job mobility and earnings instability there is still no consensus on the causes of the increase in the variance of transitory earnings earnings instability in the united states it is difficult to attribute the rise in instability to job mobility because there is no evidence of a concurrent increase in job turnover or separations using an error component model of the covariance structure of earnings on panel survey of income dynamics and survey of income and program participation data this study shows that job mobility and the increase in the variance of wage changes upon job change accounts for a substantial part of the increase in earnings instability the empirical evidence is consistent with the simulations of a search and matching model where an increase in the variance of productivity shocks increases on the job search and earnings instability among job changers while leaving job turnover approximately constant jel j21 j31

the economics of slash and burn a case study of the 1997 1998 indonesian forest fires abstract the slash and burn technique is used in many developing countries as a cheap means of clearing forest land for agriculture and involves cutting vegetation and setting it alight this paper takes up a case study of the slash and burn forest fires of 1997 1998 in indonesia and evaluates the social efficiency of this technique by means of a comparison of its economic costs with its economic benefits the economic costs include the welfare loss caused by the fires through damage to plantations and crop cultivations as well as the loss of direct indirect and non use value of environmental goods such as tropical rainforests damaged in the fires the corresponding economic benefits consist of cost saving to shifting cultivators and plantation companies because of the elimination of the need to employ the more expensive mechanical or non fire using methods of land clearing and because of the decreased requirement of fertilisers at the sites cleared for agriculture a comparison of these costs and benefits reveals an estimated loss of us 20 1 billion as a result of use of slash and burn in indonesia in 1997 1998 indicating that use of this technique is highly inefficient from a social perspective policy recommendations based on these findings include among others a proposal for imposition of a land clearing tax on plantation companies in indonesia in order to fund a state agency entrusted with the task of mechanically clearing forest land as per requirement and multilateral aid transfers directed towards providing alternative employment to shifting cultivators

earnings instability and earnings inequality of males in the united states 1967 1991 although much research has focused on recent increases in annual earnings inequality in the united states the increases could have come from either of two sources the distribution of lifetime earnings could have become more unequal or the receipt of lifetime earnings could have become more unstable based on an analysis of the 1968 92 panel study of income dynamics we find that lifetime earnings inequality increased during the early 1980s and that earnings instability increased during the 1970s we also examine how these trends are related to changes in the distribution of wages and hours and the returns to education

trends in the transitory variance of male earnings methods and evidence we estimate the trend in the transitory variance of male earnings in the united states using the michigan panel study of income dynamics from 1970 to 2004 using an error components model and simpler but only approximate methods we find that the transitory variance started to increase in the early 1970s continued to increase through the mid 1980s and then remained at this new higher level through the 1990s and beyond thus the increase mostly occurred about 30 years ago its increase accounts for between 31 and 49 percent of the total rise in cross sectional variance depending on the time period

why are u s women decreasing their labor force participation if their wages are rising given the traditional interpretation of women s labor force participation rate lfpr trends as movements along a positively sloped labor supply curve it is surprising that the recent downward trend in u s women s lfpr has occurred over a period when women s real wages were commonly believed to be rising i find that almost two thirds of the decline since 2000 is attributable to aging of the adult female population the remainder due to declining labor force participation for women under 55 becomes less puzzling in light of my evidence that the wage education locus faced by women actually may have worsened since 2000 jel j21 j31 j82

earnings inequality and mobility in the united states evidence from social security data since 1937 this paper uses social security administration longitudinal earnings micro data since 1937 to analyze the evolution of inequality and mobility in the united states annual earnings inequality is u shaped decreasing sharply up to 1953 and increasing steadily afterward short term earnings mobility measures are stable over the full period except for a temporary surge during world war ii virtually all of the increase in the variance in annual log earnings since 1970 is due to increase in the variance of permanent earnings as opposed to transitory earnings mobility at the top of the earnings distribution is stable and has not mitigated the dramatic increase in annual earnings concentration since the 1970s long term mobility among all workers has increased since the 1950s but has slightly declined among men the decrease in the gender earnings gap and the resulting substantial increase in upward mobility over a lifetime for women are the driving force behind the increase in long term mobility among all workers

intergovernmental fiscal transfers international lessons for developing countries abstract this paper reviews the central issues that arise in designing intergovernmental transfers and surveys the approaches adopted in a number of countries with special emphasis on developing countries since circumstances and objectives differ from country to country no simple uniform pattern of transfers is universally appropriate but experience around the world makes it clear that if services are to be efficiently provided transfers must be designed so that those receiving them have a clear mandate adequate resources sufficient flexibility to make decisions and are accountable for results

growth rate heterogeneity and the covariance structure of life cycle earnings using u s panel data on adult males i compare the profile heterogeneity model of earnings dynamics in which the earnings experience profile varies across individuals to a competing model in which earnings has a unit root the latter specification enjoys increasing popularity among researchers my analysis questions this favor suggesting the profile heterogeneity model provides a more consistent representation of the data i also provide new estimates of the variation in earnings growth rates previous evidence is from relatively unrepresentative samples individuals one standard deviation above the mean enjoy a 20 30 earnings advantage in just 10 years

the rise of the states u s fiscal decentralization in the postwar period article i nfo article history one of the most dramatic changes in the fiscal federalism landscape during the postwar period has been the rapid growth in state budgets which almost tripled as a share of gdp and doubled as a share of government spending between 1952 and 2006 we argue that the greater role of states cannot be easily explained by changes in tiebout forces of fiscal competition such as mobility and voting patterns and are not accounted for by demographic or income trends rather we demonstrate that much of the growth in state budgets has been driven by changes in intergovernmental interactions restricted federal grants to states have increased and federal policy and legal constraints have also mandated or heavily incentivized state own source spending particularly in the areas of education health and public welfare these outside pressures moderate the forces of fiscal competition and must be taken into account when assessing the implications of observed revenue and spending patterns

changes in earnings instability and job loss this paper examines the contribution of job loss or displacement to increasing male earnings instability between 1970 and 1991 earnings instability increased among both displaced and not displaced men so changes associated with job loss cannot fully explain rising instability changes in the incidence and consequences of job loss did however add substantially to growing earnings instability and to the overall variance of earnings there is evidence that displacement substantially raised earnings volatility for several years after job loss that effect combined with increased numbers of recently displaced workers in the 1980s relative to the previous decade contributed to rising overall earnings instability

decomposing trends in income volatility the wild ride at the top and bottom we use 2 year panels from the current population survey to provide a detailed accounting of family income volatility from 1980 to 2009 volatility doubled overall and the increase was most pronounced among the top 1 of the income distribution but in any given year the level of volatility among the bottom 10 exceeds that of the top the increased volatility comes from higher instability of head and spouse earnings other nonlabor income and from reduced covariance between these income sources with the tax system this suggests that current tax policy is less effective in mitigating income shocks than previous decades jel j31 i30

intergenerational transmission of risk attitudes a revealed preference approach using data the german socio economic panel gsoep we investigate whether the willingness to take risks which is revealed via observed choices of occupation is transmitted from parents to children our approach resembles the one by dohmen et al 2008 who investigate the same question using stated preferences as risk variable we use earnings risk measured by the cross sectional coecient of residual variation obtained from mincerian wage regressions we nd that fathers riskiness of the job chosen is a signicant determinant of sons occupational risk our results are robust to dierent specications underpinning the hypothesis of intergenerational transmission of risk preferences

trends in the transitory variance of earnings in the united states we decompose the rise in cross sectional variance of male annual earnings in the united states from 1969 to 1996 into permanent and transitory components we find that the variance of permanent earnings began rising in the the late 1970s and has continued to rise in the 1980s the variance of transitory earnings also rose in the 1980s but declined in the 1990s there are lags in the earnings process which require a structural model to pinpoint the exact calendar times at which the changes in trends occurred

did household consumption become more volatile i show that after accounting for predictable variation arising from movements in real interest rates preferences and income shocks liquidity constraints and measurement errors volatility of household consumption in the us increased by 25 percent between 1970 and 2004 the increase was lower than that of volatility of family income nonwhite and those with less than 13 years of education for whom there was no differential increase in income volatility experienced a significantly larger increase in volatility of household consumption substantial differences in wealth and access to credit markets point to the main reason for this divide jel d12 d14 e21 j15

earnings instability and tenure we study the effect of tenure on earnings instability in italy using two alternative estimation strategies first we use a descriptive measure of earnings instability and fixed effects regressions second we develop a formal model of earnings dynamics distinguishing permanent from transitory earnings and exploit variation of tenure and instability over time and across birth cohorts in estimation we use the two approaches also to evaluate earnings instability associated with temporary contracts short tenure contracts our results indicate that each year of tenure on the job reduces earnings instability on average by 11 workers on a temporary contract have an earnings instability up to 50 higher than workers on a permanent contract

unemployment insurance wage dynamics and inequality over the life cycle we investigate the relationship between life cycle wages and individual membership of unemployment insurance schemes in denmark we separate permanent from transitory wages and characterise them using membership of unemployment insurance funds we find that unemployment insurance is associated with lower wage growth heterogeneity over the life cycle and greater wage instability changing the nature of wage inequality from permanent to transitory although we are in general unable to formally test for moral hazard against adverse selection into unemployment insurance robustness checks suggest that moral hazard is the relevant interpretation

income instability and fiscal progression we construct the ratio of the post fisc transitory income variance to the pre fisc transitory income variance of family incomes as a measure of fiscal progressivity in canada between 1993 and 2008 this ratio can be interpreted as measuring the extent to which the fiscal system attenuates personal income instability we find that the tax and transfer system has been less eective in stabilizing market incomes after 1998 compared to the previous years this is attributable to the provincial and federal tax reforms from 1999 2001 which particularly aected families headed by individuals with less than high school education while the reforms reduced the eective marginal tax rates faced across all educational groups the reduction is relatively larger among families with highly educated main earners moreover the group with less than high school education is distinct in that the average eective tax burden in this group increased changes to social assistance also appear to have played a role

foreign transfers and tropical deforestation what terms of conditionality the purpose of this paper is to propose a nonparametric interest rate term structure model and investigate its implications on term structure dynamics and prices of interest rate derivative securities the nonparametric spot interest rate process is estimated from the observed short term interest rates following a robust estimation procedure and the market price of interest rate risk is estimated as implied from the historical term structure data that is instead of imposing a priori restrictions on the model data are allowed to speak for themselves and at the same time the model retains a parsimonious structure and the computational tractability the model is implemented using historical canadian interest rate term structure data the parametric models with closed form solutions for bond and bond option prices namely the vasicek 1977 and cir 1985 models are also estimated for comparison purpose the empirical results not only provide strong evidence that the traditional spot interest rate models and market prices of interest rate risk are severely misspecified but also suggest that different model specifications have significant impact on term structure dynamics and prices of interest rate derivative securities

trends in men s earnings volatility what does the panel study of income dynamics show abstract many recent studies have investigated trends in u s men s earnings volatility but the studies based on the panel study of income dynamics appear to conflict with each other and with studies based on other data we critique some of the existing methods of measuring earnings volatility and we advocate for transparent methods that focus on simple measures of dispersion in year to year earnings changes applying such measures in the psid we find that apart from the well known counter cyclicality of earnings volatility men s earnings volatility increased during the 1970s but did not show a clear trend afterwards until a new upward trend appeared after 1998

redesigning the aid contract donors use of performance indicators in uganda abstract the perceived failure of traditional ex ante conditionality has led to proposals for using performance indicators as a basis for aid allocations ex post conditionality in this article we assess the role of performance indicators and their impact on the aid contract between donors and the government of uganda in uganda the use of performance indicators has radically changed donor recipient relations by improving both program monitoring and donor coordination it has however not yet fundamentally changed the incentive structure in the aid contract to improve the incentive structure we propose a distinction between indicators used for monitoring and those designed to guide aid allocations

welfare based income insecurity in the us and germany evidence from harmonized panel data this paper develops normative approaches for measuring individual level income insecurity using concepts derived from expected utility theory and prospect theory we build a suite of measures designed to capture various facets of psychologically distressing income risk we present an application for the us and germany from 1993 2013 employing conditionally heteroskedastic fixed effects models to generate predictive densities for future incomes our results reveal much higher levels of income risk in the us relative to germany which can be mostly attributed to a higher level of autonomous time invariant volatility state by state variations in liberal conservative political administrations partially explain our results and we find some evidence that trade exposure is a contributing factor in the us

estimates of year to year volatility in earnings and in household incomes from administrative survey and matched data abstract we document trends in the volatility in earnings and household incomes between 1985 and 2005 in three different data sources administrative earnings records the survey of income and program participation sipp matched to administrative earnings records and sipp survey data in all data sources we find a substantial amount of year to year volatility in workers earnings and household incomes in the data sources that contain administrative earnings we find that volatility has been roughly constant and has even declined slightly since the mid 1980s these findings differ from what is found using survey data and what has been reported in previous studies

financing sustainable development country undertakings and rights for environmental sustainability cures abstract we propose a global mechanism to finance sustainable development sd that offers a number of advantages over the current global environmental facility gef the mechanism would be multinational provide incentives for rich and poor countries to promote sd incorporate the principle of common but differentiated responsibilities and link incentives and funding for sd to structural benchmarks and performance targets it would operate as a large fund into which rich countries would pay based on their level of population per capita income and change in a measure of environmental sustainability receipts from the funds called country undertakings and rights for environmental sustainability cures would be made to poor countries based on their population per capita income and absolute level of environmental sustainability this approach differentiates payments and receipts on the basis of income while rewarding improvements in environmental performance in rich countries and making greater payments to countries with greater environmental problems to promote flexibility recipient countries would be able to trade bank or borrow their assigned cures provided that the trade resulted in a verifiable improvement in environmental sustainability in the purchasing country a reformed gef that adopted the desirable features of cures if widely adopted and funded at a sufficiently high level would offer a significant boost to global sd and would greatly assist poor countries to address the twin challenges of poverty and environmental degradation

earnings dynamics and inequality among canadian men 1976 1992 evidence from longitudinal income tax records using an extraordinary database drawn from longitudinal income tax records we decompose canada s growth in earnings inequality into its persistent and transitory components we find that the growth in earnings inequality reflects both an increase in long run inequality and an increase in earnings instability the canadian data strongly reject several restrictions commonly imposed in the u s literature and they also suggest that imposing these evidently false restrictions may lead to distorted inferences about earnings dynamics and inequality trends

changes in the distribution of earnings volatility recent research has documented a rise in the volatility of individual labor earnings in the united states since 1970 existing measures of this trend abstract from within group latent heterogeneity effectively estimating an increase in average volatility for observable groups we decompose this average and find no systematic rise in volatility for the vast majority of individuals increasing average volatility has been driven almost entirely by rising earnings volatility of those with the most volatile earnings identified ex ante by large past earnings changes we characterize dynamics of the volatility distribution with a nonparametric bayesian stochastic volatility model from jensen and shore 2011

incentives and response rates to cross national business surveys a logit model analysis an experiment was designed to assess the effects of an enclosed incentive bookmark a promised incentive offer of free copy of the survey results the target country and the nationality of the parent company on response from a sample of american and japanese owned foreign subsidiaries logit model analysis was used to identify main and interaction effects both the bookmark and nationality of parent company affected response rates while the offer of survey results and target country had no effect no interaction effects were found the implications for cross national mail survey research are discussed

compensation for environmental services and intergovernmental fiscal transfers the case of india this paper studies mechanisms to compensate local government for the public provision of environmental services using the theory of optimal fiscal transfers in india especially we analyzed the role of intergovernmental fiscal transfers in achieving the environmental goal simply assigning the functions at appropriate levels does not ensure optimal provision of environmental services optimality in resource allocation could be achieved by combining the assignment system with an appropriate compensation mechanism intergovernmental fiscal transfers would be a suitable mechanism for compensating the local governments and help in internalizing the spillover effects of providing environmental public goods illustrations are also provided for india