducting monetary policy an important feature of this model is that it involves a tradeoff between the variances of price and wage inflation and the output gap this tradeoff implies that it is desirable for the monetary authority to respond to wage inflation in addition to price inflation output and past interest rates when setting the current interest rate the issue whether wages and prices can be indexed to steady state inflation has important implications both for the characterization of optimal interest rate rules and interest rate volatility in particular optimal policy in the presence of indexation induces implausibly high steady state inflation

endogenous money or sticky prices abstract what explains the correlations between nominal and real variables in the postwar us data are these correlations indicative of significant nominal rigidity or do they simply reflect the particular way that monetary policymakers react to developments in the real economy to answer these questions this paper uses maximum likelihood to estimate a model of endogenous money this model allows but does not require nominal prices to be sticky the results show that nominal price rigidity over and above endogenous money plays a role in accounting for key features of the data

a simple test of consumption insurance are consumers effectively insured against idiosyncratic shocks to income or wealth either by formal institutions such as charities private insurance and government programs or by informal mechanisms such as gifts and loans from relatives friends and neighbors under full insurance consumption growth should be cross sectionally independent of idiosyncratic variables that are exogenous to consumers this proposition is tested by cross sectional regressions of consumption growth on a variety of exogenous variables full insurance is rejected for long illness and involuntary job loss but not for spells of unemployment loss of work due to strike and an involuntary move

monetary policy rules in a new keynesian euro area model the first part of this paper is devoted to describe a new keynesian model which after calibration shows a great fit on euro area macroeconomic data then the stabilizing properties of alternative monetary policy rules are evaluated for consideration of the european central bank ecb our main finding is that a simple rule that provides the reaction of the nominal interest rate to price inflation wage inflation and its previous observation can fairly well approximate the optimal monetary policy this result is robust to including an ecb preference on interest rate smoothing

comparing shocks and frictions in us and euro area business cycles a bayesian dsge approach this paper estimates a dsge model with many types of shocks and frictions for both the us and the euro area economy over a common sample period 1974 2002 the structural estimation methodology allows us to investigate whether differences in business cycle behaviour are due to differences in the type of shocks that affect the two economies differences in the propagation mechanism of those shocks or differences in the way the central bank responds to those economic developments our main conclusion is that each of these characteristics is remarkably similar across both currency areas copyright 2005 john wiley sons ltd

smallholder participation in contract farming comparative evidence from five countries summary supermarkets specialized wholesalers processors and agro exporters are transforming the marketing channels into which smallholder farmers sell produce in low income economies we develop a conceptual framework with which to study contracting between smallholders and a commodity processing firm we then synthesize results from empirical studies of contract farming arrangements in five countries ghana india madagascar mozambique and nicaragua the resulting meta narrative documents patterns of participation the welfare gains associated with participation reasons for nonparticipation the significant extent of contract noncompliance and the considerable dynamism of these value chains as farmers and firms enter and exit frequently

business cycles and labor market search the quantitative implications of labor market search for economic fluctuations are evaluated in the context of a real business cycle model incorporating labor market search into the model is found to improve its empirical performance along several dimensions in particular hours now fluctuate substantially more than wages and the contemporaneous correlation between hours and productivity falls in addition the model replicates the observation that output growth displays positive autocorrelation at short horizons overall the empirical results suggest that the labor market search environment embodies a quantitatively important propagation mechanism copyright 1996 by american economic association

finding missing markets and a disturbing epilogue evidence from an export crop adoption and marketing intervention in kenya in much of the developing world many farmers grow crops for local or personal consumption despite export options that appear to be more profitable thus many conjecture that one or several markets are missing this paper reports on a randomized controlled trial conducted by drumnet in kenya that attempts to help farmers adopt and market export crops drumnet provides smallholder farmers with information about how to switch to export crops makes in kind loans for the purchase of the agricultural inputs and provides marketing services by facilitating the transaction with exporters the experimental evaluation design randomly assigns pre existing farmer self help groups to one of three groups 1 a treatment group that receives all drumnet services 2 a treatment group that receives all drumnet services except credit or 3 a control group after one year drumnet services led to an increase in production of export oriented crops and lower marketing costs this translated into household income gains for new adopters however one year after the study ended the exporter refused to continue buying the cash crops from the farmers because the conditions of the farms did not satisfy european export requirements drumnet collapsed in this region as farmers were forced to sell to middlemen and defaulted on their loans the risk of such events may explain at least partly why many seemingly more profitable export crops are not adopted

agrifood industry transformation and small farmers in developing countries summary this article introduces this special issue on the rapid transformation of the agrifood industry in developing countries and its effects on small farmers we review the literature from the late 1980s to the present and find evidence first of food processing then retail transformation and mixed evidence of impacts on small farmers both inclusion particularly with resource providing contracts and exclusion sometimes from scale constraint sometimes from inadequate non land assets the special issue papers contribute to the debate by confirming the mix of cases of inclusion and exclusion the cases are main in horticulture and dairy key hopes for smallholder development

do markets differ much this essay reports the results of a crosssection study of differences in accounting profitability that sheds light on some basic controversies in industrial economics most previous cross section studies in this field have been concerned with testing hypotheses about structural coefficients in models meant to apply to essentially all markets as we have learned more about the difficulties of constructing such general models and of performing tests on their structural parameters properly structural cross section analysis has fallen out of fashion in contrast to most of the cross section literature the analysis reported here is fundamentally descriptive it does not attempt directly to estimate or to test hypotheses about structural parameters i hope to show by example that one can perform illuminating analysis of cross section data without a host of controversial maintained hypotheses cross section data can yield interesting stylized facts to guide both general theorizing and empirical analysis of specific industries even if they cannot easily support full blown structural estimation one can view the sort of search for stylized facts conducted here as either a replacement for or an input to interindustry structural estimation depending on one s feeling about the long run potential of that research approach this study also departs from much of the cross section literature by being fundamentally concerned with the importance of various effects not just with coefficient signs and t statistics in particular this essay provides estimates of the relative importance of firm market and market share differences in the determination of business unit divisional profitability in u s manufacturing using 1975 data from the line of business program of the u s federal trade commission ftc i find support neither for the existence of firm effects nor for the importance of market share effects moreover while industry effects apparently exist and are important they appear to be negatively correlated with seller concentration in these data section i relates firm market and share effects to current issues and controversies in industrial economics and thus supplies the motivation for our empirical analysis the remainder of the essay treats the data and

on the fit of new keynesian models this article provides new tools for the evaluation of dynamic stochastic general equilibrium dsge models and applies them to a large scale new keynesian model we approximate the dsge model by a vector autoregression and then systematically relax the implied cross equation restrictions and document how the model fit changes we also compare the dsge model s impulse responses to structural shocks with those obtained after relaxing its restrictions we find that the degree of misspecification in this large scale dsge model is no longer so large as to prevent its use in day to day policy analysis yet is not small enough to be ignored

consumption and unemployment this paper examines consumption changes of workers following experiences of unemployment in different stochastic environments the model developed in the paper predicts that consumption changes following unemployment spells should be small for workers the higher are their layoff and recall probabilities these predictions are confirmed in estimates with panel data

the long run consumption effects of earnings shocks although prior studies of job displacement and disability have measured the impact of these shocks in terms of lost earnings no previous research has linked these permanent earnings shocks to the

the dynamic effects of neutral and investment specific technology shocks the neoclassical growth model is used to identify the short run effects of neutral technology shocks which affect the production of all goods homogeneously and investment specific shocks which affect only investment goods the real equipment price crucial for identifying the investment shocks experiences an abrupt increase in its average rate of decline in 1982 so the analysis is based on a split sample on the basis of the preferred specification the two technology shocks account for 73 percent of hours and 44 percent of output s business cycle variation before 1982 and 38 percent and 80 percent afterward the shocks also account for more than 40 percent of hours and 58 percent of output s forecast errors over a three to eight year horizon in both samples the majority of these effects are driven by the investment shocks

regional implications of north american integration a canadian perspective on high technology manufacturing using questionnaire data the paper outlines structural and performance responses of a sample of toronto s technology intensive manufacturers to the canada us free trade agreement fta of 1989 and the north american free trade agreement nafta of 1994 free trade has elicited complex reactions those firms with prior global and us export connections including large and small firms foreign affiliates and canadian owned firms were better prepared for the new trade regime in their product and production technology freer trade has stimulated firms with limited exports to seek improvements in innovation and productivity foreign affiliates have gained product mandates and increased outsourcing has been one of the production responses a partir des donnees provenant d un questionnaire cet article cherche aesquisser les reponses aux accords de 1989 entre le canada et les etats unis sur le libre echange canada us free trade agreement fta et aux accords nord americains de 1994 sur le libre echange north