pensions with endogenous and stochastic fertility this paper studies the design of a pay as you go social security system in an overlapping generations model where fertility is in part stochastic and in part determined through capital investment if investments are publicly observable pension benefits must be linked positively to the level of investment and payroll taxes negatively to the number of children the outcome is characterized by full insurance with all parents regardless of their number of children enjoying identical consumption levels without observability benefits must increase and payroll taxes decrease with the number of children the second best level of investment and the resulting average fertility rate are less than their corresponding first best levels

productivity differences across employers the roles of employer size age and human capital recent research using longitudinal microeconomic databases on businesses and individuals has uncovered tremendous heterogeneity across businesses even within narrowly defined industrial sectors we observe large differences in the levels and growth rates of inputs outputs and productivity across workers even controlling for demographic characteristics wage and employment outcomes vary a great deal and there are sizable worker flows across jobs in the economy these worker flows are closely connected to firm outcomes reflecting in large part the ongoing shift in resources from less productive to more productive employers the primary message is that the continual process of matching and sorting as businesses and workers seek their niches is heterogeneous with experimentation learning and selection all playing important roles understanding the connection between the matching and sorting of businesses and workers is at the very heart of the overlap between industrial organization and labor economics however due to the paucity of data linking businesses and workers at the micro level we know relatively little about these interactions although a large empirical literature suggests that worker outcomes are associated with firm characteristics notable examples are firm size wage effects compensating wage differentials and interindustry wage differentials very little is known about the converse the process by which business outcomes are associated with the characteristics of their employees there are a number of questions associated with this process do employers choose different modes of production resulting in skill segregation as suggested by the sorting and assignment hypotheses in michael kremer 1993 and michael sattinger 1993 or do all firms in a given industry select roughly the same workforce composition how do employers change their workforce composition either to accommodate demand shocks or to experiment with new modes of production in turn what is the connection between these different decisions regarding workforce composition and observable business outcomes such as survival growth and productivity in this short paper our empirical objectives are relatively modest compared to these broad research questions our focus is to provide an initial investigation into the connection between a key measure of firm performance labor productivity and the composition of the firm s workforce as measured by observable worker characteristics we exploit longitudinal matched employeremployee micro data developed under a recent pilot project at the u s census bureau our data set contains longitudinal information on key outcomes of the businesses as well as many of the basic demographic characteristics for the universe of workers at these businesses although longitudinal matched employer employee micro data have been developed in a variety of countries over the last decade or so see john abowd and francis kramarz 1999 ours is the first large scale micro level data set in the united states that allows the investigation haltiwanger department of economics university of maryland college park md 20742 u s bureau of the census and nber lane department of economics american university washington dc 20016 and u s bureau of the census spletzer bureau of labor statistics 2 massachusetts ave n e washington dc 20212 we thank adela luque and javier miranda for superb research assistance and charles brown and marilyn manser for comments on an earlier draft this research was conducted at the center for economic studies at the u s bureau of the census while the second author was an american statistical association census bureau fellow the analysis and results are attributable to the authors and do not necessarily reflect concurrence of the institutions they represent

when does labor scarcity encourage innovation this paper studies whether labor scarcity encourages technological advances that is technology adoption or innovation for example as claimed by habakkuk in the context of nineteenth century united states i define technology as strongly labor saving if technological advances reduce the marginal product of labor and as strongly labor complementary if they increase it i show that labor scarcity encourages technological advances if technology is strongly labor saving and will discourage them if technology is strongly labor complementary i also show that technology can be strongly labor saving in plausible environments but not in many canonical macroeconomic models

equilibrium exchange rates and supply side performance this paper develops a two country optimising sticky price model of real exchange rate determination in the new open macroeconomics tradition which allows several different forms of deviation from purchasing power parity ppp both along the adjustment path and in the steady state the model has a rich structure and is designed to provide a flexible tool for policy analysis unlike most other papers in the literature both of the key components of the real exchange rate the relative price of non tradables and the terms of trade are made endogenous allowing a more complete analysis of the impact of structural shocks to illustrate one possible application the model is calibrated to match key elements of the uk and euro area economies and used to examine the extent to which possible improvements in the united kingdom s relative supply side performance might account for the sharp and persistent appreciation in sterling since 1996 the results are not supportive of this hypothesis in the model improvements in productivity goods market and labour market competitiveness are all associated with a depreciation in both the spot and the equilibrium real sterling exchange rates two potential supply side sources of an equilibrium appreciation a productivity improvement biased towards traded goods balassa samuelson effect and an anticipated future productivity rise are considered however each is insufficient to account for a long run equilibrium appreciation the latter may account for an initial appreciation of the real exchange rate we conclude by considering further mechanisms that could affect our results

a positive theory of social security based on reputation we construct a general equilibrium model in which a pay as you go social security system can be adopted and sustained as a political and economic equilibrium we alalyze the welfare implictions of this system and compare general equilibrium welfare measure to the commonly used notion of actuarial fairness

chronicle of currency collapses re examining the effects on output abstract the impact of currency collapses i e large nominal depreciations or devaluations on real output remains unsettled in the empirical macroeconomic literature this paper provides new empirical evidence on this relationship using a dataset for 108 emerging and developing economies over the period 1960 2006 we provide estimates of how these episodes affect growth and output trend our main finding is that currency collapses are associated with a permanent output loss relative to trend which is estimated to range between 2 and 6 of gdp however we show that such losses tend to materialize before the drop in the value of the currency which suggests that the costs of a currency crash largely stem from the factors leading to it taken on its own i e ceteris paribus we find that currency collapses tend to have a positive effect on output more generally we also find that the likelihood of a positive growth rate in the year of the collapse is over two times more likely than a contraction and that positive growth rates in the years that follow such episodes are the norm finally we show that the persistence of the crash matters i e one time events induce exchange rate and output dynamics that differ from consecutive episodes

lending booms latin america and the world recent theories of crisis put lending booms at the root of financial collapses yet lending booms may be a natural consequence of economic development and fluctuations so are lending booms dangerous in this paper we investigate empirically this question using a broad sample of lending boom episodes over 40 years with a special eye for latin america our results indicate that 1 lending booms are often associated with i a domestic investment boom ii an increase in domestic interest rates iii a worsening of the current account iv a declines in reserves v a real appreciation vi a decline in output growth 2 typical lending booms do not increase substantially the vulnerability of the banking sector or the balance of payments comparing latin america and the rest of the world we find that latin america lending booms make the economy considerably more volatile and vulnerable to financial and balance of payment crisis

post 1500 population flows and the long run determinants of economic growth and inequality we construct a matrix showing the share of the year 2000 population in every country that is descended from people in different source countries in the year 1500 using this matrix we analyze how post 1500 migration has influenced the level of gdp per capita and within country income inequality in the world today indicators of early development such as early state history and the timing of transition to agriculture have much better predictive power for current gdp when one looks at the ancestors of the people who currently live in a country than when one considers the history on that country s territory without adjusting for migration measures of the ethnic or linguistic heterogeneity of a country s current population do not predict income inequality as well as measures of the ethnic or linguistic heterogeneity of the current population s ancestors an even better predictor of current inequality in a country is the variance of early development history of the country s inhabitants with ethnic groups originating in regions having longer histories of agriculture and organized states tending to be at the upper end of a country s income distribution however high within country variance of early development also predicts higher income per capita holding constant the average level of early development

health investment saving and public policy this paper develops an overlapping generations model in which agents invest in health to prolong life in both working and retirement periods it explores how unfunded social security with or without health subsidies affects life expectancy economic growth and welfare in particular by extending life at a possible cost of capital accumulation health subsidies and a pay as you go pension can improve welfare especially in the short run

can appreciation be expansionary evidence from the euro area summarywe identify exogenous effects of shifts in effective exchange rates for euro area ea countries between 1999 and 2016 the identification strategy is based on an external instrument built on the assumption that movements in the euro nominal effective exchange rate are largely exogenous for individual ea countries once we control for ea aggregates we find that a real appreciation creates a trade off between expenditure switching contractionary and terms of trade expansionary effects with the latter prevailing in most countries we also find some heterogeneity in the way movements in the euro exchange rate are transmitted within the ea in particular between core and peripheral countries although differences are mostly not statistically significant

bond markets initiation and tax revenue mobilization in developing countries we analyze the relationship between the introduction of a sovereign bond market bm and tax revenue mobilization behavior using a large sample of 119 developing countries propensity scores matching estimations reveal that bm participation significantly fosters domestic tax revenue mobilization moreover we find that this favorable effect is sensitive to bm countries characteristics namely the stance of monetary and fiscal policies the exchange rate regime the level of economic development and the degree of financial openness and financial development finally our results show that bm participation fosters internal taxes and reduces their instability compared to international trade taxes these findings highlight the strength of bm in promoting structural reforms in developing countries through encouraging them to increase their tax effort and even by contributing to some extent to the fiscal transition process

optimal taxation in life cycle economies abstract we use a very standard life cycle growth model in which individuals have a labor leisure choice in each period of their lives to prove that an optimizing government will almost always find it optimal to tax or subsidize interest income the intuition for our result is straightforward in a life cycle model the individual s optimal consumption work plan is almost never constant and an optimizing government almost always taxes consumption goods and labor earnings at different rates over an individual s lifetime one way to achieve this goal is to use capital and labor income taxes that vary with age if tax rates cannot be conditioned on age a nonzero tax on capital income is also optimal as it can imperfectly mimic age conditioned consumption and labor income tax rates journal of economic literature classification numbers e62 h21

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

birth date dependent population ethics critical level principles abstract this paper investigates birth date dependent principles for social evaluation in an intertemporal framework in which population size may vary we weaken the strong pareto principle in order to allow individuals birth dates to matter in establishing a social ordering using the axiomindependence of the utilities of the dead we characterize population principles with a recursive structure if the individual substitution principle and an individual intertemporal equivalence axiom are added birth date dependent generalizations of the critical level generalized utilitarian principles result stationarity leads to the special case of geometric discounting journal of economic literatureclassification numbers d63 d71

intertemporal population ethics critical level utilitarian principles this paper considers the problem of social evaluation in a model where population size individual lifetime utilities lengths of life and birth dates vary across states in an intertemporal framework we investigate principles for social evaluation that allow history to matter to some extent using an axiom called independence of the utilities of the dead we provide a characterization of critical level generalized utilitarian rules as a by product of our analysis we show that social discounting is ruled out in an intertemporal welfarist environment a simple population planning example is also discussed

efficiency with endogenous population growth in this paper we generalize the notion of pareto e ciency to make it applicable to environments with endogenous populations two di erent e ciency concepts are proposed p e ciency and a e ciency the two concepts di er in how they treat people that are not born we show how these concepts relate to the notion of pareto e ciency when fertility is

do real exchange rate appreciations matter for growth the impact of exchange rate changes on growth a long standing key issue in international macroeconomics has received renewed attention in recent years owing to weaker growth rates and the debate on currency wars the connection between real exchange rates and growth remains however an unsettled question in the academic literature we fill this gap by providing an empirical assessment based on a broad sample of emerging and advanced economies we assess the impact of appreciations productivity booms and capital inflows surges using a propensity score matching approach to address causality issues appreciations associated with higher productivity have a larger impact on growth than those associated with capital inflows furthermore appreciations per se tend to have a negative impact on growth we provide a simple theoretical model that delivers a contrasted growth appreciation pattern depending on the underlying shock the model also implies adverse effects of shocks to international capital flows so concerns about an appreciation are not inconsistent with concerns about a depreciation while the presence of an externality through firms destruction leads to inefficient allocations addressing the inefficiency does not dampen exchange rate movements

optimal taxation critical level utilitarianism and economic growth abstract we analyze tax policies in an intertemporal economy with endogenous fertility under critical level utilitarianism both from a positive and a normative standpoint on the positive side we analyze the effects of a change in the tax on capital income and on fertility both separately and combined so as to keep the per capita public debt constant on the normative side we characterize the first and second best optimal tax structures for both exogenous and endogenous labor supply

currency crises capital account liberalization and selection bias are countries with unregulated capital flows more vulnerable to currency crises efforts to answer this question properly must control for self selection bias since countries with liberalized capital accounts may also have more sound economic policies and institutions that make them less likely to experience crises we employ a matching and propensity score methodology to address this issue in a panel analysis of developing countries our results suggest that after controlling for sample selection bias countries with liberalized capital accounts experience a lower likelihood of currency crises that is when two countries have the same likelihood of allowing free movement of capital based on historical evidence and a very similar set of economic and political characteristics and one country imposes controls and the other does not the country without controls has a lower likelihood of experiencing a currency crisis this result is at odds with the conventional wisdom and suggests that the benefits of capital market liberalization for external stability are substantial

wheat agriculture and family ties abstract several recent contributions to the literature have suggested that the strength of family ties is related to various economic and social outcomes for example alesina and giuliano 2014 highlight that the strength of family ties is strongly correlated with lower gdp and lower quality of institutions however the forces shaping family ties remain relatively unexplored in the literature this paper proposes and tests the hypothesis that the agricultural legacy of a country matters for shaping the strength of its family ties using data from the world values survey and the european values study the results show that societies with a legacy of cultivating wheat tend to have weaker family ties analysis at the sub national level us data and the country level corroborate these findings the estimations allow for alternative hypotheses which propose that pathogen stress and climatic variation can potentially also give rise to the formation of family ties the results suggest that the suitability of land for wheat production is the most influential factor in explaining the variation in the strength of family ties across societies and countries

corporate debt firm size and financial fragility in emerging markets abstract the post global financial crisis period shows a surge in corporate leverage in emerging markets and a number of countries with deteriorated corporate financial fragility indicators altman s z score firm size plays a critical role in the relationship between leverage firm fragility and exchange rate movements in emerging markets while the relationship between firm leverage and distress scores varies over time the relationship between firm size and corporate vulnerability is relatively time invariant all else equal large firms in emerging markets are more financially vulnerable and also systemically important consistent with the granular origins of aggregate fluctuations in gabaix 2011 idiosyncratic shocks to the sales growth of large firms are positively and significantly correlated with gdp growth in our emerging markets sample relatedly the negative impact of exchange rate shocks has a more acute impact on the sales growth of the more highly levered large firms

optimal taxation and spending in general competitive growth models abstract we find that the optimal long run tax on capital income is zero even if the capital stock does not converge to a steady state nor to a steady state growth rate the optimal tax on human capital is also zero if human capital is not a final good but the long run wage tax is not generally zero we argue that consumption tax proposals such as the flat tax are not consumption taxes and are biased against human capital

does flattening government improve economic performance evidence from china this paper examines a causal relationship between the flattening of a government hierarchy and economic performance by exploiting a panel data set on government reorganization in china from 1995 to 2012 delayering has led to increases in revenue and inter governmental transfers for county governments but the associated enlarged span of control makes it difficult for upper level governments to coordinate and monitor local ones this has led to a reduction in county governments total public expenditure and pro growth expenditure as well as an increase in land corruption overall the flattening of the government hierarchy has a negative effect on economic performance

inequality does cause underdevelopment insights from a new instrument consistent with the provocative hypothesis of engerman and sokoloff 1997 2000 this paper confirms with cross country data that agricultural endowments predict inequality and inequality predicts development the use of agricultural endowments specifically the abundance of land suitable for growing wheat relative to that suitable for growing sugarcane as an instrument for inequality is this paper s approach to problems of measurement and endogeneity of inequality the paper finds inequality also affects other development outcomes institutions and schooling which the literature has emphasized as mechanisms by which higher inequality lowers per capita income it tests the inequality hypothesis for development institutional quality and schooling against other recent hypotheses in the literature while finding some evidence consistent with other development fundamentals the paper finds high inequality to independently be a large and statistically significant barrier to prosperity good quality institutions and high schooling

150 years of patent protection this paper examines three sets of explanations for variations in the strength of patent protection across sixty countries and a 150 year period wealthier nations are more likely to have patent systems to allow patentees a longer time to put their patents into practice and to ratify treaties assuring equal treatment of other nations but they are also likely to charge higher fees and limit patent protection in some important ways countries with democratic political institutions are consistently more likely to have patent protection appear to be determined by historical factors the origin of a country s commercial law appears particularly important in explaining the presence of restrictions on patentees privileges and discriminatory provisions against foreign patentees this abstract was borrowed from another version of this item

the old age security hypothesis revisited abstract children s altruism toward parents is allowed in a two overlapping generations model with endogenous fertility parents raise children because when retired they expect gifts from their children who are essentially a capital good individuals behavior between generations is examined by analyzing a nash equilibrium which is then compared with a social planner s optimal allocation the pay as you go public pension program is viewed as the optimal gifts from the optimal allocation when the latter is implemented the effect on fertility of the introduction of a capital market is also analyzed the validity of the old age security hypothesis is shown to depend on the parameters of utility and cost functions

the real exchange rate and economic growth revisiting the case using external instruments abstract we investigate the impact of movements in the real exchange rate on economic growth based on five year average data for a panel of over 150 countries in the post bretton woods period unlike previous literature we use external instruments to deal with possible reverse causality from growth to the real exchange rate our country specific instruments are i global capital flows interacted with individual countries financial openness and ii the growth rate of official reserves we find that a real appreciation depreciation reduces raises significantly annual real gdp growth more than in previous estimates in the literature however our results confirm this effect only for developing countries and for pegs

pay as you go public pensions with endogenous fertility abstract veall s 1986 model of public pensions is generalized to allow for endogenous fertility we show that gifts to the old which can be viewed as social security contributions are always positive in the steady state an optimal stationary allocation is sustainable if savings are zero and fertility is exogenous however the optimal allocation is in general not sustainable in particular if a government enforces a social security plan setting the pension level at the optimal gifts and individuals optimize under the pension constraint the resulting sustainable outcome is in general different from either the optimal or nash outcome

should capital income be taxed in the steady state this paper provides a new economic interpretation of the well known dynamic optimal taxation principle that capital income should not be taxed in the steady state we show that the result is related to the minimization of distortions at the intratemporal margin when every factor of production can be taxed at the optimal rate capital income should not be taxed in the steady state but when there are restrictions on the taxation of production factors the tax rate on capital income in the steady state is different from zero

the agricultural roots of chinese innovation performance abstract a debate is brewing in the literature on whether legacies of rice and wheat cultivation in china matters for cultural attributes in particular individualism vs collectivism in turn this important cultural dimension has recently been shown to affect the pattern of innovation across countries however the previous literature has not firmly connected agricultural legacies and innovation rates and has consistently used low resolution data we study the role of agricultural legacy for innovation performance using unique patent data from close to two thousand chinese counties we provide robust evidence that counties with a legacy of rice cultivation generate fewer patent applications than other counties and a legacy of wheat production tends to be associated with more patent applications the results for rice are robust to e g controlling for temperature precipitation irrigation disease burden religiosity and corruption as well as accounting for migration patterns our results firmly establish the importance of agricultural legacy for shaping the culture of innovation

social criteria for evaluating population change an alternative to the blackorby donaldson criterion abstract an ethical objection is raised against the blackorby donaldson criterion of optimum population maximizing the sum total of utilities in excess of some critical level since it may disprefer a social state with more people and with more worthwhile lives however the criterion may serve as a practicably reasonable compromise between maximizing total and average utility nevertheless an alternative compromise the maximization of number dampened total utility is proposed that is free from the above objection

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

does rice farming shape individualism and innovation abstract talhelm et al 2014 provided an original rice theory to explain large psychological differences across countries and even within countries and their impact on innovation however their findings are subject to the problems of sample bias measurement error and model misspecification after correcting these problems most findings in the original paper no longer hold we collected data on collectivism from other sources and linked them with rice areas but failed to find any relationship as predicted by the rice theory the role of rice farming in shaping cultural psychology and innovations seems to be much more muted than asserted in talhelm et al 2014

patent rights and innovation disclosure this article studies optimal patents with respect to the timing of innovation disclosure in a simple model we identify forces that lead firms to either suboptimally patent too early or too late in equilibrium and we determine conditions so that stronger patents induce earlier or later equilibrium disclosure then by solving an infinite multistage patent game with a more explicit structure we describe innovation growth and derive detailed predictions that can be used for policy experiments as an application we calibrate our multistage game using summary statistics from the seeds breeding industry we find that weaker patent rights may result in welfare gains of 46 relative to the status quo the gains are achieved because weaker patents reduce competition thus leading firms to postpone patenting

polygyny fertility and savings sub saharan africa has a high incidence of polygyny it is also the poorest region of the world in this paper i ask whether banning polygyny could play any role for development using a quantitative model of polygyny i find that enforcing monogamy lowers fertility shrinks the spousal age gap and reverses the direction of marriage payments polygyny leads to high bride prices to ration women which makes buying wives and selling daughters a good investment thus crowding out investment in physical assets for reasonable parameter values i find that banning polygyny decreases fertility by 40 percent increases savings by 70 percent and increases output per capita by 170 percent

optimal social security in a dynastic model with human capital externalities fertility and endogenous growth abstract in this paper we investigate the optimal scale of pay as you go social security in a dynastic family model with human capital externalities fertility and endogenous growth human capital externalities reduce the return to human capital investment and hence lead to under investment in human capital and over reproduction of the population if the taste for the number of children is sufficiently weak relative to the taste for the welfare of children social security can be welfare enhancing by reducing fertility and raising human capital investment per child