a theory of current account and exchange rate determinations abstract the purpose of this paper is to construct a two period two country model that derives the current account the exchange rate the terms of trade and real interest rates from optimal behavior principles this is done by constructing a model that uses money mainly as a means of exchange where the technology of exchange is flexible due to potential substitutability of time and real balances as a means of coordinating transactions the discussion results in a framework that integrates elements of net saving theories and the monetary approach into a unified structure in which the two approaches are complementary viewpoints

the effectiveness of child care subsidies in encouraging the welfare to work transition of low income single mothers in recent years public attitudes toward single mothers have changed dramatically and policymakers are being pressed to devise reforms that will reduce their welfare dependency in the summer of 1994 at least 11 separate welfare reform proposals were being debated by congressional committees because child care is relatively expensive compared to potential earnings for single mothers extensions to current child care assistance programs will be an integral component of any welfare reform package very little evidence exists regarding child care utilization patterns and links to employment for low income mothers exceptions include mark berger and dan black 1992 and the recent congressional testimony given by jane ross 1994 of the gao contributing to the changing attitudes toward welfare recipients is the change in the demographic makeup of the labor force overall female labor force participation rates have grown dramatically in the past 30 years from 45 percent in the mid 1960 s to 75 percent in the early 1990 s as a result subsidizing poor single mothers so that they can stay at home with their children while more and more married mothers are working for pay has become less popular this has led to the encouragement of work particularly full time work as a means of poverty reduction for single mothers unfortunately child care costs represent a significant employment barrier on average child care costs 63 per week overall and 44 per week for care by a relative for the typical single mother child care costs range between 15 percent and 30 percent of earned income depending on the mode of care and hourly wage 2

the role of firm size in bilateral bargaining a study of the cable television industry we examine the effect of buyer merger on bilateral negotiations between a supplier and n buyers merger may have bargaining effects in addition to the usual efficiency effects the effect of merger on the buyers bargaining position depends on the curvature of the supplier s gross surplus function merger enhances worsens the buyers bargaining position if the function is concave convex based on a panel of advertising revenue in the cable television industry our estimates indicate that the gross surplus function for suppliers of program services is convex this result suggests that cable operators integrate horizontally to realize efficiency gains rather than to enhance their bargaining position vis a vis program suppliers

environment market share and market power in this paper we develop a process model relating market share to firm profits in particular we specify average price and average cost equations as a function of previous year market share position changes in market share environmental conditions and interactions of environmental conditions with the lagged market position and market share change variables we estimate these equations using pims data after controlling for unobservable factors our results suggest that firms with high market shares derive no extra market power benefits except if they operate in environments with little buyer power instead environmental factors and changes in market share most strongly influence price and cost an analysis of the market share associated with maximal firm profits indicates that for the majority of firms in our sample steadily increasing market share does not always associate with increasing profits giving credence to the proposition that more market share is not always better

price of high quality daycare and female employment using local variation between municipalities i analyze the degree to which the price of high quality publicly subsidized childcare affects female employment following maternity leave importantly prices are income dependent and thus likely endogenous yet by exploiting information on minimum income compensation during non employment i bypass this problem the results show that the price negatively affects employment a price increase of 1 per month decreases employment by 0 08 which corresponds to a price elasticity of 0 17 these effects prevail during the first 12 months after childbirth i also find that availability of childcare increases employment

the lucas critique and the volcker deflation this paper examines in light of the lucas critique the behavior of the phillips curve and of the term structure of interest rates after october 1979 it starts with an informal account of the policy change and then discusses how we might expect these two relations to shift after such a change it finds little evidence of a direct effect of the policy change on the phillips curve at least until 1982 it finds substantial evidence of a direct effect on term structure this abstract was borrowed from another version of this item

the quantitative significance of the lucas critique doan litterman and sims dls have suggested using conditional forecasts to do policy analysis with bayesian vector autoregression bvar models their method seems to violate the lucas critique which implies that coefficients of a bvar model will change when there is a change in policy rules in this article we attempt to determine whether the lucas critique is important quantitatively in a bvar macro model that we construct we find evidence following two candidate policy rule changes of significant coefficient instability and of a deterioration in the performance of the dls method

the welfare effects of third degree price discrimination in the author examines third degree price discrimination by an upstream monopolist in an intermediate good market discrimination is motivated by the fact that downstream firms differ in their abilities to integrate backward into supply of the input the author shows that under reasonable specifications of equilibrium price discrimination leads to all buyers facing higher input prices in other cases discrimination raises some prices and lowers others the author derives conditions under which discrimination lowers welfare by reducing total output and shows that in some markets discrimination will raise welfare by preventing socially inefficient backward integration copyright 1987 by american economic association

intra firm bargaining under non binding contracts we present a new methodology for studying the problem of intra firm bargaining based on the notion that contracts cannot commit the firm and its agents to wages and employment we develop and analyse a general non cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party equilibrium firm profits are characterizable as both a weighted average of a neo classical non bargaining firm s profits and a generalization of shapley value for a corresponding cooperative game furthermore the resulting payoffs induce economically significant distortions in the firm s input and organizational design decisions

child care and the labor supply of married women reduced form evidence this paper empirically analyzes family demands for market and nonmarket child care services and the impact of these demands on the work effort of married women the paperfirst develops a general model of child care and labor force participation the model predicts that higher wages increase the likelihood of labor force participation and that higher costs decrease the likelihood of child care utilization the paper then develops a threeequation reduced form econometric specification of the general model the equations in the specification are estimated simultaneously using 1985 data from the survey of income program participation the estimates reveal that the cost of market child care has a strong negative effect on the labor supply of married women

real effects of monetary policy in a world economy abstract we present a two country heterogeneous agent model in which changes in a country s monetary policy affect real interest rates relative prices of traded and nontraded goods and real exchange rates nontransitory real effects of monetary policy stem from legal restrictions in the form of country specific reserve requirements without violating the classical assumptions of individual rationality and flexible prices the model s implications seem qualitatively consistent with the u s experience of the 1980s a monetary policy tightening leading to a rise in the real interest rate and to an initial rise in the real value of the dollar which is subsequently reversed

evaluating the effects of childcare policies on children s cognitive development and maternal labor supply to explore the role of childcare policies in the development of early cognitive skills this paper jointly estimates a cognitive achievement production function and a dynamic discrete choice model of maternal labor supply and childcare decisions using counter actuals from the model i investigate how the designs of two childcare programs head start and childcare subsidies affect the formation of cognitive skills through maternal work and childcare decisions the results suggest large impacts on cognitive skills from expanding head start to current noneligibles and negligible impacts of subsidies on cognitive skills of current eligibles abstract from author

is the household demand for in home services sensitive to tax reductions the french case our paper examines the impact of tax reductions on the demand for services in the home for that purpose we estimate a structural model of demand for such services by using household individual data collected by insee paris in 1996 in this model the net hourly wage paid to the domestic employee the household preferences for consumption of in home services and the decision to take advantage of the tax reduction are considered as endogenous variables estimation of the econometric model uses the fact that some households are observed to consume domestic services and to take advantage of the tax reduction while others either consume such services but do not take advantage of the tax reduction or do not consume these services at all its identification relies on an exclusion restriction resulting from the tax credit schedule results show that the probability of consuming in home services increases with age and income a 10 increase in the tax reduction would increase from 45 9 to 50 8 the proportion of households benefiting from the tax reduction among those who consume paid in home services moreover 13 5 of households who do not actually consume such services would do so after the 10 increase in the tax reduction these simulated variations would mainly concern high income households

employment transitions of women in india a panel analysis abstract this study analyses employment transitions of working age women in india the puzzling issue of low labour force participation despite substantial economic growth strong fertility decline and expanding female education in india has been studied in the recent literature however no study so far has looked into the dynamics of employment in terms of labour force entry and exit in this context using a nationally representative panel dataset we show that women are not only participating less in the labour force but also dropping out at an alarming rate we estimate an endogenous switching model that corrects for selection bias due to initial employment and panel attrition to investigate the determinants of women s entry into and exit from employment we find that an increase in wealth and income of other members of the household leads to lower entry and higher exit probabilities of women along with the effects of caste and religion this result reveals the importance of cultural and economic factors in explaining the low workforce participation of women in india we also explore other individual and household level determinants of women s employment transitions moreover we find that a large public workfare program significantly reduces women s exit from the labour force our study indicates that women s entry and exit decisions are not necessarily symmetric and it is important to consider the inter temporal dependence of labour supply decisions

maternal labor supply and the availability of public pre k evidence from the introduction of prekindergarten into american public schools in the 1980s and 1990s many states began to provide funding for prekindergarten programs for the first time this paper takes advantage of the staggered timing in program funding to investigate the effect that increased availability of prekindergarten programs has on the labor supply of mothers with four year olds i find that mothers with a four year old and no younger children were significantly more likely to be in the labor force and employed once prekindergarten became available and that these effects were largest for single low educated mothers and married college educated mothers mothers with a four year old and other younger children were also significantly more likely to be in the labor force and employed although these effects were smaller in magnitude and not significant for specific subpopulations

money for nothing universal child care and maternal employment abstract the strong correlation between child care and maternal employment rates has led previous research to conclude that affordable and readily available child care is a driving force both of cross country differences in maternal employment and of its rapid growth over the last decades we analyze a staged expansion of subsidized child care in norway our precise and robust difference in differences estimates reveal that there is little if any causal effect of subsidized child care on maternal employment despite a strong correlation instead of increasing mothers labor supply the new subsidized child care mostly crowds out informal child care arrangements suggesting a significant net cost of the child care subsidies

a dynamic theory of countervailing power in this article i develop a model of an infinitely repeated procurement auction with one buyer and several sellers the buyer can accumulate a backlog of unfilled orders which similar to a boom in demand forces the sellers to collude on a low price to prevent undercutting if the buyer s cost of shifiing its consumption over time is low enough then the extent of collusion is bounded away from the joint profit maximizing level even for discount factors approaching one the model is extended to allow for multiple buyers large buyers are shown to obtain lower prices from the sellers buyer mergers increase pro t for all buyers not just the merging pair at the expense of the sellers in contrast buyer growth through addition harms buyers that do not grow and benefits sellers

correlated demand shocks and price wars during booms the supergame theoretic model of price competition rotemberg and saloner 1986 is re examined in the case of serially correlated demand shocks the equilibrium price is shown to exhibit the same counter cyclical movement as in the i i d case if the discount factor and the number of firms satisfy certain relationship

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

group purchasing nonlinear tariffs and oligopoly abstract loyalty discounts are nonlinear tariffs that condition rebates or marginal prices on meeting aggregate purchase or market share targets these discounts are widespread and are often the impetus for consumers to form buying groups or group purchase organizations gpos this paper models the competitive effects of the introduction of a gpo into a market within which the preferences of the gpo s members are horizontally differentiated while nonlinear tariffs are an effective way for a monopolist to extract consumer surplus when two suppliers compete using such schedules the results are far more competitive in comparison to simple bertrand nash competition with linear tariffs this result holds when the product of each of the suppliers is attractive to a substantial portion of consumers in our model the nonlinear schedule puts all customers in play to a degree that contrasts sharply with the competition at the margin characteristic of constant per unit prices moreover competing in nonlinear tariffs removes allocative inefficiency that can result from single price competition

network access and market power abstract we use cooperative game theory to study the impact of the liberalization of eu natural gas markets on the balance of power between local champions customers and outside producers such as russian gazprom we calibrate a model of the eurasian gas network and distinguish between two steps of the reform first the opening of access to transit pipes and second the opening of access to distribution systems hence customers using the shapley value as a power index we find a modest and rather heterogeneous impact from the first step the impact of the second step is much larger and yields a clear pattern all local champions lose while all customers and all outside players gain as one third of the losses of champions within eu leaks to players abroad current reforms might enhance the dominance of already powerful outside producers when network power is assessed with the nucleolus in contrast full liberalization of access to customers does not benefit outside producers at all

the impact of child care costs on the labour supply of married mothers evidence from canada this paper provides estimates for canada of the impact of childcare costs on the labor supply of married mothers this is done by linking two microdata sources the 1988 canadian national child care survey and the 1988 labour market activity survey the key results show that the market wage and childcare costs have respectively a significant positive and negative impact on both hours of work and the labor force participation decision by married mothers the childcare cost elasticities for labor force participation and hours of work are reported to be 0 38 and 0 32 respectively

monetary policy arithmetic reconciling theory with evidence empirical evidence indicates that in countries with low inflation rates a permanent decrease in inflation rate either has no impact on capital stock and output superneutrality or causes them to fall moderately existing budget arithmetic models of monetary policy cannot deliver superneutrality in this paper we conduct a budget arithmetic analysis of monetary policy using a money demand specification money in the utility function that is new to this literature we find that one simple assumption about utility from money delivers superneutrality while a more general assumption delivers departures from superneutrality in the direction consistent with the evidence jel classification e60 e13

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

child care costs as a barrier to employment for single and married mothers because women typically serve as primary care providers for their children female labor force participation behavior is likely to be affected significantly by the costs associated with replacing maternal care with nonmaternal care while some evidence of this phenomenon exists in the economics literature discrepancies across studies make it difficult to provide conclusive evidence of the employment effects of these child care costs this paper uses an improved sipp survey design to present new evidence regarding the degree to which child care prices impede mothers employment behavior with additional evidence of the difference in these elasticities across marital status empirical technique and equation specification this permits linking this paper to the existing evidence drawing the conclusion that child care prices impede mothers employment behavior significantly with single mothers exhibiting less responsiveness in their labor force participation behavior to child care price changes than marri

women s career choices social norms and child care policies our model explains the observed gender specific patterns of career and child care choices through endogenous social norms we study how these norms interact with the gender wage gap we show that via the social norm a couple s child care and career choices impose an externality on other couples so that the laissez faire is inefficient we use our model to study the design and effectiveness of three commonly used policies we find that child care subsidies and women quotas can be effective tools to mitigate or eliminate the externality parental leave however may even intensify the externality and decrease welfare

managed care s price bargaining with hospitals research has shown that managed care mc slowed the rate of growth in health care spending in the 1990s primarily via lower unit prices paid however the mechanism of mc s price bargaining has not been well studied this article uses a unique panel dataset with actual hospital prices in massachusetts between 1994 and 2000 to examine the sources of mc s bargaining power i find two significant determinants of price discounts first plans with large memberships are able to extract volume discounts across hospitals second health plans that are more successful at channeling patients can extract greater discounts patient channeling can add to the volume discount that plans negotiate

bilateral monopolies and incentives for merger the paper presents a model of duopoly in which firms acquire inputs through bilateral monopoly relations with suppliers it combines a bargaining model with a duopoly model to examine how input pri

the loss leader is a turkey targeted discounts from multi product competitors abstract i show that multi product firms can compete for their more profitable customers by setting lower margins on goods that are purchased primarily by them effectively offering them discounts without offering these discounts to less profitable customers this suggests a theory of multi product pricing in which a good s profit margin is inversely related to the profitability of the customers who purchase it this theory i provides one explanation for firms offering lower prices to larger customers and ii suggests that loss leader pricing may allow firms to compete more vigorously for more profitable customers this can explain why stores sell turkeys as loss leaders at thanksgiving but may not discount flowers on mother s day or candy on valentines day

child care subsidies quality of care and the labor supply of low income single mothers the authors examine the effects of child care subsidies on the labor supply decisions of low income mothers and o n the quality of care their children receive using newly gathered data on two programs that subsidize the child care expenditures of families in kentucky they find that single mothers who receive child care subsidies are more likely to be employed and are generally more satisfied with the care their children receive but subsidies have little effect on hours worked copyright 1992 by mit press

price quality and income in child care choice recent legislation may substantially expand federal assistance in paying for child care this paper examines the potential effects of three aspects of federal assistance reducing child care price through vouchers or grants to providers improving its quality through incentives or regulation and increasing family income through tax credits on the child care choices employed mothers make the data come from the 1985 wave of the national longitudinal survey of youth ohio state university both multinomial and universal logit models are used the results suggest that price is a critical variable in child care choice the higher the price the lower the probability a mode of care will be chosen parents do not consistently select high quality care although overall quality improvements may increase the use of family day care mothers who earn more per hour and families who have higher incomes other than the mother s earnings are more likely to select center care over other modes consequently subsidizing child care expenditures directly through vouchers and reduced fees or increasing other family income through tax credits consistently increases the use of center based programs all else equal

a critique of exchange rate treatment in agricultural trade models comment the influence of the value of the dollar on developments in the u s farm sector is now widely recognized even so considerable controversy remains over the magnitude of exchange rate effects on agriculture while this is largely an issue of empirical measurement there is also a broadly held perception that the conceptual discussion of these effects has been inadequate in part this is due to extensive discussion of these effects based on partial equilibrium often single market analysis the single market framework imposes tight constraints on exchange rate impacts on equilibrium prices and export quantities in particular in a single market partial equilibrium model the exchange rate elasticity of price is always less than unity in absolute value 1 in an important paper chambers and just extended the single market partial equilibrium approach to account for the effects of an exchange rate realignment on all prices in an n good economy their analysis remained partial in the sense that the exchange rate was exogenous and income was held constant nevertheless they concluded that potential cross price effects in excess supply and excess demand functions make it inappropriate to restrict the exchange rate elasticity of any specific price to the closed interval 1 0 the purpose of this comment is to place the analysis of potential exchange rate effects in agricultural markets more firmly in the context of general equilibrium trade theory the approach presented herein follows krueger chipman 1974 and others in drawing a distinction between traded and nontraded goods then the crucial concept is the association of the real exchange rate and movements of disposable income between countries the xchange rate which affects the prices of traded goods vis a vis the prices of nontraded goods and relative prices among traded goods adjust jointly to accommodate the equilibrium induced by a trade imbalance the income movement between countri s is key because it creates a link between exchange rate and price changes that is not considred in a partial equilibrium analysis explicit consideration of this link clarifies the role of the exchange rate in goods markets and provides a clearer rationale for the case of a percentage change in a price exceeding the percentage exchange rate realignment

the value of consumer choice and the decline in hmo enrollments i introduction and overview health insurance contracts may restrict consumers choice of medical provider in order to minimize moral hazard for example consumers who are insured for their marginal healthcare expenses have no incentive to enforce price discipline on their own in this case insurers may impose this discipline by restricting consumers choice of medical provider to those who offer competitive prices 1 this practice known as selective contracting sc may have other benefits as well including channeling consumers to efficient providers and achieving other efficiencies associated with partial vertical integration sc has been utilized by insurers both in the united states and abroad 2 however it is not a universal feature of health insurance contracts in part this is because reducing the choice set of medical providers imposes costs on consumers to the extent that consumers assign option value to choice capps dranove and satterthwaite 2003 for example sc was widely employed in the united states by health maintenance organizations hmos and other insurers in the 1990s and appears to have been an important cost control mechanism cutler mcclellan and newhouse 2000 robinson and phibbs 1989 however most private u s health insurers moderated their use of sc during the past decade at the same time that healthcare costs accelerated anecdotally a consumer and regulatory backlash against provider choice restrictions forced insurers to expand choice and largely abandon the practice blendon et al 1998 vita 2001 simultaneously hmo enrollments declined the purpose of this article is to explore the economic tradeoffs of sc with a particular focus on directly measuring the value that consumers assign to choice in medical markets i am interested in assessing whether the magnitude of any utility loss from choice restrictions can be offset by volume based price discounts that insurers may receive from hospitals my results bear on the larger question of whether an economic linkage can be drawn between consumers demand for choice and their apparent rejection of what is called tightly managed care they also have implications for many healthcare reform proposals that necessarily imply restrictions on the consumers choice sets i analyze health plan s sc of hospitals in the state of florida between 1999 and 2003 hospital sc restricts consumer choice in multiple ways including their choice of hospital in addition hospital choice restrictions imply restrictions over the use of specific physicians 3 i start by constructing hospital networks for each of a set of plan choices and then estimate a discrete choice model of health insurance demand conditional on each plan s restricted network for these purposes i use the capps dranove and satterthwaite 2003 measure of sc disutility that focuses on the option value of choice i employ several different discrete choice estimators to estimate the model including models with plan metropolitan statistical area msa fixed effects designed to control for unobserved plan attributes this provides me with estimates of disutility resulting from choice restrictions subsequently i project the estimated plan effects onto an instrumented value of plan price in order to estimate the price elasticity and also convert my disutility estimates into dollars my results show that consumers associated restrictive hospital networks with plan disutility during each of the years of the study period with choice elasticities that range from 0 10 to 0 32 in pooled estimates greater effects are obtained in 2003 using models where i allow the estimates to vary by year using my instrumental variables methodology to recover unbiased price coefficients i show that consumers associated a one standard deviation reduction in the size of a plan s hospital network with a reduction in plan value of between 62 and 118

does contracting out increase the efficiency of government programs evidence from medicaid hmos state governments contract with health maintenance organizations hmos to coordinate medical care for nearly 20 million medicaid recipients identifying the causal effect of hmo enrollment on government spending and health care quality is difficult if as is often the case recipients have the option to enroll in a plan to estimate the average effect of hmo enrollment this paper exploits county level mandates introduced during the last several years in the state of california that required most medicaid recipients to enroll in a managed care plan the empirical results demonstrate that the resulting switch from fee for service to managed care was associated with a substantial increase in government spending but no corresponding improvement in infant health outcomes the findings cast doubt on the hypothesis that hmo contracting has reduced the strain on government budgets

marital status and full time part time work status in child care choices using recent sipp data this study estimates two econometric models to study the differences in the effect of child care costs on employment status and differences in the mode of child care used controlling for employment status for both married and single women full time employment is more elastic with respect to changes in the price of child care than part time employment and employment elasticities are larger for single than married mothers in the model of child care modal choice we find that an increased probability of full time employment is associated with an increase in the use of centre care for both married and single mothers and that price elasticities of modal choice are larger for single than married mothers

tax credits labor supply and child care we explore the impact of the child care tax credit in the u s income tax system on the labor supply decisions of married women with young children by incorporating the cost of child care into a st

opportunism in multilateral vertical contracting nondiscrimination exclusivity and uniformity comment an input supplier selling to competing downstream firms would benefit from publicly committing at the outset to all contracts efficient commitment however would require complete contracts the authors study instead bilateral contracting without commitment regarding others terms each firm then fears that the supplier might opportunistically renegotiate another s contract to increase bilateral profit at the firm s expense the authors show that nondiscrimination clauses generally cannot curb such third party opportunism even with symmetric firms to reassure firms crude forms of commitment may be adopted this could explain the pervasiveness of exclusivity arrangements and the striking uniformity and intertemporal rigidity of franchise contracts copyright 1994 by american economic association

the role of buying consortia among smes in the electricity market in italy we model the electricity market in italy focusing on the impact of buying consortia among smes on the behaviour of the large electricity producers and sellers we show that consortia may in certain circumstances produce a pro competitive result i e they may induce a reduction of prices not only for consortia members but also for firms not in the consortia

higher prices for larger quantities nonmonotonic price quantity relations in b2b markets we study a microprocessor company selling short life cycle products to a set of buyers that includes large consumer electronic goods manufacturers the seller has a limited capacity for each product and negotiates with each buyer for the price our analysis of their sales data reveals that larger purchases do not always result in bigger discounts instead the discount curve is like an n while existing theories cannot explain this nonmonotonic pattern we develop an analytical model and show that the nonmonotonicity is rooted in how sellers value capacity when negotiating with a buyer large buyers accelerate the selling process and small buyers are helpful in consuming the residual capacity however satisfying midsized buyers may be costly because supplying these buyers can make it difficult to utilize the remaining capacity which is often too much for small buyers but not enough for large buyers we briefly discuss the implications for capacity rationing and posted pricing as well as potential appl

collusion over the business cycle we present a theory of collusive pricing for markets in which demand alternates stochastically between fast growth boom and slow growth recession phases we show that 1 the most collusive prices are weakly procyclical countercyclical when demand growth rates are positively negatively correlated through time and 2 the amplitude of the collusive pricing cycle is larger when the expected duration of boom phases decreases and when the expected duration of recession phases increases we also offer a generalization of rotemberg and saloner s 1986 model interpreting their findings in terms of transitory demand shocks that occur within broader business cycle phases

why do larger buyers pay lower prices intense supplier competition abstract the paper provides a theoretical explanation of the common claim that larger buyers pay lower prices in the model suppliers compete more aggressively for the business of larger buyers much as they do in boom periods of rotemberg and saloner

expectations and commodity price dynamics the overshooting model monetary policy has important effects on agricultural commodity prices because though they are flexible other goods prices are sticky this paper formalizes the argument by applying the dornbusch overshooting model a decline in the nominal money supply is a decline in the real money supply in the short run it raises the real interest rate which depresses real commodity prices they overshoot their new equilibrium in order to generate an expectation of future appreciation sufficient to offset the higher interest rate these real effects which vanish in the long run also result from a decline in the money growth rate

a structural model of child care and the labor supply of married women this article empirically examines married women s labor supply and child care expenditures the article uses winter 1984 85 data from the survey of income and program participation to estimate a fu

child care costs and family labor supply this paper presents a theoretical and empirical analysis of the effects of child care costs on family labor supply and the demand for market child care the model is a framework for cross section estimation of the effects of child care costs on labor supply and child care use it applies to households having young children requiring continuous care and in which both the mother and 1 other potential child care provider are present the 3 potential sources of child care are the mother the potential informal provider and the market using data from the 1980 baseline household survey of the employment opportunity pilot projects this empirical analysis uses a subsample of 6170 households in which there is a married woman under age 45 with her spouse present at the time of the survey at least 1 child under age 14 and nonmissing data on key variables results show that 1 higher market child care costs discourage women from working even when an informal source of care is available indicating that such informal care is an imperfect substitute for market care 2 a higher wage rate for the mother encourages her to work thus a higher wage rate increases the probability of using market child care 3 the number of children requiring care has a negative impact on the probability of the women working with the largest impact caused by younger children 4 nonwage income has a negative impact on the probability of the woman working and 5 black women are more likely to work than whites and are statistically more likely than whites to use market child care if they do work this family labor supply model predicts that the cost of market child care will affect household decisions on labor supply and child care use estimates of a qualitative choice model provide strong confirmation that child care costs affect such decisions the responsiveness of the labor supply of mothers to child care costs demonstrated in this study indicate that such subsidies do have their intended effect of encouraging labor supply the fact that a large proportion of current child care subsidies benefit primarily middle and upper income families via the income tax credit suggests that the labor supply effets of such subsidies may in practice be stronger for less needy families than for low income families employer subsidized child care may become an increasingly popular tool for attracting mothers into the labor force

the impact of cyclical demand movements on collusive behavior recent work by rotemberg and saloner 1986 investigates the effect of the business cycle on optimal collusive pricing by specifying that demand is subject to i i d shocks an implication of the i i d assumption is that firms expectations on future demand are unrelated to the current level of demand we put forth a model that allows for both the level of current demand and firms expectations on future demand to change over time thus it captures two important properties of the business cycle our analysis reveals that while the gain to deviating from a collusive agreement is greatest during booms firms find it most difficult to collude during recessions as the forgone profits from inducing a price war are relatively low an implication of this effect for pricing behavior is that at the same level of demand price is lower when demand is declining than when demand is rising consistent with previous theoretical work we find that firms price countercyclically for a range of values for the discount factor however numerical simulations reveal a greater tendency for firms to price countercyclically during recessions than during booms

a structural model of labor supply and child care demand this paper specifies and estimates a structural model in which the decision to purchase market child care and the quality purchased is made simultaneously with the employment decision of the mother separate analyses are performed for married mothers and single mothers the structural estimates are used to simulate the effects and costs of changes in the federal child care tax credit the simulations indicate that a refundable child care tax credit would distribute child care benefits more equally across the population by increasing the shares of subsidies received by low income families and would induce a considerable increase in expenditures on market child care labor supply also increases but by considerably less than child care expenditures a surprising result is that despite large increases in child care

labour underutilisation in metropolitan labour markets in australia individual characteristics personal circumstances and local labour markets there has been a growing awareness that the issue of labour market disadvantage is substantially greater than merely considering unemployment and the ability to find a job there is an increasing l

what to stabilize in the open economy we consider the question how best to maintain price level stability in an open economy and evaluate three possible policy choices a a constant money growth rate rule b a fixed exchange rate and c a policy of explicit commitment to a price level target in each case we assume that policy is conducted by injecting reserves into or withdrawing reserves from the banking system in evaluating the three regimes we adopt the criterion that the best policy should leave the least scope for indeterminacy and excessive economic volatility in a steady state equilibrium the choice of regime is largely irrelevant any steady state equilibrium under one regime can be duplicated by an appropriate choice of the control variable under any other regime however we show that the sets of equilibria under the three regimes are dramatically different when all countries follow the policy of fixing a constant rate of money growth there are no equilibria displaying endogenously arising volatility and there is no indeterminacy of equilibrium under a regime of fixed exchange rates indeterminacies and endogenously arising fluctuations are impossible if and only if the country with the low reserve to deposit ratio is charged with maintaining the fixed rate finally when one country targets the time path of its price level under very weak conditions there will be indeterminacy of equilibrium and endogenously arising volatility driven by expectations