can falling supply explain the rising return to college for younger men a cohort based analysis although the college high school wage gap for younger u s men has doubled over the past 30 years the gap for older men has remained nearly constant in the united kingdom and canada the college high school wage gap also increased for younger relative to older men using a model with imperfect substitution between similarly educated workers in different age groups we argue that these shifts reflect changes in the relative supply of highly educated workers across age groups the driving force behind these changes is the slowdown in the rate of growth of educational attainment that began with cohorts born in the early 1950s in all three countries

measuring human capital in the labor market the supply of experience in 8 oecd countries abstract to investigate the evolution of the supply side of the labor market i derive a methodology to measure an important component of the human capital level of the workforce the experience of the labor market based on the perpetual inventory method a stock of experience is estimated for eight oecd countries it appears that during the last three decades the oecd labor markets have faced a decline in the supply of experience by the labor market participants with a minimum in the early 1980s for most countries and a recovery in the 1990s some implications regarding relative wages relative unemployment and schooling are discussed

the relationship between resilience and sustainability of ecological economic systems resilience as a descriptive concept gives insight into the dynamic properties of an ecological economic system sustainability as a normative concept captures basic ideas of intergenerational justice when human well being depends on natural capital and services thus resilience and sustainability are independent concepts in this paper we discuss the relationship between resilience and sustainability of ecological economic systems we use a simple dynamic model where two natural capital stocks provide ecosystem services that are complements for human well being to illustrate different possible cases of the relationship between resilience and sustainability and to identify the conditions under which each of those will hold a resilience of the system is necessary but not sufficient for sustainability b resilience of the system is sufficient but not necessary for sustainability c resilience of the system is neither necessary nor sufficient for sustainability and d resilience is both necessary and sufficient for sustainability we conclude that more criteria than just resilience have to be taken into account when designing policies for the sustainable development of ecological economic systems and vice versa the property of resilience should not be confused with the positive normative connotations of sustainability c 2011 elsevier b v all rights reserved

environmental policy government and the market environmental policy is made in a context of both market failure and government failure on the one hand leaving environmental protection to the free market relying on notions of corporate social responsibility and altruistic consumer and shareholder preferences will not deliver optimal results on the other hand nationalizing the delivery of environmental protection is likely to fail because nation states rarely have the depth and quality of information required to instruct all the relevant agents to make appropriate decisions thus as for many areas of policy appropriate models of environmental intervention will lie between these two extremes while it is impossible to specify general rules concerning the precise form of intervention in part because the type of intervention depends upon value judgements this paper sets out some of the considerations that are particular to environmental policy and explores several principles for policy design including information coordination and principal agent problems with a particular focus on the international context

by force of demand explaining cyclical fluctuations of international trade and government spending abstract this paper explores the role of demand shocks as an alternative to productivity shocks in driving both domestic and international business cycles within the international real business cycle irbc framework in addition to those well documented domestic business cycle fluctuations e g the volatility and cyclicality of output consumption investment labor hours and labor productivity and international business cycle properties e g the countercyclical net export and the comovement puzzle this paper focuses on two additional stylized facts in the industrialized countries the procyclical trade openness the gdp fraction of trade volume and the countercyclical government size the gdp fraction of government spending using a parsimonious dynamic stochastic general equilibrium model we show that the model s predictions under productivity shocks are not consistent with these facts instead a demand shock driven model replicates the above facts while matching other domestic and international business cycle properties an estimated version of the model confirms the quantitatively important impacts of demand shocks

why does trend growth affect equilibrium employment a new explanation of an old puzzle that the employment rate appears to respond to changes in trend growth is an enduring macroeconomic puzzle this paper shows that in the presence of a return to experience a slowdown in productivity growth raises reservation wages thereby lowering aggregate employment the paper develops new evidence that shows this mechanism is important for ex

your money or your life green growth policies and welfare in 2050 this paper proposes a simple index of economic progress that weighs in the monetary cost induced by climate change mitigation policies as well as the health benefits arising from the reduction in local air pollution the shadow price of pollution is calculated indirectly through its impact on life expectancy taking into account the health benefits of mitigation policies significantly reduces their monetary cost in china and india as well as in countries with large fossil based energy producing sectors australia canada and the united states

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

employment and hours over the business cycle abstract approximately one quarter of the adjustment in total hours of employment over the business cycle represents adjustments in hours while the remainder is explained by changes in employment real business cycle models characterize agents as either continuously adjusting their hours or making only labor force participation decisions about jobs with indivisible hours in this paper we extend the representative agent framework to allow for decisions on both participation and hours we calibrate and simulate a dynamic version of the model and show that it is better able to mimic some features of the aggregate data

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

the welfare economic theory of green national accounts this paper takes a critical look at the literature on green national accounts the problem studied is to find a linear index of economic variables that responds to perturbations in the same direction as social well being the thesis of a large literature that net national product which is a flow is that index in closed economies is shown in some interpretations to be simply false and in others to suffer from deep estimation problems it is argued that capital depreciation using shadow prices should certainly be included in national accounts but that the right welfare index is a comprehensive measure of wealth defined as the shadow value of an economy s stock of all capital assets it is shown that comprehensive wealth is usable as a criterion for policy evaluation as well as for determining sustainable economic development

government spending and the international business cycle in this paper the author develops a stochastic general equilibrium model of the world economy it differs from previous multicountry models in the introduction of the government sector the author assumes that countries produce a nonspecialized traded good and that households derive utility from the consumption of private and public goods and services this simple modification has a potential explanation for the low cross country correlations in private consumption and output and the countercyclical trade balances that are observed empirically

structural decompositions of energy consumption between 1995 and 2009 evidence from wiod abstract energy is key to achieving sustainable development this paper explicitly distinguishes between the supply side of energy consumption and demand side of energy consumption and investigates the factors that affect the energy consumption across economies using data from the world input output database wiod this paper decomposes the relative changes of energy consumption into intensity effect production structure structural change in final demand total final demand effect and household consumption then it further decomposes production structure into inter industry structural effect and trade effect in intermediate inputs overall energy consumption growth is mainly driven by total final demand 55 04 increase at the world level but can be significantly reduced by intensity effect due to technological change 21 02 decrease at the world level there is heterogeneity of structure related effects across economies and within the same economy in both aspects of energy consumption in addition the trade effect and household effect are relatively small this paper provides an empirical framework for analyzing energy consumption in a globalizing world and suggests tailored and integrated energy policies

questioning demand a study of regretted purchases in great britain abstract this paper presents findings from a nationally representative household survey on the tendency to regret purchases across 20 product groups the survey reveals that the vast majority of adults in great britain 82 have regretted a purchase in the past post purchase regret is shown to be particularly prevalent for clothing footwear and takeaway food the tendency to regret purchases appears to reduce with age and to be more common amongst white collar rather than blue collar workers combining survey results with average price estimates gives an estimated aggregate annual expenditure on regretted purchases of 5 25bn equivalent to 2 10 of annual consumer spending on goods in great britain these findings are interesting because they suggest that there is a degree of self assessed over consumption that if reduced could help to reduce pressures on the environment

the economic analysis of biodiversity an assessment biodiversity is complex difficult to define difficult to measure and often involves international and intergenerational considerations biodiversity loss presents significant economic challenges a great deal of economics is required to understand the issues but a simple and important observation is that most species and ecosystems are not traded in markets so prices are often absent and biodiversity is under provided despite the formidable obstacles to high quality economic analysis economics has plenty to offer to biodiversity policy first economic valuation techniques can be employed to roughly estimate the value of the benefits provided by biodiversity and ecosystems second assessing the optimum amount of biodiversity involves recognizing that the conversion of natural capital into manufactured and human capital has so far generated vast amounts of wealth while there may have been too much biodiversity in the past economic analysis suggests that this is a difficult position to hold now third econometric techniques and carefully designed policy studies can assist in determining what policies are most suited to different contexts to cost effectively reduce biodiversity loss fourth political economy is helpful because international coordination is often required ecosystems do not respect national borders and many biodiverse ecosystems are in poorer countries this paper synthesizes the issues and proposes a research agenda which includes improving the measurement and accounting of natural capital improving valuation techniques and theory to provide greater guidance as to the optimum biodiversity and developing our understanding of the merits of different alternatives for government intervention to reduce biodiversity loss

occupational mobility and wage inequality in this article we argue that wage inequality and occupational mobility are intimately related we are motivated by our empirical findings that human capital is occupation specific and that the fraction of workers switching occupations in the u s was as high as 16 a year in the early 1970 s and had increased to 21 by the mid 1990 s we develop a general equilibrium model with occupation specific human capital and heterogeneous experience levels within occupations we find that the model calibrated to match the level of occupational mobility in the 1970 s accounts quite well for the level of within group wage inequality in that period next we find that the model calibrated to match the increase in occupational mobility accounts for over 90 of the increase in wage inequality between the 1970 s and the 1990 s the theory is also quantitatively consistent with the level and increase in the short term variability of earnings copyright wiley blackwell

propagation mechanisms for government spending shocks a bayesian comparison the inability of a simple real business cycle model to predict a rise in consumption in response to increased government expenditures observed in many empirical studies has stimulated the development of alternative theories of government spending shocks using the bayesian approach we evaluate the quantitative performance of five extant models and find that neither of the considered transmission mechanisms for government spending helps improve the fit of the baseline model moreover we find that consumption decreases in all estimated models in response to a rise in government spending

sustainability in uncertain economies a stochastic growth model with a list of capital assets i e reproducible capital non renewable resources the knowledge base and institutions is studied to evaluate the effects of different sources of uncertainty on sustainability it is also discussed which measure can serve as an index of intergenerational welfare to evaluate sustainable development under uncertainty the aim is to consider a more comprehensive setting than is usually explored in the literature and to generalize arrow dasgupta and maler results to the case of uncertainty

sustainable development and resilience in ecosystems two new important developments in environmental and resource economics is presented non convex dynamics of ecosystems and wealth as an indicator of sustainable development non convex dynamics imply existence of resilience that is the robustness of systems to withstand exogenous perturbations resilience can be regarded as an insurance against flips of the system into different basins of stability sustainable development according to the bruntland report is the provision of productive resources to future generations to make it possible for them to live as well as the present generation thus the value of changes in productive assets is therefore an index of whether an economy is on a sustainable path or not resilience can be regarded as one such productive asset and the paper discusses how one can define the value of this asset

the price of experience we identify a key role of factor supply driven by demographic changes in shaping several empirical regularities that are a focus of active research in macro and labor economics in particular demographic changes alone can account for the large movements of the return to experience over the last four decades for the differential dynamics of the age premium across education groups emphasized by katz and murphy 1992 for the differential dynamics of the college premium across age groups emphasized by card and lemieux 2001 and for the changes in cross sectional and cohort based life cycle profiles emphasized by kambourov and manovskii 2005 jel d91 e24 i23 j11 j24 j31

sustainability as a fair bequest an evaluation challenge abstract in contrast to conventional approaches the conceptualisation of sustainability as fair bequest makes it possible to consider a finite time horizon valuation is necessary to determine whether the bequest package that is passed on from one generation to the next is fair acknowledging the merits as well as the limitations of economic price theory this paper differentiates between three classes of valuables the essential the useful and the unique it is argued that a fair bequest package should contain items from each of the classes because the three classes are incommensurable fairness of the bequest cannot be expressed by a single figure like a non declining total value of the package we then discuss which methods are appropriate for describing a bequest package with respect to its fairness

recent advances in the valuation of ecosystem services and biodiversity recent interest in the economics of biodiversity and wider ecosystem services has been given empirical expression through a focus upon economic valuation this emphasis has been prompted by a growing recognition that the benefits and opportunity costs associated with such services are frequently given cursory consideration in policy analyses or even completely ignored the valuation of biodiversity and ecosystem services is therefore increasingly seen as a crucial element of robust decision making and this has been reflected in a growing body of related research we provide a critical review of some of this research considering the valuation methods applied to date and focussing upon their limitations in respect to certain categories of ecosystem services particularly cultural services and the applicability of the extant literature to new settings substantial questions also remain at the interface of natural science and economics and we consider the potential contribution of the conceptualization of ecosystems as assets as a response to this challenge as part of this review we also highlight the role which large scale ecosystem assessments have played as an impetus to extending the valuation evidence base and the way in which frameworks and assessments of how ecosystems contribute to human wellbeing might be translated into policy thinking and decision analyses

the effect of cohort size on earnings growth a reexamination of the evidence this study reexamines the effect of cohort size on earnings growth finis welch finds that individuals in larger cohorts experience depressed earnings conditions on entry into the labor market but that their earnings grow at faster rates than in smaller cohorts thus a large portion of the cohort size effect on earnings dissipates after a few years however using data almost identical to those of welch but estimating less restrictive models it is found here that cohort size not only depresses earnings at entry but also seems to slow down early career earnings growth the evidence suggests that earnings ini larger cohorts do not approach normal levels after at brief period in the labor force rather the negative cohort size effect on earnings appears to worsen with experience

early career work experience and gender wage differentials we estimate a wage model that includes an array of variables measuring the fraction of time worked during each year of the career this array fully characterizes past employment experience regardless of how sporadic it has been our model yields substantially higher estimated returns to experience and lower returns to tenure than do models that measure experience cumulatively and use the standard quadratic functional form we find that the data reject the standard model but fail to reject our model furthermore we find that 12 of the male female wage gap is due to differences in the timing of work experience

the effects of differential income replacement and mortality on u s social security redistribution we study redistribution via the u s social security retirement system for cohorts of men born during the second half of the 20th century our focus is on redistribution across race and education groups the cohorts we study are younger than cohorts studied in previous similar research and thus more exposed to recent increases in earnings inequality all else equal this should increase the degree of progressivity of social security redistribution due to the structure of the benefit formula however we find that redistribution is only modestly progressive for individuals born as late as 1980 differential mortality rates across race and education groups are the primary explanation while black white mortality gaps have narrowed some in recent years they remain large and dull progressivity mortality gaps by education level are also large and unlike the gaps by race they are widening which puts additional regressive pressure on social security redistribution

can fiscal spending stimulate private consumption abstract empirically government expenditure shocks seem to crowd in private consumption while neoclassical and new keynesian models predict crowding out we derive conditions under which a government in utility specification in a sticky price model helps to reconcile theory and evidence

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

the economic insurance value of ecosystem resilience abstract ecosystem resilience i e an ecosystem s ability to maintain its basic functions and controls under disturbances is often interpreted as insurance by decreasing the probability of future drops in the provision of ecosystem services resilience insures risk averse ecosystem users against potential welfare losses using a general and stringent definition of insurance and a simple ecological economic model we derive the marginal economic insurance value of ecosystem resilience and study how it depends on ecosystem properties economic context and the ecosystem user s risk preferences we show that i the insurance value of resilience is negative positive for low high levels of resilience ii it increases with the level of resilience and iii it is one additive component of the overall always positive economic value of resilience

critical natural capital revisited ecological resilience and sustainable development abstract the maintenance of critical natural capital is an important objective of sustainable development critical natural capital represents a multidimensional concept as it mirrors the different frameworks of various scientific disciplines and social groups in valuing nature this article revisits the concept of critical natural capital and examines its relation to the concept of ecological resilience i propose that ecological resilience can help a great deal in specifying the ecological criticality of specific renewable parts of the natural capital more specifically i suggest that the degree of ecological resilience is inversely related to the degree of threat ecosystems are prone to the concept of ecological resilience may complement other measures such as integrity or vulnerability in estimating the degree of threat specific ecosystems are exposed to the empirical estimates of ecological resilience add a further criterion in order to build a comprehensive and clear conception of critical natural capital

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

capital theory and the measurement of sustainable development an indicator of weak sustainability the measurement of sustainable development is not without considerable difficulties yet this should not detract from the positive advances that can be made in this direction in this paper we present one form that a weak sustainability indicator can take derived from a simple but intuitive savings rule it incorporates the idea that the level of overall capital stock should be non decreasing although subject to qualification at this stage some interesting results emerge from the application of the rule to 18 countries

environmental choices and hyperbolic discounting an experimental analysis environmental goods such as carbon abatement or green space development often generate benefit streams that may not occur until far into the future how individual consumers value such amenities therefore depends critically on the discount rate the usual assumption is that agents discount future values using constant exponential rate but there is some evidence from the lab suggesting that discount functions are more likely quasi hyperbolic we compare estimates of subjects rate of intertemporal time preference for financial rewards and environmental goods using multiple price list and a new matrix multiple price list approaches our objective is to determine if discount functions for environmental and monetary goods differ and to estimate the structure of discounting in both contexts we find that financial discount functions are not hyperbolic but those for environmental goods are discount rates for environmental goods are generally lower than for financial rewards but are still above zero consumers therefore value long lived environmental goods differently than financial goods

anticipation learning and welfare the case of distortionary taxation we study the impact of anticipated fiscal policy changes in the ramsey economy when agents form expectations using adaptive learning we extend the existing framework by distortionary taxes as well as elastic labour supply which makes agents decisions non predetermined but more realistic we detect that the dynamic responses to anticipated tax changes under learning have oscillatory behaviour moreover we demonstrate that this behaviour can have important implications for the welfare consequences of fiscal reforms

stochastic depreciation and the business cycle the authors study a version of the neoclassical growth model in which shocks to both aggregate productivity and the depreciation of capital generate fluctuations around the steady state growth path depreciation shocks induce an inverse comovement between average labor productivity and hours worked when the model is calibrated to u s data it generates a correlation between productivity and hours which is significantly closer to the observed value than that of standard real business cycle models furthermore the addition of depreciation shocks does not cause a deterioration of the predictions of the model concerning other comovements copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

declining labor turnover and turbulence abstract the rate of job loss has been on a secular decline for the last four decades or longer changes in demographics or industry composition do not account for the trend this paper seeks to identify the possible sources of the decline using a simple search and matching model with two types of workers experienced and inexperienced where the former type faces a risk of skill loss during unemployment the calibrated model suggests that a higher risk of skill loss during unemployment results in a lower job separation rate because workers accept lower wages in exchange for job security various other potential hypotheses are also examined

ownership risk investment and the use of natural resources the effect of insecure ownership on ordinary investment and natural resource use is examined insecure ownership is postulated to depend on the type of government regime in power and the prevalence of political violence or instability the political determinants of economy wide investment are estimated from cross country data and the results are used to form an index of ownership security when introduced into empirical models of natural resource use this index has a significant and quantitatively important effect on the use of forests and petroleum contrary to conventional wisdom ownership risk slows resource use in some circumstances

spatial aggregation and the value of natural capital abstract location matters for the value of capital assets the value of changes in natural capital wealth can depend on whether natural capital asset prices are measured locally and then aggregated or whether average values are applied over aggregate representative areas spatial heterogeneity of resource characteristics and institutions impact approximations of the intertemporal welfare function and accounting price function because when spatial aggregation precedes valuation it implies greater arbitrage opportunities leading to more inelastic shadow accounting price functions than when valuation is done locally and then aggregated aggregation of observed values across varying resource and institutional characteristics can lead to omitted variables bias we illustrate these results in the context of groundwater in the kansas high plains aquifer and demonstrate that the accounting price function is less elastic when the accounting price is measured locally failure to measure locally and then aggregate could lead to undervaluing scarce resources and overvaluing plentiful ones which biases wealth accounts in favor of passing the non declining wealth sustainability test

are we consuming too much this paper articulates and applies frameworks for examining whether consumption is excessive we consider two criteria for the possible excessiveness or insufficiency of current consumption one is an intertemporal utility maximization criterion actual current consumption is deemed excessive if it is higher than the level of current consumption on the consumption path that maximizes the present discounted value of utility the other is a sustainability criterion which requires that current consumption be consistent with non declining living standards over time we extend previous theoretical approaches by offering a formula for the sustainability criterion that accounts for population growth and technological change in applying this formula we find that some poor regions of the world are failing to meet the sustainability criterion in these regions genuine wealth per capita is falling as investments in human and manufactured capital are not sufficient to offset the depletion of natural capital

irreversibility and uncertainty cause an intergenerational equity efficiency trade off abstract two important policy goals in intergenerational problems are pareto efficiency and sustainability i e intergenerational equity we demonstrate that the pursuit of these goals is subject to an intergenerational equity efficiency trade off our analysis highlights two salient characteristics of intergenerational problems and policy i temporal irreversibility i e the inability to revise one s past actions and ii uncertainty of future consequences of present actions in human environment systems we employ a two non overlapping generations model that combines an intragenerational production decision on the use of circulating capital and a non renewable resource with a negative intergenerational externality as an unforeseen contingency if initially unknown problems become apparent and policy is enacted after irreversible actions were taken policy making faces a fundamental trade off between ex post pareto efficiency and sustainability that is one can achieve either one of these two goals but not both

swimming upstream trends in the gender wage differential in the 1980s using michigan panel study of income dynamics data for 1979 and 1988 we analyze how a falling gender wage gap occurred despite changes in wage structure unfavorable to low wage workers the decrease is traced to gender specific factors which more than counterbalanced changes in measured and unmeasured prices working against women supply shifts net of demand were unfavorable for women generally and hurt high skilled more than middle and low skilled women by analyzing wages we find support for the notion of a gender twist in supply and demand having its largest negative effect on high skilled women

firm size wage gaps job responsibility and hierarchical matching i present the fact that wage gaps due to firm size increase with job responsibility i use swedish data to determine whether wage gaps increase with a direct measure of job responsibility to compare the age patterns of the wage gaps for blue and white collar workers and to compare wages by job responsibility and spans of control with u s data i compare supervisory to nonsupervisory occupations and find that wage gaps increase with job responsibility for most occupational ladders this fact is consistent with hierarchical matching models in which the larger number of subordinates amplifies managerial talent

are positional concerns stronger in some domains than in others for more than one hundred years economists have discussed the concept of positional goods that the utility conferred by many perhaps even most goods depends not only on the amount the individual consumes but also on the amount others consume e g thorstein veblen 1899 james duesenberry 1949 john k galbraith 1958 robert frank 1985 while economic interest in positional goods is increasing e g mark pingle and mike mitchell 2002 kenneth arrow et al 2004 ed hopkins and tatiana kornienko 2004 the literature remains largely theoretical rather than empirical if status concerns affect all items in the utility function equally leisure as well as goods the positional effect would operate like a lump sum tax reducing well being without changing the allocation of time or money arrow et al 2004 however if positional concerns are stronger for some things than for others then in order to understand how people can become better off in well being not simply in wealth we must investigate how interpersonal competition interacts with material gains frank 1997 evidence about what goods are more positional than others is essential for correct policy recommendations gregory besharov 2002 but little is actually known about the relative positional rankings of items in the typical consumer s utility function four hypotheses proposed in the literature are

time consistent optimal fiscal policy this article studies the properties of optimal fiscal policy in a stochastic growth model when the government cannot commit itself beyond the next period s capital income tax rate we find that the results contrast markedly with those under full commitment first capital income tax rates are very high 65 on average versus close to zero on average under full commitment second labor income taxes are rather low on average about 12 versus a value of around 31 under full commitment finally labor income taxes are quite volatile whereas under full commitment their standard deviation is essentially zero

why the gender gap in wages narrowed in the 1980s since 1976 the gender gap in wages on average declined by about 1 per year this article focuses on identifying the factors underlying this trend three data sets are analyzed the current population survey the panel study of income dynamics and the national longitudinal survey we find that convergence in measurable work related characteristics schooling and work experience explains one third to one half the narrowing the remainder is attributable to a relative increase in women s returns to experience as well as to declining wages in blue collar work and other factors

optimal fiscal and monetary policy some recent results this paper studies the quantitative properties of fiscal and monetary policy in business cycle models in terms of fiscal policy optimal labor tax rates are virtually constant and optimal capital income tax rates are close to zero on average in terms of monetary policy the friedman rule is optimal nominal interest rates are zero and optimal monetary policy is activist in the sense that it responds to shocks to the economy

time consistent control in non linear models abstract the paper shows how to use optimal control to compute optimal time consistent markovian government policies in nonlinear dynamic general equilibrium models it extends cohen and michel s 1988 results for the linear quadratic case the method involves replacing private agents costate variables with flexible functions of current state variables in the government s maximization problem the functions hold in equilibrium to an arbitrarily close approximation they can be found numerically by perturbation or projection methods a stochastic model of optimal public spending illustrates the technique

net national product as an indicator of sustainability net national product nnp can potentially serve several objectives among others to measure value added and to be an indicator of welfare in the aftermath of the world commission on environment and development however it also seems important to investigate whether the concept of nnp can serve as an indicator of sustainability my point of departure following hicks 1946 ch 14 is therefore to require that nnp should measure what can be consumed in the present period without reducing future consumption possibilities and in line with this to argue that the nnp should equal the maximum per capita consumption level that can be sustained if sufficiently many facilitating assumptions are made then a concept of nnp that serves as an exact indicator of sustainability can easily be constructed for instance for a closed economy with a constant population a stationary technology and with only one capital good it follows that the present does not reduce future consumption possibilities if and only if it does not decrease the stock of the single capital good hence under the assumption that the one capital good k is identical to the one consumption good x nnp defined as y x k measures the maximal sustainable consumption at time t because then x y is equivalent to k the purpose of this note is to establish that with multiple capital goods it is not in general possible to construct an exact indicator of sustainability on the

clarifying protected and utilitarian values of critical capital abstract sustainable development may be defined as a non declining value of capital stocks social natural built and human over time the ability for substitution between and within each stock over time has been widely debated resulting in the identification and then preservation of critical capital stocks we propose that critical can be defined from two ethical perspectives teleological or consequentialist goal or ends based and deontological moral duty and rule based the consequential ethic ensures critical capitals are utilitarian in value and they generate goods and services for the maintenance of human wellbeing whilst deontologically critical capital depends on culturally and psychologically protected values which may vary locally or at least as for e g biodiversity be open to conflicting opinions this separation in the basis for defining critical capital stocks leads to awareness that some tradeoffs between critical capital stocks may be irreconcilable or likely to lead to outrage a framework is developed to guide practitioners as to how to identify critical capital stocks using both protected and utilitarian values examples show that protected values are likely to be specific to community ethnic religious cultural etc and require different methods for resolving substitutability of capital stocks to achieve sustainable development

ecological threshold and ecological economic threshold implications from an ecological economic model with adaptation abstract this paper investigates ecological threshold and ecological economic threshold by developing an ecological economic model an extension of a population resource dynamics model developed by brander and taylor 1998 the model reflects three critical issues regarding an ecological economic system system boundary non convexity and adaptation the paper elucidates six main findings ecological economic threshold may come before ecological threshold the ecological economic threshold may exhibit a highly context dependent and dynamic nature which suggests the precautionary principle markets do not respond sufficiently to maintain resiliency under an external shock as prices do not reflect thresholds the system can be restored by intervention even after crossing the ecological economic threshold various transitional paths are possible in restoring the system and adaptation affects resilience to a somewhat significant effect which suggests the importance of better information and education because of the complexity of the model i adopt a system dynamics approach for the development and analysis of the model

trends in quality adjusted skill premia in the united states 1960 2000 this paper presents new evidence that increases in college enrollment lead to a decline in the average quality of college graduates between 1960 and 2000 resulting in a decrease of 8 percentage points in the college premium the standard demand and supply framework katz and murphy 1992 card and lemieux 2001 can qualitatively account for the trend in the college and age premia over this period but the quantitative adjustments that need to be made to account for changes in quality are substantial furthermore the standard interpretation of the supply effect can be misleading if the quality of college workers is not controlled for to illustrate the importance of these adjustments we reanalyze the problem studied in card and lemieux 2001 who observe that the rise in the college premium in the 1980s occurred mainly for young workers and attribute this to the differential behavior of the supply of skill between the young and the old our results show that changes in quality are as important as changes in prices to explain the phenomenon they document

a dynamic analysis of human welfare in a warming planet anthropogenic greenhouse gas ghg emissions have caused atmospheric concentrations with no precedents in the last half a million years inducing serious uncertainties about future climates and their effects on human welfare recent climate science supports the view that the climate stabilization will require very low ghg emissions in the future we ask is a path of low emissions compatible with sustainable levels of human welfare with steady growth in human quality of life addressing these questions requires both defining welfare criteria and empirically estimating the possible paths of the economy we specify and calibrate a dynamic model with four intertemporal links education physical capital knowledge and the environment in line with nordhaus 2008a and with the stern review 2007 we assume that ghg emissions allow increased production while a higher stock of atmospheric carbon decreases production our index of human welfare which we call quality of life quol emphasizes education knowledge and the environment affected by greenhouse gas emissions in addition to consumption and leisure thus we avoid a consumptionist fallacy that welfare depends only on commodity consumption and perhaps leisure we reject discounted utilitarianism as a normative criterion and consider two alternatives the first is an intergenerational maximin criterion which maximizes the quality of life of the first generation subject to maintaining at least that level for all successive generations the second is human development optimization that seeks the maximization of the quol of the first generation subject to achieving a given constant rate of growth in all subsequent generations hence our analysis focuses on a human notion of sustainability as opposed to the conventional green sustainability limited to keeping the quality of the environment constant because our dynamic optimization programs defy explicit analytical solutions our approach has been computational as a benchmark we consider a simple model with physical and human capital for which we prove a turnpike theorem we then devise a computational algorithm inspired by the turnpike property to construct feasible although not necessarily optimal paths in the more complex and realistic model our analysis indicates that with ghg emission paths entailing very low emissions in the future positive rates of growth in quol are possible while the first generation experiences a quol higher than the historical reference level we also observe a tradeoff between the quality of life of the first generation and the rate of growth in the quality of life yet generation 1 s sacrifice for the sake of a higher growth rate appears to be small the paths that we compute involve investments in knowledge at noticeably higher levels than in the past

has fiscal policy helped stabilize the postwar u s economy abstract in this paper i consider whether postwar fiscal policy has helped stabilize the u s economy i do this by adding to the stochastic growth model fiscal policy feedback rules estimated from postwar data these rules allow fiscal policies to respond to current and lagged output and labor hours i use the estimated policy rules to see if postwar fiscal policy reduces output volatility and or lengthens expansions and shortens recessions i find that fiscal policy in general provides little stability on either count i also find that the endogenous feedback links by themselves can provide some stabilization

fiscal policy in general equilibrium this paper studies four classic fiscal policy experiments within a quantitatively restricted neoclassical model the authors main findings are as follows 1 permanent changes in government purchases can lead to short run and long run output multipliers that exceed one 2 permanent changes in government purchases induce larger effects than temporary changes 3 the financing decision is quantitatively more important than the resource cost of changes in government purchases and 4 public investment has dramatic effects on private output and investment these findings stem from important dynamic interactions of capital and labor absent in earlier equilibrium analyses of fiscal policy copyright 1993 by american economic association

resilience weather and dynamic adjustments in agroecosystems the case of wheat yield in england the paper presents an investigation of agroecosystem dynamics with an application to wheat yield data in england over the period 1885 2012 the analysis relies on a threshold quantile autoregressive model the model allows for lag effects to vary across quantiles of the distribution as well as with the values taken by the lagged variables the analysis documents the dynamics and persistence of yield adjustments to shocks the estimates indicate the presence of dynamic instability in the lower quantile of the distribution the analysis shows that after controlling for the role of technological trend wheat yield exhibits resilience to adverse weather shocks

the environment as a commodity all economic activity is based ultimately on re sources found in nature whether it is consumption the point in exposing the morphology of produced or production or whether it is exchange the comgoods and services is not to construct a resource moditi es which are involved are made of constitutheory of a value there are any number of natural ents provided by nature thus the ingredients of resources and this alone precludes such an at any manufactured good are other produced goods tempted theory from being coherent my purpose labour time and skills and natural resources each rather is to use it to express surprise at the fact that of these constituent produced goods is in turn made despite the centrality of natural resources in eco up from the ingredients that went into its manufacnomic activity they find little room in economics ture namely labour time and skills natural rediscourses interest in resource economics more sources and further produced goods it follows particularly environmental economics has only that any manufactured commodity is ultimately a been intermittent and if we are currently witness combination of labour and natural resources ing a resurgence and this special issue is an ex ample of it we have also just lived through a labour too is a produced good even raw labour is decade long neglect during which much valuable an output manufactured by those natural resources research could have been done 2 we are way behind which sustain life resources such as the multitude where we should have been and could have been

regulating environmental threats environmental consequences of natural resource exploitation often entail threats of future occurrences of detrimental abrupt events rather than or in addition to inflicting a damage gradually the possibility of abrupt occurrence of climate change related calamities is a case in mind the uncertainty associated with the realization of these threats and their public bad nature complicate the design of optimal economic response we derive a pigouvian hazard tax schedule that implements the socially optimal outcome the tax is based on the expected cost of the hazard generating activities and serves to reduce hazardous emissions well in advance of the catastrophic occurrence a numerical example illustrates possible effects of the proposed regulation scheme implications for climate policy are discussed

status effects and negative utility growth this paper explains the observed stagnation of happiness measures through a growth model in which agents care about conspicuous consumption normal goods confer direct utility while status goods confer utility only at the expense of others firms can improve the quality of both goods through r d the nash equilibrium of the consumer game results in the share of expenditure on status goods increasing with the number of times the status good has been improved as the economy grows resources for innovation are transferred entirely to status good r d the resulting long run rate of utility growth is negative

inclusive wealth with a changing but aging population we consider the effect of population age distribution in inclusive wealth accounting numerical results demonstrate that the wealth of nations with an aging demographic structure as well as those with a rapidly increasing working age generation may have been overestimated

choices and the value of natural capital sustainability requires maintaining opportunities for future generations so they can meet their needs opportunities are passed to future generations through a set of capital assets nature provides an important class of these assets but markets seldom reveal the marginal value of natural capital rather the marginal social worth or asset price must be imputed based on intertemporal exchange in the context of assessing whether intertemporal allocation rules lead to sustainable development appropriate asset prices must be based on the actual allocations and trade offs society makes therefore measuring economic programmes that enable the measurement of asset prices is an important empirical task we review the theory of measuring natural capital asset prices and discuss the key elements of measuring economic programmes that enable the measurement of natural capital asset prices we place the measurement of economic programmes and natural capital asset prices in the context of wealth based sustainability metrics

explaining cross cohort differences in life cycle earnings abstract college educated workers entering the labor market in 1940 experienced a 4 fold increase in their labor earnings between the ages of 25 and 55 in contrast the increase was 2 6 fold for those entering the market in 1980 for workers without a college education these figures are 3 6 fold and 1 5 fold respectively why are earnings profiles flatter for recent cohorts we build a parsimonious model of schooling and human capital accumulation on the job and calibrate it to earnings statistics of workers from the 1940 cohort the model accounts for 99 of the flattening of earnings profiles for workers with a college education between the 1940 and the 1980 cohorts 52 for workers without a college education the flattening in our model results from a single exogenous factor the increasing price of skills the higher skill price induces i higher college enrollment for recent cohorts and thus a change in the educational composition of workers and ii higher human capital at the start of work life for college educated workers in the recent cohorts which implies lower earnings growth over the life cycle

prices and quantities unsustainable consumption and the global economy abstract the ecological unsustainability of current consumption patterns is now well documented one aspect of this problem which has not been sufficiently addressed is the growth of excess consumption driven by falling goods prices the index of department store prices have fallen substantially since the early 1990s in large part because global capital mobility and excess global labor supply has allowed firms to depress wages and avoid paying environmental costs consumers have responded by purchasing increasing numbers of these artificially cheap goods the example of apparel is discussed in some detail and data from other goods categories are presented these trends suggest that achieving sustainable consumption in the us is not only a technical issue but will also involve fundamental changes in the global political economy to eliminate the artificially low prices of imported goods

status effects and environmental externalities abstract this paper examines a static competitive economy where the production of a consumption good generates pollution that adversely affects human welfare preferences are defined over consumption leisure pollution and economic status each person s status increases with her own consumption but decreases with the average consumption of society the achievement of a pareto efficient resource allocation requires a consumption tax to offset the incentive to overconsume in the pursuit of enhanced status in contrast with standard prescriptions the efficient pollution tax generally exceeds the sum of individuals marginal willingness to pay for pollution abatement these findings remain unaltered when preferences are modified to incorporate altruistic concern for others well being altruism however suggests a potential role for government intervention to achieve a desirable i e pareto efficient distribution of welfare between individuals

tax disturbances and real economic activity in the postwar united states abstract this paper investigates the macroeconomic effects of cyclical fluctuations in marginal tax rates it finds that systematically including tax variables in a standard real business cycle model substantially improves the model s ability to reproduce basic facts about postwar u s business cycle fluctuations in particular modeling fluctuations in personal and corporate income tax rates increases the model s predicted relative variability of hours and decreases its predicted correlation between hours and average productivity fluctuations in tax rates produce large substitution effects that alter the leisure labor supply decision

incorporating resilience in the assessment of inclusive wealth an example from south east australia this paper explores the consequences of changes in a system s resilience on the sustainability of resource allocation decisions as measured by inclusive wealth iw arrow et al in environ resour econ 26 647 685 2003 we incorporate an estimate of resilience in iw by taking account of known or suspected thresholds that can lead to irreversible or practically irreversible changes in the productivity and value of assets and hence social welfare these thresholds allow us to identify policies or projects that may be leading to an increased risk of decline in capital stocks the wealth of the region such risks are not reflected through usual measures of current system performance e g agricultural production we use the goulburn broken catchment in south eastern australia as a case study to explore the significance and practicality of including resilience in inclusive wealth estimates

two views of inequality over the life cycle data on the life cycle profiles of inequality in wages earnings hours worked and consumption contain precious information for answering questions about the ability of households to insure labor market risk and about the sources of this risk this paper demonstrates that the choice of whether to control for cohort effects or for time effects has a drastic impact on the estimated age profiles for inequality and thus on the answers to those questions it also shows that time effects are required to account of the observed trends in inequality in 30 years of u s data whereas there is no evidence that cohort effects have been important jel c13 d31 d91 j22 j31

does nnp growth indicate welfare improvement abstract we show that instantaneous increases in real nnp over time are an accurate indicator of true dynamic welfare improvements this highlights a connection between the theory of green or comprehensive national income accounting and the theory of real price indices

limits to substitution between ecosystem services and manufactured goods and implications for social discounting this paper examines implications of limits to substitution for estimating substitutability between ecosystem services and manufactured goods and for social discounting based on a model that accounts for a subsistence requirement in the consumption of ecosystem services we provide empirical evidence on substitution elasticities we find an initial mean elasticity of substitution of two which declines over time towards complementarity we subsequently extend the theory of dual discounting by introducing a subsistence requirement the relative price of ecosystem services is non constant and grows without bound as the consumption of ecosystem services declines towards the subsistence level an application suggests that the initial discount rate for ecosystem services is more than a percentage point lower as compared to manufactured goods this difference increases by a further half percentage point over a 300 year time horizon the results underscore the importance of considering limited substitutability in long term public project appraisal

understanding the evolution of the us wage distribution a theoretical analysis in this paper we propose an analytically tractable overlapping generations model of human capital accumulation and study its implications for the evolution of the us wage distribution from 1970 to 2000 the key feature of the model and the only source of heterogeneity is that individuals differ in theirabilitytoaccumulatehumancapital therefore wageinequalityresultsonlyfromdifferencesin human capital accumulation we examine the response of this model to skill biased technical change sbtc theoretically we show that in response to sbtc the model generates behavior consistent with some prominent trends observed in the us data including i a rise in overall wage inequality both in the short run and long run ii an initial fall in the education premium followed by a strong recovery leading to a higher premium in the long run iii the fact that most of this fall and rise takes place among younger workers iv a rise in within group inequality v stagnation in median wage growth and a slowdown in aggregate labor productivity and vi a rise in consumption inequality that is much smaller than the rise in wage inequality these results suggest that the heterogeneity in the ability to accumulate human capital is an important feature for understanding the effects of sbtc and interpreting the transformation of the us labor markets since the 1970s jel e21 e24 j24 j31

the importance of bundling in a gorman lancaster model of earnings the idea that the labor market of individuals can be decomposed into payments to separate productive attributes has an enduring appeal in economics assuming that demographic groups differ only in their endowments of productive characteristics it is possible to rationalize observed demographic earnings differentials without invoking the arguments that characteristics specific to a particular demographic group are direct objects of employer demand by aggregating skills over all demographic groups it is possible to produce a theory of the market determination of the prices of skills held in different amounts by different demographic groups this paper considers conditions under which characteristics are uniformly priced across sectors of a multisector economy the paper presents empirical evidence that rejects uniform pricing of characteristics as a description of the us labor market bundling may account for this evudence but other hypotheses do as well authors

the output employment and interest rate effects of government consumption abstract we study the impact on aggregate variables of changes in government consumption using the neoclassical stochastic growth model we show theoretically that the impact on output and employment of a persistent change in government consumption exceeds that of a temporary change we also show that in principle there can be an analog to the keynesian multiplier in the neoclassical growth model finally in an empirically plausible version of the model we show that the interest rate impact of a persistent government consumption shock exceeds that of a temporary one our results provide counterexamples to existing claims in the literature

evaluating projects and assessing sustainable development in imperfect economies we are interested in three related questions 1 how should accounting prices be estimated 2 how should we evaluate policy change in an imperfect economy 3 how can we check whether intergenerational well being will be sustained along a projected economic programme we do not presume that the economy is convex nor do we assume that the government optimizes on behalf of its citizens we show that the same set of accounting prices should be used both for policy evaluation and for assessing whether or not intergenerational welfare along a given economic path will be sustained we also show that a comprehensive measure of wealth computed in terms of the accounting prices can be used as an index for problems 2 and 3 above the remainder of the paper is concerned with rules for estimating the accounting prices of several specific environmental natural resources transacted in a few well known economic institutions

ethics politics and nonsatiation in consumption a synthesis in contrast with the production of goods and services by firms where the production costs are minimized under appropriate behavioral assumptions consumer producers in neoclassical theory maximize consumption expenditure i e production costs of their outputs according to kenneth boulding were the impact upon the limited resources available on planet earth taken into account consumption expenditure should be minimized we propose that we keep consumer theory as a reasonable description of reality however we should evaluate the long run consequences of such postulated behavior in a larger context which as a consequence of larger population with increasing per capita consumption comprises the overburdening of natural resources by decomposing the time horizon of cultural evolution into shorter periods of adjustment we may then distinguish several types of institutional determination of how societies take decisions as a group and individually the consumer theory simply reflects the predominant ethical values of which ideologies political platforms and demand patterns are shorter run adjustments

the economics of the climate i review the economic characteristics of the climate problem focusing on the choice of discount rates in the presence of a stock externality risk and uncertainty ambiguity and the role of integrated assessment models iams in analyzing policy choices i suggest that iams can play a role in providing qualitative understanding of how complex systems behave but are not accurate enough to provide quantitative insights arguments in favor of action on climate issues have to be based on aversion to risk and ambiguity and the need to avoid a small but positive risk of a disastrous outcome

can public spending boost private consumption this paper analyses the effects on private consumption from an increase in productive and unproductive public spending a new keynesian model incorporating price and wage rigidities monetary policy and various fiscal rules is developed and estimated using bayesian techniques to capture the key cyclical characteristics of the us economy we find that price and wage rigidities along with a positive shock to the part of public spending that is productive are suficient to boost private consumption moreover we show that this initial positive reaction of private consumption is adequate to create a positive present value consumption multiplier for more than five years finally we show that our main results remain robust to changes in the monetary rule and the various methods of deficit financing

factor proportions and relative wages the supply side determinants of wage inequality supply side factors may contribute to rising wage inequality first certain changes in the supply of skills allegedly exacerbate wage inequality women s increased labor force participation and increased immigration are the leading candidates both allegedly reduce the wages of less skilled men however immigration s impact on wage inequality has been minor and the effects of women s participation is inconclusive second in evaluating the likelihood that human capital investment will mitigate future inequality evidence suggests that rising returns to education have increased the proportion of young people attending college limiting the growth of inequality among high wage workers

fiscal spending shocks endogenous government spending and real business cycles abstract we analyze a real business cycle model in which the government optimally chooses public investment and nonmilitary current expenditures to maximize the welfare of the representative private agent we characterize the optimal response of endogenous spending to shocks to technology and to military expenditures comovements between the components of government spending and other macroeconomic aggregates predicted by the model are compared with the corresponding comovements in the u s data the model captures the qualitative features of the relative volatilities of the components of government spending quite well but predicts too high correlations between the components of government spending and output

optimal versus sustainable degrowth policies abstract this paper introduces a natural resource and pollution in a ramsey growth model which relies on the postulates of ecological economics it studies the impact of voluntary degrowth policies on production and welfare the instrument of these policies is a tax on the natural resource these public policies are implemented after the downturn of the households welfare following from the increased pollution two kinds of policies are considered and rely either on an optimality criterion or on an intergenerational equity criterion with respect to the laissez faire case they decrease both production and pollution but increase welfare classes of sustainable degrowth paths characterized by time constant or time increasing tax rates are determined