the role of aggregation in estimating the effects of private school competition on student achievement abstract this paper investigates possible reasons for the disparity in results in the private school competition literature in particular the focus is on the data set the grade range and level of aggregation of the competition variable and on the choice of ols or iv estimation strategies the results show that the size and significance of the competition variable depends on each of these attributes although the grade range of the competition variable has a slightly smaller impact than the others private school competition does not have a consistently positive significant effect on student achievement

deep habits price rigidities and the consumption response to government spending this paper inspects the deep habits mechanism originally used by ravn schmitt grohe and uribe 2006 to generate the positive comovement of public and private consumption observed in many var studies in their set up the price elasticity of demand is pro cyclical and it is optimal for the firm to lower the mark up while expanding production after the fiscal shock raising the demand for labor and the real wage consequently agents substitute consumption for leisure and overcome the negative wealth effect of the fiscal expansion here we show that increasing price stickiness reduces the impact of the fiscal shock on the real wage and hinders the rise of consumption if the degree of price stickiness is high enough consumption is crowded out this is in contrast to the role of price rigidities in the standard new keynesian model where they weaken the crowding out of consumption

what accounts for the changes in u s fiscal policy transmission using vector autoregressions on u s time series for 1957 79 and 1983 2004 we find government spending shocks to have stronger effects on output consumption and wages in the earlier period we try to account for this observation within a dsge model featuring price rigidities and limited asset market participation specifically we estimate the structural parameters of the model for both periods by matching impulse responses model based counterfactual experiments suggest that most of the changes in fiscal policy transmission are accounted for by increased asset market participation and the more active monetary policy of the volcker greenspan period

the stabilizing role of government size abstract this paper presents an analysis of how alternative models of the business cycle can replicate the stylized fact that large governments are associated with less volatile economies our analysis shows that adding nominal rigidities and costs of capital adjustment to an otherwise standard rbc model can generate a negative correlation between government size and the volatility of output however in the model we find that the stabilizing effect is only due to a composition effect and it is not present when we look at the volatility of private output given that empirically we also observe a negative correlation between government size and the volatility of consumption we modify the model by introducing rule of thumb consumers in this modified version of our initial model we observe that consumption volatility is also reduced when government size increases in similar way to the observed pattern in oecd economies over the last 45 years

how do fiscal and technology shocks affect real exchange rates new evidence for the united states abstract using vector autoregressions on u s time series relative to an aggregate of industrialized countries this paper provides new evidence on the dynamic effects of government spending and technology shocks on the real exchange rate and the terms of trade to achieve identification we derive robust restrictions on the sign of several impulse responses from a two country general equilibrium model we find that both the real exchange rate and the terms of trade whose responses are left unrestricted depreciate in response to expansionary government spending shocks and appreciate in response to positive technology shocks

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

liquidity effects and the monetary transmission mechanism several recent papers provide strong empirical support for the view that an expansionary monetary policy disturbance generates a persistent decrease in interest rates and a persistent increase in output and employment existing quantitative general equilibrium models which allow for capital accumulation are inconsistent with this view there does exist a recently developed class of general equilibrium models which can rationalize the contemporaneous response of interest rates output and employment to a money supply shock however a key shortcoming of these models is that they cannot rationalize persistent liquidity effects this paper discusses the basic frictions and mechanisms underlying this new class of models and investigates one avenue for generating persistence we argue that once a simplified version of the model in christiano and eichenbaum 1991 is modified to allow for extremely small costs of adjusting sectoral flow of funds positive money shocks generate long lasting quantitatively significant liquidity effects as well as persistent increases in aggregate economic activity

interest rates inflation and federal reserve policy since 1980 this paper characterizes federal reserve policy since 1980 as one that actively manages short term nominal interest rates in order to control inflation and evaluates this policy using a dynamic stochastic sticky price model of the united states economy the results show that the fed s policy insulates aggregate output from the effects of exogenous demand side disturbances and by calling for a modest but persistent reduction in short term interest rates following a positive technology shock helps the economy to respond to supply side disturbances as it would in the absence of nominal rigidities

cost function estimation under risk aversion standard definitions of the cost function do not admit risk standard ex post approaches to cost function estimation yield biased and inconsistent estimates when production is stochastic recently an ex ante approach to cost function estimation with stochastic production has been developed by imbedding the distance function in the cost function estimation problem we generalize the approach to consider risk aversion in decision making only two empirical studies have considered stochastic production in cost function estimation both have required constant returns to scale we demonstrate a methodology sufficiently general to consider nonconstant returns to scale

incorporating stochastic variables in crop response models implications for fertilization decisions most crop decision models focus on output variation in response to nonstochastic inputs little attention has been given to the effects of stochastic factors on the input use decision a crop decision model is developed to examine the impact of soil moisture on the nitrogen fertilization decision the model is applied to 15 different soil and weather conditions for corn production in indiana based on estimated response functions the profit maximizing nitrogen application rate varies from 156 to 185 pounds of actual nitrogen n per acre we evaluate the expected economic losses arising from applying to one set of conditions a rate deemed optimal for another

acreage decisions under risk the case of corn and soybeans an acreage supply response model is developed under expected utility maximization the resulting framework is used to specify and estimate a system of risk responsive acreage equations for corn and soybeans in the united states particular attention is given to the truncation effects of government price supports on the distribution of corn and soybean prices also a wealth variable is included in the acreage equations the empirical results indicate that risk and wealth variables play an important role in cornsoybean acreage decisions the analysis also shows that cross commodity risk reduction is important in acreage allocation decisions

money new keynesian macroeconomics and the business cycle abstract we show in this paper that the typical modern business cycle cannot be reduced to the real business cycles archetype a monopolistic competition model with price adjustment costs affected by technological and monetary shocks better mimics the economic fluctuations in two countries with very different cyclical properties namely france and the united states in our model monetary shocks are necessary to reproduce the standard deviation of output the money output correlation the labour productivity worked hours relative standard deviation the labour productivity worked hours correlation and the mark up output correlation with two independent shocks one real more specifically defined than the solow residual and one nominal the model gives an answer to some empirical puzzles which were left unexplained by traditional rbc models

fiscal shocks and real exchange rate dynamics some evidence for latin america this paper analyses the effects of fiscal shocks using a two country macroeconomic model for output labour input government spending and relative prices which provides the orthogonality restrictions for obtaining the structural shocks dynamic simulation techniques are then applied in particular to shed light on the possible effects of fiscal imbalances on the real exchange rate in the case of six latin american countries using quarterly data over the period 1980 2006 we find that in a majority of cases fiscal shocks are the main driving force of real exchange rate fluctuations

fiscal expansions unemployment and labor force participation theory and evidence structural vars indicate that for many oecd countries labor force participation employment and the unemployment rate significantly increase following increases in government expenditures under a variety of specifications and identification schemes fiscal expansions also tend to increase real wages existing models have difficulties in generating such responses we show that the empirical regularities can be reproduced with two additions into a standard new keynesian model with matching frictions a a labor force participation choice and b workers heterogeneity

timing and real indeterminacy in monetary models an increasingly common approach to the theoretical analysis of monetary policy is to ensure that a proposed policy does not introduce real indeterminacy and thus sunspot fluctuations into the model economy policy is typically conducted in terms of directives for the nominal interest rate this paper uses a discrete time money in the utility function model to demonstrate how seemingly minor modifications in the trading environment result in dramatic differences in the policy restrictions needed to ensure real determinacy these differences arise because of the differing pricing equations for the nominal interest rate

tax base and crowding in effects of balanced budget fiscal policy a dynamic general equilibrium business cycle model is constructed with staggered price adjustment monopolistic wage setting and distortionary taxation the government purchases goods runs an unemployment benefit system and balances its budget through a proportional tax on labour income a temporary tax financed increase in government expenditures can lower the tax rate through a demand induced widening of the tax base it is shown analytically that this allows private consumption to rise under realistic conditions despite the negative wealth effect of increased fiscal spending

nominal price rigidity money supply endogeneity and business cycles abstract this paper investigates the ability of nominal price rigidity to explain the co movement of inflation with the cyclical component of output observed in the post war u s data a dynamic general equilibrium model is constructed with the introduction of monopolistic competition and nominal price rigidity in a standard real business cycle model allowing for an endogenous money supply rule it is then demonstrated that sticky price models can explain the observed associations between movements in inflation and output much better than flexible price models this result depends little on whether money supply is assumed to be endogenous or not

optimal public sector wages i build a dynamic stochastic general equilibrium model with search and matching frictions to determine the optimal public sector wage policy public sector wages are crucial in achieving efficient allocation of jobs high wages induce too many unemployed to queue for public sector jobs in turn raising unemployment the optimal wage depends on the frictions in the two sectors following technology shocks public sector wages should be pro cyclical and deviations from the optimal policy significantly increase the volatility of unemployment

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

an economic model of teaching effectiveness the literature on the determinants of good teaching performance has been largely devoted to empirical measurement a complete review of the publications in this area would require at least an entire issue the size of this journal yet it is virtually impossible to discover attempts to derive hypotheses about the determinants of good teaching from explicit models of behavior this has led researchers into the trap of exploring only the empirical determinants of good teaching performance typically the results of student evaluations are correlated with affective personality traits of the teachers with peer evaluations of psychological compositions or even with the results of various psychological tests examples are the works of robert isaacson et al frank costin et al and wilbert mckeachie et al in most of these studies no substantive conclusions are reached regarding the determinants of effective teaching in the few studies which do contain significant findings the independent variable in question is difficult to explain as a direct determinant of teaching effectiveness for example isaacson et al find that virtually the only statistically significant determinant of effective teaching is the personality characteristic which they label culture this may imply that simply wearing a tweed jacket and taking up pipesmoking is sufficient to improve teaching this paper takes a somewhat different approach to the analysis of teaching assume that the individual in question wishes to maximize teaching effectiveness clearly there are constraints on this maximization process one must necessarily be the time budget constraint a second constraint however adds a good deal of interest to the model this constraint is best described as the bundle of characteristics available to the individual these characteristics could be termed the components of the individual s personality such attributes include physical appearance psychological makeup speaking ability and a myriad of other variables thus this model bears a resemblance to the standard economic models of monopolistic competition see a michael spence before proceeding to a formal statement of the problem a philosophical issue must be addressed what is meant by teaching effectiveness generally this is interpreted as maximizing student evaluations of teachers however this is clearly not always equivalent to maximizing student learning unfortunately the latter variable is difficult but not impossible to measure preand posttesting with standardized tests is becoming increasingly accepted for example the meaning of teaching effectiveness in this paper must unfortunately remain ambiguous some teachers concerned perhaps with obtaining tenure will interpret good teaching as obtaining good evaluations the criterion by which they are judged others may take a more eclectic viewpoint since the problem below is an individual maximization problem the precise definition of effective teaching may simply vary from individual to individual see w r allen formally this problem is exactly analogous to one first addressed by kelvin lancaster he assumes that the consumer attempts to maximize satisfaction through purchase of bundles of attributes each commodity is possessed of certain of these characteristics by consuming various combinations of these commodities the consumer is assistant professor department of economics and director center for economic education california state university hayward i would like to thank alex cassuto nancy sanders and an anonymous referee for helpful discussion in a previously unreported experiment in the department of economics california state universitybakersfield faculty members were required to wear coats and ties in classes it was subsequently observed that teaching evaluations improved unfortunately no detailed statistical results of this experiment are available for analysis

production and innovation when techniques are tacit the case of education abstract the central theme of this paper is that the conventional economic theory of production does not hold even approximately in a field like education after examining the result of input output studies in education and the effect of government attempts to enhance education effectiveness we provide a sketch of a new production theory for sectors where techniques are poorly articulated and idiosyncratic

modeling multiple outputs in educational production functions for some time now economists have conceptualized learning as a production process most educational production functions specify only one output usually a measure of cognitive achievement some recent studies have recognized the multidimensional aspects of schooling specifying outputs in both the cognitive and affective domains introducing multiple outputs into the production function raises interesting theoretical and empirical issues one issue is the manner in which various outputs are interrelated how one models output interactions in educational production functions may be important are the outputs multiple products if so are they independently or simultaneously produced or are the outputs joint products answers to these questions may affect empirical estimates of the educational production function s this paper briefly describes how one might approach this problem we argue on conceptual grounds that modeling outputs in the cognitive and affective domains as joint products is preferable in addition we compare the three approaches empirically to evaluate the sensitivity of educational production function parameter estimates to output specification

why does private consumption rise after a government spending shock recent empirical evidence suggests that private consumption is crowded in by government spending this outcome violates existing macroeconomic theory according to which the negative wealth effect brought about by a rise in public expenditure should decrease consumption

does competition among public schools benefit students and taxpayers tiebout choice among districts is the most powerful market force in american public education naive estimates of its effects are biased by endogenous district formation i derive instruments from the natural boundaries in a metropolitan area my results suggest that metropolitan areas with greater tiebout choice have more productive public schools and less private schooling little of the effect of tiebout choice works through its effect on household sorting this finding may be explained by another finding students are equally segregated by school in metropolitan areas with greater and lesser degrees of tiebout choice among districts

schooling and economic well being the role of nonmarket effects standard estimates of the economic value of additional schooling based on earnings differences associated with differences in the level of schooling attained cover only a portion of the total effects of education that are valued by citizens we first identify a catalog of nonmarketed effects many of which have been recently studied by economists and then propose a procedure for estimating a willingness to pay value for these effects using empirical estimates of the magnitude of a selection of these effects found in the literature we calculate willingness to pay values using our proposed procedure these illustrative calculations suggest that standard estimates of the benefit of incremental schooling substantially understate the full value of such investments

fiscal stimulus and the role of wage rigidity abstract in this paper we study the impact of an expansion in public spending in an economy characterized by limited asset market participation and sticky wages the flexible wage version of the model implies strong expansionary effects on output and consumption but also a counterfactual increase in real wages the introduction of sticky wages besides being a realistic addition solves this problem and preserves the expansionary effects on output and consumption moreover once we introduce segmentation in the labor market sticky wages are even essential to obtain expansionary effects

argentine agricultural policy in a multiple input multiple output framework argentine agricultural output grew at a rate of about 1 4 per year between 1940 and 1972 cavallo and mundlak p 13 which is a very sluggish growth rate given earlier rates of 1 8 for 1908 20 and 2 2 1920 40 schultz it also is sluggish relative to growth in u s agricultural output of 1 9 during the same period adjusting for factor use total factor productivity in argentine agriculture grew at a rate of only 0 6 during this period compared to 1 2 in the rest of the argentine economy cavallo and mundlak and compared to about 1 9 in u s agriculture usda a number of hypotheses have been offered to

government size and business cycle volatility how important are credit constraints in this paper we analyse how the availability of credit influences the relationship between government size as a proxy for fiscal stabilization policy and the amplitude of business cycle fluctuations in a sample of advanced oecd countries interpreting relatively low loan to value ratios as an indication of tight credit constraints we find that government size exerts a stabilizing effect on output and consumption growth fluctuations only when credit constraints are relatively tight our results provide support for the hypothesis that credit market frictions play a crucial role in the transmission of fiscal policy

reassessing discretionary fiscal policy in 1992 president bush proposed legislation intended to speed up the recovery from the 1990 91 recession congress rejected this proposal for countercyclical fiscal policy stimulus in early 1993 president clinton proposed his own stimulus package but congress rejected this proposal too many reasons were given for deciding against these two discretionary fiscal policy proposals but perhaps the most common one was the large federal budget deficit in the early 1990s with the rapid disappearance of budget deficits in recent years this reason to vote against a discretionary fiscal stimulus is unlikely to be mentioned in the next economic cycle discretionary countercyclical fiscal policy again appears to be a politically feasible option but should america use it after so many years of disuse much has happened in macroeconomics since the 1960s and 1970s when discretionary countercyclical fiscal policy was last considered a serious option in the united states first monetary policy making has changed substantially over the last two decades the federal reserve s interest rate decisions have become more explicit more systematic and more reactive to changes in both inflation and output the fed has placed a greater emphasis on keeping inflation low the experience with this new policy has been very favorable inflation has been low since the early 1980s and the real economy has been more stable the 1980s and 1990s saw two lengthy expansions separated by a relatively short and mild recession in terms of the tradeoff between output variability and inflation

anticipating the consequences of school reform a new use of dea we use dea type linear programming techniques to simulate a basic component of educational reform eliminating restrictions on the allocation of school personnel our technique allows us to identify potential output gains or equivalently potential cost savings from reform we can also identify which personnel groups are likely to gain and lose under this reform when we apply our model to a sample of texas school districts we find evidence that the educational establishment has substantial economic rents to protect from school reform and that the primary beneficiaries of reform are likely to be affluent school districts with few minority students the technique which relies on the relationship between the direct and indirect distance functions can be easily generalized to measure the potential gains from removing other input restrictions such as union work rules environmental regulations or deed restrictions

on non uniqueness in rational expectations models an attempt at perspective abstract many macroeconomic models involving rational expectations give rise to an infinity of solution paths even when the models are linear in all variables some writers have suggested that this non uniqueness constitutes a serious weakness for the rational expectations hypothesis one purpose of the present paper is to argue that the non uniqueness in question is not properly attributable to the rationality hypothesis but instead is a general feature of dynamic models involving expectations it is also argued that there typically exists in a very wide class of linear rational expectations models a single solution that excludes bubble or bootstrap effects one that occur only because they are arbitrarily expected to occur a systematic procedure for obtaining solutions free from such effects is introduced and discussed in addition this procedure is used to interpret and reconsider several prominent examples with solution multiplicities including ones developed by fischer black and john b taylor

supply demand and technology in a multiproduct industry texas field crops the purpose of this paper is to examine the structure of agricultural production for six texas field crops cotton grain sorghum wheat corn rice and hay which account for nearly 95 of recent field crop value specific objectives are to a test the structure of technology to determine i if output and input utilization choices for individual products are independent of production decisions about other outputs and ii if products and or inputs can be consistently aggregated b estimate a coherent set of interrelated supply functions for the six commodities and input demand functions for fertilizer and hired labor because the empirical focus of this paper is specific to one state the results will be of limited value for interpreting specific production relationships elsewhere however the problem is of common interest in production agriculture and the techniques used demonstrate an important application of dual modeling

the general equilibrium effects of fiscal policy estimates for the euro area abstract this paper describes a dynamic stochastic general equilibrium model featuring a fraction of non ricardian agents in order to estimate the effects of fiscal policy in the euro area the model takes into account distortionary taxation on labor and capital income and on consumption while expenditures are broken down into purchases of goods and services compensation of public employees and transfers to households a newly computed quarterly data set of fiscal variables is used our results point to the prevalence of mild keynesian effects of public expenditures in particular although innovations in fiscal policy variables tend to be rather persistent government purchases of goods and services and compensations for public employees have small and short lived expansionary effects on private consumption while innovations in transfers to households show a slightly more sizeable and lasting effect the effects are more significant on the revenue side decreases in labor income and consumption tax rates have sizeable effects on consumption and output while a reduction in capital income tax favors investment and output in the medium run finally our estimates suggest that fiscal policy variables contribute little to the cyclical variability of the main macro variables

the effects of discretionary fiscal policy on macroeconomic aggregates a reappraisal fiscal stimuli to recover a cascade of academic and layman articles debate the effectiveness of fiscal policy in stimulating the economy backed up by different economic models and empirical support this essay surveys the theoretical predictions and recent empirical vector autoregression var evidence on the short run effects of discretionary fiscal policy on macroeconomic aggregates

the analytics of svars a unified framework to measure fiscal multipliers ticities implied by the identification schemes generate a large dispersion in the estimates of tax and spending multipliers second i estimate fiscal multipliers consistent with prior distributions of the elasticities computed by a variety of empirical strategies and by employing a simple dynamic stochastic general equilibrium model i document three findings for the u s for the period 1947 2010 first the impact tax multiplier is close to 0 second the impact spending multiplier ranges between 0 35 and 1 third there is a large uncertainty in the estimates of fiscal multipliers at longer horizons yet the probability that the spending multiplier is larger than the tax multiplier is above 0 65 for up to three years after policy interventions

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

econometric estimation of producers risk attitudes general methods are proposed for the identification and econometric estimation of the parameters of the distribution of risk attitudes in a producer population the proposed methods also provide the basis for the development of statistical tests of model specification and of behavioral hypotheses econometric risk attitude estimation is shown to be possible under less restrictive conditions than previously believed a moment based version of the general model is applied to indian data and the econometrically estimated risk attitudes are presented and compared to experimental results for a similar group of producers

school decentralization helping the good get better but leaving the poor behind abstract the decentralization of public services is a major feature of institutional innovation the main argument in support of decentralization is that it brings decisions closer to the people thereby alleviating information asymmetries and improving accountability however decentralization can also degrade service provision in poor communities that lack the ability to voice and defend their preferences in this paper we analyze the average and distributional effects of school decentralization on educational quality in argentina we find that decentralization had an overall positive impact on student test scores the decentralization gains however did not reach the poor thus although bringing decisions closer to the people may help the good get better the already disadvantaged may not receive these benefits

the effects of fiscal shocks on employment and the real wage we study the transmission of fiscal shocks in the labor market we employ a structural var and base identification on the restrictions that shocks to government consumption investment and employment must raise output and deficits these restrictions hold in both prototype real business cycle rbc and new keynesian models shocks to government consumption and investment increase real wages and employment contemporaneously both at state level and in the aggregate the dynamics in response to employment shocks are mixed increases in government employment raise the real wage and total employment in the aggregate however in one third of the states they reduce total employment

fiscal policy monopolistic competition and finite lives abstract this paper studies the short run transitional and long run output effects of permanent and temporary shocks in public consumption under various financing methods to this end a dynamic macroeconomic model for a closed economy is developed which features a perfectly competitive final goods sector and a monopolistically competitive intermediate goods sector finitely lived households consume final goods supply labor and save part of their income amongst the findings for a permanent rise in public consumption are i monopolistic competition increases the absolute value of the balanced budget output multiplier ii positive long run output multipliers are obtained only if the generational turnover effect is dominated by the intertemporal labor supply effect iii short run output multipliers under lump sum tax financing are smaller than long run output multipliers if labor supply is elastic and iv bond financing reduces the size of long run output multipliers as compared to lump sum tax financing and may give rise to non monotonic adjustment paths if labor supply is sufficiently elastic and the speed of adjustment of lump sum taxes is not too high temporary bond financed fiscal shocks are shown to yield i permanent effects on output and ii negative long run output multipliers

fiscal policy the real exchange rate and traded goods we estimate the effects of government spending shocks on the cpi real exchange rate the trade balance and their co movements with gdp and private consumption we decompose the variations of the cpi real exchange rate into variations of the traded goods real exchange rate and the relative price of traded to non traded goods we reach three main conclusions a rise in government spending induces a depreciation of the cpi real exchange rate and a trade balance deficit private consumption rises in response to a government spending shock and therefore co moves positively with the real exchange rate both components of the cpi real exchange depreciate we employ vector auto regression var techniques to estimate the effects of fiscal policy and in particular government spending on the cpi real exchange rate and the trade balance in the us and three other oecd countries our empirical analysis delivers two key results first a rise in government spending tends to induce a real exchange rate depreciation and a trade balance deficit although especially in the us the latter effect tends to be small second in all countries private consumption rises in response to a government spending shock and therefore co moves positively with the real exchange rate two important implications follow from these results our evidence provides support for a traditional twin deficit hypothesis in stark contrast with a recent study by kim and roubini 2008 a second implication concerns the consistency of facts and theory both the response of the real exchange rate and its co movement with private consumption and the trade balance are at odds with a benchmark general equilibrium open economy model featuring complete financial markets in fact while the model is successful in replicating the negative response of the trade balance to a government spending shock that we observe in the data and also in linking the magnitude of that response to the degree of openness it has counterfactual predictions on the response of the real exchange rate and of private consumption we argue that the key failure of the model lies in the equilibrium behaviour of private consumption in the model as a result of a typical wealth effect on labour supply private consumption falls in response to a rise in government spending whereas the opposite is true in the data this in turn explains the behaviour of the real exchange rate in the reference model with complete asset markets a risk sharing arbitrage condition ties the ratio of the marginal utilities of consumption across countries to the real exchange rate via this condition and provided that deviations from purchasing power parity are feasible the fall in consumption is accompanied by an equilibrium appreciation of the real exchange rate we proceed by investigating further the sources of the cpi real exchange rate movements in the data a traditional approach decomposes the real exchange rate into two terms

the influence of private school enrollment on public school performance school choice reform refers to changes that allow parents greater freedom to choose schools for their children school choice reform is contentious because it fundamentally alters the environment in which public and private schools operate and could result in significant changes for both demanders and suppliers of education this article develops a model of public education with imperfect exit to predict how private school enrollment influences performance of public schools empirical evidence from data on all private and public schools in california provides substantial support for the hypothesis that public school test scores are inversely related to private school enrollments and charter school enrollments when private and charter schooling reflects exiting by parents unhappy with local public schools implications regarding how expanded private school choice might influence public school performance in california and elsewhere are discussed

joint risk preference technology estimation with a primal system applied studies of the firm in a risky environment have concentrated either on the firm s technology or on its risk preferences these models result in generally inconsistent and inefficient parameter estimates a primal model is proposed which allows a firm s preferences and technology to be estimated jointly in the presence of risk the model is applied to iowa corn production and estimated technology parameters are compared with those from other approaches modest risk aversion leads to inelastic even backbending per acre supplies and input demands yield heteroskedasticity in inputs leads to supply heteroskedasticity in prices especially for risk neutral firms

on fiscal multipliers estimates from a medium scale dsge model this paper contributes to the debate on fiscal multipliers in the context of a structural model i estimate a micro founded dynamic stochastic general equilibrium model that features a rich fiscal policy block and a transmission mechanism for government spending shocks using bayesian techniques for us data

the taylor rule and optimal monetary policy where it denotes the fed s operating target for the federal funds rate pt is the inflation rate measured by the gdp deflator yt is the log of real gdp and y t is the log of potential output identified empirically with a linear trend the rule has since been subject to considerable attention both as an account of actual policy in the united states and elsewhere and as a prescription for desirable policy taylor argues for the rule s normative significance both on the basis of simulations and on the ground that it describes u s policy in a period in which monetary policy is widely judged to have been unusually successful taylor 1999 suggesting that the rule is worth adopting as a principle of behavior here i wish to consider to what extent this prescription resembles the sort of policy that economic theory would recommend i consider the question in the context of a simple but widely used optimizing model of the monetary transmission mechanism which allows one to reach clear conclusions about economic welfare the model is highly stylized but incorporates important features of more realistic models and allows me to make several points that are of more general validity out of concern for the robustness of the conclusions reached the analysis here addresses only broad qualitative features of the taylor rule and attempts to identify features of a desirable policy rule that are likely to hold under a variety of model specifications

every catholic child in a catholic school historical resistance to state schooling contemporary private competition and student achievement across countries nineteenth century catholic doctrine strongly opposed state schooling we show that countries with larger shares of catholics in 1900 but without a catholic state religion tend to have larger shares of privately operated schools even today we use this historical pattern as a natural experiment to estimate the causal effect of contemporary private competition on student achievement in cross country student level analyses our results show that larger shares of privately operated schools lead to better student achievement in mathematics science and reading and to lower total education spending even after controlling for current catholic shares

sticky price and limited participation models of money a comparison abstract we provide new evidence that models of the monetary transmission mechanism should be consistent with at least the following facts after a contractionary monetary policy shock the aggregate price level responds very little aggregate output falls interest rates initially rise real wages decline by a modest amount and profits fall we compare the ability of sticky price and limited participation models with frictionless labor markets to account for these facts the key failing of the sticky price model lies in its counterfactual implications for profits the limited participation model can account for all the above facts but only if one is willing to assume a high labor supply elasticity 2 percent and a high markup 40 percent the shortcomings of both models reflect the absence of labor market frictions such as wage contracts or factor hoarding which dampen movements in the marginal cost of production after a monetary policy shock 1997 elsevier science b v

multiple input multiple output production choices and technology in the u s wheat region duality theory motivates a translog expected profit function consistent with multiple products price uncertainty preseason climate constraints acreage control policies and possibly nonhomothetic technology although multiple outputs are allowed enterprise specific data is not necessary instead time series measures of output revenues and expected prices input expenses and prices and fixed input flows are employed appropriate measures of elasticities of choice returns to size and biases in technological change are derived results indicated decreasing returns to size rather limited though complementary responsiveness of choices to price changes and the nature of biases in technological changes

fiscal policy in a tractable liquidity constrained economy we analyse the effects of fiscal expansions when public debt is used as liquidity by the private sector aggregate shocks are introduced into an incomplete market economy where heterogenous agents face occasionally binding borrowing constraints and store wealth to smooth out idiosyncratic income fluctuations debt financed increases in spending facilitate self insurance by bond holders and may crowd in private consumption they also loosen the borrowing constraints faced by firms thereby raising labour demand and possibly the real wage whether private consumption and wages rise or fall ultimately depends on the relative strengths of the liquidity and wealth effects that arise following the shock

the effect on black white wage differences of differences in the quantity and quality of education using data from the national longitudinal survey of youth for the years 1979 88 the author examines the extent to which black white differences in educational attainment educational quality and unmeasured individual ability can explain black white wage differences an analysis that corrects for both selectivity and ability biases inherent in estimating the education wage relationship shows that the main source of the black white wage differential is the racial difference in the quality rather than quantity of schooling in fact the author concludes closing the racial gap in the basic skills learned in school could reduce the wage differential by two thirds

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

risk aversion and price risk in duality models of production a linear mean variance approach a duality model of production is developed that permits risk aversion and price uncertainty the linear mean variance framework employed is tractable for empirical research in contrast to duality models of risk based on a generalized expected utility function the framework is more general than in standard price certainty models while retaining the simplicity needed for empirical research

imperfect competition and the fiscal multiplier the impact of fiscal policy in an economy with a monopolistic output market but a perfectly competitive labor market is examined both in the short run with a fixed number of firms and in the long run with free entry the main innovation of the paper is the generality of the assumptions about preferences and technology which enable the authors to examine the robustness of the relationship between the degree of monopoly and the fiscal multiplier found by r startz 1989 n g mankiw 1988 and h d dixon 1987 the specific results of these papers are found to rest on two assumptions constant returns and cobb douglas preferences copyright 1996 by the editors of the scandinavian journal of economics

schools and housing values this study combines historical and quantitative methods to determine the market response to a major nineteenth century american urban architectural form the speculatively built row house the paper estimates a hedonic price index which decomposes the

the costs of global tariff barriers on wool products 1997 2005 the doha round of multilateral trade negotiations commits world trade organization wto members to improving market access for both agricultural and nonagricultural goods tariff barriers on wool products represent a small but important subset of these negotiations to inform the debate on the round we analyze the distortionary effects of recent 1997 2005 tariff barriers on wool products using a model that applies a comprehensive analytical approach with regard to the production trade and consumption of wool products we also account for any indirect effects of wool tariff barriers on the nonwool economy by incorporating the production trade and consumption of nonwool products that is the framework is a comparative static global general equilibrium model with a detailed representation of the world wool market changes in wool tariffs over 1997 2005 lead to positive welfare effects for most regions italy china and the uk are estimated to have gained the most from the changes the results indicate that the nature of recent wool tariffs severely distort the size of wool industries in different regions the changes in the output of wool commodities are extreme reflecting the discriminatory nature of the tariffs

optimal monetary and fiscal policy in a currency union we lay out a tractable model for the analysis of optimal monetary and fiscal policy in a currency union the monetary authority sets a common interest rate for the union whereas fiscal policy is implemented at the country level through the choice of government spending in the presence of country specific shocks and nominal rigidities the policy mix that is optimal from the viewpoint of the union as a whole requires that inflation be stabilized at the union level by the common central bank whereas fiscal policy has a country specific stabilization role one beyond the efficient provision of public goods

variation in the fiscal multiplier with the method of financing evidence across industrial countries government spending has often varied with the business cycle to stimulate the economy and to revive economic conditions however the state of public finances has often necessitated higher borrowing to finance widening fiscal deficits indeed recent austerity packages around the globe have crystalized the importance of fiscal consolidation against the backdrop of rising public debt to shed light on recent debates regarding fiscal multipliers the article estimates variation in these multipliers with the method of financing using annual data for a sample of industrial countries there is a large variation in the effects of expansionary and contractinary government spending shocks on economic variables within and across countries the significant effects of negative government spending shocks fiscal contraction appear more prevalent than those of expansionary shocks on real output growth price inflation and nominal wage inflation consistent with theory s predictions the fiscal multiplier is more lik

cost functions under production uncertainty we characterize the cost functions which would be consistent with expected utility maximization when production is uncertain it is not generally possible assuming risk aversion to use only expected output as the constraint in a cost minimization problem in some leading cases cost functions consistent with expected utility maximization are particularly useful because they are devoid of risk preferences

understanding the dynamic effects of government spending on foreign trade abstract using vector autoregressions on u s time series the present paper documents the effects of fiscal policy on foreign trade an increase in government spending significantly depreciates the nominal exchange rate appreciates the terms of trade and increases net exports exposed to the same spending shock a new keynesian general equilibrium model is shown to match qualitatively the response of relative prices the response of net exports in contrast depends on the intra and intertemporal elasticities of substitution and the degree of home bias in private spending an accommodating monetary policy dampens but does not alter the response of net exports

fiscal policy in the new neoclassical synthesis we analytically derive the cyclical effects of fiscal policy shocks in a new neoclassical synthesis model price stickiness has the consequence that a rise in government demand affects labor demand while at the same time the usual wealth effect boosts labor supply the strength of the demand effect depends on the response of the real interest rate governed by the monetary policy regime when the central bank controls money growth fiscal expansions are deflationary and might even be contractionary whereas output wages and inflation can increase when the rise in the real interest rate is dampened by an interest rate rule however price stickiness alone is not sufficient to explain a rise in consumption as predicted by keynesian theory

market power and fiscal policy in oecd countries we compute average markups as a measure of market power throughout time and study their interaction with fiscal policy and macroeconomic variables in a var framework from impulse response functions the results with annual data for a set of 14 oecd countries show that the markup i depicts a pro cyclical behaviour with productivity shocks and ii a counter cyclical behaviour with fiscal spending shocks we also use a pvar increasing the efficiency in the estimations which confirms the country specific results

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

fiscal stimulus with spending reversals abstract the short run effects of fiscal policy depend not only on current tax and spending choices but also on expectations about future policy adjustment while general equilibrium models typically restrict medium term adjustment to taxation we highlight the importance of government spending dynamics first we provide time series evidence for the united states suggesting that an exogenous increase in government spending prompts a rise in public debt followed over time by a reduction in spending below trend second we show how expected spending reversals alter the short run impact of fiscal policy in a new keynesian model bringing it closer in line with the evidence

interactions of monetary and fiscal policy via open market operations we examine interactions of monetary and fiscal policy in a sticky price model where public debt is non neutral as it provides transaction services this property is brought about by a legal restriction on open market operations by which only government bonds are eligible debt creation eases access to money and can therefore induce households to increase purchases of goods government expenditures which are not completely tax financed and deficit financed tax cuts then tend to stimulate private consumption however for these fiscal impulses to raise real activity monetary policy should not too aggressively aim at stabilising the economy

a translog cost function analysis of u s agriculture 1939 77 over the past four decades major changes have occurred in u s agriculture a new era in agricultural production in the united states began in 1939 world war ii gave a boost to agriculture still bogged in the depression productivity increases over the period 1939 77 have been quite impressive measured crudely by the ratio of the indices of output and input the productivity index 1967 100 increased from 59 in 1939 to 119 in 1977 to study this phenomenon a multi input translog cost function incorporating hicks neutral technical change hntc was specified annual timeseries data for the united states was used to estimate the model neoclassical duality theory provides an approach for computing the pairwise elasticities of substitution between inputs for each year as well as the annual own and cross price elasticities of demand for inputs

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

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

on the contract curve a test of alternative models of collective bargaining the traditional model of collective bargaining confines unions to settlements constrained by the employer s labor demand curve but an alternative model places wage employment outcomes on a contract curve that extends beyond the labor demand curve this paper derives a multidimensional hedonic contract curve model in which employment security provisions are used to maintain efficient bargains outside the employer s demand curve and distinguishes empirically between the contract curve and demand constraint models using data for public school teachers in new york state estimates clearly support the contract curve model over the demand constraint model by linking the gap between compensation and the value of the marginal product to the strength of employment security provisions

input demands and inefficiency in u s agriculture markov chain monte carlo mcmc methods are used to estimate a seemingly unrelated regression sur system of input demand functions for u s agriculture our demand functions have flexible forms and allow for nonrandom technical inefficiency concavity constraints are imposed at individual data points and the distributions of measures of relative technical efficiency are constrained to the unit interval results are evaluated in terms of characteristics of the posterior distributions of parameters measures of relative technical efficiency and other nonlinear functions of the parameters

the effects of public spending externalities abstract we conduct a positive analysis on the effects of externalities produced by government spending to this effect we estimate using u s data an rbc model with two salient features first we allow government consumption to directly affect the marginal utility of consumption second we allow public capital to shift the productivity of private factors we provide an identification analysis that supports the strategy adopted for estimating the parameters governing these two channels on one hand private and government consumption are robustly estimated to be substitute goods because of substitutability labor supply reacts little to a government consumption shock so the estimated output multiplier is much lower than in models with separabilities on the other hand our results point towards public investment being unproductive

uncertain fiscal consolidations the paper explores the macroeconomic consequences of fiscal consolidations whose timing and composition are uncertain drawing on the evidence in alesina and ardagna 2010 we emphasize whether or not the fiscal consolidation is driven by tax rises or expenditure cuts we find that the composition of the fiscal consolidation its duration the monetary policy stance the level of government debt and expectations over the likelihood and composition of fiscal consolidations all matter in determining the extent to which a given consolidation is expansionary and or successful in stabilizing government debt

estimation of australian wool and lamb production technologies under uncertainty an error components approach a model of producer behavior which explicitly accounts for both output price and production uncertainty is formulated and estimated if the production technology is multiplicatively separable in its deterministic and stochastic components then the expected utility maximization problem implies cost minimization for planned or expected output consequently our empirical model of three lamb and wool producing sectors in australia involves the estimation of a system of input cost share and cost equations whose disturbances have an error components structure the empirical results are evaluated in terms of input demand elasticities and estimates of the stochastic components of production are presented

the quality of schooling quantity alone is misleading although much research discusses the quantity of schooling as an effective impact on productivity and earnings most such research leaves out the idea of the quality of schooling which may cause biases in the estimated returns to schooling this paper consequently attempts to extend the standard mincerian approach to incorporate school quality as well as quantity it demonstrates how exclusion of quality in the standard procedure may cause biases in the estimated returns to years of schooling probably in the upward direction the paper explores the implications of this extension of the standard model for the case of young brazilian males it shows that the estimate of the private return to years of schooling using the preferred quality inclusive specification is only one half the estimate using the standard procedure indicating substantial upward bias in the standard estimates it further outlines a method for estimating a social return to quality and finds that it exceeds substantially the social return to quantity the paper then shows why this in turn suggests there may be an equity productivity trade off in schooling investments

an intertemporal model of saving and investment this paper characterizes a market economy with infinitely long lived consumers and value maximizing firms which face costs of adjustment for capital the temporary equilibrium of this economy is similar to the short run equilibrium of standard macroeconomic models consumption is a function of wealth investment is related to the value of firms equilibrium between aggregate demand and aggregate supply is achieved by the endogenous adjustment of the sequence of current and future interest rates the dynamic behavior of output consumption and investment in this economy is the same as in an optimal growth model with adjustment costs the paper shows this equivalence and then uses it together with the equivalence of taxes to technological shocks to study the dynamic effects of fiscal policy

fiscal policy and occupational employment dynamics we document substantial heterogeneity in occupational employment dynamics in response to government spending shocks in the united states employment rises most strongly in service sales and office pink collar occupations by contrast employment in blue collar occupations is hardly affected by fiscal policy we provide evidence that occupation specific changes in labor demand are key for understanding these findings we develop a business cycle model that explains the heterogeneous occupational employment dynamics as a consequence of composition effects due to heterogeneous employment changes across industries and occupation specific within industry employment shifts due to differences in the short run substitutability between labor and capital services across occupations